World Markets Research Centre
Global Insight
Nov 27 2009

EBRD Broadens Armenian Investment Programmes

BYLINE: Lilit Gevorgyan

On 26 November Olivier Descamps, the European Bank for Reconstruction
and Development (EBRD) Business Group Director in South Eastern
Europe, Central Asia and the Caucasus, welcomed the Armenian
government’s bailout programme launched in the aftermath of the
economic crisis. After his meeting with the Armenian Prime Minister
Tigran Sarkisian in the capital Yerevan, Descamps stated at the
follow-up press conference that the EBRD is interested in continued
co-operation with the Armenian government. This is confirmed by the
Bank’s $150US-million investment in 2009, a record figure for the
country, and almost double 2008’s investment. Talking about the EBRD’s
new proposals, Descamps highlighted the idea of establishing pension
and insurance funds, as well as a project to support small- and
medium-sized enterprises to save energy. He also stated that by the
end of 2009 another $40US-million agreement will be signed to complete
the reconstruction of Armenia’s Zvartnots airport. Sarkisian in his
turn asked Descamps to take part in the creation of a free economic
zone in the areas close to Zvartnots airport, an idea welcomed by
Descamps.

Significance:The EBRD has been working with the Armenian authorities
since the independence of this tiny former Soviet republic in 1991.
The co-operation has steadily increased especially after Sarkisian,
formerly the head of the Armenian Central Bank, became Prime Minister
in April 2008. The support of EBRD representatives has been very
forthcoming in helping Sarkisian realise his plan of modernising and
liberalising the Armenian economy. Although his economic policies have
had some success, especially with streamlining the tax regime, issues
such as the ongoing spread of monopolies and rampant corruption
continue to hinder the country’s development. Despite all the
international financial assistance, Sarkisian remains largely a
technocrat unable to solve these problems. Tackling of the problems
would require the president rather than the prime minister to show the
political will to liberalise the economy and fight widespread nepotism
and corruption. However, the reality remains that this would undermine
the president’s power base given that Armenia’s political elite is
largely made up of oligarchs. As a result, market reforms are not
likely to come in the foreseeable future.