TODAY.AZ / Analytics

Armenia loses keys to foreign investors’ confidence

05 May 2014 [09:41] - TODAY.AZ
By AzerNews

With zero economic roles in the South Caucasus region, Armenia is rapidly losing its attraction for foreign investments.

Oligarchy and monopoly, unreliable business and investment climate, and increasing foreign debt are the main components of Armenia's small economy.

The situation is so complicated that neither foreign investors nor ethnic Armenian investors abroad have enough confidence in Armenia's business climate.

Armenia's small economy suffers seriously from monopoly and monopolies and oligopolies rule about 60 percent of the shares in Armenia's market, the World Bank's report on "Republic of Armenia: Accumulation, Competition, Cooperation", published in November 2013, shows.

Local media reported that only small- and medium-sized businesses under the roof of oligarchs or officials are protected.

The role of small- and medium-sized enterprises (SMEs), which are mainly engaged in retail and wholesale trade, is decreasing in the country, and almost 1,500 small-trade entities were closed in one year.

European companies would've been interested in Armenia's market if local oligarchs did not exist, German Ambassador to Armenia Rayner Morel said recently.

"Armenia should deal with the monopolization of its economy and enhance the role of SMEs. After that, the Armenian market can be attractive for European companies," he said.

Morel stressed that SMEs should hold great importance for Armenia, because they are the main drivers of the economy. "SMEs are not developing in Armenia due to the predominance of oligarchy in local businesses."

Prime Minister Ovik Abramyan recently promised to create favorable conditions for SMEs, saying, "We will take positive steps for small- and medium-sized enterprises in the near future."

Local media believed that Abramyan's statement on SMEs was abstract.

"His statements raise many questions. How can Abramyan support the development of small and medium-sized businesses at a time when he, being an oligarch, hampers it?" the media reported.

Armenia seems to be close to losing political stability, another key factor in attracting investors' confidence.

The recent appointment of some new ministers, who are members of former President Robert Kocharyan's staff, has led to prediction of unstable political situation in the country.

Kocharyan, who has increased his political activity in recent months, has regularly criticized the current authorities.

Local experts believe that Kocharyan's political activation is linked to his intensions to come to power again.

"Kocharyan will return to the political arena and organize a coup d'état in the next six months which will allow him to seize power," Agasi Enokyan, political analyst and Head of the Armenian Center of International Relations, said.

Having confidence in stable business and political climate is vital for attracting foreign investments. Armenia has not been able to provide these key elements in recent years, a fact confirmed by official statistics.

Foreign direct investments in the country decreased by 35.3 percent in 2013 compared to 2012, reaching $4.692 million. These figures were not recorded even during the global financial crisis in 2009, when the volume of investments in Armenia decreased by 25.8 percent.

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