European Bank Doubles Investments In Armenia

The sharp increase reported by Olivier Descamps, the EBRD director for southeastern Europe, the Caucasus and Central Asia, should ease a significant fall in foreign direct investment (FDI) in the Armenian economy.

Armenian government statistics show FDI falling by 30 percent year on year to $246.4 million in the first half of this year. That was primarily the result of a 70 percent decline in investments from Russia, which stood at $81.6 million and were mainly channelled into the energy and telecommunications sectors.

By contrast, FDI inflows surged by almost 70 percent to a new record high of $1.13 billion last year. Russian companies accounted for nearly two-thirds of the sum, solidifying Russia’s status as Armenia’s number one foreign investor.

Speaking at a news conference in Yerevan on Wednesday, Descamps said the London-based development bank will be the single largest source of FDI in the country in 2009. The EBRD investments there since the early 1990s have totaled $500 million, mainly taking the form of loans to private Armenian companies and purchases of minority stakes in some of them.

“We have committed ourselves to make $150 million worth of investments in Armenia in 2009 and are now Armenia’s largest investor,” Descamps said, according to the ARKA news agency. He said about two-thirds of the total has already been provided to local firms. That includes a $60 million loan disbursed to Armenia’s Russian-owned national electricity distribution company earlier this year.

Descamps also signed on Thursday a $5.5 million loan agreement with the country’s largest food supermarket chain, 25 percent of which is owned by the EBRD. Representatives of the Star retailer said they will use the loan, repayable in seven years, to “restructure” their company and further expand its operations.

The EBRD is also expected to invest $40 million by the end of the year in the ongoing reconstruction of Yerevan’s Zvartnots international airport managed by an Argentine company. Incidentally, the company’s ethnic Armenian owner, Eduardo Eurnekian, met with President Serzh Sarkisian on Thursday. Sarkisian expressed hope, according to his office, that the Aeropuertos Argentina group will honor its pledge to pledge to complete the second and final section of Zvartnots’s new terminal by 2011.

A separate statement by the Armenian government said Prime Minister Tigran Sarkisian and Descamps discussed late Wednesday the EBRD’s possible involvement in government plans to create a tax-free economic zone around the airport. No details were reported.