"Fact" daily writes:
For months, many experts have been saying that the process of nationalization-nationalization, and more precisely, expropriation, of the HEC will certainly reduce the positive trends related to Armenia's investment environment.
Lilia Amirkhanyan, an expert of the "Hayatsk" analytical center, says that if we conventionally imagine the investment environment as a building, then the developments related to the HEP are the demolition of another nail, axis from that building. "Since 2018, we have found ourselves in an unstable situation for investment attractiveness.
The political events of 2018 were problematic for investment attraction, because any shock, revolution for the economy initially creates a certain uncertainty, a waiting situation. In order to carry out his activity, the investor at least waits to understand what kind of environment he is dealing with, what the rules of the game will be, will they change or not, what will they be in case of change, etc.
This added to the factor of an already problematic investment environment for us, that is, we have an external security component. For years, they tried to increase investment attractiveness as much as possible, but we had an objective factor.
Now, to all that, the HEC factor has come to add, with all its developments and consequences. In general, it is not possible to expect anything positive for investment attractiveness from these processes for a very simple reason. The investment environment is an environment formed by a number of factors and circumstances, it has political, economic factors, the latter more widely - tax policy, creating an environment for business, etc.
The investment environment is the set of factors by which a potential investor evaluates whether it is worth investing and operating there or not. One of those factors is political instability, and economic policy and the processes implemented by it refer to the remaining processes. If we go back to the example of the HEC, we have a set of several phenomena.
On the one hand, this is clearly a political process, it is difficult to deny it in a reasonable way. On the other hand, the declared part of this process is problematic. Regarding the declared part, we had a claim: the authorities aimed at nationalization.
If we leave aside the political factor of nationalization, when we study the international practice, even in the case of positive attempts at nationalization, the country goes through an unstable and dangerous process, and when the nationalization is successful, let's say, the organization is in a crisis situation, to get the country out of that situation, it does nationalization and solves the problem. In the case of successful cases, it may be achieved in a certain period of time, but it is achieved," says Amirkhanyan in a conversation with "Past".
He emphasizes that, in our case, the economic justifications for nationalization are also not valid, that is, the process of nationalization of HEP is not fully economically justified. "At the same time, let's note that if we are talking about nationalization, because there were announcements about it, but at the same time there are announcements that it is possible for another owner to acquire it. We have a problematic situation in terms of investment attractiveness, and we will face a bunch of problems if it is acquired by another private organization, and we will face another bunch of problems if the process goes along the path of nationalization.
In any case, the probability of these problems is quite high. These processes have already affected our investment attractiveness. At least the statistics today give reason to think about it. During the six months of this year, we have invested only 5 billion drams, which is probably equivalent to not having any investment, we are talking about foreign direct investments.
Against that background, do we have the right to assume that perhaps these actions brought today's statistics? At least there is no justification for the opposite," says our interlocutor. On the other hand, we have internal investments in our economy, citizens who want to establish a business or expand an existing one.
The expert says, in this regard, we may be in a somewhat paradoxical situation. "The negative precedent of investment attractiveness and projects is a precedent for both foreign and domestic investors. But during these same processes, we see a certain internal vitality, and this paradoxical situation may also be due to the paradox of the growth of our economy and the economy itself.
In the previous years, there were clear external influences on our economy, they left their "result" on the economy with statistics, growth in some sectors, etc. As a result of those influences, we had vitality in some directions, and it was, of course, not to the desired extent, but it was also capitalized to a certain extent, for example, in the banking system, it seems that we are dealing with the capitalization of all that, because until now the financial services, the profitability of the banking system are at a fairly high level, although the external factors that caused it seem to have been completely canceled.
The second circumstance is that our economy today is under the influence of great growth in the construction sector, and it is no secret that very large investments are being made in that sector. For certain reasons, an environment has been created for construction activity: income tax refunds, etc., it is a direction that provides profitability, even if temporary, but there is economic interest here, and therefore also internal activity.
It is good that at least we have a certain vitality in that regard, but it is problematic in that, no matter how clear these effects are, they are of a temporary nature. No one can claim that in the near future there will not be any other factor under the influence of which the vibrancy of the same sectors will be preserved. Maybe there will be, maybe new factors will appear, this is not ruled out, but in any case, the fact that we have these temporary effects today, at least give rise to concerns and fears regarding the future growth of those same areas.
What will happen to the vibrancy of these sectors if suddenly there are no other factors? Let's go to a more global macro level: what will happen to economic growth, domestic investments, business activity, etc.? There is a rather large factor of instability here.
After all, attracting internal resources for the economy, be it investments or internal resources of public debt, has a certain maturity. They are generally shorter-term and highly profitable. These seem to be temporary, but in the longer term we have bad precedents that cannot be ignored, that is, in the case of such processes, it is difficult to imagine an investor who will invest in a long-term project.
In the case of the construction of the building, there is an expectation of a medium-term repurchase, but now with such uncertainty and such precedents, it is difficult to imagine an investor who will invest in large long-term projects of 10, 15 years, he adds. He emphasizes that the expert community has been saying for years that it is not bad that there are short-term effects.
"But the problem is that, it seems, we are more focused on extracting something from short-term effects, manipulating them, than thinking about long-term sustainable growth. We have 6.2 percent economic growth for the third quarter. For our economy, this is a serious number, quite a good indicator.
A critic can say, you are talking about cancellation of external influences, and we provide 6.2 percent growth in the third quarter. When we look in comparison with the 3rd quarter of the previous year, that is, which directions have grown and in what amounts, that 6.2 percent was formed by double-digit increases in construction and services, but next to it, for example, the growth of the manufacturing industry is 1.9 percent. It turns out that today construction and service provide these increases, but the growth rates of our key directions, which imply ensuring long-term stable growth, are quite modest.
If this phenomenon continues, we may face the process of deindustrialization of the economy, when the economy becomes not a creator, but a consumer. And in the case of the state, the long-term vision is more important than the current situations.
We can talk about the ever-increasing debt, when you have concerns about long-term growth, debt servicing will sooner or later be a problem. This chain continues in all possible directions and areas," concludes Lilia Amirkhanyan.
Lusine Arakelyan Details in today's issue of "Past" daily
