Political instability hinders economical development in Armenia

6 December 2018 18:11 (UTC+04:00)

By Abdul Kerimkhanov

Armenian population that hopes for stabilization in their economy following the elections, will most likely have to put up with the crisis situation in the country again.

An investment boom is not expected in Armenia in the near future, said Armenian economist Atom Margarian, Sputnik Armenia reported. He added that internal resources, their generation is associated with processes in the real sector of the economy and the base of these resources has narrowed significantly over the past decade due to the economic policy.

Businessmen avoid investing due to the internal political situation, he noted. On the other hand, there were also subjective reasons: for example, the situation around Amulsar gold mine, and after all this sector could provide the lion’s share of investments.

"In these conditions, it is difficult to expect an investment boom to occur in the near future, given that a new parliament, and a new cabinet of ministers still need to be formed. The most important thing is what the program of the new Cabinet will be for the next five years," noted Markarian.

Economist considers that it is already possible to talk about a reduction in investment, although the results for the quarter have not yet been summed up and there are no specific figures yet. In this context, he is convinced that investment activity can increase only after the settlement of the political situation in the country.

Most of the investment, as in the past year, came to the operation of Amulsar gold mine. But in 2018, the flow of money here has decreased. Mining work does not begin, as the authorities again check whether the mine will not harm the environment. Therefore, investments here have decreased from 58.9 to 20.6 billion drams (about $42 million).

Earlier, Prime Minister Nikol Pashinyan also stated that the political situation in the country impedes attracting investments. He noted that many businessmen, including Armenians of the Diaspora, are ready to invest in the Armenian economy, but do not do this because of an incomprehensible political situation.

In turn, Beniamin Matevosyan, an analyst at the Center for Public Diplomacy, drew attention to the fact that investment and capital like calmness, predictability and political stability, which Armenia lacks recently. He noted that recent populist statements from Armenian authorities are unlikely to lead to attracting investment.

A vulnerability of capital, in particular, a large business also plays a negative role. The expert also draws attention to the fact that Lidian Armenia company, despite the license and investments, cannot continue operations at the Amulsar field.

"If suddenly "Lidian" leaves the Armenian market, it is obvious that the company will appeal to the international arbitration court. This, in turn, will have serious image consequences for the country, and will also mean a loss of capital," Matevosyan considers.

Such situation leads to the fact that Armenia in the business sphere is considered as an unstable partner. The issues of ensuring political stability and, above all, the protection of business should be resolved after the elections.

Grant Mikayelyan, a researcher at the Caucasus Institute, draws attention to the fact that about $100 million of the $150 million invested in the country since the beginning of the year falls in the first quarter. He considers that political events in the country influenced this situation.

The decline in domestic investment can be indirectly noticed in the decline in the pace of construction. He believes that  Armenia should not expect large investments by April 2019. 

Armenia, which cannot attract investments from foreign countries, is in deep economic crisis. The ongoing war, immigration, lack of jobs, instability, corruption has a negative effect on investors' willingness to cooperate with such country.

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Abdul Kerimkhanov is AzerNews’ staff journalist, follow him on Twitter: @AbdulKerim94 

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