ArmInfo. Even with small volumes of the market, limited infrastructures and a low level of PPP (purchasing power parity), Armenia is able to triple the volume of investments in GDP. This conclusion was made by the authors of the study entitled "Investment Environment of Armenia. Legal Field and Existing Problems", which was conducted with the assistance of Konrad Adenauer (is the political foundation of the Federal Republic of Germany) and the Economic Journalists Club of Armenia.
According to the head of the department of statistics, an expert of the NGO "National Center for Public Policy Research" and the co-author of the study Armen Kotyan, they tried to find an answer to two main questions in their work, namely, how basic conditions created in the republic contribute to attracting investment and, second, how much effectively use them.
Thus, using the example of 72 countries comparable to the volume of the market with Armenia, the authors tried to understand whether it was possible in the current conditions to attract more investment or whether it was possible to attract them more than was possible in the last 5-10 years. Based on the regression analysis, factors that contribute to a greater volume of investments in the same conditions were identified: ownership, effective implementation of antitrust policy, tax incentives for investments, tariff limits and the optimal ratio of labor productivity and payment for a given labor, export volumes and domestic and foreign market.
In particular, the authors of the study concluded that if Armenia uses the starting conditions in such a way as they are used in countries comparable to the size of the market, the country will be able to attract foreign investments in the amount of 7.2% of GDP, from the actual average over the past 5 years at a rate of 2.7%. That is, experts say, without changing anything - with effective use of the starting conditions, strengthening the systemic links between the individual components, the current volume of investments can be tripled. Comparing the per capita GDP in Armenia with the same indicator in 38 countries with the same economic opportunities, the authors of the study concluded that, using the existing starting conditions, the minimum investment can be increased to 5.1% of GDP.
As Armen Ktoyan emphasizes, traditionally an important condition for attracting investments is the availability of appropriate infrastructures. "We often hear objective criticism that Armenia lacks relevant infrastructures that impede investments. But, examining the experience of 47 countries comparable to Armenia in the quality of infrastructures, we found that with proper management of the starting conditions and neutralizing the factor of infrastructure constraints, Armenia can attract investments of 4.95% of GDP or $ 400-500 million, "he said. That is, in the conditions of small market size, limited infrastructures and a low level of PPP, which in turn is due to low GDP per capita, Armenia is able to increase investment to 4.9- 7.1% of GDP.
The authors of the study also tried to answer the question - why should an investor invest in Armenia, and not in any other country in the region or the world? As Ktoyan pointed out, for several years there has been a tendency of a decline in foreign direct investment (FDI) in developing and transition economies. In particular, in countries with transitional economies, such as Armenia, the level of investment in 2018 decreased by 27%, which suggests that such economies are becoming less attractive to investors. And this is despite the fact that in such countries the rate of return on investment is one of the highest - 11.8%. Meanwhile, a survey among managers of 500-1000 large global companies showed that 29% of respondents are willing to invest in developed countries, and in developing countries out of 100 respondents only 15. "Such countries for business leaders have the same attractiveness as African ones," the expert explained.
Having studied the global trends in investment potential in a particular area, the authors of the work concluded that the situation inherent in the Armenian economy is not endemic. In developing countries and countries with economies in transition, the same areas that today are "leaders" in attracting investment flows in Armenia have investment attractiveness. These are spheres of agriculture, food and alcohol industry, telecommunications. Nevertheless, in the formation of capital, Armenia today lags far behind Azerbaijan, Georgia, Moldova and Kazakhstan - with an indicator of 19%.
The authors of the study conducted a comparative analysis of the FDI / GDP indicator. "Comparing the indicator in Armenia, with a similar indicator in comparable countries, we see that we are ahead of Russia, Moldova, Iran, but we are far behind Georgia, Tajikistan, Azerbaijan," the economist said. It should be noted that the authors of the study on investment attraction issues in Armenia, Armen Ktoyan, and the Deputy Chairman of the Standing Committee of the National Assembly of Armenia on Finance, Credit and Budget Issues, Artak Manukyan, used the publications of the RA Statistical Committee, World Bank Indicators and other international reports development of the business environment, as well as publications of local and international experts.
