MJ Posted December 6, 2002 Report Share Posted December 6, 2002 With the crash of the stock market worldwide, I suspect it is a good time for Armenia to start an organized campaign of attracting foreign investments. After all, the likelihood of losing your investments in western markets is pretty significant, too. I think this may be a momentum not to be lost. Quote Link to comment Share on other sites More sharing options...
Sip Posted December 6, 2002 Report Share Posted December 6, 2002 What kinds of investments would you say have a better chance of attracting foreign investors ... i.e. which sectors? For example it was mentioned here that there may be a rather "cheap" but good quality high tech labor force in Armenia waiting to be utilized. Quote Link to comment Share on other sites More sharing options...
MJ Posted December 6, 2002 Author Report Share Posted December 6, 2002 I think "high tech labor" is too broad of a term. In the past, Armenia has been a leader within the USSR in microelectronics, etc. I doubt very much that in our days the Armenian "high tech labor" is qualified to attract foreign investors on its own. Systematic effort has to be put together to retrain the former employees of the industry, to promote new norms of discipline, significant investments are needed to acquire necessary equipment, etc. Whatever could be easily brought together and marketed, Russians have already jumped on, I think. So, the low hanging food is gone. As far as the software industry is concerned, sure it has significant potential - that is it can be gradually developed, assuming one can find market niche. However, there is a major stumbling block there - the fast internet connection and its cost thanks to Mr. Boghbadyan and his alike. Overall, low transportation cost industries, such as textile, shoe production, wines, crystals, etc, may have future, I think. But the existence of potential does not manifest mechanical success. Some special effort and vision is expected from the government of Armenia. One venue of attracting foreign investments may be, I think, the establishment of duty free (whatever it may mean) economic zone, let’s say, in the earthquake zone. As a collateral effect, the earthquake zone may also be built. In perspective, the duty free zone may be expended to include Adjaria, and the Kars province of Turkey. In any case, I think it would be a good practice to start it from Kumairy. What industries may thrive may depend of what investors may find such entity attractive. Quote Link to comment Share on other sites More sharing options...
nairi Posted December 6, 2002 Report Share Posted December 6, 2002 Is the Armenian economy stable enough (i.e. not corrupt) to handle such large investments? Or will it help stabilize the Armenian economy? What do you think? Nairi Quote Link to comment Share on other sites More sharing options...
Azat Posted December 6, 2002 Report Share Posted December 6, 2002 MJ, can you comment on the fiber optic, chemical, adventure travel, laser sectors. I have always been told that those are possible place to invest in Armenia however have found little or no valid information on any of them with the exception of Travel(which I am not a big proponent of) Also, we all know about the terrible telecommunications infrastructure in Armenia and how poorly ArmenTel is going at improving the situation. (This may be a stupid question as I do not know anything about this) Is it not possible to install a DirectTV(DirectPC) dish outside your window in Armenia and tap into the high speed bandwidth from Hughes? Do these Satellites not work out side of the North American continent. It certainly is cheaper than dial up access it in Armenia. I read an article recently where basic DSL service with guarantee 256KB download and 128KB Upload was $200 US. Quote Link to comment Share on other sites More sharing options...
Sip Posted December 6, 2002 Report Share Posted December 6, 2002 quote:Originally posted by MJ:... However, there is a major stumbling block there - the fast internet connection and its cost thanks to Mr. Boghbadyan and his alike.And since today is ask MJ day ... I got curious about that statement. Does Boghbadyan (don't know him) somehow have a hand in the internet backbone in Armenia, or maybe just the service provider side, and why is there a "sumbling block"? Thanks for the reply above by the way! [ December 06, 2002, 11:13 AM: Message edited by: Sip ] Quote Link to comment Share on other sites More sharing options...
