GOVERNMENT SUPPORT GUARANTEES BUSINESS

Azat Artsakh, Republic of Nagorno Karabakh
Sept 28 2005

In two or three years after the maintenance of the ceasefire the
NKR government launched the loan programme for the treatment of the
paralyzed economy through the funds of Artsakhinvest Foundation. That
was absolutely the right thing to choose. The wrong thing about it was
that the people in charge of loan repayment relied on the conscience
of borrowers. There was no mechanism of loan repayment.

The consequence of this is that the bulk of over 2 billion drams of
loan has not been repaid yet. Carrying on with this “guarantee free”
loan programme would mean dissipation of government funds. The year
2003 can be considered as the second stage of the loan programme.

This time the executive’s attitude was more cautious, warrants were
replaced by collateral of real and personal property. In order
to coordinate the programmes of development of small and medium
size business the Foundation for Small and Medium-Size Business
Development was set up, which was restructured into the Arstakh
Development Agency in 2005. From 2003 to 2005 over 1 billion 62
million drams from government funds was lent to businesses operating
in NKR. The year 2005 is distinguished by the scope and amount of
soft loans. In 2005 about 800 million drams was lent from government
funds. 200 million drams was provided for wine growing and orchards,
cattle farming, manufacturing and purchase of agricultural machines
each. Besides, food processing, IT and other branches were also
funded in the framework of loan programmes. In order for the money to
reach the addressees (i.e. regions mainly) the Artsakh Development
Agency set limits on the number of applications for loans from each
region. This policy is obviously effective. If in 2003 the loans
granted for wine growing in Askeran region totaled only 9.8 million,
in 2005 they mounted to 49 million. In the region of Hadrut the loan
sums totaled 7.4 million and 30 million, in Martakert 6.0 and 35
million respectively. Two businesses received 100 million drams each
for purchase of agricultural machines. The two pools of agricultural
machines will offer agricultural services to farmers at comparatively
low prices. Summing up the indices describing the dynamic of small
businesses and government funding, we may say that small business is
going along successfully despite the problem of collateral.