Monday, January 11 2016 14:32

ArmInfo. EBRD's private sector portfolio in Armenia grew 14.7% in 2015 totaling EUR295 million on October 31 2015 versus EUR257.2 million a year ago, according to the document of the European Bank for Reconstruction and Development Strategy for Armenia that was approved by the Board of Directors at its meeting on 25 November 2015.

According to the document, EBRD implemented 56 projects in the private sector for 10 months of 2015.  The number of the implemented projects grew 27% as compared to the previous year. The projects for the financial institutions accounted for 49% of total. The Bank's profit totaled EUR143 million, of which EUR131 million were Depository Credits (banks), EUR72 million were 9 infrastructure, transport, environment, and municipal projects.   Infrastructure development project accounted for 24% of total portfolio of the Bank in Armenia: EUR51 million or17% of total in energy sector, including EUR39 million - power and energy and EUR13 million - natural resources. 

Industrial trade and business sector project accounted for 10% of total private sector portfolio of EBRD in Armenia. In particular, Agribusiness projects totaled EUR30 million. 

The Bank defined its Strategic Orientations.  Strategic Directions:  Strengthening the competitiveness of the domestic private sector and levelling the playing field is pivotal to Armenia's ability to engender a more broad-based economy, reduce vulnerability to external factors, and achieve sustainable growth. To that end, increased access to finance, particularly for MSMEs, further improvements to the business environment, developing modern management capacity in corporates, and strengthening the value chain are all necessary.  Capital markets development, especially in the context of pension reform, is another important element that could provide a much needed enhancement to the traditional bank lending that dominates the financial sector, and which has exhausted breathing space for many corporate borrowers. Finally, much more remains to be done to improve and commercialise public services and infrastructure, both for the direct benefit of citizens and to improve the competitiveness of business. In view of the identified sector and country-based transition gaps, the Bank's strategic orientations in the new strategy period therefore concentrate on enhancing private sector competitiveness, developing capital markets, and supporting commercialised public utilities with improved service delivery.

Enhancing private sector competitiveness by strengthening capacity, increasing corporate transparency and improving the business environment Enhancing private sector competitiveness by strengthening capacity, increasing corporate transparency and improving the business environment: For Armenia's small, 3 open economy, a significant improvement in competitiveness is the key to attracting investment. The Bank will target assistance for improvements to the regulatory and administrative environment, encourage more sustainable and resource efficient growth across sectors, and strengthen its assistance to MSMEs that strive to be more transparent and competitive through a combination of finance and advisory services.  While financing of the best of the Armenian private sector through SBI instruments will remain an integral part of the support provided by the Bank, reaching out to SMEs across industries via partner banks will continue to deliver the most transition impact overall.  Enhancing access to finance through SME loans therefore will continue to be a cornerstone of the Bank's strategy.

Developing capital markets and promoting local currency financing:  While Armenia currently has access to international capital markets, the development of local capital markets and local currency finance is critical for the country's sustainable development. There is a need for new instruments across firm capital structure, along with modern behaviour among corporates in their approach to shareholder value. As the authorities roll out mandatory pension reforms, which will likely increase savings and create local demand for bonds and equity, the majority of pension fund investments will be channelled in local currency.  Once in place, success will largely depend on the emergence of a healthy supply of capital market issues on the local market, and enough different investors to create market liquidity, alongside the emergence of a more robust money market and hedging instruments. The Bank will address these challenges in Armenia as a focus country for its local currency and capital markets work.

Developing sustainable and commercialised public utilities: Armenia's available fiscal space cannot fully accommodate the country's crucial energy, transport and municipal infrastructure needs in the absence of high growth rates. This highlights the importance of commercialisation and increased private participation in public service provision, while a significant grant element for all sovereign and sovereign guaranteed project financing will be needed during the medium term for debt sustainability. To achieve efficient prioritisation, the Government of Armenia will need to develop projects within national sector strategies that are consistent with its financing constraints. The Bank is well positioned to contribute to these strategies in cooperation with other donors, and assist in upgrading and expanding public service provision through policy advisory and capacity building assistance aimed at sustainable commercialisation combined with lending for energy and energy efficiency, transport and municipal service projects which are environmentally sound, improve competitiveness, and lead to cost recovery.

Over the previous country strategy period, the Bank's main priorities in Armenia have been to: (i) develop the financial sector and improve access to finance; (ii) improve municipal and urban transport infrastructure; (iii) develop agribusiness and high value-added, exportoriented industrial companies; and (iv) improve the regulatory and institutional framework for sustainable energy and mining. In addition, the Bank has engaged in policy dialogue focused on improving the business climate. In spite of a challenging operational environment, the Bank signed 44 projects totalling ?257.2 million in volume, bringing its cumulative investment to ?876.7 million across 137 projects, combined with significant policy dialogue, technical assistance and capacity building engagements in each of these areas.