Both Armenia and Russia complain about the “property in exchange for debt” deal. Armenia is desperate; there is no money coming in, there are no workplaces, there is no production. Russia is not very happy either and complains that it has received cheaper products instead of money in exchange for the natural gas supply. What can be excluded here are the energy units which were working, and by profit, at that time.
This is years later, but when making the deal, the Armenian government was confessing its political love and devotion to Russia along with this. In any case, it has happened and this year Russian capital, in the form of investments, is in first place in Armenia. Perhaps it would be better if what they say was a reality, because as Armenians say, money doesn’t smell and it doesn’t matter who the investor is; the important thing is the presence of money.
According to Head of the European Union Chamber of Commerce in Armenia, Hovhannes Igityan, the first in direct investments in Armenia is Germany, with 47.8 million dollar investments in molybdenum extraction. With regards to direct investments, Russian capital makes up 28.7 million dollars instead of the declared 87.5. This amount includes the “ArmenTel”-“VimpelCom” deals, which are far from being direct investments, but are also counted as Russian investments. Based on this deal between the Russian and Greek companies, it is very hard to estimate the size of the portion of the Armenian side. The “ArmenTel” precedent may be considered a successful deal between Armenia and Russia, when the state privatized its belonging in accordance with accepted procedures going on in the international markets, that is, to sell it to a private Russian company.
Initially, it was clear from the “property in exchange for debt” deal that Russia was not going to make investments from its budget into Armenia. If Armenia is unable to governmentally administer its property and hands it over to another country which is not one of the leaders in technology in the world, then that country, in turn, must look for private exploiters to run the Armenian factories. H. Igityan mentions that in exchange for the accumulated debt, it was not hard for the Armenian government to sell the mentioned property by an international auction and pay back Russia’s loan with the money received. The EU Chamber of Commerce has some cases of business correspondence with the Armenian government when investors get tied up in the local laws/obstacles knot. Russian capital is no exception here and the issue is the same for everyone. The taxing policy taken from the EU countries has been localized in Armenia and is being proofread the Armenian way. The changing laws get on the nerves of the foreign investors and in order to not lose their health completely, the latter have started to “adapt” to the conditions of Armenia. According to Igityan, this is a very wrong custom, which increases the levels of shady economy more and more.
“When we talk about the EU, we must remember that it is thanks to their taxing system that revenues make up a considerable percentage in the GDP. Besides that, the tax portion of the revenue exceeds the indirect taxes. European laws work the opposite way in Armenia. Forty-seven percent of the taxes portion of the state budget is from the VAT. This is the tax that even the poorest people pay. This is why largest taxpayers show this type of tax. The terrible thing is that in Armenia, business has entered the National Assembly and the government. This means that tax revenues depend on the willingness of the government official to pay taxes,” says Igityan.
The Armenian market, famous for its liberal taxing field, does not even lure the Armenians from the Diaspora. We can’t say that the Diaspora-Armenians don’t make investments in the homeland. There are investments made, but we don’t get the results that people in, let’s say, China could have received. The simple investment/income formula has been disfigured. The Armenian government enacts administrative obstacles for imports. In the case of imports to Armenia, which has no alternative transportation routes, the price for transportation, which makes up a considerable percentage of the worth of the product, is added to the price for the product and taxed. The EU Chamber of Commerce has proposed to revise such a taxing policy, but there are still no replies. The Armenian government has regulated the issue concerning the return of VAT that was charged on the border, but not by law. Let us recall that there was a time when the EU Chamber of Commerce was consistent on the solution to the problem. Igityan mentions that in order to avoid the red tape, businessmen take shares from their businesses and offer them to state officials, and solve any issues they encounter with one friendly phone call.