MJ Posted December 6, 2002 Author Report Share Posted December 6, 2002 Well, if anyone has to claim the Analyst’s Corner in the Hye Forum, that would be not me but Alpha and Boghos. I can just make a couple of declarative statements. Armenia is part of the fiber optic network extending from the Black Sea to Iran. The access is not the problem (I assume that I understand the question correctly, otherwise if it is about production of the material used in fiber optics, I am not knowledgeable in it, but assume that something of that type should be very easy to bring together in Armenia – assuming there is market to export it to). The problem is the Armentel deal and the monopoly provided to ArmenTel by the Minister of telecommunications at the time – Boghbadyan, who I suspect is still serving his jail term. The good thing is that the ArmeniTel monopoly is about to expire in a year or two, if I am not mistaken. I have no comments about travel. It is a very "Diaspora Oriented Business." It would not make the day, I think. However, to the extend that it can be encouraged, why not? I think it is more realistic to think of Armenia as an intimidate hub for cargo shipments. Hope that the latest status change of the Zvartnots airport ownership/management may support such potential endeavor. I think the only chance of Armenian chemical industry’s revival is conditioned to the establishment of Armeno-Turkish relations, otherwise it is an industry with very high transportation cost. I also know for sure that Satellite Dishes do exist in Armenia. One of my best friends in Yerevan has a dish sticking out of his balcony. Whether it allows fast Internet access, I don’t know. P.S. In the past, there has been a very significant base for laser industry in Armenia. How much of it is intact in our days I don't know. Sure it fits the profile of low transportation cost industry. [ December 06, 2002, 01:47 PM: Message edited by: MJ ] Quote Link to comment Share on other sites More sharing options...
Azat Posted December 6, 2002 Report Share Posted December 6, 2002 I know that the current tourism is completely Diaspora bases, but do you think that can be changed to get more people to visit who are not armenian. Or do we not have the facilities and the natural resources to be a tourist destination. I will give one small example. I was there couple of years back and am going back this coming summer for a family reason(party). I am taking 2 friends with me who are WINE enthusiasts. They had this idea that they would spend 2-3 days with us and the rest of the time they would go from one winery to another and stay at "chalets" around the wineries. They were surprised when I told them that not only there will be no "chalets" around the wine region but that wineries are not like here ot Italy or France where you can go and taste the wine and buy a bottle or two. Going back to the main question. Can we someday(2 year, 10 years 20 years) have facilities like those to attract niche driven travelers. I can think of few like wine, hiking, skiing(if Tsaxkadsor is a world class ski area like many claim.) historic, etc. Quote Link to comment Share on other sites More sharing options...
MJ Posted December 6, 2002 Author Report Share Posted December 6, 2002 I am a strong believer of the potential Armenian wine industry and associated with it tourism. Armenian grape and water are exquisite. However, bringing it to the attention of the international consumers is not that easy. But it is very possible – the Australian wines being a recent such phenomenon. One can also take into notice the South African and Chilean wines. I personally can consume about 15% of it, and Thoth can consume 65%. The remaining 35% can be marketed to the rest of the world. (In case someone doesn’t like my arithmetic, the mismatch is due to the black market effects. ) I am also sure that we there is a possibility of the targeted tourism, but so that to accomplish something on that stage, one has to get out of the realm of the parochial "Armenian themes." One example would be "weight Lose Facilities," for example. I am sure we can be creative enough to come up with many other ideas. In any case, appropriate taxation and other incentives may always help to promote different industries. An example that comes to my mind is one of the Caribbean Islands, where people go to have cosmetic surgeries done – the surgeons do not have to be necessarily Armenians, btw. This is just one example for the sake of the conversation. Quote Link to comment Share on other sites More sharing options...
alpha Posted December 7, 2002 Report Share Posted December 7, 2002 We have had an interesting discussion in another thread a while ago (/cgi-bin/forum/ultimatebb.cgi?ubb=get_topic;f=27;t=000028), but it’s always interesting to revisit the topic. I strongly believe that Armenia can not develop industries that have high cost of transportation, so therefore heavy industries like chemical will gradually die. It’s too far from major industrial markets where most of the consumption of these products takes place, therefore it automatically put at a competitive disadvantage. The low margin industries such as textiles and shoe processing will not have a major impact on the economic growth in a long run. In order for a country to advance knowledge based industries should receive special attention from the government. Infrastructure should be put in place that will stimulate entrepreneurialism (legal protection of investor and an entrepreneur should be a priority). The growth of Ireland in the past decade is a great example how government investment in people pays off. The government of Republic of Ireland started funding technical schools starting mid 60’s in hopes of attracting major high tech companies. To their disappointment investment did not fly to their country immediately. At the beginning stages the policy backfired because most of the graduates immigrated to Great Britain and United States. However major high tech companies eventually started investing in Ireland and now it’s one of the most vibrant economies of Europe. We shouldn’t expect results immediately. It’s a long term process that takes a generation or two. There is a learning curve that Armenia needs to pass through in order to prove itself as a viable investment alternative to more developed countries. Another sector that can become a major force in Armenia is the finance and banking sector. By developing appropriate legal field the country can become a regional banking center. So far Tigran Sargsyan, the Chariman of Central Bank of Armenia is doing an outstanding job in this regard. The country is gradually becoming a regional banking center. Many projects in Caucasus are financed through Armenia HSBC, which should create a confidence among other Western Banks to set subsidiaries in Armenia. The most vibrant sector of Armenian economy, jewelry and diamond processing, will continue to attract foreign capital, since it has a competitive advantage over its Western and Israeli competitors in terms of quality and cost. Armenia being a net energy exporter can also develop its energy sector and exert pressure on its neighbors by controlling energy supply. By utilizing the knowledge obtained by Armenians during the course of operating Metsamor Nuclear Plant, Armenia has a great potential to develop nuclear plants. The cooperation between Armenian nuclear scientists and Institute of Atomic Energy of Russia will give Armenia opportunities to develop that sector. I have addressed my issues regarding tourism industry in the above link. Quote Link to comment Share on other sites More sharing options...
