Business & Economy

Foreign investments made in Armenia go all the way back to 1994. Despite the changes in the political field, the authorities have always made it clear that they accept all types of investments. If we look at things from a political point of view, the communists are the only ones who consider the foreign investments made in Armenia as negative. They think that foreign capital falters the economy of the nation and turns it into some kind of transnational corporation. Other political forces and the authorities think that the investments help further develop the country’s economy. There is no developing country in the world that has not been able to achieve success in economy without foreign capital. This is why the authorities keep announcing that they have provided certain conditions for the foreign investors. True, it is not like that now but the reason for that is that the authorities are periodically trying to improve the economy by adding new laws.

Economists who classify foreign investors believe that the investments made in the field where necessary are the most effective. Let’s say for example, in production and agriculture.

According to statistics, the amount of foreign investments made in Armenia in 2003 was calculated to be $154 million dollars. In the past couple of years, the amount of investments made has said to be around $100-150 million dollars. However, the year 1998 can not be surpassed. Official statistics show that $230 million dollars has been invested during that year. But 70% of that amount was used for two large privatizations-the privatization of “ArmenTel” and the Yerevan Cognac Factory. “ArmenTel” bought the Greek state OTE company while, according to economists, private investments are more important for the economy. Those investments are the ones that are directed towards production. The foreign investor always tries to avoid investing in a country where politics and economy are in a stable condition. Armenia does not benefit from this. This has nothing to do with the stability of politics (or instability) of Armenia. It has only been 13 years since Armenia declared its independence, however, the country is being governed by the third president and the 11th Prime Minister. This can be perceived as stability. On the other hand, there is no economic stability in the country. The legislation about the economy keeps on changing from time to time. Each year, the government presents a total packet of the legislation on economy along with the budget. Then the laws start changing throughout the year. Just last year 20 new laws and resolutions were passed. The goal of this was to “improve the flow of investments”. It is possible that passing those laws and resolutions were done for a good reason, but the constant changing of laws causes a lot of confusion. This is sort of like when the rules change after the game starts. It is evident that investors will not be too interested in investing in a country where changes are so constant. This is the only reason that Armenia differs from other countries in the region. We must not blame politics for this. For example, the Western world feels that it is its duty to aid Georgia after all it went through with the change of rule, or the oil reserves in Azerbaijan which attract the attention of investors. In 1998, when the construction of the oil reserve had barely begun, foreign investments in Azerbaijan had reached the $1,200,000,000 billion dollar mark.

Of course, Armenian authorities are trying the best they can to stimulate the flow of foreign investments in the country. On that occasion, a Development agency has been founded. The state advertises branches of economy and tries to direct them towards private foreign capital. There was even a try to bring in capital to the country as a means of improving the situation of the country (Linsie Foundation). But it is not working out. The authorities can not really do much. The investments made in Azerbaijan are 10 times more than Armenia.

In 2003, 17 foreign businessmen have made investments in Armenia. In 2004, there were more than 20 countries. By getting acquainted with the list of countries making direct investments, we can come to the following conclusion: investments are being made from offshore countries or countries where there are large Armenian communities. It is obvious that a large part of Diasporan Armenians are trying to take part in improving the economic life of their historical homeland. It would be wrong to explain this strictly from the economic point of view. According to the legislation, there are laws stating the privileges that foreign investors have, but those laws either lack something or are ineffective.

First let’s talk about the flaws. The law only gives an incentive to investments of $1 million or more. Secondly, in reality, investments made in production can not be reproduced in the period foreseen in the law. As a result of all this, more than half of the foreign investors in Armenia work as merchants. Foreign capital which circulates the considerable section of economy, tries to make its way into stable fields (trade and service). During the past years, there have been only two large international trademarks that have made their way into Armenia-one being “Coca-Cola” and the other “Perno Ricar”. The other trademarks are unknown in neither the production sites, nor the stores where products are sold.

Now let’s talk about the opposite result of the privileges. The foreign businesses are freed from any taxes for a couple of years. By taking advantage of this, many local Armenian manufacturers present the amounts received from their business as foreign and joint. Only large businessmen are the ones doing this. They register their business in any country and then start a joint-stock company in Armenia. As a result, today we have many Greek-Armenian, Russian-Armenian, Dutch-Armenian, Canadian-Armenian businesses in Armenia. Society knows who the real owners are of those businesses and factories. However, it is very beneficial for those owners and the Armenian authorities to look at them as joint-stock companies. That way it becomes a little easier to raise the statistics of foreign investments. No matter how much those statistics correspond to international standards, they still have something to do with Armenia. What’s worse is that a considerable amount of foreign investments are made by Armenians (Diasporan Armenians). That is more of an ethnic issue, rather than an economic one. So, we can not really consider Armenia as a country that attracts the attention of foreign investors. You can be happy about that, if, of course, you are a Communist.