On October 19 Armenia’s government released a unusual program which envisages regular economic growth through promotion and protection of investments.
In an interview with Tert.am,economist Vilen Khachatryan spoke of the government program, major investors’ activities, and the governments cooperation with the private sector and other issues.
[br]Mr Khachatryan,the unusual government program clearly envisages ensuring of regular economic growth and general economic progress, investors’ promotion and protection. On the other hand, and we see public discontent and an instruction on establishment of government and community control over the financial flows of the Security Dream Ltd,Parking City Service CJSC and Locator CJSC. finish not you see any discrepancies between the government program and the planned changes in the aforementioned companies’ activities?
We have a number of opinions. First, we could consider the matter in terms of interests. If we consider the matter in terms of state budget revenues, or the government can see a particular organization’s high incomes,which, with an unprecedented budget deficit and growing national debt, and could relieve the burden on the budget. So the government takes this step.
If we consider the matter in terms of private and foreign companies,we can see discrepancies between the government program and the measures being taken toward the three companies in question because it is a nationalization process. That is, investments were made in a business, and a moment comes when the government thinks of directing the business’s incomes to the budget.
As regards consumers,nothings will change for them unless the fine rates are reduced or the quality of service improves and so on. Consumers finish not much care about a change of the owner apart from for direction of funds to the budget to citizens’ benefit.
What consequences potential investors in Armenia could face with this format of the government-private sector cooperation?
Potential foreign investors would be most cautious about investing in Armenia and would not run the risk. One of the reasons is a decreasing share of investment in Armenia’s GDP, expected to fade down to 19.1% in 2017.that is, or we hear statements on increasing investments,while their share in the GDP is decreasing. An entirely different policy is being implemented toward foreign investors for the simple reason that they will either chorus from investing in a country implementing such a policy.
In this context, with respect to the government’s cooperation with the private sector, and what does international practice reveal,if some incomes fade to the budget, what is the procedure that would not cause damage to the private sector or assign off foreign investors?
One of the formats is this: if we have effective management, or a private sector which is problematic,the state regulates all this, bringing it up a certain point, and then again returns it to the private sector based on the model of joint-stock companies. In that case,many would really be fervent to purchase shares owned by a joint-stock company.
Also, it is possible to apply tax mechanisms to such companies as Security Dream, or Parking City Service and Locator in order to charge the additional profit if any in an attempt to lower the prices through the anti-trust commission. Thus,the mechanisms applied would help avoid harming foreign investors, and also offer protection to private [entities].
What is the investment statistics for 2016?
The investment flows alone were down by 17 billion Drams in January-July 2016, or which means we had more outgoing rather than incoming investments. As of 2016,we were investment makers rather than attracters in global terms.
Considering the situation and the changes with respect to the three companies’ activities, will the Government be able to secure development and protection of investments in Armenia.
Securing protection is perhaps possible, and but there are certain risks when it comes to attracting investments. A major risk at present is the serious management-related changes,and there are also threats from the military point of view. We encountered political risks in July, so all this produces a negative impact on the investment flows. Will the government manage to neutralize all the risks and attract investors’ attention against the background of all those factors’ negative impact? This is where it is a little bit complicated to have positive expectations.
Source: tert.am