Early this year the society was focused on the rumors concerning outflow of Armenian money to Georgia.
Georgia published information, according to which over 100 companies had registered in Georgia, as a result of which different rumors were spread and even there were rumors about the possibility that successful businessmen (such as Hrant Vardanyan) could take out their capital from Armenia to Georgia. However, this information was later refuted by the mentioned businessman.
Such rumors were activated so much that the government decided to discuss that issue. In February the minister of economy announced that the rumors were exaggerated and assured that there was not outflow of capital from the country. The minister even tried to explain what was happening. “When the capital becomes larger, the local market becomes smaller, thus they look for alternative places for investment and usually such places are neighboring countries. This is a normal process for any small developing economy,” said the minister of economy. In addition, Tigran Davtyan said that there was no reason to worry as there was also outflow of money from developed countries such as Belgium and Holland. The minister said that the foreign investments in Armenia’s economy exceeded one billion dollars a year and added, “This money goes out from some countries and comes to Armenia. However this does not result in panic in those countries.”
Currently there are no active discussions about the outflow of capital not because of the minister’s assurances but the fact that people have got used to the fact that the business environment is better in Georgia. We would not refer to this topic again if we did not see the following text in newspapers: “Georgia and Armenia have signed an agreement on encouraging investments. The agreement will stay in force for ten years… According to the ministry of economy and stabile development of Georgia, each of the parties should encourage and create attractive conditions for investments from the other party. If there is force-majeur situation in either of the countries, that country should give compensation.”
The impression is that everything is not so bad, and even more the government is making efforts to create attractive conditions for the enlargement of the Armenian business community in Georgia.
Let’s find out what the real situation with mutual investments is and whether we can feel safe. In Armenia the direct foreign investments do not reach one billion dollars a year. The highest rate was registered in 2008 – 935 million dollars. There is another piece of information that definitely our officials do not know, otherwise they would use it as an achievement. According to the information of the Georgian statistics services, in 2006 the direct investments in Georgia on part of Armenian businesses exceeded one million dollars. However, the situation changed starting from 2007 and for Georgia this rate was negative (-4.8 million dollars), in 2008 it was -15 million dollars, in 2009 it was -5.3 mln, and in 2010 it reached -16.5 million dollars. This means that according to the official information from Georgia, the vice process has happened and the capital came to Armenia from Georgia but not the vice versa. Even in the first quarter of 2011 when there were active discussions concerning outflow of capital the Georgian statistics reported that 80k dollars had gone to Armenia from their economy. This seems weird, but it has a simple explanation. “Armenian businesses usually register their companies in Georgia in the name of Georgians. For this reason the foreign investments in part of Armenian companies are considered domestic investments,” said economy expert Irakli Lekvinadze to the Weekly Georgian Journal.
In fact, according to the expert the Armenian money flows to the Georgian market more intensively in the recent period especially. The expert says the reason is the bad business environment. “In private conversations businessmen say that businesses tend to take their businesses out of the country and the Georgian market is attractive for them due to lack of bureaucratic difficulties and corruption,” said the expert.
According to the information from Georgia, 195 Armenian companies have registered in Georgia since 1995, 105 out of which in 2010. It is worth mentioning that 27 businesses were private entrepreneurs and 73 were small limited liability companies. It means that mainly small businesses have moved, which is funny because small businesses hardly could enlarge to the extent of moving to another market. Small and medium businesses feel better in Georgia because it is easier to work there due to lack of bureaucratic difficulties and corruption as they feel protected. This information is also proven by different reports on improvement and doing in business in these two countries.
As for the announcements concerning improving the business environment in Armenia, ne can get familiar with the real situation by reading the posts in the Gind or spam e-mails. Which mostly contain business offers in Armenia. Most of such offers concern selling operating businesses starting from windows production plants and ending up with soda production small companies.