High Time to Change Stereotypes
Interview of David Sargsyan, Head of Legal Practice, Ameria Group, for ArmInfo
nvestors in Armenia often face political and economic risks, inefficient corporate governance and weak legal system. Bearing in mind national interests, many spheres and directions of investment activities, which are the most important in terms of economic security and economic interests, they need to be protected and supported. Legislation of our country is mainly targeted at the liberalisation of investment environment and the creation of investment-friendly conditions both for external and local investors. The extent to which laws on protection of investors’ rights are abided by and the causes for persisting capital outflow were highlighted by David Sargsyan, Head of Legal Practice, Ameria Group, in the interview with ArmInfo.
- Mr. Sargsyan, protection of investors’ rights continues to be as vital as ever. Is any wind of change expected towards the security of capital investments in our country?
This is always an issue for a country like Armenia since investments-wise, unfortunately, Armenia is not among the most attractive countries of the world. Investments, investor’s interests and readiness to invest in a particular country are indicators of economic prosperity and development of that country. Boosting of local investments is another critical issue in Armenia. The tendency of outflow of capital (for instance to neighboring Georgia or Russia) may hinder further development of our country. We can stop this through improvement of not only the legislative field but also practical implementation and activities by means of promotional tools. To break the stereotype of an investment-unfriendly country we should continuously conduct informational campaigns targeted at formation of new business thinking.
- The government reforms aimed at improvement of investment environment failed to prevent capital outflow from the country. What was the reason of the failure of the government’s good intentions?
- The Government does its best to maintain the intensity of investments by simplifying the entry of investors to the Armenian market, including by means of abatement - look up!!! of customs and tax administration, enabling investors to register their business through ‘one window’. Now business registration process has become more time-saving with a number of state duties cancelled at all. One can register a business just in a few days. The legislation also says that a corporate seal is not a required tool and now the company may use it at its own discretion. So, as you see, steps are being taken for creation of favorable conditions and development of business environment. Yet, as we try to figure out why the inflow of capital to Armenia is so small, we should not forget about many objective and subjective reasons. Firstly, it is because of certain distrust. Armenia is situated in a region with many outstanding frozen conflicts with indefinite development outlook.
Meanwhile, the situation on the external political arena (Syria, Iran) makes investors think twice before investing into the economy of our country. Lack of trust in the court and judicial system, too, influences the decisions of investors. Now outflow of established and professional labor resources is a hot topic, but I am not going to uncover the political and economic background of the problem. I would only say that one cannot say for sure whether or not everybody is leaving the country or everything is fine in Armenia and people prefer staying in their country. That would be an extreme interpretation of the situation. There is a definite legislative basis, and clearly defined rules of the game on the one hand, and Armenian reality with negative phenomena such as corruption and monopolization of several industries of economy, on the other hand. Our task is to make laws more efficient and targeted in this reality. Only in that case investors’ (both local and foreign) rights would be protected and they will not want to leave Armenia.
Launch of businesses in other countries should be aimed at increasing of the scope of activities and not at capital outflow of income.
- Given the problems specified, to what extent can the rights of investors be protected?
Our legislation is flexible and complete enough to protect investors’ rights. We should simply abide to it. I would recommend that businessmen who enter new markets pay due attention to professional business consultants, attorneys, auditors, market-makers. These specialists may help with their practical advice on structuring and doing business, management of investments, etc. Yet, unfortunately, many businessmen consider it a waste of money and try to stick to the “Armenian way” of doing business based on “valuable” advice of relatives or friends.
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