EZ Posted December 7, 2002 Report Share Posted December 7, 2002 Very interesting, all of this. Glad to get this free education. But what about the safety issue? That isn't going to improve any time soon, is it, especially when there is going to be a war against Irak. I read some very positive stuff here, but the safety issue in the region seems to be a big problem that could exist for a very long time. Ireland didn't have to deal with such problems when they tried to attract foreign investors. Quote Link to comment Share on other sites More sharing options...
MJ Posted December 8, 2002 Author Report Share Posted December 8, 2002 Indeed, Alpha. I find it being increasingly hard to say something qualitatively new in this forum. There is enough material here for launching a political party with a broad political, economical and social program. Nevertheless, I think some of the low margin industries may have very important positive impact for the long run - they are low risk industries, they may generate a lot of jobs and provide a “bottom line.” Today, they are absent, thus the huge unemployment rate in Armenia. Without the steady flow of cash flow through the low margin businesses, the government would not have (as it is the case now) the money to invest in knowledge based and high return enterprises. We have all the schools we need in Armenia. What we lack, I think, is an outlet for the graduates and sufficient financing for the schools to upgrade their programs. We also have a secondary problem of “hard head” academicians. But “money talks.” I also share your vision of Armenia becoming, in perspective, regional banking center as well as energy center. However, I doubt that Armenia would be allowed to “control” the regional energy supply. But she can efficiently organize it, which would help Armenia to become regional energy center - regardless of where the pipelines subject to controversy may pass through. Quote Link to comment Share on other sites More sharing options...
THOTH Posted December 8, 2002 Report Share Posted December 8, 2002 quote:Originally posted by MJ:I am a strong believer of the potential Armenian wine industry and associated with it tourism. ..... I personally can consume about 15% of it, and Thoth can consume 65%. The remaining 35% can be marketed to the rest of the world. (In case someone doesn’t like my arithmetic, the mismatch is due to the black market effects. indeed...LOL...and perhaps true. Actually an idea I had last year was that if I was able to arrange to move to Armenia (didn't/hasn't happened...yet) - that a project of mine would be to research the state of and quality/type of product of Armenian wine today....and to possibly advise Armenian winemakers concerning some of what they might be able to do to improve and market their product for international consumption (and perhaps wine tourism...but the wine itself comes first I think...and right now Armenian wine isn't quite there). There is definatly a great oppurtunity here for Armenian winemakers. And of course I would consider if there could be a role for me as well...besides just as a consumer. Quote Link to comment Share on other sites More sharing options...
Boghos Posted December 9, 2002 Report Share Posted December 9, 2002 I think there are at least two issues here: - investment in emerging markets from a cyclical point of view- Armenia´s capacity to attract foreign investment On the first one I think that risk aversion is still very high. Looking at risk premia across the board it is clear that investors are very much on a wait and see instance in relatioj to anything that smells risk. That applies from US corporate debt to the most exotic debt instrument of the most exotic emerging country. Having said that why is that the US equity market has performed relatively well in the past two months or so ? I will not engage into the foolish exercise of predicting markets or pinpointing the reasosn for each exact move, but suffices to say that even though equities get much more press, fixed income investors are usually much more "serious" and a better indicator of overall market conditions. This is a very simplistic/simplified view of markets, if you wish to discuss it further, needless to say, just reply. My point is that currently there is a major scarcity of capital for any risktaking enterprise outside of hedge funds, and even that maybe a bubble in terms of investment themes. - as to Armenia´s specific qualities, I think Alpha, MJ and others have already discussed this in the mentioned thread above. We are getting more signs that Armenia´s software industry is making good progress. But this is just from a press base observation, in any case it does sound right. My view is that Armenia´s chance is in services, where it may have a major competitive advantage, if it invests in education towards the right goals and also light industry. Quote Link to comment Share on other sites More sharing options...
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