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HOVHANNES IGITYAN: SERZH SARGSYAN'S GEOPOLITICAL CHOICE IS AN OBSTACLE FOR INVESTMENTS IN ARMENIA'S ECONOMY
ArmInfo's Interview with Hovhannes Igityan, expert at the European
Business Association, member of the Armenian National Movement
by David Stepanyan
Tuesday, October 14, 23:52
The intensifying sanctions against Russia have already resulted
in considerable reduction in transfers from Russia to Armenia,
which is joining the Eurasian Economic Union. To all appearances,
the authorities are not so concerned with this tendency. Are you
concernedwith the situation?
Of course, the transfers equal to the budget of Armenia play a very
much great part in the social and economic life of the republic.
Nevertheless, it is wrong to watch them as a long-term panacea for
local problems. Today the transfers to Armenia are declining because
of worsening of the living standards in Russia, and because of the
worsening of the attitude to the labor migrants. This results in the
situation when it becomes more and more difficult for the Armenians to
work in Russia. Many of them are taking their families to Russia. This
results in considerable reduction of transfers to Armenia. Therefore,
Armenia's development should be linked not with transfers but with
direct investments. The government, staying aside, simply watches
how social problems have been resolved without its meddling, and
make it possible to avoid at least food riots. One should take into
consideration that 20% of transfers enter the state budget in the
form of VAT, the rest also enter the state budget as various indirect
taxes. Nevertheless, to ensure the high quality development of the
Armenian economy, industry, we need direct foreign investments,
first of all.
Would you specify the figures and time of investments, which will
relieve Armenia of its dependency on transfers?
The matter concerns 2-3 billion EUR. Such investment in the Armenian
industrial sector will take 3-5 years. Our calculations show that
investment of the first billion of EUR will bring 100-120 thsd job
places, the second billion - 80-100 thsd, and the third one - even
fewer. That is to say, on the bad forecast we speak about 200-220
thsd job places with a good salary. It is impossible to account more
correctly. And if we take into consideration that one job place feeds
a family consisting of 4-5 persons, in that case we shall have 800
thsd-1 mln beneficiaries, that is to say, the number of our citizens
working abroad and sending transfers to the rest staying in Armenia.
In what fields may these direct investments be placed?
The President's economists keep wondering what Armenia could export to
Europe if it joined the Deep and Comprehensive Free Trade Area. The
actual purpose of DCFTA was not to develop own production and to
export something but to create conditions that could encourage
investors worldwide to move their productions here. The matter
especially concerns the businesses in the countries having serious
social problems, particularly, Spain Greece, Italy.
Our labor migrants pin big hopes on Armenia's Accession to the
Eurasian Economic Union. Will the accession improve their working
and living conditions?
I do not think that Armenia's joining the EAEU may change anything
in the matter of the general attitude to the Armenians. However,
this attitude has been worsening as from time to time the Russian
politician-"patriots" watch labor migrants as a factor that hinders
local residents to get a job. The great majority of migrants have
been working in a shadow sector of the Russian economy that belongs
to the persons close to the power who are allowed to do practically
everything, just the same way as in Armenia.
On October 10, the Agreement on Armenia's Accession to the Eurasian
Economic Union was signed amid the unprecedented toughening of the
sanctions against Russia. How could you explain this paradox?
Perfectly realizing the role of Russia and its potential in our region
and at the post-Soviet area, the politicians saying that Armenia should
not join the Eurasian Economic Union understand very well the possible
consequences of such a step for Armenia. Nevertheless, even in such
conditions, in Minsk Serzh Sargsyan should have demanded some time for
Armenia to revise the opportunities and risks of Armenia's joining the
EAEU. Later it was necessary to declare about the balanced using of
DCFTA with the EU by Armenia, the available potential of free trade
with Russia and cooperation with the Eurasian Economic Union being
formed. All this might be done without damaging Armenia.
Meanwhile, today Armenia is practically the only country, which in
the conditions of the global consolidated position regarding Russia,
stands next to Russia ex cathedra. Taking into consideration the
fact that all other calculations find themselves in a deadlock, the
reasons of such a behavior should be looked for in Serzh Sargsyan's
weakness and political poor judgment. The ruling party has been
simply looking for an opportunity of its staying in power at least
for a short-term prospect so that at the personal level not to have
problems with the leadership of Russia. At the state level I see
no opportunity of Moscow to take aggressive steps towards Armenia,
as in all the spheres - military, political, economic and energy,
our country belongs to Russia.
You have mentioned that the DCFTA would have created favorable
conditions in Armenia for investing in the economy. What is the
obstacle for investments today?
