An investment fund set up this year by wealthy Armenians living in the diaspora has announced its first project - a hydropower plant to be built in the northern Lori province, close to the Georgian border.

The Armenian service of Radio Free Europe/Radio Liberty (RFE/RL) cited Energy Minister Ashot Manukyan as saying that the investment would amount to $150mn and pursue a generating capacity of 76 megawatts (MW). The investment fund, called Investors' Club of Armenia, said that the construction would take three years and would generate 5% of the country's power production once online.

Setting up the investment fund together with wealthy Russian business people of Armenian origin was presented as part of Prime Minister Karen Karapetyan's plan to attract more foreign investment to Armenia, following the victory of the Republican Party at the polls in April.

Karapetyan, first appointed prime minister in September 2016, came to power at a bad time, having inherited a poorly performing economy and social unrest in relation to an increasingly unpopular regime. In 2016, the Armenian economy posted a meagre 0.2% GDP growth rate and net foreign investment dropped by 31% y/y to AMD81.6bn (€157mn).

If Karapetyan, who is known as a technocrat that worked in senior management in the Russian energy industry before taking the PM post, is to be successful, more such investments will be needed, as well as earnest reform of state institutions, which has yet to take place.

Despite Karapetyan's best efforts, Armenia's governance indicators remain poor, corruption is rampant, the poverty level high and the country's sustained trade deficits have pushed its foreign debt levels up.

One of Armenia's foremost imports is gas from Russia and Iran, therefore boosting local power generation could help address in part the trade imbalances. Armenia is a net power exporter - it trades electricity in exchange for Iranian gas, which it exports through two high-voltage power lines. A third power line connecting the two countries is currently under construction.