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armenias ambition

Suren Karayan, Armenia’s minister of economic development and investments, explains how the country plans to exploit its network of east-west connections to enhance its FDI attractiveness.

 

Q: How do you intend to increase Armenia’s inward FDI and make the country more attractive to investors?

A: First, through the improvement of legislation, with particular attention to the introduction of a mechanism to protect foreign investors. With the aim of improving the investment environment and attracting new investments, we have introduced an addition to the law on foreign investments. The new law sets national treatment and most favoured nation principles, specifies guarantees and the provisions of dispute settlement for foreign investors.

A new strategy on public-private partnership development and corresponding legislation has also been drafted, aimed at effectively implementing major public projects and developing infrastructures, as well as enhancing the quality of public services.

Second, the ministry of economic development and investments has initiated the collection of investment projects. To that end, a platform for investment projects has been created. With the help of this tool we bring together and [develop] realistic private or public investment projects.

Third, [we have been] developing new support mechanisms for foreign investors, as well as maintaining current trade regimes and obtaining new ones. I would like to highlight that today we have created an effective system to promote investment in sectors with export potential. In addition, we are working towards creating investment funds to increase the availability of financial resources to implement investment projects.

And the fourth point [takes in our] activities to promote Armenia’s investment potential. We have established a strategic partnership with leading professional service networks, particularly KPMG, Grant Thornton and the International Finance Corporation. This co-operation aims to represent enhanced business plans to foreign investors. Within this partnership, the companies will collaborate with us in the revision and fundraising process of more realistic projects, including those in the major infrastructure sector.

Q: What are the government’s top economic priorities and what is the economic outlook for 2017?

A: The Armenian government is building its economic policy agenda to capitalise on the country’s strengths and create a level playing field for export development, creative entrepreneurship and investment attraction. Beyond this, we [hope to use the country's physical advantages to make us more competitive on a regional and international scale].

The general mechanics of turning these ambitions into viable policies and actions in order to seed our long-term vision of Armenia’s development profile seem an easier task. What is really hard is smart engineering all the necessary components to drive the vehicle [along] the right path.

In this instance, a leading policy priority is to build a strong and dynamic environment to support and advance our export-led growth model. We are targeting new export markets and the expansion of traditional ones, implementing proactive export promotion and market penetration initiatives, and making the best use of available preferential trade regimes. One of our current major goals is to ensure an effective trade partnership, and to set up beneficial regulatory platforms with Iran and the Gulf countries.

An incredibly important area is to boost entrepreneurship through the strengthening of a transparent business-related regulatory environment. On its path to business reform, Armenia has registered continuous progress in the World Bank’s Doing Business rankings, and currently places 38th among 190 countries. The government is prioritising a new target of getting into the top 20 through the next four to five years of upcoming reforms. 

We will rely heavily on our society’s entrepreneurial acumen, creativity and talent, and establish a viable environment to promote innovation and technological modernisation. Armenia has already successfully shown its strengths and capabilities in the IT sphere at a global level, with internationally successful start-ups, companies and initiatives.

I would also stress the huge potential of the tourism industry. We are lucky to have diverse and unique natural landscape, and we have acquired a developed tourism infrastructure... Our vision of tourism development is fed by our extensive history, culture and our fresh and modern outlook.

We believe we are on the right track. Still, we are at the initial milestones of this ambitious reform path, but we can see encouraging signs. The efforts we have made leave us with an optimistic expectation to position the country on about 4% to 5% annual economic growth path. This will ensure credible grounds to accomplish the long-term goals of raising current GDP fivefold and current per-capita GDP fourfold – goals that have been declared at the highest political level.

Q: In which sectors can Armenia have a competitive advantage for FDI?

A: The diversity of the sectors of the Armenian economy affords a wide range of opportunities for investors. We have a number of success stories and significant untapped potential. Today, Armenia has its own place on the world map of IT. IT is one of the fastest growing sectors of the Armenian economy and its main capital is human resources, which ensures the creation of intellectual property and added value.

Armenia has all the necessary fundamentals as well as the potential to become a regional hub and a key player in the IT sector. This is illustrated by the presence of leading international corporations such as Microsoft, Synopsys, IBM, Oracle, National Instruments and D-Link here. Moreover, the IBM Innovative Solutions and Technologies Center, the Microsoft Innovation Center, the Armenian-Indian Center for Excellence and other companies are all successfully operating here. 

The success of the sector is also demonstrated by the continuous achievements of Armenian companies in the international market. Forbes magazine has estimated the market value of Armenian company PicsArt to be more than $250m. 

Another important sector is the processing industry, which is closely linked to agriculture as the major direction of this industry is food processing. These two sectors are rather sensitive. The government envisions the future of agriculture to be a competitive and export-oriented sector. The products of organic agriculture are becoming more and more widespread and in higher demand. In this regard, ample potential to practise organic agriculture can be traced in Armenia. Greenhouse cultivation is also developing rapidly.

The development of the processing industry is due to the growth rate and productivity increase recorded by the agriculture sector. Armenia is famous for its centuries-old traditions of beverage making, which has become its calling card. Meanwhile, this sector has a considerable untapped potential and greater efficiencies may ensure substantial results.

In Armenia, light industry has extensive development potential, marked by the co-operation of local companies with the sector’s leading enterprises. Armenian companies are collaborating or have networks with brands such as Moncler, Valentino, Marlboro Classics, Paul & Shark and Roberto Cavalli.   

Pharmaceutical production has recorded sustainable growth and the government has identified it as a priority and a prospective sector for developing the economy. Medicines produced in Armenia are being consumed in the Commonwealth of Independent States and many other countries, thus acquiring credibility and popularity.

We believe this sector has huge potential for both an increase in export volume and import substitution. Companies can benefit from the Eurasian Economic Union [EAEU] single market of pharmaceuticals, which will enable them to sell medicines produced in Armenia in the EAEU market of 170 million consumers without additional certifications and permits.     

As for human capital, it is worth mentioning traditional Armenian hospitality, which plays a significant role in the development of tourism industry. Tourism is one of the primary and most steadily developing sectors of the economy, ensuring sustainable and dynamic growth in the number of incoming tourists, investment in hotel construction and development of other related infrastructure. 

All the aforementioned sectors have great potential for development and a wide range of prospects for cooperation.

Q: What are the most interesting opportunities for foreign investors in Armenia?

A: Comprehensive and continuous reforms have led us to create a legally protected and liberal environment for doing business – in some cases, even more advanced than in some EU countries – thus making it possible for foreign investors to capitalise on available investment opportunities. A constantly enlarging market, as well as a number of incentives for investors, makes the business environment even more favourable. 

Membership of the EAEU, preferential trade regimes with different countries, particularly the Generalised Scheme of Preferences plus (GSP+) regime provided by the EU, the GSP regime with the US, Canada, Switzerland, Japan and Norway, and strong ties and good relations with Iran and the Middle East make Armenia a unique bridge within the EU-EAEU and Iran-Middle East triangle.

An individual approach based on investors’ needs will be applied to every investment project in Armenia, and every investor will be given the necessary support and assistance, and will be offered a wide range of privileges and incentives.

This article is sourced from fDi Magazine
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