Exclusive Interview: Nikol Pashinyan

Armenia’s prime minister Nikol Pashinyan tells Global Markets how his government’s agenda to reform the economy and eradicate corruption will lead to both stronger exports and the creation of technology ‘unicorns’

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How is Armenia’s five-year economic plan progressing? What are the main goals and how will you achieve them?

Our government’s five-year programme will transform Armenia into a modern, high-tech and well-governed democratic society. It will be free from corruption, with well-established institutions ensuring our nation’s security and the protection of human and property rights.

On the economy, the programme is built on three principles: zero tolerance to corruption; improving revenue mobilisation through ensuring fairness in the tax system; and structural measures to foster inclusive growth through achieving a business-friendly environment and healthy competition in the private sector.

In this context, enhancing the government’s spending capacity and its efficiency, especially in human development, is a key success factor. 

Our programme also includes a new economic growth strategy. We are moving from a model driven by domestic demand to one focused on exports and investment. 

We are only at the beginning of the journey, but some results are already apparent. Our economic growth rates are above the average for the region and for the world. Tax revenues have also increased by more than 25% in the first half of this year, showing strengthened trust in the government.

We are developing a long-term country transformation strategy called Vision of Armenia for 2050. This will kick-start wide ranging public and professional consultations and set strategic goals and actions for the next 10 years. It also aims to build consensus among all Armenians around the world.

One of the aims of the economic plan is to increase exports from 20% to 43%-45% of GDP by 2024. How will you achieve this?

One of the key lessons learned since Armenia gained independence in 1990 is that expanding our export potential is a crucial goal. We must pursue opportunities to expand our footprint in global trade.

Focusing on exports across industries is one of the main value drivers in our strategy. Our strategic engagement with both the Eurasia Economic Union (EEU) and the Comprehensive and Enhanced Partnership Agreement (CEPA) with the EU is a solid foundation for achieving this goal.

We have made a strong start towards meeting our export target of around 50% of GDP over the long term.

Some 1.65m international tourists visited Armenia in 2018, and the figures for the first half of 2019 are 12% higher. The high-tech sector is also booming, growing 20%-30% per annum. We already have several start-up companies (such as PicsArt) that have successfully attracted US venture capital and are approaching several hundred million dollar valuations.

Finally, by implementing our long-term transformation strategy and building our cutting-edge innovation ecosystem, we hope to host many homegrown unicorns with some of them reaching $10bn in valuation.

What are your plans to encourage foreign direct investment in Armenia? Corruption is one of the main obstacles. Can you outline how you hope to address that?

Foreign direct investment (FDI) is going to be the backbone of our new growth and development model. This requires a systemic overhaul. Bold efforts in this direction are underway. We’re moving away from investments based on captured assets by a few vested groups that enjoy unjustified privileges towards a fair and transparent investment environment.

This will open up avenues for forward-looking competitive investment initiatives, and most importantly help us to attract multinational companies to create high quality and competitive jobs.

Attracting FDI became more challenging after the global crisis in 2008 because everyone, including advanced countries, was competing for it. We must therefore take risks ourselves. We need to mobilise domestic savings and channel them into productive investments. Without that, FDI will be confined to a narrow channel of opportunities.

In this context, developing our domestic capital markets (including collective investment schemes) has become one of our major priorities. This requires good corporate governance and full transparency in the corporate sector.

For the first time since independence, our citizens are confident that the government is serious about eradicating corruption. For example, the recent study performed by the European Business Association among SMEs has shown that corruption didn’t even come up among the top 15 problems that businesses face in Armenia. However, we are not satisfied yet and much more needs to be done to ensure the necessary FDI.

Global economic growth is under threat. Is Armenia at risk? What measures are you taking to ensure the Armenian economy is resilient?

Indeed, the global economy is currently facing massive uncertainty and Armenia as a small open economy is exposed to external shocks. Our main actions to ensure the resilience in the long-term are our wide-ranging structural reforms. These measures are intended to increase the potential of the economy. 

In the short term, preserving our macroeconomic stability is our first line of defence. Public debt is sustainable, which allows us to build buffers for countercyclical fiscal policy in case of an adverse shock. On the monetary and financial stability side, the Central Bank of Armenia has advanced policy frameworks, which have been tested many times. Results speak for themselves — inflation has been under control and banks have been resilient despite massive regional volatility.

What message would you send to foreign companies considering investing in Armenia?

The anticipated transformation will open up new opportunities, especially in the high-tech sector.

In a world of closing doors, Armenia can be the key to markets in our region. Our joint integration programmes with both the EEU and EU will build a bridge between advanced markets and our neighbours in the region with large populations.

We are open to new ideas and ready to show regulatory flexibility in attracting high quality investments that will help us to learn and implement international best practices. We understand that the best resource we have is our human capital and we are ready to collaborate with potential investors in developing our talent pool to meet global standards.