Post on 15-Feb-2017
transcript
Prepared by Management Mix LLC Version 1.0
ArmeniaInvestment Opportunities 2017
Address by Raffy Semerdjian
Content
Armenia Investment Opportunities - 2016 2
❶ Introduction
❷ Socio-economic overview
❸ Market & trade overview
❹ Investment climate
❺ Conclusions
❻ Global recommendations
Annexes
❶ Introduction
This report is prepared by Management Mix Ltd and will becommunicated to stakeholders, specially from the European Countries,the Gulf States, the Middle East and to all those interested inopportunities in direct investments in Armenia.
The purpose of this report is to provide potential investors with anoverview on Armenia, introducing some key indicators, and exploringthe sectors with a considerable return on investment.
Armenia Investment Opportunities - 2016 3
❷ Socio-economic overview - General
Armenia Investment Opportunities - 2016 4
IndependenceSince 1991
Official languageArmenian
Government systemParliamentary (post 2017)
CurrencyCurrency rates / 2015 average 1 USD - 477 AMD
Membership The United Nations The Council of Europe The Eurasian Economic Union ICSID: International Center for
Settlement of Investment Disputes The national coat of
arms of ArmeniaThe national flag of
Armenia
❷ Socio-economic overview - Geography
International flights to Yerevan
1.5 hours from Beirut
2.5 hours from Moscow
3 hours from the UAE
3 hours from Rome, Vienna, Prague
4 hours from Paris
Armenia Investment Opportunities - 2016 5
Total area29,743 km² - with 90% above 1,000mOpen borders with Iran and Georgia
The Capital CityYerevan
WeatherHighland continental Hot summers and cold winters300 sunny days
❷ Socio-economic overview - Demography
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Urbanization64%
Life expectancy 74 years
Adult literacy rate99.6%
Population3,000,000 (approx.)1.12 million (Yerevan)
Age structure 70% between 15 & 64 years 50 % between 15 & 50 years 26% below 19 10% above 64
Active Population 50.9% (1.13 million)
Armenia Investment Opportunities - 2016 7
❷ Socio-economic overview - General indicators
Terrorism index 2015/16 rank at 116
124 is the most secure
116
23
7183 77
93
27
0
20
40
60
80
100
120
140
Armenia Russia Georgia Kazakhstan Belarus Azerbaijan Turkey
Rank out of 124
❷ Socio-economic overview - The Economy
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Source: Armstat.am – the data are for the year 2015 unless otherwise indicated.
DebtTotal: 4.3 USD Bln.37% of GDP
OtherInflation rate: 3.7%Unemployment rate: 18%Tourist arrivals in 2015: 1,500,000
The GDPTotal: $12 Bln. USDAnnual growth: 3%Per capita: 4,000 USD
TradeExports at 1.49 USD Bln.Imports at 3.25 USD Bln.
❷ Socio-economic overview - Inflation (%)
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9.5
1.2
3.8
1.1 1
.5
2.1
1.7
4.3
5.3
3.4
2.7
15
.9
7.4
5
7.2
17
.6
4.8
9.7
6
14
.1
7.8
4.3
14
.7
2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4
Georgia Germany Armenia Russia Kazakhstan Ukraine Linear (Germany) Linear (Armenia)
Telecom
• VivaCell MTS
• Beeline
Banking
• HSBC
• Credit Agricole
• ArmSwissBank
Financial services
• Nasdaq-OMX
• Amundi-ACBA Asset Management
• C-QUADRAT Ampega Asset Management
Mining
• Cronimet
• Lydian International
F&B
• PepsiCo & Coca-Cola
• Pernod-Ricard
• Carrefour
Airport
• Corporación America
Energy
• ContourGlobal
• Tashir Group
Universities & Education
• American University of Armenia,
• French University,
• British School of Business,
• Slavonic University,
• UWC Dilijan Central College
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❷ Socio-economic overview - Major FDIs
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❷ Socio-economic overview - FDIs
UAE, 25.80
Argentina, 100.12
Lebanon, 12.21
Italy, 6.20
USA, 24.23
Germany, 57.12Ireland, 8.37
Luxemburg, 60.44
Switzerland, 91.69
Russia, 68.07
Investments by country of originmln. USD, 2015
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❷ Socio-economic overview - Infrastructure
Telephone services 3 mobile operations, high quality
connections, 3.8 million subscribers, 4G system available across Armenia.
Media36 privately owned TV stations, and 2 public
EnergyHas a nuclear power plant, 2 thermal power stations, and 100s HPPs
Water supplyReliable and sustainable to both urban and rural communities
RoadsNorth-south highway enables transportof goods between GCC countries, Iran,Georgia, Russia and Europe.
