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AmCham Armenia Believes President Aliyev’s Statements on War Affect Investment Climate in Whole Regi

Written by Madona Gasanova

01/09/2013 20:00 (226 Day 14:52 minutes ago)

The FINANCIAL --  “The statements of the Azerbaijani President regarding possible war with Armenia have had negative implications not only for the business and investment climates of Armenia and Azerbaijan, where some major oil companies have serious interests, but also for the entire region. Though I personally do not know of any potential investment to Armenia which did not happen because of the statements of the Azerbaijani President,” Diana Gaziyan, Executive Director at the American Chamber of Commerce (AMCham) in Armenia, told The FINANCIAL.

 

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Diana Gaziyan, Executive Director at the American Chamber of Commerce (AmCham) in Armenia:

“When talking about business relations between Armenia and the United States, one shall not forget the large Armenian Diaspora in the U.S., which makes the ties between the two countries even stronger. As Armenians are rather entrepreneurial by nature, many Diaspora Armenians are involved in business activities and are keen to invest in their motherland. In fact, many U.S. investments in Armenia are Diaspora-driven. However, the potential of such business links is not fully realized yet, and a comprehensive strategy is needed to bring the business relations with the Diaspora to the desired level.”

“Armenia is a small, landlocked country, and the economic blockade by Turkey and Azerbaijan only adds to the situation by minimizing its economic opportunities to a certain degree. This situation makes it necessary to pay special attention to reforming the business climate in the country with the goal of supporting domestic business and attracting foreign investors. Regarding corruption, unfortunately, this is a problem in many transition economies, and Armenia in this respect is no exception. It is not possible to eliminate corruption overnight, and consistent measures of a systemic nature have to be adopted in order to effectively combat corruption.

Armenia has not yet fully addressed all challenges from a business perspective, but a number of reforms affecting its business climate and mitigating corruption risks are being implemented. These reforms are in the areas of tax reporting, trading across borders, registering and liquidating a business, obtaining construction permits, getting credit, protecting investors, enforcing contracts, registering property, etc. Another large programme aimed at streamlining legislation and reducing bureaucratic and corruption risks is the “Regulatory Guillotine Program”, implemented by the Armenian Government with donor support (from the OSCE, Austrian Development Agency, USAID, World Bank , and UNDP). This ambitious programme aims to remove obstacles and redundancies in the legislative field, cutting unnecessary expenditures, simplifying regulations, and raising the efficiency of the management system in general. AmCham is a member of the Business Advisory Council, which along with the “National Centre for Legislative Regulation,” under the Armenian Government staff, works to address the challenges facing the business environment and other sectors through formulating and presenting recommendations and examples of “best practices”.

 

Q. What are the main problems that investors face in Armenia?

A. Armenia is a relatively small market, with no access to the sea and with two of its four borders closed. This situation translates into high transportation costs for local and foreign businessmen, who pay extra charges to Georgian companies dealing with the transportation. I can add to this the need for comprehensive reforms in the areas of tax and customs legislation and administration, ensuring fair competition by applying the same rules for various business players, and improving the rule of law.

The Armenian Government realizes the need for addressing these issues and moves towards liberalizing the business environment and making it attractive for foreign investment. For example, Armenia has improved its rankings in the annual “Doing Business - 2013” report of the International Finance Corporation (IFC) and the World Bank . It has moved up 8 places in that report’s ranking, and now occupies 32nd place in the list of 185 countries after improving its indicators for a number of categories, among which is “Protecting Investors” (from 98th to 25th place).

Attracting foreign investment, including from the U.S. and Europe, is of the utmost importance for a country like Armenia. Not only does it promote the economic development of the country, but it also affects its business culture through the introduction of corporate governance principles and the implementation of international best practices. The foreign companies in Armenia are also active and outspoken in terms of raising issues, advocating for their business rights individually and through using various platforms, such as AmCham, as well as bringing the know-how in their respective areas, which puts them at the forefront of reforms in Armenia.

"Currently, AmCham has approximately 100 members, 20 percent of which have foreign CEOs".

