EBRD Chief Sees Continued Involvement in Armenia

YEREVAN( RFE/RL)–The European Bank for Reconstruction and Development intends to expand its activities in Armenia despite the effective failure of some of its large-scale lending programs–the bank’s president–Jean Lemiere–said on Monday. He made the announcement at the end of two-day talks with Armenian leaders in Yerevan.

An international institution set up in 1991 to assist the countries of Eastern Europe and the former USSR in their transition to the free market–the EBRD has so far allocated a total of $132 million to various investmen’s projects in Armenia–mostly in the form of loans. Three of the projects–expansion of the Hrazdan thermal power station and construction of a cargo terminal and a wholesale agricultural market–are seen as gross failures.

A $57 million loan released in 1995 proved insufficient for the construction of the Fifth Block of the Hrazdan plant–the largest in the country. Experts have blamed the flop on wrong calculations and government mismanagement. The Armenian authorities–having already spent $23 million in payment for the loan–have been looking for ways to re-vitalize the facility–with the privatization now seen as the only way out.

Prime Minister Andranik Markarian said on Monday that the EBRD has shown interest in the sell-off. Markarian–speaking at a joint news conference with Lemiere–blamed the previous cabinets for failure to "justify the economic benefit" of EBRD-funded projects.

"From now on we will hold open and frank discussions before seeking funding for big projects," the premier declared. Lemiere–however–said that the EBRD has been by and large satisfied with the results of its activities in Armenia–saying that most of them have been a success. He said the bank will now focus its efforts on the development of small and medium-sized private businesses.

The need to support the Armenian private sector was stressed by President Robert Kocharian who met the EBRD chief earlier in the day. Kocharian said the decade-long economic reforms are now in a "critical phase" and should be backed up by Western donors and credit institutions.

The EBRD last year extended a $20 million credit to the French-owned Yerevan Brandy Factory–its biggest yet lending to a private business operating in Armenia. Earlier this year–the bank signed an agreement with the government on the purchase of a 20 percent share in the four state-run electricity distribution companies. The deal was conditional to the sale of a 51 percent stake in the utilities to strategic foreign investors.

Last month’s failure of an international tender for the companies put EBRD involvement in the energy sector in doubt. Lemiere said the EBRD will still be willing to buy the minority stake if the government completes their sale before the end of this year.


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