Elizabeth Hanny: The open skies policy has been a real success

17.06.2015 | 00:00 Home / News / Interviews /

Banks.am’s interview with economic and commercial officer of US embassy to Armenia Elizabeth Hanny.

- During the Armenian President’s visit to Washington in May 2015, Armenia and U.S. signed Trade and Investment Framework Agreement (TIFA). It has taken nearly 10 years to sign this agreement.  What were the main reasons for such long negotiations to sign the agreement?

- The reality is that while people have been talking about a TIFA for many years, the negotiations have not been underway for ten years. The negotiations only began last year. And we began the negotiations with the Armenian government last year because we felt that the Armenian- U.S. economic relationship had finally matured to a point where a TIFA – which is a Trade and Investment Framework Agreement could add value to the discussions on economic issues that we were already having. And the actual negotiation phase went very quickly. We are very pleased that we finally have a TIFA agreement in place with Armenia and we hope it will lead to a strengthening of our economic relationship.    
- There were reports, rumors, that the singing of TIFA was postponed because of the problems regarding business climate in Armenia. What can you say in this regard?   

- It was not postponed because it was never planned. We began talking to the Armenian side about this in the last meeting of U.S.-Armenia Joint Economic Taskforce (USATF) that we had and at that point U.S. Trade Representative began the discussions with the Ministry of Economy of Armenia. And it is just taken some time for all the pieces to fall into place so we could move forward on it.     

- According to TIFA, creation of Armenian-American Trade and Investment Council is scheduled. What are the main tasks of this Council? How will it operate?  

- The Council is essentially the U.S. Trade Representative’s office leading for the American side and then the Armenian lead on the other side. Those two parties will negotiate ahead of time to determine an agenda. It is that agenda that the Council will address and the types of things that are most likely to be addressed will be things like the following. The parties will be monitoring trade and investment relations, they will be talking about opportunities for potential investments and also will look to identify and remove impediments to the trade relationship. The actual Council’s meetings will also include representatives from private sector. So both governments will separately consult with private sector and then some private sectors representatives will also participate in the Council meetings. And the TIFA Council meeting is likely to be held in conjunction with our existing U.S.-Armenia Taskforce and we probably do them for logistical reasons on two consecutive days.

- A couple of days, ago Armenia and an American company signed an amended and supplemented agreement on the purchase of Vorotan Complex of HPP. It is the largest U.S. investment in the history of Armenia.  Can we say that TIFA has given green light to this deal?

- I wouldn’t say that, no. The Contour Global deal has been in the process of negotiation with the government for almost 3 years and it is an entirely separate negotiation happening  between the company and the government, whereas the TIFA has been a discussion between our U.S. Trade Representative’s office and the Armenian government. However, both of these are signs of our deepening trade and investment relationship with Armenia and we are hoping that that will spur additional interest in the Armenian market.   

- Presently, we have over 400 American capital companies operating in Armenia. In your opinion, will their number grow after TIFA signing and after successful deal with Vorotan HPP?

- We certainly hope that the number of U.S. companies interested in investing in the Armenian market will increase as a result of both the Vorotan deal signing and the TIFA agreement. A high-profile deal like Contour Global is definitely something that other investors watch carefully to see whether or not market like Armenia is a good place to do business. However, ultimately whether U.S. businesses come here is primarily a factor of the Armenian business environment. And whether or not there are options for profitable business in Armenia. If companies can’t come here and make money, they are not going to come. So we have to find the sectors and the industries, that are the most attractive to U.S. businesses and focus on highlighting those opportunities to the businesses.  

Elizabeth Hanny
Photo: Mediamax

- What are the main obstacles for American business in Armenia?

- Armenia has a lot of strengths. It has a highly educated work force, a lot of experience in the IT sector. There are a lot of American companies investing in the IT sector, which is doing fabulous job. But there are also still challenges. And the main obstacles for American companies, won’t come any surprise to you; they are the same obstacles that all the companies face here.  And that is lack of transparency and predictability in tax and customs regimes, and it is the market dominance that is enjoyed by the some well-connected elites that stifles competition and prevents other companies from getting involved in certain sectors of the market. American businesses really look for predictability. They want to know exactly what they are getting into. They want to know how much they are going to have to pay, when they are going have to pay it; they want to know that the rules are not going to change and they want to know that everybody is going to be subject to the same rules of the game. From the technical level Armenia has a lot of very good laws in place; they have a very attractive trade regime and investment regime in terms of repatriating funds. The real issue is on the equitable application of the law and the ability to know that they can rely on those laws if they run into difficulties.

-After the signing of  the TIFA, Armenian organizations in the U.S. have started a new campaign aimed at signing the U.S.-Armenia Double Tax Treaty. When will it be possible for the parties to start negotiations on the treaty?       

-  There are no plans to start negotiations on a double taxation treaty.  Double taxation treaties are negotiated when a significant number of American businesses complain that they are being harmed by the lack of a double taxation treaty. These companies have to then apply to our Department of the Treasury, saying that they are being taxed twice. At this point no one has complained. So the Treasury Department has no basis to start negotiations.  

- My last question is about Open Skies policy. There is an impression that though the open skies policy was adopted 2 years ago, the implementation is very slow and the number of companies flying to Armenia is not increasing but decreasing. Do you agree with that?

- I think that the open skies policy has been a real success, not only because it demonstrated that the Armenian government was willing and able to undertake such an important large scale reform, but because it has had real results. If you look at the numbers, you can see that passenger traffic is up, the flights are up, and the prices are down. There have been real benefits, but the thing to keep in mind as well is that these are tough economic times. Regionally we are experiencing recessions, stagnation. People don’t have as much money; they aren’t travelling as much regionally and globally. So it is hard to compare now to previous times when the economic conditions were better. But there was also a significant shift in the country’s policy from the time when the open skies plan was developed. At that time Armenia was looking towards the EU, was looking to sign the Association agreement and DCFTA. Instead Armenia went with the Eurasian Economic Union. So a lot of airlines were waiting to see what sort of impact Armenia's accession to the Eurasian Economic Union would have on their commercial and regulatory environment before they made a huge business decision to start changing their routes. But the decisions that air companies take are usually a year or two in advance. So they are waiting to see what to do next year. And ultimately these types of reforms take time, the results are not overnight. The law actually implementing the new regulatory framework is still at the National Assembly; it has not been passed yet. So it’s not a complete process and so I think that it is too early to judge the results right now. I think that in the long run, this type of decision can do nothing but help this economy.                            

Yekaterina Poghosyan talked to Elizabeth Hanny

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