Armenian Firms Apply for Government Support

YEREVAN (RFE/RL)–Responding to a government call, dozens of Armenian companies have applied for government assistance in securing cheap credit needed for the expansion of their operations, Prime Minister Tigran Sarkisian said on Thursday.

The Armenian government urged local firms to submit viable business plans last November as part of its broader efforts to mitigate the fallout from the global economic crisis. It hopes to use much of large-scale financial assistance sought from Western donors for that purpose.

According to Sarkisian, a special government task force coordinating anti-crisis measures has already received nearly 70 applications. He said most of them were deemed not good enough and sent back to applicants. The task force found other proposals “quite interesting” and is now starting detailed discussions with relevant companies, he said.

“The state will help to ensure that those projects are put into practice as soon as possible,” Sarkisian told his ministers at a weekly cabinet session. “The main emphasis will be on import substitution.” The government will also help export-oriented manufacturers, he said.

It remains unclear just how the government will help local businesses get low-interest loans and other financial support, though. The government has been negotiating with the World Bank over the release of $250 million in loans which it wants to channel into small and medium-sized businesses (SMEs) through Armenian commercial banks. Officials have yet to explain whether the government would have the authority to tell those banks to lend to specific SMEs.

A team of World Bank officials is currently in Yerevan, meeting various Armenian officials and assessing the requested assistance. The head of the bank’s Yerevan office, Aristomene Varoudakis, indicated last month that Armenia is well placed to get at least $100 million in anti-crisis aid.

As well as seeking donor funds for SMEs, the government hopes to cushion the effects of the global downturn with much greater public spending on road and housing construction and massive projects such as the construction of a new nuclear plant and a railway linking Armenia to Iran. The implementation of those projects requires billions of dollars in funding from foreign investors.

The worldwide recession is being increasingly felt in Armenia, with economic growth slowing significantly in the fourth quarter of 2008. The government had forecast a growth rate of at least 9 percent for this year. The projection is increasingly questioned by analysts.

The Economist Intelligence Unit (EIU), a London-based think-tank, predicted in a recent report that that the Armenian economy will expand by only 4.5 percent in 2009, sharply down from an average of 12 percent registered from 2002-2007. “Our outlook ; is based on the assumption that the leading drivers of growth in recent years will come under strain,” it said. The report pointed, in particular, to tumbling international prices of non-ferrous metals, Armenia’s number one export, and an anticipated drop in cash remittances sent home by hundreds of thousands of Armenian migrant workers.

Like the authorities in Yerevan, the EIU stressed the importance of greater government support for SMEs and improved business environment. It said Prime Minister Sarkisian seems genuinely committed to combating widespread corruption, strengthening the rule of law and ensuring fair business competition.

“However, given the close links between political and business circles in Armenia–and the fact that the president [Serzh Sarkisian] relies on these figures for support ‘s vested interests will still present a significant obstacle to more open and transparent policies, and will slow the pace of reform,” cautioned the EIU report.


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