IT’S A GOOD TIME TO LOOK AT ARMENIA
By Sonia Medzadourian Crow
Armenia’s transition to a market economy remains a work in progress, but this is a good time for the U.S. business community to look at Armenia. Armenia has built an exceptional track record on reform, which has brought considerable macroeconomic gains and helped establish a suitable framework for a private-sector friendly environment.
Positive developments in Armenia include:
Ø Macroeconomic Stability. Cumulative inflation by the end of 1996 was 5.7 percent, the lowest in the NIS; for the first seven months of 1999, it was 0.9 percent. After years of collapse, GDP grew by 5.4 percent in 1994 and has continued in the positive range of 5-7 percent for subsequent years. The fiscal deficit declined to 8.4 percent of GDP by 1996, down from 48 percent in 1993.
Ø Advanced Legal Framework. With the passage of the new Civil Code in 1998 that includes fundamental commercial legislation and with other laws on contracts, bankruptcy, and real property, Armenia has “one of the very best legal frameworks in the region,” according to the World Bank.
ØPrivatization. Almost 100 percent of arable land is privately owned, as is 80 percent of the housing stock. Nearly 5,000 small businesses and over 1,100 medium and large enterprises have been privatized to date.
Ø Banking. Modern laws (covering the Central Bank, banking, and bank insolvency) have been adopted. Loan-loss provisioning has been introduced and enforced strongly. Movement of funds is unrestricted.
The core of the government’s reform program has been the stimulation of the private sector (75 percent of GDP growth for 1998 came from the private sector) and the removal of barriers to foreign investment. Armenian President Robert Kocharian stated recently that “today capital knows no borders. At this important moment in Armenia’s history, the role of foreign investment cannot be overestimated.”
Armenia offers attractive investment opportunities in such areas as computer software engineering (the country has an inexpensive, highly skilled labor pool); high-tech electronics, engineering, and assembly; chemical/biochemical production (40 percent of the entire Soviet Union’s chemical and electrical engineering output came from Armenia); consumer goods and light manufacturing (textiles, shoes, household goods); pharmaceuticals production; and agribusiness.
Today, Armenia continues to serve its historic function as a crossroad linking Europe, Asia, and the Middle East, which offers investors entry into regional markets well beyond the size of this small republic. A notable example of Armenia’s attractions: In July 1999, General Motors announced plans to build an assembly plant in Armenia.
The USABIA
The United States–Armenia Business and Investment Association (usabia), a nonprofit trade organization established in 1998, works to promote business, trade, and investment ties between the United States and Armenia. With offices in Washington, D.C., and Yerevan, usabia facilitates economic development, networking, matchmaking, information exchange, trade missions, and cooperation between U.S. and Armenian businesses and governmental entities—including advocacy in Washington and Yerevan on issues of importance to U.S. businesses.
usabia has a formal agreement of cooperation with the Armenian Government through the Armenian Development Agency (ADA), which was established in 1998 to promote an investment climate that attracts foreign capital and supports the Armenian Government’s open door trade and investment policy.
In June 1999, usabia launched a website that features information designed to facilitate commercial relations between the United States and Armenian business and investment communities by providing “guides” on doing business in Armenia, investment opportunities, economic data and analysis, travel tips, and links to pertinent resources.
In July 1999, usabia and the Armenian Engineers and Scientists of America, Inc. (aesa) announced the signing of a memorandum of understanding to work together cooperatively with the aim of promoting critically needed economic development in Armenia. The formal agreement outlines a range of activities for mutual cooperation, including trade missions, business forums, investment seminars, and the provision of technical assistance for purposes such as sector analyses, trade links, and matchmaking between Armenian and U.S. entrepreneurs.
For more information about the activities and services of USABIA, call (202) 342-2582, email info@usabia.org, or visit www.usabia.org.
Sonia Medzadourian Crow is Executive Director of the U.S.–Armenia Business and Investment Association (usabia).