Foreign Investors Took The Fancy Of Immovables, Banks And Energy In

FOREIGN INVESTORS TOOK THE FANCY OF IMMOVABLES, BANKS AND ENERGY IN ARMENIA
Narine Kirakosyan

ArmInfo, May 22, 2007.
2007-07-03 12:11:00

Interview of Head of the Department of Consulting Services of ‘Ameria’
Company Gagik Sahakyan

If the Armenian entrepreneurs, having a business-project, used to
apply for professional consultation at the end of 90s for attraction
of investments, today they apply for advise regarding increase of
productivity of investments in economy and profitability of their
business. As the saying goes," contribution demands wit" and investors
often apply for this "wit" to "Ameria", the leading company in the
market of consulting services in Armenia. "Ameria" specializes in four
main spheres of professional activity: managerial consulting; audit;
accounting and tax consulting; juridical consulting; investment and
banking services.

Head of the Department of Consulting Services of "Ameria" Company
Gagik Sahakyan kindly agreed to answer a number of questions of
ArmInfo correspondent.

Mr Sahakyan , your company, founded in 1998, has soon become the
leader in the Armenian market of consulting services. You introduced
the international experience in this sphere and showed understanding
of the local peculiarities during solution of complex problems in
more than 30 spheres of economy and public activity. What is the
evolution of consulting services over the last years?

In 1998-2000, we were more addressed a request to find investors. The
entrepreneurs had ideas, however, the political-economic situation
of those years was accompanied by lots of financial problems, which
had to be solved.

Our specialists also assisted in developing a strategic plan of
development, directed to potential investors. Then they started
addressing more for support during restructurization of production,
i.e. when it is necessary to determine the points of "increased danger"
in the business system, reveal the inner reserves of the enterprise,
enhance its investment attractiveness. Then, the domestic enterprises,
which lost the external markets, had to find new target markets,
for which our specialists examined the market demands. In addition,
if the market was free for almost all the business undertakings in
the midst-end, 90s, now big competition exist in the market and our
clients seek for the ways of competitiveness increase.

However, evolutional development exists here as well. For example, at
the end of 90s, we advised the Armenian entrepreneurs on processing
of agricultural production, who lost the market, to refuse from
production in glass container, aimed at the final consumer, and
start production of concentrated juice, tomato and other products
in big aseptic barrels aimed at industrial consumers. This saved the
companies’ resources and allowed entering the international markets
with confidence. However, now, when the financial state is stable and
upgrading is completed, we advise again to switch over to production
aimed at the final user. Although it requires considerable marketing
efforts but enables to work in more profitable segments. Today,
the business development evolution has reached the level when the
majority of our clients address us for the purpose of increasing
efficiency of their business processes. This includes optimization
of organizational and functional structures of companies, development
and implementation of informational control systems, etc.

What sphere do the investors prefer today to invest money in?

The investors are greatly interested in developer projects. Of course,
initially, the investors wish to study the financial peculiarities in
the area of construction of the housing real estate, its profitability
and the possible concomitant risks. The agricultural and processing
sectors, which need enlargement of technological opportunities,
also regenerate. At the same time, unfortunately, the textile and
engineering industries are in crisis. The facilities of metal mining
industry remain rather demanded for investments. It is pleasant to
note that despite the positive conjuncture in external markets,
the majority of companies, which exploit the large deposits, are
guided by experience of the efficient foreign management and attract
qualitative resources as to increase efficiency of the processes.

Some interest is also observed in the area of information technologies.

You render consultations in the banking sphere as well. It would be
interesting to know your assessment of the situation.

I would characterize the situation in the banking system of Armenia as
stable with all the pluses and minuses typical to this stability. In
fact, we have a rather predictable banking system, a relative security
of investments, low inflation level, on one hand. On the other hand,
most of the banks are passive in their investment activity, that
negatively affects potential development of the industry. Here, we
lag behind many countries, including the CIS developing countries. For
example, the situation in Georgia in this aspect has radically changed
over the last years. The banking system here develops more rapidly. I
think the point is that the key free resources of the banking system
are mainly concentrated on the building and development projects where
the level of risk is more predictable than in industry. However, I
am sure that investments in the banking sphere will grow and lead to
diversification of the banking services and use of new technologies
that, in its turn, will cause toughening of competition and natural
strive for broadening of the client base via a literate and more
aggressive policy.

There are foreign investments in the energy sphere of Armenia,
especially in the small energy. This is a profitable sphere for
investors. Why the energy prices are so high in Armenia?

The power generation in Armenia is carried out by three main sources
and the prime cost of each of them vastly differs. The hydropower
plants assure 20% of the total energy output, the nuclear power
plant generates the cheapest electric power and assures 40% of the
demand. The heat power plants generate the same volume of power and
the prime cost of each kW makes up more than 3 cents. I think our
electric power prices are not so high taking into account that 1 kW
at night costs 15 drams and 25 drams in daytime. This is a fair price
which allows the energy-generating plants to gain rational profit
and attract new investments for upgrading of plants and construction
of new powers. Moreover, it should be noted that the policy of
tariffs especially stimulates investments in the renewable energy
resources. The investment activity, observed in the sphere of HPP,
is stipulated for this fact, especially as the operational life of
Hrazdan hydropower plant ends in 2017, and that of Metsamor Nuclear
Power Plant ends a year earlier. Construction of new NPP is undecided,
especially since this project is very expensive.

Therefore, the extensive network of HPP may become a partial
alternative to it.

At last, can you comment on the prospects of development of tourist
business in Armenia?

If the matter concerns the tourism development as such, it is
necessary to get concentrated on the directions of the sphere where
the investments may give results. You see, there are prerequisites
for the religious tourism development, there is an extreme or an
echo-tourism, which may and must be developed in Armenia. Having all
the resources – historical and cultural objects – one could develop
a tourist infrastructure meeting the international standards. For
example, one could design places for souvenir-trade, small hotels,
restaurants and other infrastructures with attraction of designers and
landscape architects, taking into account the opinion of the Church.

At the same time, the tourists are attracted not only by sightseeing,
but the rest and entertaining programmes as well. As for the resort
town of Tsakhkadzor, one cannot say that it has become a resort. Here
the main problem is not the absence of investments but of a concept
according to which this area is developed. The investors made great
contributions where and how they liked, however, in most of cases,
the resort development logic was not taken into account during the
hotel construction. High prices in the hotels is another problem to
be fortunately solved by the market. High prices seem to dictate
high-level service. In fact, the service in these hotels should
pass a long way to meet the international standards. In a nutshell,
Tsakhkadzor has no style that is typical to a mountain-ski resort,
and this omission should be completed if the investors wish to repay
their expenses and the state – to stimulate development of a definite
niche in tourism.

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