Friday, September 15, 2006

Foreign Investments in Armenia

Foreign direct investments (FDI) in Armenia has been steadily growing over the years, except for the spike in 1998 when the national telephone company (Armentel) was acquired by the Hellenic OTE firm. These tend to be relatively small, but have shown a very healthy growth pattern. In 2005, FDI stood at USD 258 million and made up about 7 percent of GDP (click here for a trend).

The Armenian statistical agency (, in a recent release, reported FDI for the first half of the year to total USD 86.3 million, or 9.3 percent higher than that for the same period in 2005. Interestingly, more than 40 percent of the FDI took place in the telecom and air transport sectors which should go a long way in relaxing some of the constraints imposed by the land-locked geography of Armenia.

FDI by sector in 2006H1
Telecom 33.1%
Mining 14.3%
Air Transport 9.4%
Other 43.2%

The total foreign investment for the first half of the year was actually USD 178.5 million (27.9 percent growth over same period in 2005), of which 86.3 million is FDI. I guess the difference is dividend investment. But what is it invested in? How much of it is debt purchase, minority ownership in a corporation, and so on? The breakdown of this foreign investment is interesting. Lebanese investors, with about USD 50 million, lead the way. They are closely followed by Greece, and from a distance by Russia, Argentina, the US, and Germany.

Total Foreign Investment in 2006H1 (USD million)
Lebanon 49.6
Greece 37.9
Russia 19.2
Argentina 17.3
US 14.9
Germany 12.1
Other 27.5
Total 178.5
FDI 86.3

It is not clear how the recent destruction of its economy by Israel will affect future investments from Lebanon. Greece continues to play a critical role by its steady and sizeable investments in Armenia. Russia’s investments seem to be too low by any yardstick. Argentina has been on the radar screen for a number of years by its investment in the Zvartnots airport in Yerevan. US investors do not seem to have much of a presence particularly given the size of their economy. However, Germany has made its presence felt, particularly as it represented the largest export market for Armenian goods in 2005 (click

Does anyone have a time series of the FDI data by source (country) and sector? It will be good if this can be posted on the
AEA website, unless available online elsewhere, so that it will be accessible to researchers. The Economy and Values Research Center in Yerevan has done some work on the role of the Diaspora. But besides that, is there any research done on their economic impact as well as the rate of return on such investments? Equally important, has any research been done, other than that by the World Bank, on impediments to such investments?


hayastan said...

this is awesome
i am writing a research paper, and it would be helpful to know the source of this information

David said...

The sources are cited in the more recent pieces on the blog. Armstat provides all sorts of data and statistics and it is the place to go.