By Atom Markarian
The European Bank for Reconstruction and Development (EBRD) purchased on Wednesday a 25 percent share in a major Armenian commercial bank in line with its pledge to boost direct investments in the country’s private sector.
Senior EBRD executives said they will pay Armeconombank $1 million and grant it $500,000 in “technical assistance” as they sealed the deal in Yerevan. “This is our first investment [of its kind] in Armenia, and if further opportunities arise we will certainly consider them,” an EBRD finance director, Maria-Luisa Cicogniani, told a news conference.
“We are a long-term investor in the bank, we are not a short-term speculator,” she said.
Cicogniani added that Armeconombank was chosen from among the two dozen Armenian banks because of its Western-style management and financial transparency. Armeconombank is one of few local banks structured as a public joint-stock company. It has about 2,000 small shareholders but is overwhelmingly controlled by Khachatur Sukiasian, a business tycoon and parliament deputy.
Cicogniani said the deal is part of the EBRD’s plans to deepen its involvement in Armenia and six other former Soviet republics. The London-based institution, which was set up by leading Western donor states in 1992 to foster economic reform in former Communist nations, already owns minority stakes in two Georgian and one Azerbaijani bank.
Visiting Yerevan last May, EBRD President Jean Lemierre said the bank will invest in the Armenian private sector at least $13 million this year and $26 million next year -- up from $8 million invested in 2003. He said most of the money will be channeled into Armenian banks that will in turn lend it to private firms with credible investment projects worth between $500,00 and $2 million.
The EBRD will soon buy minority stakes in several Armenian manufacturing companies, according to the head of its Yerevan office, Nikolay Hajinsky. He did not name those firms.
The overall EBRD investments in the Armenian economy since 1993 have covered 11 programs totaling $150. The biggest of those projects, involving the construction of a thermal power plant and a cargo terminal at Yerevan airport, are considered to have been gross failures. This seems a key reason why the EBRD has decided to concentrate on private sector projects that require smaller investments.