Zangezur Copper Molybdenum Combine (ZCMC) has been a leading company in copper and molybdenum mining and processing in Armenia for more than 60 years. After being privatised in 2004, it is now in the hands of private local and international owners who are benefiting from the country’s open business environment and highly educated population. The company’s general manager, Mger Poloskov, lays out the country’s vibrant mining scene and why foreign investors should have the confidence to do business in Armenia
How would you describe Armenia’s mining sector today?
The mining sector here is very dynamic, and it has changed a lot over the last decades. Today, the sector employs around 15,000 people directly and more than 100,000 with its satellite service and supply companies in affiliated sectors. The average wage in the sector is pretty high – one of the highest in the economy. But just as any natural resource industry, the development of mining is quite cyclical. At the moment, I believe we are at the very bottom of the curve, but once the growth picks up I do not have any doubts that mining/ore extraction and metallurgy sectors will continue their growth and will enter into a new technological era of development, based on intensive expansion instead of extensive.
Armenia has a long history of mineral exploration, but in recent years exploration activities and mining investments have been increasing. While there have been some slowdowns, from 2005 to 2013 companies such as CRONIMET, Dundee Precious Metals (successfully exited recently), Polymetal, Global Gold Corporation, and Lydian established exploration and production operations in Armenia. As a large foreign investor, CRONIMET (the majority owner of ZCMC) has benefited from the liberal economic approach of the country and its open investment and trade policies.
We can definitely state that both the business environment and the legislative framework for businesses is quite favorable in Armenia. Armenia is a member of large international organisations, such as the World Bank Group, the World Trade Organization and the Asian Development Bank. Its relationship with Gulf countries, especially the UAE, has also been developing. The Armenian Government has signed investment protection and promotion treaties with 39 countries, including the USA, Germany, Russia, and France, which provide additional guarantees for foreign investment.
At the UAE Investment Forum last March, President Serzh Sargsyan remarked that bilateral trade between Armenia and UAE had witnessed unprecedented growth – growing 2.5 times by the end of 2016 and multiplying again by a factor of eight by early 2017. In which areas do you see potential to export to the UAE and the Gulf?
We also believe that cooperation with UAE is important for our land-locked country. We see real opportunity to achieve mutually beneficial agreements that will further upgrade the Armenian-UAE economic relations to a qualitatively new level. In our everyday work, we see the necessity of deepening the trade and financial cooperation with the countries of the Persian Gulf, as this is an important hub for transportation – products are shipped from Armenia to the Gulf region and other countries, and back towards Armenia.
The areas of cooperation are quite extensive but include industrial production, alternative energy solutions, agriculture, and various other services. Armenia should aim to increase exports of high-value and knowledge-intensive products, as this is the area where we have some competitive advantages. From our own experience and cooperation, we already have very successful trade and finance solutions in place, having established mutually beneficial cooperation with UAE companies.
How can ZCMC’s positive experience as a company with one of the largest foreign direct investors serve as a testament to encourage more international investors to take a chance on Armenia?
Armenia by itself was a serious milestone for our German investor – CRONIMET Mining AG; not many Western investors had enough courage and knowledge to enter a post-soviet small unknown country in 1995. Since then, we have done a lot here, having invested several hundred million in mining, metallurgy, other manufacturing industries and social projects. Now our main assets in the country are our Plant of Pure Iron and Zangezur Copper Molybdenum Combine.
Armenia’s financial and banking system is sound and transparent and is operating based on international accounting principles. There are no limitations on conversion and transfer of money or repatriation of capital and earnings, which is important for foreign investors. In general, Armenia has quite developed infrastructure in terms of production and auxiliary facilities, electricity supply, gas network, ICT and the business environment. In addition, the country has a large pool of well-educated people.
There are really tangible results from the recent reforms to the business environment implemented by the government. In terms of economic freedom, it’s quick and easy to open a new company, buy a property or operate a business. This makes an entrance of an investor quite easy and recent improvements have made that even easier.
What is the overall message you would like to send to the Gulf – why invest in Armenia and why now?
The multiplicity and diversity of companies, markets and industries require high levels of communication among partners, and this is a real challenge in each new country a foreign company enters. Here in Armenia, we were able to form our business operations by establishing sound communications channels with all relevant parties to ensure the coherence of approach necessary for success. As such, and much to the credit of our qualified and experienced local staff, dynamic growth of CRONIMET’s activities in Armenia is constantly recorded.
Finally, how would you sum up the unique characteristics that make Armenia a place to visit and do business in?
One should not be afraid of investing in Armenia. This country has quite developed infrastructure and an open business environment with relatively low taxes. The government supports foreign investors and there are investment guarantees. The other important factor is the understandable business approach. Armenians have a close-to-European mindset along with perfect understanding and acceptance of Middle East specifics, keeping a foreign investor comfortable. Its rich and diverse culture, ancient history, hospitable and educated people make Armenia attractive not only in terms of doing business but also spending leisure time. We always enjoy our trips and use every opportunity to visit the “open-air museum” and its historical monuments that tell the country’s history.