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168.am wrote: Judging from foreign investment in the real economy, Armenia’s situation is catastrophic. The authorities talk about world-class growth, but there is no investment. Investment is falling sharply.
Both general investment and direct investment declined.
According to official statistics, in the first quarter of this year, the net inflow of foreign investment absorbed by the real sector decreased by nearly US$131 million.
Net direct investment flows decreased by more than $73 million.
Compared with the previous year, the absolute change in investment was negative $230 million and the absolute change in direct investment was more than $181 million.
Of course, the investment situation in Armenia has been a focus of attention in recent years. Last year, the actual utilization of foreign capital was only US$353 million.
This year, as we’ve seen, even those small investments have declined.
The authorities have taken all measures to prevent foreign capital from entering the Armenian economy.
Foreign capital does not feel safe in Armenia, which is one of the main reasons why capital does not flow into Armenia. And not only does it not come, it also goes out. The well-known example of the Yelaskh Metallurgical Plant is enough for foreign investors to avoid the temptation of investing in Armenia.
We have reached a point where even within our sovereign territory, the authorities are unable to ensure the safety of investments.
But the problem is not just external security.
Armenia’s name has been frequently mentioned in cases heard by international arbitration courts in recent years, thanks to the efforts of the authorities, who foreign investors accuse of violating their rights, including based on political expediency.
They filed a massive lawsuit for over a billion dollars.
When the government uses various shady deals to acquire shares of well-known companies operating in Armenia with foreign capital, sometimes immediately during a change of ownership, it can’t help but worry potential investors.
All of this has a direct impact on the country’s investment climate and the intentions of potential investors. Although this does not seem to bother the authorities.
They are willing to do anything for their political goals. It doesn’t matter what consequences they will have in the future, what risks they will face, and what huge fines the country will face for their risk-taking.
The largest decreases in net investment flows in the real sector of the Armenian economy this year were in the Virgin Islands and the United Arab Emirates, which last year received about $100 million in investments through a deal that hosted a world-class event and began talking about repositioning and shifting partnerships with other countries.
The decline in investment in the Virgin Islands is almost entirely related to metal mining.
As a result, net investment flows in metal ore mining have declined, although the sector remains one of the few in the economy that still generates investments. There are very few such sectors in the Armenian economy. Energy is one of the few areas, where net direct investment flows this year amounted to about $25 million. They come mainly from Russia and France.
There has been a big drop in retail investment. It fell mainly on one country: the United Arab Emirates.
The net flow of foreign investment in the telecommunications sector decreased by more than $100 million, while the net flow of direct investment decreased by $42 million. The decrease in direct investment was entirely at the expense of Cyprus investment.
In many cases, it is difficult to consider investments in the Armenian economy as real investments, because they are simply the result of a change in ownership. One owner is replaced by another. In such transactions, people traditionally consider the money in circulation as an investment, but they are not investments in the literal sense.
Sometimes, Armenia makes such “investments”. That is why the technical state of our economy is so bad.
Little real investment has been made that could have helped retool the economy and increase productivity. There are many reasons for this, related to security, the risk of war, an unstable environment, and many other circumstances.
As long as the authorities continue to lead the country through such trials, investors will not come to Armenia. Moreover, those who years ago could not even imagine that one day they will find themselves in such a situation that the government will not be able to protect the security of investments from direct external influences on the sovereign territory of their country.
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