Investments are never made just for fun. Even Armenia's initialing the
AA/DCFTA would not have attracted investments to Armenia by itself. It
is only a tool to attract investments and Armenia should have used it.
Free competition, normal administration, cheap labor force and free
access to the main consumer markets are needed for the potential
investors seeking to obtain profit. All this was implied in the DCFTA.
So, is Serzh Sargsyan's geopolitical choice an obstacle for
investments?
Yes, it certainly is. Of course, Sargsyan's economists keep persuading
the people that once they join the Customs Union, the whole world will
rush to Armenia so as to produce something here and to sell it all over
the Eurasian Economic Union. In reality, this market is very corrupt
and not very rich. If you want to sell something in Chelyabinsk or
Yekaterinburg, you don't have to produce it in a country that does
not even have a common border with Russia, you can as well do it in
Chelyabinsk and Yekaterinburg.
A politician from Diaspora has mentioned $500 bln when speaking of the
aggregate capital of the Armenians worldwide. What prevents the owners
of that capital and the authorities of Armenia from putting aside the
empty rhetoric and investing at least 1% of that capital in Armenia?
First of all, it is necessary to calculate which part of that capital
is in the pockets of the powers that be in Armenia (I think, no less
than 10 bln USD) and what part they have invested in Armenia. In the
meantime, I see their investments in Belarus, Kazakhstan, Latvia,
France, and Los Angeles. I see what funds they spend abroad. It is
also a factor and our compatriots from Diaspora also see that. The
patriotism time of our compatriots and potential investors has gone
and today they look at the situation in Armenia more soberly, i.e.
from the viewpoint of the investment profitability. Once I offered
a well-known French concessionary company to consider projects of
construction of tunnels, flyovers and parking lots in Armenia.
However, after a preliminary study of the terms, the French came
to the conclusion that their entry to the Armenian market was
inexpedient. In other words, Armenia, where the concession is won
by a foreign company that technologically lags behind the Western
countries, cannot have good concession projects, because corruption
and protectionism are observed here. If we also take into account the
instability of Armenia's integration preferences and the uncertainty
of the economic situation caused by the sanctions against Russia, it
will finally become clear that one should not expect big investments
in Armenia in the near future.
http://www.arminfo.am/index.cfm?objectid=ADAE1DD0-53DB-11E4-B90C0EB7C0D21663
From: A. Papazian
ArmInfo's Interview with Hovhannes Igityan, expert at the European
Business Association, member of the Armenian National Movement
by David Stepanyan
Tuesday, October 14, 23:52
The intensifying sanctions against Russia have already resulted
in considerable reduction in transfers from Russia to Armenia,
which is joining the Eurasian Economic Union. To all appearances,
the authorities are not so concerned with this tendency. Are you
concernedwith the situation?
Of course, the transfers equal to the budget of Armenia play a very
much great part in the social and economic life of the republic.
Nevertheless, it is wrong to watch them as a long-term panacea for
local problems. Today the transfers to Armenia are declining because
of worsening of the living standards in Russia, and because of the
worsening of the attitude to the labor migrants. This results in the
situation when it becomes more and more difficult for the Armenians to
work in Russia. Many of them are taking their families to Russia. This
results in considerable reduction of transfers to Armenia. Therefore,
Armenia's development should be linked not with transfers but with
direct investments. The government, staying aside, simply watches
how social problems have been resolved without its meddling, and
make it possible to avoid at least food riots. One should take into
consideration that 20% of transfers enter the state budget in the
form of VAT, the rest also enter the state budget as various indirect
taxes. Nevertheless, to ensure the high quality development of the
Armenian economy, industry, we need direct foreign investments,
first of all.
Would you specify the figures and time of investments, which will
relieve Armenia of its dependency on transfers?
The matter concerns 2-3 billion EUR. Such investment in the Armenian
industrial sector will take 3-5 years. Our calculations show that
investment of the first billion of EUR will bring 100-120 thsd job
places, the second billion - 80-100 thsd, and the third one - even
fewer. That is to say, on the bad forecast we speak about 200-220
thsd job places with a good salary. It is impossible to account more
correctly. And if we take into consideration that one job place feeds
a family consisting of 4-5 persons, in that case we shall have 800
thsd-1 mln beneficiaries, that is to say, the number of our citizens
working abroad and sending transfers to the rest staying in Armenia.
In what fields may these direct investments be placed?
