TWO WAVES OF GLOBAL CRISIS: EBRD’S ANALYSIS OF ARMENIAN ECONOMY

news.am
Feb 17 2010
Armenia

At the presentation of the EBRD Transition Report 2009 in Yerevan,
Helena Schweiger, EBRD Principal Economist for Armenia, pointed out
that the first wave of the global crisis did not affect Armenia,
as the Armenian banks were not seriously dependent on the global
financial market nor were derivatives actively used. So the Armenian
banks’ conservative policy proved to be of benefit to both commercial
banks themselves and the country as a whole.

The second wave of the crisis, which developed from an economic into
a financial one, changed the situation. Armenian guest workers’
businesses in Russia went bad, which affected money transfers
to Armenia. The amount of money transfers to the country showed a
30.6% decrease (a total of U.S. $694.9m) in 2009 against 2008, which
immediately affected many business sectors, particularly construction,
which is actually paralyzed.

After outlining the present state of the Armenian economy, EBRD
experts turned to the saving recipes for economic recovery. First of
all, they pointed out the necessity for reforming Armenia’s business
environment. As regards the means of achieving success, the EBRD
experts singled out the Government’s anti-monopoly policy.

It is common knowledge that, in an Armenia-like country, business
integration with power creates perfect conditions for monopolies. A
number of markets are shared by few market members or only one economic
entity dominates them, which is actually the same.

The Government’s economic policy actually encourages big business.

Some goods markets, which are, in fact, fully controlled by narrow
business circles, are "tightly closed" for other businessmen. And,
of course, in trying to get access to monopolized markets, "the
newcomers" encounter various obstacles.

Underlining the role of small-to-medium business, the EBRD urged the RA
Government to support them. The EBRD, for its part, supports Armenian
businesses irrespective of their being small or big ones. No other
explanation for the attention such an influential bank pays to such
"a trifle" as retail trade can be offered.

We would like to remind the readers that the European Bank for
Reconstruction and Development (EBRD) and the STAR supermarket chain
signed credit agreements last year. Under the agreements the EBRD
was to allocate a total of U.S. $5.5m to the STAR chain. Under the
circumstances, when small and medium-sized enterprises can hardly
compete with their "big counterparts", the EBRD’s support for big
businesses seems to be contrary to its slogans.