RailwayAccess to Black Sea, Batumi, and Potiports.
Subway12 km in the Capital
Airports2 international airports, 50 international airlines flying directly from Yerevan to 60 large cities
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❷ Socio-economic overview - Infrastructure
Source: Akamai, Bandwidthplace.com, Numbeo
e-Society
e-Gov: www.e-gov.am
e-Cadastre: www.e-cadastre.am
e-Register: www.e-register.a
e-Payments: www.e-payments.am
Number of users2.2 million
Country coverage98%
Internet cost$1 per 1MBPS
Average internet speed
8.5 mbps(Armenia)
6.8 mbps(World)
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❸ Market & trade overview - Corporate expenses
Salary and benefits
Minimum: 50,000 AMD/month (~ $105)
Average: 173,000 AMD/month (~ $360)
Qualified Middle Management:
HR, accountant, etc.: 500 USD/month
Manager, Director: 1000 USD/month
Insurance cost/employee: 150 to 350 USD
Annual paid vacation: 23 working days
Taxes
Corporate profit tax: 20%
Income tax – social security: 23% - 34 %
Value added tax (VAT): 20%
Customs tax: 0 to 10%
Non-resident dividend tax: 10%
Non-resident tax: 20% (service providers)
Tax on bank deposits: 10%
Private equity-Investment Funds tax: 0.01%
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❸ Market & trade overview - Indicators
GSP+ trade regime with the European Union, allowing the export of nearly 7,200 items
to the EU with no or reduced tariffs
Local Market of 3,000,000 Consumers
Eurasian Economic Union Market of 180,000,000 Consumers
Iranian Market of 90,000,000 Consumers
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❸ Market & trade overview - Corporate expenses
Operational expenses
Rent – prime location: $10 up to $30 per square meter per month;
Utilities: very affordable (i.e. ₡10 cents /kwh electricity);
Transportation: around $2,000/ 40 ft. container between Poti/ Batumi ports to Yerevan;
Telephone/internet: 2 USD per month for unlimited service (mobile)
Zero cost for registering a company!
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❸ Market & trade overview - Corporate services
Management consulting & trainingManagement Mix
Certification & inspectionTÜV Rheinland
International transit Spayka, Prime Logistic, City Logistics
Hospitality servicesMarriott, Hyatt, Hilton, Radisson, Hyur
Incubator, Social Impact InitiativeImpact Hub
Banking & FinanceACBA-Credit Agricole Bank, AmeriaBank,HSBC, ArmSwissBank, Anelik Bank
AuditingGrant Thornton, KPMG, PwC
LegalCabinet Sevag Torossian (France)
Real estateRealty Group, Target Development, Elite Group
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❹ Investment climate - General indicators
Ease of doing business index 2016 rank at 35
35
51
24
41 44
6355
0
10
20
30
40
50
60
70
Armenia Russia Georgia Kazakhstan Belarus Azerbaijan Turkey
Rank out of 189
1 is the easiest; 1 is Singapore; 189 is Eritrea
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❹ Investment climate - General indicators
Corruption index 2015 rank at 95
1 is the least corrupt; 1 is Denmark; 167 is Somalia
95119
48
123107
119
66
0
20
40
60
80
100
120
140
Armenia Russia Georgia Kazakhstan Belarus Azerbaijan Turkey
Rank out of 167
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❹ Investment climate - General indicators
Economic Freedom index 2016 rank at 54
1 is the most free; 1 is Hong Kong; 178 is North Korea
54
153
23
68
157
91 79
0
20
40
60
80
100
120
140
160
180
Armenia Russia Georgia Kazakhstan Belarus Azerbaijan Turkey
Rank out of 178
Armenia Investment Opportunities - 2016 21
FREE ECONOMIC ZONES
VAT PAYMENTS postponement for up to 3-year period for
importing equipment and goods within the scope of investment
projects.
CUSTOMS DUTY exemption within the scope of investment
projects.
