Russia

Australia Entering Armenia

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More Sheep Farms in Armenia

It seems like anything goes in these days of global investment opportunities. Indeed, in a recent news report from Arka, the Armenian Development Agency (ADA) will be privy to a new investment program by a (yet to be named) Australian company. By next month, this will enable the set-up of sheep-breeding farms there, with a capacity of 5,000 sheep. This will take place in conjunction with regional administrations in Armenia and a “territory for building the farms will be defined.” The main goal of this program will be the “farming of genetically traditional semi-stiff-haired types of sheep in Armenia.”

Australia: Armenia’s Auxiliary

So what does Australia have to offer Armenia? According to the ADA’s General Director, Robert Harutyunyan, the Australian company is going to “introduce a standard plan of a sheep-breeding farm in the investment package,” and that later on, there will be a defining of territories for farms through the regions.” ADA’s main aim is to finally eliminate “old soviet standards,” and thereafter develop “new sheep-breeding farms in accordance with international standards.”

Additional Armenian Investment Opportunities

But that is not all. At the moment there are also a few other potential investors hailing from CIS and Arab countries that are looking into these projects with interest and are seeing Armenia as a good place. Plus it seems sheep farming is on the rise since figures for last year showed that “customs cost of 135 thousand sheep increased by 56% making about $14 million compared with 2009.” In addition, according to Harutyunyan, a cheese company in Armenia is looking into expanding its export volumes this fall, following its successful 5 ton export to Russia a few months ago.

Indeed, “if supply exceeds demand here in Armenia, greater volumes may be sent outside.” Forecasts suggest that such supply may indeed “exceed demand by 10 to 20 percent.” Russians like Armenian cheese, and according to another related Arka article, “the Armenian Cheese company was set to export 120 to 140 tons of cheese in Sept-Oct 2010 to Russia and 80 tons to the United States. However, nothing like that happened, since cheese prices jumped in Armenia, and it was decided to refrain from exporting cheese and postpone these plans for 2011.”

Chinese Goes East

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It seems like there are going to be increased investment opportunities in Russia for China since the former country is in the process of “restructur[ing] its economy and reduc[ing] its reliance on commodities.” This can be seen through Fuyao Glass Industries Co. Ltd., which is one of the world’s biggest auto glassmakers which is now planning on investing $200m in a Russian glass factory. It actually marks Fuyao Glass’ first time branching out onto foreign soil. According to the company’s chairman Cao Dewang, production is set to begin at the end of 2011 and supply glass for over 3 million cars each year.

Increased Business Opportunities

There could be even more business opportunities for Russia with further deregulation of its domestic market which will be good for foreign enterprises. This is already being witnessed by China Investment Corp’s investment plans in Russian “infrastructure, negotiable securities and real estate.” Russia is definitely happy about Chinese investments that according to Federal Financial Markets Service head Vladimir Milovidov will “promote bilateral cooperation on trade and finance.” As well, Russia sees how good China’s financial market supervision policies are for their country.

Great Financial Plans Ahead

Since things are going so well in Russia and China doesn’t want to miss out, the latter country plans to invest $12bn in its market to “boost bilateral trade” by the year 2020. In the first six months of 2010, China invested $260m in Russia which was “58.5 percent higher than the same period of the previous year.” But former Russian ambassador to China Igor Rogachev pointed out some realities: “although China has become Russia's biggest trading partner, China is still not a major investor in the Russian market.”

Global Financial System Reform?

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BRIC Leaders Meeting

BRIC nation leaders (Brazil, Russia, India and China) are meeting up in China for a one day conference. BRIC is actually a bit of an inaccurate description now (it should really be changed to BRICS) since South Africa recently joined. As a unit they have both economic and political influence today, and also form part of the G20. The topic to be addressed will be reforming the global financial system since the nations comprising the BRIC make up 40 percent of the world’s population and nearly a fifth of its growth. Given these statistics, the BRICS feels they deserve a “greater say in global affairs.” While BRICS influence has increased since the start of the global financial crisis, there is still much more to be done.

BRICS Status

The BRICS will be discussing rules regarding international trade but there is no guarantee that it will hold much weight. BRICS are in favor of free trade and against protectionism, but in general don’t agree on much. Since all BRIC countries fared well vis-à-vis the 2008 economic crisis, they have already proven themselves. India has a global economic status vis-à-vis being a service provider and engages in the most trade with China although has a large trade deficit with the Chinese.

