Foreign Direct Investments
Countries have adopted their conformable regulations and policies for attracting more investments. The major grounds that FDI gain currency among various countries is that investments advance the particular economy. The problems of attracting foreign direct investments (FDI) have obtained considerable attention in Armenia either. Thus, the relevance of this paper is based on the issue of attracting FDI, namely in Armenia. The paper sets to examine the policy of foreign direct investments performed by the government of Armenia, the major steps undertaken to motivate foreign investors and preferable spheres to invest.
The statements represented are supported by statistical data taken from National Statistical Service of the Republic of Armenia. Having analyzed and evaluated the information several strong and weak points are noticed in the process of attracting FDI. At the end of the work some solutions and suggestions are made to improve the situation. Introduction Producers are not gamblers. They just want a good return on their investment. Max von Sydow Ever since the collapse of the Soviet Union Armenia has made a giant step upward to its economy liberalization and enhancement.
The Government of Armenia has put big efforts in favor of market-oriented economy formation. Due to adopting fiscal policy and performing the processes of privatization the economy of RA rebounded. In order to encourage trade Armenia became a full member of WTO which is the main motivator for Armenia to have laissez-faire trade. Thus, small and medium enterprise section was opened not only for private but also for foreign direct investments (FDI). The term ”foreign direct investment” refers to investment of foreign assets into domestic structures, equipment, and organizations (www.econterms. com).
Consequently, being an immense economic force FDI deserves the attention of policymakers, business persons as well as society as a whole. Considering the case of developing countries the main motivations for attracting FDI are obvious: development and economic growth. However, FDI’s greatest contributions to development lie in its productivity-enhancing functions as it improves export capacity of foreign-invested firms integrating those firms to global production networks and channels and transfers technology in production and management processes,
Thus, as a consequence, FDI intensify competition not only within the boundaries of a certain country but what is more important outside it contributing to economic development. Having assumed FDI’s value for development and globalization, however, is not enough for attaining it. The process of attracting FDI requires a scope of market-oriented and up-to-date economic policies and institutions-as well as legal structures that complement the regulation of open markets and trade. Policy of Investments in Armenia: Government measures to motivate FDI
RA government considers policy of investment to be one of the most important features for its economy development. The government emphasizes the importance of attracting investments especially foreign direct investments, which will boost industry as well as the other branches of economy. RA has set up its primary goal upward FDI-”ensuring of sustainable economic growth, increasing prosperity of population and protection of environment via increasing of economic activity, formulation of favorable investment climate, and growth of investment volume”.
Thus, the policy of investment was created taking into consideration five-aspect approach (Concept on Investment policy): 1. To create an attractive and favorable investment climate in all spheres furnishing them with stabile and predictable conditions for performing business transactions. 2. To lessen the risks of foreign and domestic investments flows-obliterating tax and other administrative barriers. 3. To engage MNCs in order to boost the role of Armenian economy in globalizing world economy. 4. To efficiently manage the process of privatization (consider the process for each investor separately) engaging successful investors.
5. To diversify the Armenian exports structure since the present structure consists of only several product-groups. Mentioned above aspects served as a base for Armenian Republic to declare an investment policy of ”Open doors”. Mainly this liberal approach was taken into consideration while accomplishing the ”Law about Foreign Investments”, which states the Government willingness to do to its best to attract FDI and to improve investment climate in Armenia. Formulating of favorable investment climate supposes the performance of following measures (Concept on Investment policy, 2007):
1. The Ministry of Economy-responsible for realization of investment policy and improvement of investment climate. 2. Armenian Development Agency (ADA)-responsible for engaging investors and implementation of investment policy. ADA acts as “one-stop shop” agency for investors assisting them in setting up their business in Armenia, helping in project implementation, performing a liaison role with the Government, providing information on investment opportunities in the country, as well as investment related regulations and laws1.
In its export promotion activities, the ADA helps find export markets for products, undertakes market studies and seeks out partners for joint ventures aimed at increasing the volume of exports. Within the scopes of ADA’s responsibilities is to organize international conferences, business-forums, trade fairs and exhibitions. It is worth mentioning that the government appreciates the performance of ADA and considers it as the main national intermediary for bridging gaps between policy development and implementation and the public and private sectors.
The Chairman of the Board of ADA is the Prime Minister of the Republic of Armenia. ADA cooperates with many international organizations such as World Bank, Multilateral Investment Guarantee Agency (MIGA), UN Development Program (UNDP), USAID, Development Alternatives Inc. (DAI) and others. 3. Business Support Council-responsible for improvement of administrative procedures of investment policies. 4. Securities Commission of RA-provides protection of investors.