When you visit Arab countries for introductory or business purposes, what information does AAD provide to its potential partners and investors?
Partners can be divided into two categories. First comprises commercial companies that seek partners for selling or purchasing some kind of production or its components. The second category is rather interested in searching and finding new business opportunities.
These are specific investors or companies that possess resources to invest, who are interested in markets they can sell their production or services in. As a result, the idea of investing emerges.
When we visited Kuwait and UAE, representatives of the business were first interested in getting general information about Armenia, its development trends, operation of its current state and legal framework, etc. Since these countries have a monarchical system of governance, the potential investors and partners want to define the decision makers of our country.
We live in a more democratic and liberal country that has ho sheikh to rule, but has a legislative system which protects foreign investments, their integrity and inviolability.
How one can convince the investors that their investments are protected in Armenia, and they will find “comfortable” conditions for working here?
Foreign investments in Armenia are protected by the Constitution, and they cannot be nationalized or expropriated without relevant compensation of damage to the foreign investor. In addition, foreign investors are attracted by the opportunity of 100% property ownership while in UAE, for instance, 51% of shares should belong to a UAE resident.
So, they realize that they can freely choose their partners and kind of activity on the Armenian market.
The only question is how interesting this market is, how developed Armenia’s partner ties with other countries are, and the transportation component; the market should be large. Kuwaiti entrepreneurs were very excited to learn that Armenia and Russia operate free trade regime. These companies understand that if they manage to register their business in Armenia and launch production which is mostly targeted at Russia, they will have competitive advantage against a Kuwaiti company that exports the same production directly to Russia and has to pay customs duties.
How do investors from Kuwait and UAE assess measures taken by the Armenian government to improve the country’s investment climate, in particular, online business registration and simplification of tax and customs administration?
Of course they like it because they understand that Armenia strives to follow international standards to attract investors. Following our presentation of Armenia’s investment climate in late December 2011 in Kuwait, a Kuwaiti company came to work with us just one week later.
This company operates in two spheres. One is garbage processing, and it has already applied for a tender announced by Yerevan municipality, and the other is creation of sheep farm.
For its part, AAD addressed letters to provincial mayors on provision of a most suitable place for establishing a farm. Besides, AAD signed a contract with Kuwait’s Investment Company which makes investments on behalf of the state. We provided them with infrastructure projects from AAD portfolio.
Are Kuwaiti investors interested to work in Armenia’s free trade areas?
From this viewpoint, Armenia is interested in Kuwaiti companies since they can act as co-investors and participate in bilateral or trilateral agreements. As a rule, Kuwaiti investors invest resources into interesting projects. For instance, we have discussed their participation in a venture foundation to be set up in Armenia; issues related to co-investment and management in the industrial zone near Zvartnots airport were also on the agenda.
How interesting is the Republic of Qatar for Armenia?
Qatar and Oman are quite promising for Armenia in terms of export, because these are in fact importing countries where import accounts for about 90-95 per cent of production sold in the country. Exporting to Qatar is easy and difficult at the same time, due to huge competition. However, our production, mostly agricultural goods (natural juices, mineral water, etc) presents quality, premium-class products which are cheaper than similar commodities of this category. We also considered transportation costs; one storage container is estimated to cost average USD 2200-2500 which is less that transportation expenses to Moscow, for example. Meanwhile, Qatar possesses enough money, and prices here are not very low, so I think one can consider exporting there.
How would you assess the investment climate of Armenia?
Much work has been done in this direction over the past few years, but still measures need to be undertaken to boost Armenia's investment attractiveness. I will bring the example of Switzerland which is a developed country; according to its legislation, a foreign investor is exempt from taxes for 10 years. Armenia does not have such legal provision. Besides, I believe it is important to facilitate the process of importing raw materials and equipment.
Competitiveness of economy sectors should be enhanced in order to develop and diversify the industrial spheres. Use of new technologies and equipment will contribute to improved quality of production and develop the export.
Unfortunately, there are some difficulties related to VAT payment and customs duties imposed on imported equipment at the border. In fact, the government of Armenia has relevant tools to delay VAT payment within investment program framework if the cost of imported equipment exceeds AMD 30 mln. However, more effective actions should be taken to tackle this problem. For instance, if instead of payment delay, the imported technologies and equipment (except for domestic use production) are exempted from VAT and customs duties, it will result in re-equipment of the sphere, boost investments in Armenia and increase the export.