EDB: Enhancing investment in Armenia is among our key priorities

Armenia has been a member of the EAEU for two years already. Does it manage to use the potential of the Eurasian Union effectively?

Armenia uses its potential even to a greater extent than some other member countries, although there’s still significant room for enhancements. In 2016, Armenia achieved progress in mutual trade intensification, which is an important area.

I believe that these export indicators are reassuring. Another area that should be given attention is, in my opinion, investment cooperation. It offers significant potential.

In what sectors could Armenia enhance its exports to the EAEU?

In the first place, I would like to point out that Armenia is rather competitive and can continue to augment food supplies to our countries. Other opportunities lie in Armenia’s human capital and cooperation in investment technology and high-tech sectors. Our countries should consider the possibilities for creating joint ventures in these areas to deliver goods and services to third country markets.

How do you estimate Armenia’s economic performance?

On the whole, I believe that Armenia had good results in 2016 despite a slowdown in the second half of the year. It should be taken into account that the external conditions for Armenia were rather complicated, especially with cuts in money remittances, from Russia in particular. It is important that such negative factors be compensated by increases in exports, in the first place. It will be very difficult for our countries to integrate and grow without such compensations.

In this, Armenia’s example is very important to other EAEU countries. I would suggest that this year we may witness a recovery in mutual trade between the EAEU countries and an increase in its share in the countries’ overall trade turnover. Last year, Armenia increased the share of its exports to the EAEU countries by almost 20 per cent. It is one of the examples of how our countries can use integration opportunities.

Statistics shows that Armenian goods are supplied primarily to Russia, not Kazakhstan or Belarus. What do you think in this respect?

We’re in the very beginning yet and it is evident that many spheres are still beyond our coverage. As for Armenia, I agree that we do see certain progress with Russia. At the same time, cooperation should be deepened with other countries as well. In particular, it is necessary to consider the removal of non-tariff restrictions and the use of investment cooperation to enhance trade. In this respect, all our countries need to work on lifting both tariff and non-tariff barriers.

I think this can be explained by the fact that the channel to Russia is developed better and, for this reason, Armenian manufacturers head for it. In addition, there was respective demand from Russia and the possibility to fill an empty niche.

As for Kazakhstan, Belarus and other countries, additional efforts are needed and investment cooperation would be helpful in this regard. I would also consider cooperation between small and medium-sized businesses of our countries. I believe there’s unused potential, as at present trade cooperation is built by and around large-sized companies and this may hinder integration.

What do you mean by investment cooperation? What amounts and spheres are contemplated?

As concerns investment cooperation, it is advisable to analyse interaction between the public and private sectors. The potential spheres in our markets are agriculture and the processing sector, for example mechanical engineering, where value chains could be created with the participation of Armenian producers.

This is probably the most fashionable topic in the current discussions within the EAEU – how to use joint efforts to integrate in the existing value chains or create new value chains so as to approach foreign markets through inter-country cooperation.

As for the amounts of investments, if we talk about Russia and Kazakhstan, these are the countries with high investment potential in terms of project fulfilment. However, in addition to the private sector and certain countries, development institutions such as EDB should also play a part.

We have projects in Armenia’s agriculture and transport sectors already. Infrastructure offers significant potential, which can be developed further. We also have co-financing projects with development institutions from other regions. I believe that this offers significant opportunities for augmenting investments in the Armenian economy while the global background remains complicated in terms of investments. In Armenia itself, we observed certain attenuation of the stimuli for investments and economic growth in the second half of 2016. This is the very reason why investments should be given special attention when devising growth stimulation measures.

Given that the Armenian economy has weakened to an extent, what will attract investors to Armenia?

It is obvious that predictability and long-term investment opportunities are important to any investor. As a macro-economist, I always advocate that our countries should follow certain rules as concerns predictability, in the macroeconomic sphere in particular. The EAEU has set certain limitations for its member countries. For example, the government budget deficit or government debt should not exceed a certain threshold. Overall, in 2016 Armenia had difficulties, partly due to the external environment, with attaining these thresholds, but these were rather medium-term benchmarks. The EAEU is currently conducting consultations on how to return to common indicators in case of deviations.

Does this mean that the increase in Armenia’s government debt in 2016 won’t influence significantly investment and capital inflows?

Exactly. Moreover, it should be taken into account that the threshold value of the government debt is set at 50% of GDP for our countries. It is 60% of GDP for the EU countries and the median for developed countries is 90-100%. Armenia’s performance is not bad in this context.

What are your forecasts for Armenia’s economic development in 2017? Will it be able to attain the planned economic growth of 3.2% by the end of the year?

We believe that the slowdown we observed in the second half of 2016 will be overcome. The Armenian economy can attain a growth of more than 2%, or within the 2-3% interval, during the year. This acceleration and certain stabilisation in the fiscal sphere that we also expect allow us forecasting that the situation with the government debt will stabilise with time. On the whole, we believe that this year should be somewhat better for Armenia as concerns its key indicators, including economic growth.

I don’t exclude that the planned indicator of 3.2% will be achieved. To this end, it is very important that after a rather successful previous year in terms of export growth Armenia continues to perform well during this year as well.

Prime Minister of Armenia Karen Karapetyan presented rather ambitious investment programmes in various spheres. Is it possible that the EDB countries will have interest in them and participate in these projects?

This is the main interest at the moment and it should be the main focus. It is very good that Armenia has such a list of projects because when an investor considers a country it is very important that it has a list of priority projects. I think that our countries and our development institution will consider these projects thoroughly now. For us, augmenting investment in Armenia is one of the key priorities and we will definitely analyse very carefully all the opportunities, in infrastructure in particular.

I believe that identifying and announcing these projects was a correct step and that our countries will engage in discussions of respective investment opportunities. After a certain period of discussions, we may expect that some key players from our countries will express readiness to join these projects.

Source: ARKA (information agency, Armenia)

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