Q. What is the total amount of investment made by the U.S. in Armenia in 2012? In 2013?

A. The level of U.S. investment in the real sector of Armenia in 2012 constituted around USD 14.6 million, of which about USD 3.7 million were in the form of direct investments. For 2013, the information available is as of March 2013, with the total investments in the real sector constituting around USD 3.9 million, of which about USD 122 thousand were direct investments.

Q. What makes the U.S. interested in Armenia?

A. The primary interest is its people. Armenia has a talented and diligent workforce, which is a big plus for the U.S. and other foreign investors when it comes to making an investment decision. Armenian people are brainy in technical sciences, and it is no wonder that the information technologies (IT) sector is one of the thriving industries in the Armenian economy. The sector’s productivity is rather high, while the salaries are smaller compared to other markets. Major U.S. companies like Microsoft , Synopsys, LTX-Credence, Mentor Graphics, and other international companies are present in Armenia. The IT sector is a priority direction for the Armenian Government, and is seen as a growing and promising industry. With the purpose of helping Armenian companies attract foreign investors and raise their competitiveness, the Armenian Government has set up the Enterprise Incubator Foundation (EIF), with the assistance of the World Bank .

Tourism is another thriving sector that needs to be mentioned. According to the World Economic Forum (WEF), Armenia improved by some 11 points compared to the previous year in the “Travel & Tourism Competitiveness Report 2013”, taking 79th place in the list of 140 countries. As the first Christian nation in the world with an ancient culture and unique traditions, Armenia has a great historic and religious infrastructure to offer to tourists. It also has beautiful nature, which can support ecotourism, as well as an extremely hospitable people.

The tourism industry has been at the centre of the attention of the government and donor organizations. The First Tourism Development Initiative was developed in 2001 by the USAID funded International Executive Service Corps (IESC). Since then, the Armenian Government, donor organizations, and the private sector have invested in the industry extensively to promote the country internationally as a tourism destination, and to develop the internal infrastructure.

Armenia’s tourism product is mainly “classic tours”, which include visits to churches and monasteries, national parks, and other locations, as part of an introduction to the history and culture of the Armenian people. Armenia’s key geographical markets, which have the greatest potential as key source markets for Armenia, are the USA, Russia, France, Italy and the UK. In fact, the products and markets are tightly linked. It is important to ensure that Armenia’s core tourism products are designed based on the target market demand and the natural and heritage resources with which the country is endowed. Currently, the Marketing Strategy and Country Branding of the country is being developed by the National Competitiveness Foundation of Armenia (NCFA) and USAID.

The banking and financial sector may also be of interest to the U.S. and other international investors. In particular, the banking sector is rather stable and developed. As assessed by the World Economic Forum (WEF), Armenia is ranked 51st among 144 countries in the category of banking system stability, with only Estonia ahead of it among former Soviet states (ranked 36th). The stability of the banking sector is secured through the strong regulation and supervision by the Armenian Central Bank. Currently, banks operating in Armenia are well capitalized and display a satisfactory liquidity level.

Other sectors of interest to the U.S. and international investors may be agriculture, energy, mining, food processing, pharmaceutical, etc.

When talking about business relations between Armenia and the United States, one shall not forget the large Armenian Diaspora in the U.S., which makes the ties between the two countries even stronger. As Armenians are rather entrepreneurial by nature, many Diaspora Armenians are involved in business activities and are keen to invest in their motherland. In fact, many U.S. investments in Armenia are Diaspora-driven. However, the potential of such business links is not fully realized yet, and a comprehensive strategy is needed to bring the business relations with the Diaspora to the desired level.

Q. Corporate Social Responsibility (CSR) has been one of the top issues supported by AmCham in Georgia, which has been less developed in the country. How developed is CSR in Armenia?

A. The concept of Corporate Social Responsibility (CSR) is relatively new in Armenia. AmCham strongly supports and promotes this concept. As a member of the UN Global Compact Steering Committee, we co-organized a conference on CSR in 2008 and since then, have been holding discussions and conducting surveys among our members on this topic. The purpose of these activities is to instil the CSR culture in Armenia, to develop multi-stakeholder business partnerships around CSR projects, and to educate businesses on the management of CSR-related projects. Currently, within the framework of the UN Global Compact Steering Committee, AmCham is involved in selecting a winner of a tender on a CSR project, announced earlier this year.

 

 

 

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