Go.Armenia

The Great Armenian Economic Boom

Armenia leads the way in economic development, ahead of all other Republics of the Former Soviet Union. Foreign Direct Investment (FDI) is at the head of the charge; imports continue to grow, the balance of payments and inflation are both under control and the Dram is as strong as it has ever been. This is all confirmed in yearly reports of the World Bank and the International Monetary Fund.

FDI in particular has been seen on every Yerevan street corner for some years, and now can be seen on the surrounding hilltops, where all manner of construction projects continue to spring up – higher and higher. They have banners slung over their upper floor windows offering modern apartments, or shop and office space, all of which are for sale or for rent. This is to meet the needs of the long list of Foreign Investors, who have been coming in droves to Armenia for the past several years and who continue to beat at the door to get on board the Armenian economic bandwagon. The opportunities to make it rich in Armenia are endless.

They teem through Yerevan’s streets, soaking up the aura of success; Americans, Brits, Italians, French; even Japanese and Koreans; they are all flocking to Armenia to be a part of this economic revolution. All the major high street names are clambering for pole positions in the newly constructed commercial centers, eager to stay ahead of their international competitors. Luckily for Armenia, the authorities have not been overwhelmed by the invasion; they manage to maintain a level of calm. Thankfully, because of their cautious response to this investor onslaught, moderation has been maintained.

Sound familiar? – Of course not; it is all a hoax.

The truth is that there is virtually NO Foreign Direct Investment in Armenia. State companies and other assets have been transferred to state officials, who represent themselves through a variety of foreign entities. They are often in Russia, or in South America, but are also in North America, in Europe, and no doubt in a number of other overseas locations. The operations are often facilitated through a variety of financial mechanisms, which show tens of millions, or even hundreds of millions of dollars worth of investment, but in fact are worthless pieces of paper. The actual construction work, which is done by local workers, is financed by the local currency, which is squeezed out of the Armenian common folk every day, and in ever-increasing amounts. That money often comes from relatives who have found no other alternative but to become part of the Diaspora living abroad, and their donations increasingly figure into the economic boom equation.

The value of the Dram has been driven upward through recent years to increase profits for those who are involved in this FDI scam, and they are the same people who monopolise imports of the most saleable and profitable goods and materials. The fact that exports suffer as a result is of little concern; the prime objective is to take advantage of the domestic market, which is totally under the control of the authorities.

The only real Foreign Direct Investments in Armenia have been the Ararat Gold Recovery Company and the diamond polishing plant. The gold company is owned and run by an Indian group, and although the diamond polishing plant is owned by an Armenian, he actually lives and operates outside of Armenia. Some years ago, the same very wealthy and patriotic Armenian investor purchased the central universal store, and despite major modernisation, the store remains closed. That is testament to the attractiveness of Foreign Investment in Armenia today.

Diamond exports, which have been the backbone of Armenian exports, have been forced into decline through recent years, and now that the price of gold has increased to recent highs of more than $600 per ounce, from the $180 per ounce it was when the Ararat factory was built in 1997, the Armenian Authorities have decided to drive one of their most prominent Foreign Investors out of the Republic and to impose Armenian ownership.

The FDI bubble is about to burst, nearly all state assets have been “Privatized by Foreign Investors”. There is nothing left, and there is no sign of the foreigners rushing to become a part of the Armenian Economic Boom.

But this should not be cause for concern; the Armenian authorities have yet another ploy in the pipeline to maintain the impetus, and the signs are that the World Bank and the IMF are ready to stay on board, even though they have long known that Armenia’s economic roller coaster will soon be rattling off its rails.