PROFIT TAX privileges for large exporters
TAX EXEMPTIONS for IT start-up companies
TAX EXEMPTIONS in border areas of Armenia
❹ Investment climate - Incentives for investors
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127
126
158
256
166
2012
2013
2014
2015
2016
Commitments in million USDOperates in Armenia since 1993
Cumulative business volume (by end of 2015): $2.13 billion
Covered sectors:
1. Agricultural extension and research
2. Agro-industry, marketing, and trade
3. Animal production
4. General energy sector
5. General trade and industry sector
6. Public administration
7. SME finance Reference: The World Bank
❹ Investment climate - International organizations
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Operates in Armenia since 1995
Cumulative business volume (by end of 2015): $340 million
Active portfolio (by end of 2015): $147 million
Covered sectors:
1. Sustainable energy
2. Agribusiness
3. Corporate governance
4. Investment climate reform
5. Banking & finance
Reference: IFC
❹ Investment climate - International organizations
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Operates in Armenia since 1992
Cumulative business volume (by end of 2015): $1.13 billion
Active portfolio (April 2016): $347.34 million USD
Covered sectors:
1. Sustainable energy
2. Agribusiness
3. Corporate governance
4. Investment climate reform
5. Banking & finance
Reference: EBRD
93
94
49
114
138
2011
2012
2013
2014
2015
Investments in million EUR
❹ Investment climate - International organizations
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Operates in Armenia since 2005
Cumulative business volume (by end of 2015): $1.04 billion
Active portfolio (2015): $689 million USD
Covered sectors:
1. Transport
2. Finance
3. Energy
4. Public sector management
Reference: ADB
201.5
3.6
Sovereign loans
Technical assistance
Investments in million
USD
❹ Investment climate - International organizations
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Major producer of molybdenum (7% ofworld production) and significant depositsof copper and gold;
As of 2011 the mining industry accountedfor over half of the country's exports.
Mining & natural resources
IT is a major cluster, the sector grew by anaverage of 22 percent annually from 2008-2013, and 25.2% in 2014;
The sector employs over 20,000 computerprogrammers and software engineers;
Presence of major IT companies such asOracle and Synopsys, Microsoft MentorGraphics and the French Atos Company(Thierry Breton), develops some of its mainsoftware's in Armenia.
Information Technology
❹ Investment climate - Promising industries
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Very small, dynamic, transparent andstructured Financial and Banking system;
The differential of interest rates is high(around 5%); Major expansion possibilities;
Can be developed as a Regional Hub, asIran and Russia don’t have liberal systems.
Finance & Banking
Agriculture constitutes around 20% of GDP,and 40% of the total workforce;
More than 250.000 tons of fruit andvegetables were exported in 2015;
The nation has numerous vineyards and isa major producer of wine and cognac;
Potential of attracting Iran market andincreasing Russia market.
Agriculture
❹ Investment climate - Promising industries
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Agro-processing is one of the mostimportant and efficient Industries;
It is an important cluster using localagriculture, resources and nearby markets;
Major food processing industries can bedeveloped locally.
Agro processing
Tourist arrivals increased by around 12 %for the last 10 years reaching around 1.5millions in 2015;
Skiing resorts, religious tourism andwellness and health tourism are interestingattractions;
Chains such as Mariott, Hyatt and Hiltonare operating but the country lacks 5 and 4star hotels
Hospitality & Tourism
❹ Investment climate - Promising industries
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Pharmaceuticals
Fashion, Clothing, Leather, Apparels, Garments
Precision Industry
Research and Development
Robotics
Jewelry
❹ Investment climate - Promising industries
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❹ Investment climate - Success stories
Pernod RicardAlcoholic Beverage, France
Development and profit for the last 15 years
Credit Agricole and HSBCBanking & Finance, France, UK
Development and profit for the last 15 years
RencoContracting & Development, Italy
Development and profit for the last 15 years
Vallex Mining (Teghout)Mining, Russia
Around 360 mln. USD investment
Grand TobaccoFood & tobacco holding, Canada
Exporting more than 140 containers every
month for more than 22 countries
TÜV RheinlandCertification/Inspection, Germany
Certified around 50 companies according to
CE & ISO standards
VivaCell MTS ArmeniaTelecom, Lebanon
The investment registered profit on exit of
more than 300 million USD
DoubleTree by HiltonHospitality, Italy
Major investment in the center of Yerevan
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❹ Investment climate - Success stories
Cronimet & Makur YerkatMining/Processing, Germany
Initial investment of 132 Million USD andfurther investment by Circa, 2005 – 2015 ofaround 850 Million USD, employing around3.400 employees; some of the financinginstitutions: Commerzbank, RaiffeisenBank. Daughter companies: Pure Iron Plan(molybdenum smelter), ArmenianMolybdenum Production (molybdenumsmelter).
Synopsys, Synergy, Microsoft Lab, Tumo Center, Mentor Graphics, National InstrumentsIT, USA
Major successes in IT industry
Karas, Armas, ZorahWineries, Argentina, USA, Italy
An important cluster/ wine & alcoholic
beverage
SanitekWaste Collection, Lebanon
Waste collection of the Capital Yerevan,
employing more than 1.200 employees
SADE
Contracting
Veolia, SAURWater, France
Domestic water distribution
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❹ Investment climate - Success stories
ContourGlobalEnergy, USA
Vorotan Hydropower Cascade
AmeriabankBanking & Finance, IFC & EBRD
The largest local bank in Armenia
InecobankBanking & Finance, IFC & EBRD
The first M&A in Armenia
Al HokairRetail, UAE
Retail (Zara, H&M, etc.)
