Industrial Production in Artsakh Drops Sharply Due to Reduction in Mining Industry

The head of the Department of Economic Development at the Ministry of Economy and Agriculture of Artsakh, Bella Petrosyan, discussed the damages to the economy and production infrastructure caused by the war and the recovery measures being implemented in an interview with "Armenpress."

What stage is the restoration process of production infrastructure and factories damaged by the war at?
Since December of last year, the Artsakh government has begun the process of inventorying buildings and facilities of production significance that were damaged as a result of military actions. Specifically, an interdepartmental commission has been established to assess and evaluate the damages. After the completion of this work, the government will determine the corresponding rules for support or compensation.

What preliminary data indicates the extent of production volume reduction in the post-war period and the reasons behind it?
Post-war, in January 2021, the economic activity index of Artsakh fell by half compared to the previous year. The volume of industrial production in the Republic of Artsakh decreased by 36.5% last year, including a 60% reduction in December alone. Then, in January 2021, compared to the same period the previous year, the industrial production volume decreased by 71.7%. In particular, the volume of mining decreased by 20% year-on-year, with a staggering 96% reduction in just December of the previous year, while the volume of manufacturing industry fell by 63%. Throughout the year, the reduction in food production was relatively insignificant at 3%, following a 20% decrease in December.

A sharp decline in industrial production volumes was observed across all sectors. Nevertheless, it can be noted that the mentioned indicators were largely influenced by the fact that mining activities in January 2021 were almost nonexistent (a decrease of 99.9%). The decline in the manufacturing sector by 36% was primarily due to reductions in food and clothing production. At the same time, it is worth noting the growth of specific manufacturing sectors during this period, such as beverages, timber, doors, and windows.

The electricity production in December 2020 was only 20 million kWh, compared to approximately 100 million kWh in the same period the previous year. In January this year, electricity production in Artsakh amounted to 7.3 million kWh. The volume of construction work decreased by 56% from October to December 2020, and in January 2021, it decreased by 53% compared to the previous January.

Is there a possibility for well-known Artsakh brands, whose factories remain under Azerbaijani control, to restore their operations?
Efforts are underway in this direction. The government is inclined to create favorable conditions for local producers to resume operations. This applies not only to well-known brands. If possible, perhaps all producers will desire to restart their productions. However, no specific government programs have been developed in this regard yet.

Are there support programs available for novice entrepreneurs to engage in production activities?
A package of tax incentives has been developed in Artsakh, which will make it easier and more attractive to do business locally. This includes tax exemptions for most taxpayers from profit tax during 2020-2022. The income tax rate withheld from employed individuals and those under civil contracts has been reduced to 15% in 2021, 14% in 2022, and 13% starting January 1, 2023. For individuals employed in agricultural production, the income tax rate on salaries and similar incomes is set at 3%. Taxpayers are exempted from making fixed and license fees for a period of three years. Additionally, a 50% refund of calculated taxes is provided for loans received before October 1, 2020, and paid interest. For a duration of six months, state support is given in the amount of the calculated and paid income tax on the salaries and equivalent payments of the company’s employees. Further assistance programs may also be offered by the Ministry of Economy and Agriculture of the Republic of Artsakh, with the public being properly informed about them.