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.