The President's economists keep wondering what Armenia could export to
Europe if it joined the Deep and Comprehensive Free Trade Area. The
actual purpose of DCFTA was not to develop own production and to
export something but to create conditions that could encourage
investors worldwide to move their productions here. The matter
especially concerns the businesses in the countries having serious
social problems, particularly, Spain Greece, Italy.
Our labor migrants pin big hopes on Armenia's Accession to the
Eurasian Economic Union. Will the accession improve their working
and living conditions?
I do not think that Armenia's joining the EAEU may change anything
in the matter of the general attitude to the Armenians. However,
this attitude has been worsening as from time to time the Russian
politician-"patriots" watch labor migrants as a factor that hinders
local residents to get a job. The great majority of migrants have
been working in a shadow sector of the Russian economy that belongs
to the persons close to the power who are allowed to do practically
everything, just the same way as in Armenia.
On October 10, the Agreement on Armenia's Accession to the Eurasian
Economic Union was signed amid the unprecedented toughening of the
sanctions against Russia. How could you explain this paradox?
Perfectly realizing the role of Russia and its potential in our region
and at the post-Soviet area, the politicians saying that Armenia should
not join the Eurasian Economic Union understand very well the possible
consequences of such a step for Armenia. Nevertheless, even in such
conditions, in Minsk Serzh Sargsyan should have demanded some time for
Armenia to revise the opportunities and risks of Armenia's joining the
EAEU. Later it was necessary to declare about the balanced using of
DCFTA with the EU by Armenia, the available potential of free trade
with Russia and cooperation with the Eurasian Economic Union being
formed. All this might be done without damaging Armenia.
Meanwhile, today Armenia is practically the only country, which in
the conditions of the global consolidated position regarding Russia,
stands next to Russia ex cathedra. Taking into consideration the
fact that all other calculations find themselves in a deadlock, the
reasons of such a behavior should be looked for in Serzh Sargsyan's
weakness and political poor judgment. The ruling party has been
simply looking for an opportunity of its staying in power at least
for a short-term prospect so that at the personal level not to have
problems with the leadership of Russia. At the state level I see
no opportunity of Moscow to take aggressive steps towards Armenia,
as in all the spheres - military, political, economic and energy,
our country belongs to Russia.
You have mentioned that the DCFTA would have created favorable
conditions in Armenia for investing in the economy. What is the
obstacle for investments today?
Investments are never made just for fun. Even Armenia's initialing the
AA/DCFTA would not have attracted investments to Armenia by itself. It
is only a tool to attract investments and Armenia should have used it.
Free competition, normal administration, cheap labor force and free
access to the main consumer markets are needed for the potential
investors seeking to obtain profit. All this was implied in the DCFTA.
So, is Serzh Sargsyan's geopolitical choice an obstacle for
investments?
Yes, it certainly is. Of course, Sargsyan's economists keep persuading
the people that once they join the Customs Union, the whole world will
rush to Armenia so as to produce something here and to sell it all over
the Eurasian Economic Union. In reality, this market is very corrupt
and not very rich. If you want to sell something in Chelyabinsk or
Yekaterinburg, you don't have to produce it in a country that does
not even have a common border with Russia, you can as well do it in
Chelyabinsk and Yekaterinburg.
A politician from Diaspora has mentioned $500 bln when speaking of the
aggregate capital of the Armenians worldwide. What prevents the owners
of that capital and the authorities of Armenia from putting aside the
empty rhetoric and investing at least 1% of that capital in Armenia?
First of all, it is necessary to calculate which part of that capital
is in the pockets of the powers that be in Armenia (I think, no less
than 10 bln USD) and what part they have invested in Armenia. In the
meantime, I see their investments in Belarus, Kazakhstan, Latvia,
France, and Los Angeles. I see what funds they spend abroad. It is
also a factor and our compatriots from Diaspora also see that. The
patriotism time of our compatriots and potential investors has gone
and today they look at the situation in Armenia more soberly, i.e.
from the viewpoint of the investment profitability. Once I offered
a well-known French concessionary company to consider projects of
construction of tunnels, flyovers and parking lots in Armenia.
However, after a preliminary study of the terms, the French came
to the conclusion that their entry to the Armenian market was
inexpedient. In other words, Armenia, where the concession is won
by a foreign company that technologically lags behind the Western
countries, cannot have good concession projects, because corruption
and protectionism are observed here. If we also take into account the
instability of Armenia's integration preferences and the uncertainty
of the economic situation caused by the sanctions against Russia, it
will finally become clear that one should not expect big investments
in Armenia in the near future.
http://www.arminfo.am/index.cfm?objectid=ADAE1DD0-53DB-11E4-B90C0EB7C0D21663
From: A. Papazian