GOVERNMENT CONTINUES TO PURSUE CREATION OF REGIONAL FINANCIAL CENTRE IN ARMENIA

World Markets Research Centre
Global Insight
February 24, 2010

BYLINE: Lilit Gevorgyan

Armenia’s economy minister Nerses Yeritsyan said at a news conference
yesterday that his government is still keen on pursuing creation of
regional financial centre in the northern Armenian town of Dilijan.

According to Yeritsyan, speculations that the government has abandoned
the project were not true. He added that the Central Bank of Armenia
has been working on the project, further explaining that the government
has to carry out a number of reforms, including in the pensions,
insurance and corporate management sectors, to ensure the success of
the project. The idea of turning Armenia into a regional financial
centre was first announced on 24 May 2008 at a conference in Dilijan
attended by Armenian president Serzh Sargsyan and PM Tigran Sarkisian.

Significance:The launch of the Armenian government’s ambitious project
in 2008 was ill-fated as it was soon followed by the global economic
crisis, which left Armenia amongst the top three worst hit countries
of the Commonwealth of Independent States (CIS) with 18% decline in
GDP in 2009. The crisis temporarily shelved the regional financial
centre creation project. The Armenian economy is in its early stages
of recovery which according to the International Monetary Fund will
be translated in 2% GDP growth in 2010. While it is encouraging
for the investors to see the reiteration of state commitment to the
high-profile project at the same time the current business environment
in Armenia casts doubts on the ability of the government to implement
the project. Aside the reforms that Yeritsyan lists as priority for
the implementation of the project, the Armenian government has a long
list of market-oriented changes to make. The country’s economy is
distorted by oligarchic businesses, poor tax collection, a heavy and
complicated tax burden for most of the small and medium size businesses
and rampant corruption. The global economic crisis may have delayed
the implementation of the project but with the recession over, the
government has to face the real problems that are likely to jeopardise
the plans of turning Armenia into a regional financial centre.