Armenia’s Tiny Stock Market Remains Stagnant

Western corporate culture is still far from taking root in Armenia where a nascent stock market maintains its minuscule size despite years of robust economic growth, a senior state regulator admitted on Wednesday.

Eduard Muradian, head of the state Securities Commission, said a meager $3 million worth of shares in Armenian companies were sold and purchased through the country’s sole stock exchange last year. The overall sales of securities stood at an equally modest $60 million and government treasury bills and notes accounted for as much as 95 percent of the total, he said.

The official figures highlight the highly underdeveloped state of the Armenian stock market and in particular the fact that the stock exchange is the last place local investors would go in order to buy equities. Most of Armenia’s leading firms are controlled by a single owner or a small number of big shareholders, usually close friends or relatives.

Many of them routinely hide or underreport their revenues to evade profit tax, making ownership of minority shares in their stock pointless. According to the Securities Commission, only 200 of about 1,300 joint-stock firms operating in Armenia posted profits in 2003 and only 15 of them paid small shareholders any dividends in the first half of last year.

Muradian publicly acknowledged last November that the latter are routinely cheated and squeezed out of business by their wealthy partners. He repeated on Wednesday that the fraudulent accounting and lack of transparency is a serious obstacle to the spread of Western corporate standards and practices in Armenia.

Muradian also complained that Armenian entrepreneurs do not even attempt to attract domestic investments into their equities. “No company has attempted to offer the market interesting investment tools to date,” he told reporters, adding that tax avoidance is not the only problem.

“There is a grave lack of romanticism in our business circles,” the official explained. “When you have no leaps of imagination, when your thinking is very short-term, the development of all systems slows down.”