World Bank Official Says Reassured Over Armenian Energy Privatization

YEREVAN (RFE/RL)–A senior World Bank official said on Monday that she has been reassured by the Armenian authorities about their commitment to privatizing the country’s electricity distribution networks despite strong opposition in the parliament.

The sell-off to foreign investors of the four state-run power companies is the main condition for the release of over $50 million in fresh World Bank loans that would cover about half of the Armenian government’s budget deficit this year.

Judy O’Connor–the Bank’s regional director for the South Caucasus–told reporters that during her talks with Armenian leaders she saw a "commitment to have this thing (the privatization) done as quickly and transparently as possible."

She said the vital "structural adjustment credits" (SAC) will be disbursed "very shortly after" the government selects winners of the international tender for the electricity companies and "finalizes" negotiations with them.

The privatization process was previously due to be completed by the end of this month. However–that time frame became impossible to meet when the Armenian parliament voted last April to suspend the bidding pending the adoption of a special law setting key terms of the sell-off. The move was part of bitter squabbles in the government–with opponents of Kocharian–who then controlled the parliament–seeking to upset the increasingly confident president.

In an effort to keep the privatization process on track–the energy ministry has promptly drafted a bill that will be put to debate in the parliament soon. A new timetable approved by the government of Prime Minister Andranik Markarian envisages that winners of the contest will be announced by next October. In O’Connor’s words–even this timetable might prove to be unrealistic. "My impression is that the currently approved timetable is achievable but very optimistic," she said.

Four Western firms – the Electricite de France giant–Swiss-Swedish group ABB–Spain’s Union Fenosa and the US operator AES Silk Road – were short-listed for the final phase of the bidding in April. Another major bidder–a Russian consortium made up of Gazprom’s ITERA subsidiary and the Rosenergoatom nuclear operator–was left off the short-list at the insistence of the World Bank and other Western agencies.

The move–strongly criticized in Russia–threatened to sour the otherwise cordial Russian-Armenian relationship. The suspension of the privatization process gave the Russia’s a chance to re-enter the bidding–with ITERA trying to team up with one of the four Western companies and Rosenergoatom reportedly putting forward an alternative proposal to the Armenian government.

Analysts believe the issue has left Yerevan with a difficult choice between economic efficiency and the risk of a deterioration of relations with Moscow. The World Bank and many energy officials in Armenia take the view that the privatization of the national power grid is essential for attracting urgently needed investmen’s in the sector.

O’Connor reiterated that the issue is a purely economic one and must not be exploited for political purposes.

Commenting on her talks with Kocharian–Markarian and other top officials–O’Connor said they also vowed to reverse what she described as a "delay" in economic reform resulting from months of infighting in the Armenian leadership. The authorities–she said–pledged to "catch up with delays they have seen in the last several months."

"We are very keen to support them in this activity," she added. The World Bank official expressed hope that the stabilization of the political situation in Armenia will allow the authorities to "accelerate" the implementation of urgent measures needed to drag the economy out of post-Soviet stagnation.

Meanwhile–Senior executives from the International Monetary Fund have begun a series of meetings with Armenian leaders for the first time since the recent change of government in Yerevan.

Representatives of the IMF and the World Bank Friday were inquiring about the new cabinet’s economic priorities to ascertain their position on whether to release fresh loans that are crucial for the country’s budget and continued financial stability.

Also on Friday–President Robert Kocharian met with a senior IMF delegation headed by the deputy director of the Fund’s European department–Thomas Wulf–who was said to have expressed concern at Armenia’s most recent macroeconomic indicators. The Armenian economy showed a greater strain in the first quarter of 2000–with GDP growing by less than one percent–according to official figures. "Accepting Mr. Wulf’s concerns over the indicators–Robert Kocharian said at the same time that they were the result of the domestic political situation," according to the presidential press service. "The president assured that within several months positive change will be evident."

The IMF and the Armenian authorities have reportedly been negotiating on a new Enhanced Structural Adjustment Facility (ESAF)–a low-interest loan designed to strengthen the country’s highly unfavorable balance of paymen’s.

The previous three-year ESAF program for Armenia worth $160 million was completed in late 1999. The fight against rampant corruption was also high on the agenda of Friday’s talks. Kocharian and Markarian vowed to implement a comprehensive "anti-corruption program" that primarily aims to ensure a more favorable business climate in Armenia.


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