COMMENTARY : Armenia Offers Economic Opportunities

“Wanted: Patient business persons willing to invest time and money in Republic of Armenia. Only those possessing good old American ingenuity need apply.”

This fictitious ad sums up the pro-business attitude that prevails today in Armenia as the nation switches gears from a communist to capitalist economy.

It also gives a clue to the opportunities awaiting American investors in a number of areas, including real estate, construction, manufacturing, engineering, computers and banking.

In a recent one-week business trip--my third since Armenia declared its independence from the (former) Soviet Union last summer--I found the government eager to cooperate.

Mayor Galstyan Ambartsyum of Yerevan, Armenia’s capital city, told me, “If a businessman is willing to come here, we will help in any way possible.”

As a real estate professional, I couldn’t help noticing the potential for those willing to invest in renovating or building hotels, office buildings and residential housing.

Shells of building projects are everywhere, simply abandoned when the Soviet government collapsed. To attract entrepreneurs from the West, the government has embarked on a policy of setting up joint ventures whereby the investor provides capital and the government provides the partially completed structure.

An example is a new 100,000-square-foot unfinished building next to the city hall in Yerevan. Constructed during the Red regime to house a “government agency,” possibly the KGB, its exterior walls are completed, featuring a facing of a reddish Armenian stone. A skylight stretches across the entire roof over an atrium.

However, there is nothing inside . . . no other interior walls, no elevators, no lights or electrical wiring, no heating or air-conditioning, no carpeting. When the building is completed with joint venture capital, the ground floor will house retail business and the top four floors a hotel, with the rest of the space being offices.

New hotels will be needed to accommodate the influx of visitors who will surely come as Armenians living outside the country--who outnumber those within it--visit the motherland they have never seen. Next door to Grand Central Station, a shell for a 650-room hotel already stands, waiting for a joint venture partner; it too was abandoned when the Soviet government collapsed.

Of course, the reality is that Armenia has many problems. Flying into the country, you notice immediately that 70 years of Communist mismanagement has taken its toll. The roads were ravaged by torrential rains and heavy snow earlier this year, making each trip an adventure. Most telephones are useless. Electricity functions erratically because the atomic reactor was shut down for safety reasons. The old Soviet ruble, still the official unit of exchange, is being traded at an average of 100 to the dollar.

Western entrepreneurs will need to import the interior fixtures and furnishings for buildings--even such basic necessities as toilets--from Europe or the United States.

And, passing through customs, still managed by the Red Army, requires you to wait long hours in dark rooms and hallways and to endure long, hard stares from Soviet clerks.

However, compensating for such disadvantages are the people of Armenia, known for resilience amid adversity, their education (the literacy rate is 99%) and hospitality (cab drivers won’t accept your fare once they learn you’re American). Political leadership is strong and the people of Armenia are determined to build a beautiful, better nation.

The country boasts a highly skilled technical labor force that currently is poorly paid. There is new emphasis on learning the English language and business administration, especially since the UC system opened its American University of Armenia in Yerevan.

The country’s transition to a free-market economy won’t be easy, but the government’s cooperation and enthusiasm will make it possible. “It is clear that Western companies willing to do business in a less comfortable environment, and having some patience with unorthodox ‘Old World’ ways, should fare well in Armenia,” said the director of NPO Transitor, Aram Vartanyan.

Companies such as AT&T;, Computer Land, Benetton and Adidas, to name a few, already are doing well.

Smoothing the way are two Americans from Los Angeles as ministers. Steve Tashijan of Southern California Edison is the minister of energy and Raffi Hovannissian, an attorney, is the minister of foreign affairs.

Joint ventures in that commonwealth, with a population of 3 1/2 million people, could lead to additional opportunities in the other commonwealth nations--where Armenia already has extensive experience and contacts. That translated to a population market of 300 million.

So, although our economy is presently soft in the West, there is much room to grow in the East!