Expert on  consequences of ENA nationalization for Armenia: Capital  outflow, loss of investment attractiveness, economic isolation and  many more

ArmInfo.The policy of nationalization in Venezuela, aimed at <establishing social justice>, actually destroyed economic initiative, dismantled the private sector, and deterred foreign capital. The long-term outcome of  nationalization in Venezuela was its isolation and classification as one of the poorest countries in Latin America.

Vahram Mirakyan, the head of the Union of Entrepreneurs <Mantashyants>, recalled the  unfortunate experience of the country that has pursued the  nationalization, and the resulting consequences. I hope that after  the emotions subside, the calls for <nationalization> of ENA will be  followed by processes typical of a state governed by the rule of law.   Otherwise, Armenia will end up the list of authoritarian countries  that are unattractive for doing business and rejected by foreign  investment," he wrote on social media.

As Mirakyan pointed out, we have already undergone the process of  "nationalization" of private capital - about 100 years ago, when the  Bolsheviks extensively <nationalized> the capabilities of all  Armenian companies, businessmen and farms. At that time, they used  other terms: <dekulakization>, <restoration of socialist property>,  <confiscation of bourgeois property>, <return of wealth to the  people>, etc.

<Bolshevik terminology was ideological and based on socialist  ideology. It was primarily used for propaganda purposes. In reality,  nationalization was often carried out in a violent, unregulated and  illegal way. However, it was presented as a means of achieving social  justice, class victory and economic revival to resonate with the  broad masses of the disadvantaged.  "After the Bolsheviks, there have  been many nationalization processes in the world, mostly in socialist  or authoritarian systems. Not mostly, but always," he noted, citing  the example of Venezuela (the Chavez and Maduro regimes, starting in  the 2000s), when the oil, electricity, cement and food sectors were  nationalized.

Similar examples of nationalization, he continued, have recently  occurred in Zimbabwe, Bolivia, Mexico, Iran (after the revolution),  Cuba, Russia, etc.  "I will not go into detail, because the  consequences are essentially the same: states violated or restricted  property rights in the name of <national interests>, <social justice>  or <political control>. In some cases, compensation was provided, but  too often it was not. Such practices have caused enormous damage to  the investment climate and the reputation of the economy.

The seizure of private property or the violation of rights under the  guise of <nationalization> has a number of negative consequences,  such as: 1. Legal uncertainty and the erosion of property rights.  When the state seizes property without due process or due process, it  signals that investors' rights are not protected. 2.  Confidence in  the economy declines. Nationalizations are often associated with  economic populism, political manipulation or pressure instruments. 3.  The likelihood of long-term investment decreases. Long- term  investments are not made in places where laws can change or property  can be confiscated tomorrow.  4. Capital flight increases.  Local  businesses withdraw their funds, transferring them to countries with  stable legal systems.  5. The interest rate on a country's bonds  rises

When the risk of nationalization is high, that country's bonds and  investment projects must offer a much higher return to the same  investor in that country for him to even consider investing.  There  is also a negative consequence of nationalization. Since states are  always relatively worse managers than the private sector,  nationalization results in stagnation and degradation in these  companies, and management and maintenance make the company and the  country uncompetitive and regressive.

We should at least remember this well, because about 30 years ago we  rejected the socialist system and moved to private capital and  private property, but now there are calls to move back to the  opposite. Who would have thought that 30 years after the rejection of  socialism and authoritarianism, there would be calls and processes to  return back?" he concluded.