Armenia needs to have a higher and more sustainable growth, the Asian Development Bank’s (ADB) vice president said in an interview with RFE/RL’s Armenian Service (Azatutyun.am).
Wencai Zhang, who paid a visit to Armenia last week and held meetings with the country’s top officials, including President Serzh Sarkisian and Prime Minister Karen Karapetian, reminded viewers of Azatutyun TV’s Sunday Analytical Show that the ADB had revised its earlier 2.2% economic growth forecast for Armenia in 2017 upwards and now expects the country’s GDP to grow by 3.8% this year. At the same time he noted that this is still a relatively low growth for the South Caucasus nation.
“Now I think Armenia wants to have a higher, more sustainable and inclusive growth. The country must do a lot in this sense. But, of course, in the short term they [the government] also have to focus on the macroeconomic and financial stability. This is so important,” said the ADB vice president.
In Zhang’s words, despite many challenges, Armenia also has a lot of potential for growth.
“I can say that in the next five years we are going to have a new country partnership strategy for 2019-2023, so we try to support the country’s priorities for the development, for the reforms, particularly for private sector development,” he said.
According to Zhang, now the ADB also tries to promote reforms and support key infrastructure “to lay a strong basis for the medium and long-term strong growth” in Armenia.
“Of course, we will try to support programs of reform, such as the North-South road corridor, urban development, social sector projects, and even agricultural projects, but at the same time we support such reforms as the financial market, public sector efficiency improvement, and even education and health sector reform, private sector environment improvement. That will be really the basis for the stronger growth in the coming years,” said Zhang.
The ADB vice president said that while seeing opportunities, he also sees challenges in the Armenian economy. “I think that the country has a lot of potential, talented people, well-educated people. Even though Armenia has a relatively small population, but it also has many talented people, well-educated workforce. From the historical perspective, you have been very good in a number of areas, such as science, technologies, even IT… But, at the same time, we see that the country also faces challenges: as a land-locked country you need to build connectivity with the regional market, the international market.”
Zhang noted that Armenia relies on products of very few sectors with narrow economic base. “Armenia faces diversification issues. You rely on the construction sector, maybe some of the agricultural sector very much. Also, you don’t have your own natural gas. You have to import all your resources from other countries. Also you rely on remittances so much. I think there are a lot of challenges that the country faces, the country doesn’t have enough private sector investments, relies on consumption a lot…The country certainly needs more private sector investments and that’s why we are here. In the coming years we will try to talk to the government and see how ADB can support the private sector, how we can support structural reforms to address constraints that the country faces, including these connectivity issues.”
The ADB vice president said that their organization supports regional cooperation and integration. He pointed to the support for the construction of the South-North road corridor, which is to be a modern highway that will connect Iran and Georgia via Armenia.
Allegations of government corruption and misuse of funds have dogged the project that the ADB has been financing since 2009.
Zhang, meanwhile, gave assurances that the ADB is very serious about any possible misuse of funds by entities involved in the implementation of its projects.
“Our policy is very clear. When we do the development project in a member country we have a very strict policy about transparency, governance issue, procurement issues, particularly on the procurement side. And we have to be sure, when we do any kind of procurement for civil works, the supply of goods, services, we have to make sure that the government agency follows ADB’s procedures,” he said.
“We have a certain technical commercial criteria. We have a very strict process for bid evaluation. ADB and the government together with others try to make sure the process is in line with our very high standards, so that we have transparent, fair competition among all bidders. This is something we have been very strict about over years. We have zero tolerance towards any kind of corruption. We want to make sure they follow also our financial management policy.”
In terms of regional connectivity Zhang said that the ADB supports cooperation among its member countries at regional and sub-regional levels.
“Armenia is a landlocked country. So, certainly connectivity with the region and with the international market is so important for Armenia. That’s why the ADB supports this North-South road corridor project. This will link the country with the neighboring countries like Georgia and Iran,” he said. “I met with [Armenian] government [representatives] and said: this is such an important corridor. I want to say one day that this road corridor one day will become an economic corridor, a trade corridor not only for Armenia, but for the countries in the region.”
At present, because of conflicts, Armenia has no economic or political ties with two of its four neighbors – Azerbaijan and Turkey, which are also members of the ADB.
Zhang said that the ADB really wants to see its member countries work together, but at the same time as an international agency has to remain neutral.
“We feel that you cannot just build hardware like a road or a railway, but you also need a policy dialogue. If you just build hardware and have no policy coordination, you just cannot move your goods, your people and services across the border. Policy dialogue, mutual political, economic trust are also so important,” said the ADB vice president, adding that “if there is something that the ADB can do to facilitate this kind of cooperation and policy dialogue among its member countries, we will be very happy to do that.”
The ADB has been working with the Armenian government since 2005 and so far has approved 27 loans totaling $1.27 billion and 26 technical assistance grants totaling $16.5 million.