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❹ Investment climate - Failures and/or exits
Orange Telecommunications (France)
The latest comer to the telecom industry; Orange exited from Armenia in 2015, due to: Cross-cultural issues such as initiating price war at the entry without any reason; Leadership and Management issues ; Couldn’t create an advantage even though the brand Orange and its French notoriety are cheered by Armenians;
Carrefour (France/UAE)
After more than 1 year to its entry the group is desperately looking for having sustainable results with challenges such as: Change of the French General Director; The location itself and limiting its presence with one facility; Local leader brands refused to collaborate due to the entry fees and the supply policy.
Procredit Bank (German)
Exit from Armenian market in early 2016: Did not take into consideration cultural aspects and could not adapt to local market needs by proposing a niche of
only business lending, rejecting the private clients needs; The Parachuted Top Management followed instructions from German HQ, without making adaptations; The novice staff, trained by HQ methods could not assure the quality of service required by local customers, specially
in the regions outside the capital.
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❹ Investment climate - Investments for 2015-17
Lydian International - Mining (UK - Toronto Exchange listed company)
A new investment of 330 million USD with major shareholders such as EBRD & IFC
Gardenia - Agriculture (Lebanese Investor)
Around 1 million square meters of Pecan Plantations Around 1 million meters of Chestnut Plantations
Leaves Garden - Agriculture and Real Estate (United Arab Emirates)
Established in Armenia, the Abu Dhabi group is enhancing its investments
SAP - Software Solutions
10 mln. USD investment in IT, SME and ‘National Cloud’ development
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❺ Conclusions - Armenia Investment Opportunities
Armenia is a small country, with a small economy where risks are and can be controlled easily;
Armenia has a liberal system for foreign direct investments, exchange, capital flows and dividend
repatriation;
Armenia is in the Customs and Economic Union with Russia, Kazakhstan, Belarus, Kirgizstan;
Armenia is a major launch-pad to local production and for export to Iran, Russia, Georgia, etc.
Armenia has low crime rates and is considered in the top 10 secure countries;
Armenia has abundant literate manpower with very reasonable costs;
Armenia’s real estate, including land and constructed areas, is very reasonably priced;
Armenia has very dynamic diaspora composed of businessmen interested in investment
opportunities.
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❻ Global recommendations
Armenia can be considered a hub for business groups that want to
target Iran, Russia, and Minor Asian countries;
Armenia can be considered an alternative to Luxembourg,
Switzerland and other countries where investors can benefit from
a moderate taxing & corporate expenses.
Annexes
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Armenia Investment Opportunities - 2016 38
About Management Mix
CSP, Founded in France, 1969
CSP Caucasus, Founded in Armenia, 2000
Management Mix, umbrella branding, 2010
Presently operating through 3 regional headquarters: Cyprus, Lebanon andArmenia
Solutions Provided: Strategy & Management Consultancy, Training &Investments
Attracted investments to Armenia in finance & banking, telecom, wastemanagement, etc.
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Researches & studies on Armenian Industries & Sectors by Management Mix
Banking & Financial
Insurance and Reinsurance
Waste Management
Pharmaceutical
Mining
Healthcare
Tourism
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Management Mix operations in around 25 countries: 2000 – 2015
Central African Republic
Raffy Semerdjian
• CEO of Management Mix - www.managementmix.com
• Scholar & Visiting Professor • Saint Joseph University (Lebanon)• American University of Armenia (Armenia)• Gulf University for Science & Technology (Kuwait) • Universite Paris 9, Dauphine (France)
• Global consultant in Management Systems and investments;
• Specialized in Middle East and Eurasian Union
Armenia Investment Opportunities - 2016 41
Armenia Investment Opportunities - 2016 42
Management Mix offices
e-mail: info@managementmix.com
URL: http://www.managementmix.com
Wisdom Tower, 3rd Floor, Ayios Pavlos & Kadmos Avenue,
Nicosia, CyprusTel: +357 96 691022, Fax: +357 96 691044
Ring Building, 4th Floor,Fouad Shehab Avenue,
Beirut Central District, LebanonTel: +961 01 983838, Fax: +961 01 983737
Piazza Grande Building, 3rd Floor,10, Vazgen Sargsyan Avenue,
Yerevan Central District, ArmeniaTel: +374 10 580441