Armenia is at the intersection, where we should decide the vector and realize where we go: A.Khurshudyan
“Armenia: Investment Forum 2016” was held recently in New York, entitled “Armenia as a gate to major markets.” The Forum was so stressed, that Armenian president Serzh Sargsyan participated in its plenary session. The official statement read, that purpose of the Forum is raising Armenia’s awareness and the country’s business environment, introducing Armenia’s current investment possibilities and trade regimes, establishing connections with potential investors and transnational corporations. 168.am talked to economist Ashot Khurshudyan, expert at International Center for Human Development, on productivity of the Forum, Armenia’s role as a “gate,” as well as its benefit to the newly built Armenian Government.
What does Armenia’s investment environment look like and can Armenia become a gate to have an access to major markets?
Introducing Armenia as an intersection isn’t new and Armenia has repeatedly attempted to appear before the world that way to involve investment. Formerly it was introduced as east-west intersection, a country at the crucial point of former Silk Road, connecting Asia and Europe. Presently a small change was recorded, and during that investment Forum an attempt was made to introduce Armenia as a gate to Eurasian market. There is one peculiarity in our region—Turks, Georgians and Azerbaijanis introduce their countries almost the same way, i.e. east-west intersection and etc.
In our case we couldn’t that much effectively introduce ourselves, as there was Azerbaijan-Georgia-Turkey line, however, today the situation has so changed that we have that gate as a EEU member country. The point is how we should use it. Two issues are observed here: we state the investment environment, however, the greatest primary issue is Russia. We know how the West treats Russia—sanctions and etc., i.e. the political factor may pass a rather big obstacle or a positive signal in case of a change, and Armenia may assume that role. Today it’s a more influential factor, than the existent investment environment in Armenia. And during that Forum an attempt was made to make use of a situation, when stagnation dominates in the world, consumption records a decline, only producing isn’t enough, they don’t invest in production, and even suspend it, which means that there are large funds, which they don’t know where to invest. That issue always emerges in terms of a crisis.
However, that crisis is existent in Russia as well, i.e. for the time being it’s impossible to imagine that some large funds will come quickly. However, economy is something, that after crisis, recession, growth starts. If today we would be able to submit any program regarding growth on 2-5 year basis, then, yes, presently it would be possible to engage investments. However, I don’t imagine it on account of investment environment, presently they may be investments brought through negotiations only.
How does Government change affect investors? Does their trust grow more under the conditions of the incumbent Government?
The Government hasn’t submitted any program yet, however, after the statement, one crucial point was observed: some words directed to business, for instance, on customs border price for the commodities should be decided not by preliminarily defined prices, but based on the invoice. Being familiarized with state bureaucracy and rather tense budget situation, this means that the Government isn’t tended to support business, but that won’t be easy, as we have numerous social issues. I’m going to wait for its program to understand how the Government will cope with that dilemma.
President Sargsyan stated in the USA that new Armenian Government assumed wide liabilities and will function freely, however, to which extent that freedom will expand on oligarchs and the privileged?
You know, shadow isn’t the source for the issues. Armenia’s main issue is the judicial system in that regard.
But the judicial system isn’t under the PM.
This is the dilemma. Thus, from the very day of its establishment, under all Armenian presidents and political parties, I haven’t heard that reply—how to have an independent, just and professional judicial system, but this is the only solution. If you want to have a legal field, you should not only work legally, but have a judicial system, which will apply due punishment in case of something illegal. There is no other solution, this is it. And if we want to get rid of shadow in Armenia, solve issues, first and foremost, we should have that judicial system. Otherwise, one power will fight against the other. It may sound ridiculous, but those very oligarchs should have the right to protect themselves by the judicial system, as political force may be applied against them, and the issue won’t be their legal work, but complete removal as an economic subject. This is a rather serious issue, solution to which I don’t imagine in 1-2 days, however, to that end steps should be initiated.
In any country, if someone intends to make an investment, firstly, he/she looks how the property right is protected. Until now under the name of that unfortunate ‘public interest’ we won’t withdraw from the practice of taking people’s property. Maybe they’ll demonstratively refuse, and state that practice won’t be used, and they may more toughen the law, meanwhile some provisions of the law were included in the Constitution, and protection of the property right was more mitigated. These are crucial signals and grand investor, first and foremost, looks to likewise risks, as even in countries with rather strong political stability political changes take place, and at that time, the legal field and judicial system become the only ally of the businessman.
During both former and incumbent Government it’s stated that there is a political will, freedom has been provided to solve the issues, however, as Hovik Abrahamyan’s Government failed to provide equal conditions in the field, Karen Karapetyan’s Government, at least formally has little time to act and record some positive results. What hopes can we have for this Government?
We are touching upon the equal field, however, we had other precedent, when prior to the crisis Governments of both Hovik Abrahamyan and Tigran Sargsyan supported business. It’s already not about the equal field, but the Government mediated, and the practice of large loans, allocation of tax privileges extended for a rather long period. When the second crisis was recorded, all those, promising to establish workplaces by that money and etc., for the second time automatically face issues, again asked to postpone the deadlines, and etc. Unfortunately, those processes, as stated in 2009, weren’t transparent, we didn’t receive reports whether those millions of dollars, allotted to business, served their purpose or not. We observe in the budget: some part of the loans is paid, but what implication did they have? And it wasn’t about equal changes, but on Government’s intervention on saving the business. We have two ways out: either we go on the same way or stop it. The latter contains risks, that many businesses may go bankrupt, however, keeping business on account of taxpayers isn’t so productive.
Also that of external debt.
Yes, and today’s Armenia is like a patient, who was given many antibiotics, has recovered to some extent, e.g. structurally, but our body is very weak from those pills. How should it return to normal life after that much issues, as e.g. we brought that much external loans, some of them alloted to business, and some part was used fiscally to increase claim of the economy, but we can’t take that much loans any more, our body—economy, should continue functioning. And how should it develop? Answer to this question should be given by the Government. If you support anyone, you automatically don’t support others. Support sounds nice, but it’s also unequal. It’s another issue whether that inequality is fair or not. Or can the Government state that it won’t support and will establish a competitive environment, let business grow and continue acting, or, for instance, bankruptcy in economy very frequently is considered one of the mechanisms for recovery. We are at that very intersection, that we should decide the vector and realize where we go.
By Gayane Khachatryan