China Success

China is doing very well in the hi-tech industry, now having the status as a “mass producer of hi-tech products,” such as semi-conductors and solar panels. As well it is doing well in garment and textile industries, maintaining its reputation for being top in low-cost high value markets. At the end of the day China needs to continue to “maintain competitiveness in the global economy [through] low-cost manufacturing.” But if prices start to go up, then what will start happening is that companies will start looking elsewhere like Vietnam.

Indeed, just this last year China started constructing high-speed rail around the world, and is now “home to the world’s fastest train,” and it looks like Brazil is going to use Chinese firms to plan their high-speed rail project. But perhaps some of China’s success will come at the expense of other countries. Brazil and India are “concerned” China will “flood their markets with cheap goods.”

BRIC Cohesion?

Even though the four (now five) countries form the BRIC, it seems that in general, experts feel that the acronym alone is insufficient to give them a unified presence “on the global stage.” It is going to take much more time and a “wait-and-see” approach will have to be taken vis-à-vis G20 and other countries collaboration. While the BRIC are lessening their need to work with developed economies, globally they still have to collaborate with the “major industrialized nations.”

So the BRIC (or BRICS) do definitely have much to offer, but they need to work on compromising so that they can become a more cohesive unit and thus a force to be reckoned with vis-à-vis reforming the global financial system.

Armenian Investment is Working

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Increased Investment Opportunities for Armenia

Good news for Armenian investments. According to the country’s parliament chairman, Hovik Abrahamian, attempts are being made to push for investments in the transport and energy sectors throughout the BSEC countries.* As well, the greater cohesion between BSEC member countries, the better for all, especially since this is the current goal of the National Assembly of Armenia. This is bound to lead to an increase in investment opportunities for the country.

Armenia Develops Iranian Energy Cooperation

When Armenia attempts to work with Iran, according to Armen Movisyan (the former country’s Energy Minister), around 80 percent of cooperation between the two countries comes from the energy sector, at an estimated volume of $450 million. If a third transmission is built and a hydroelectric power plant on Araks River, this will further connect the two countries which could also ultimately lead to the goal of establishing a “North – South” transport corridor.

Armenia and Energy Security

According to Sevak Sarukhanyan (Armenia’s Deputy Director of Noravank Foundation), “energy security is the most important issue for Armenia, as the country was probably the first state in CIS and the post-Soviet area to be hit by a severe energy crisis.” The two factors that basically led to this crisis were the closing of the Metasmor nuclear power plant in the late 1980s and the shifting of the country’s energy production to thermal power plants utilizing natural gas and fuel oil.

So it does seem today that there is much work to be done in terms of political and economic cohesion between Armenia and other BSEC countries, as well as Iran. At the end of the day – political affiliations and aspirations aside – most countries want the best for their citizens and that usually means working with neighboring countries to acquiesce the best investments.

*Established in 1992, the BSEC comprises Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania, Russia, Turkey and Ukraine with Austria, Germany, Egypt, Israel, Italy, Poland, Slovakia, Tunisia, France, the Confederation of European Energy Charter and the International Black Sea having observer status.

Boost to Azerbaijan’s Investment Options

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Good news is potentially on the horizon for Azerbaijan.  According to experts the country looks set to move from a “stable” to a “positive” status suggesting the country will become “an investment-grade territory” in the very near future.  This is within the backdrop of the country showing general improvements vis-à-vis the government’s fiscal and external positions.  This has been most noted in the country’s acquisition of State Oil Fund of Azerbaijan’s assets.

<h3>Other Great Economic Stats</h3>

Simultaneous to this good financial news for the country is the fact that its government “registered a fiscal surplus of 14 percent of GDP in its consolidated budget,” a substantial change from its figure in 2010 of 30 percent.  Further, the government has been  making investments in other (non-oil based) sectors which are likewise starting to reap benefits with a 7.9 percent jump last year, more than double of the figure for the year before.

<h3>Need for Economic Freedom</h3>

While this of course is all great news for Azerbaijan, the country is still a long way from becoming a true global economic player.  Before that has even a hope of happening, the country  will be forced to engage in some major renovations and liberations of its economic structure.  Further the country’s securities need to be worked on which will take some efforts from its PashaBank vis-à-vis a portfolio diversification.  Because it plans on joining the overseas capital markets, there is an expected 5-y percent worth of profits from operations with securities this year.  Currently the bank’s investment portfolio stands at 31 percent of securities assets (bonds, etc.).  Experts have noted that the country needs to make it a priority to show its interest in “investing in sovereign bonds of foreign countries….particularly in Russia, Ukraine and Central Europe.”

Financial things are a-changing in Azerbaijan, that’s for sure.  But it’s going to take time.  There are a lot of economic factors that are beginning to work well in the country but its deeper political issues (i.e. the required infrastructure reform) is still a subject with which to contend.