Investors lose interest in Armenia's economy

Susanna Petrosyan, Yerevan. Exclusively for Vestnik Kavkaza
Investors lose interest in Armenia's economy

The reduction of foreign investment in the Armenian economy, which has already become a well-established trend, is now causing growing concern. Politicians and experts are trying to understand the causes of the deepening trend that began in 2012, and the rate of decline in investment became even more significant in the past years. According to the National Statistical Service (NSS) of Armenia, in 2015 compared to the year 2014, total investment decreased by more than 26%, and foreign direct investment fell by 40%. In the first quarter of this year, foreign investment decreased by half compared to the same period last year.

According to Deputy Minister of Economy Emil Tarasyan, the reduction of transfers from Russia, which compared to 2015 is 22-23%, affects the reduction of the amount of investment. Other factors are the instability in the Karabakh conflict zone as well as the temporary closure of the Upper Lars checkpoint because of a landslide which slowed down the process of trade turnover with Russia.

Transfers remitted through banks to Armenia by individuals from abroad, primarily from Russia, decreased quite significantly. In June 2016 the volume of inflow of remittances amounted to 135 million 277 thousand dollars while the figure in the same period of 2015 was 163.2 million dollars. According to economist Gor Tsaturian the reduction of transfers is caused by the difficult situation in the Russian economy, which has led to a tangible reduction of Russian investment in the Armenian economy. Russia remains the biggest investor in the Armenian economy. Over the past 25 years foreign direct investment in Armenia amounted to about 10 billion dollars, 3.43 billion of which came from Russia.

However, many experts believe that official sources only partially explain the situation with investment.

The chairman of the Union of exporters Raffi Mkhchyan notes that the reality is much darker than the official statistics. One of the main reasons has been the unattractive investment environment in Armenia. According to economic observer of the publication Hetq, Seda Hergnyan, improvement in the competitive economic environment is one of the main conditions for investment growth, but there are anti-competitive agreements, abuse of monopoly power and other negative phenomena in the market.

Among the main factors in the reduction in investments, experts cite the omnipotent monopolies, unequal conditions in entrepreneurship, distribution of budgetary funds, tax breaks given to companies which are owned by high-ranking officials through fake nominees, and various kinds of "kickbacks" from the budget.

It has become a rule that Armenian officials try to write off the economic problems to external factors and deliberately draw attention away from the local context. Meanwhile, mainly domestic factors have led to a sharp decline in investment as well as other negative phenomena in the economy, and one has to look for the origins of the problems in today's logic of the Armenian economy.

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