Jan van Bilsen: Private sector in Armenia has strong potential

06.07.2016 | 10:08 Home / News / Interviews /

Banks.am talked to International Financial Corporation (IFC) Regional Manager for the South Caucasus Jan van Bilsen about IFC’s role in the development of Armenia, acquisition of Vorotan HPP shares, investment climate in Armenia and other topics.

- Mr. Bilsen, what is the role of IFC in development of Armenian economy? What is IFC’s mission in Armenia?

- IFC, a member of the World Bank Group, is the world’s largest development institution focused on the private sector in emerging markets.

In Armenia, we focus on boosting the country’s competitiveness and job creation. Amid a challenging economic climate in the wider region, we also help Armenian banks grow, bolstering confidence in the country’s banking sector, which is critical for broader economic development.

As part of this strategy, we invested $50 million subordinated loan to Ameriabank, the largest bank in Armenia, and a $20 million loan to Armenia’s Inecobank in December last year. Our loan to Inecobank aimed support its acquisition of ProCredit Bank Armenia.

In addition to investments, we provide advisory services, which help our clients improve risk management, bolster corporate governance practices, and introduce innovative solutions for SME clients.

Since Armenia became an IFC member in 1995, IFC’s long-term investment commitments have totaled $340 million, including $22.8 million mobilized from other lenders. That has financed 47 projects across a range of sectors. IFC has also supported cross-border trade worth around $130 million through its trade finance program.

Moreover, IFC was the first non-resident issuer of local-currency bonds in Armenia’s domestic capital markets. We issued the inaugural Armenian dram bond in 2013.

- Which tools does IFC use to support business environment in Armenia? Is financing provided by loans or grants?

- IFC does not provide grants to businesses in Armenia or anywhere else. We offer loans to private businesses and take equity positions in companies, to provide developmental support and long-term growth capital that private enterprises need.

IFC’s offerings are designed to meet the specific needs of our clients in different industries, with a special focus on infrastructure, manufacturing, agribusiness, services, and financial markets.

Our financial products enable companies to obtain financing and to manage risk and broaden their access to foreign and domestic capital markets. Our advice helps unlock private sector investment, which is essential for expanding businesses, creating jobs, and growing economies.

Furthermore, our advisory services are providing advice to the Armenian government on investment policy and inspections reforms.

- We learned last June that IFC purchased a part of Vorotan HPP shares. What was the purpose of the purchase?

- As announced last summer in Armenian and international media, including Mediamax news agency, IFC signed an agreement to buy a minority stake (20 percent) in ContourGlobal Hydro Cascade, wholly-owned by ContourGlobal. The investment was destined to help the company acquire, operate, and rehabilitate the Vorotan Hydropower Cascade.

Vorotan is one of Armenia’s main power generating facilities and our aim with the investments is to enhance the reliability of the country’s electricity supply. The project will also help reduce Armenia's dependence on foreign sources of power.

The private sector can play an important role in addressing key infrastructure challenges in Armenia and this transaction is an important step in that direction.

- How would you estimate attractiveness of investing in Armenia? Which fields you think have the biggest potential of growth?

- We believe that private sector in Armenia has strong potential. In addition to ongoing financial sector support, IFC aims to grow its real sector portfolio through investments in industries such as agribusiness, which will help improve living conditions in rural areas.

- Armenian authorities expect 2.2% economy growth this year, and renowned international organizations predict almost the same. Do you think this prediction is realistic?

- The global economy is still fragile and this impacts Europe and Central Asia, where the environment is extremely challenging. Countries in the region, including Armenia, are still adjusting to this new economic reality.

However, certain more competitive sectors in Armenia, like agribusiness and mining, offer significant potential.

In this fragile environment, much needs to be done to further improve the investment climate. The Armenia Investment Climate Reform Project, implemented by the World Bank Group’s Trade and Competitiveness Global Practice, continues to provide advice to the Armenian government on investment policy and inspections reforms.

- What future plans does IFC have for Armenia?

- IFC’s strategy in Armenia is part of the joint World Bank Group Country Partnership Strategy. One of its key objectives is to support competitiveness and job creation. IFC contributes to this by: promoting greater access to finance for small and medium enterprises; providing finance to competitive domestic companies to help them grow and create jobs; helping develop Armenia's mining sector in a sustainable and socially inclusive manner; establishing a market for energy efficiency and renewable energy investments; and improving the country's investment climate and decreasing the costs of doing business, especially in the agribusiness sector.

In IFC’s fiscal year ending June 30, 2016, we plan to invest around $85 million to support private clients in Armenia and we hope to be in a position to invest approximately the same amount next FY.

Siranush Simonyan talked to Jan van Bilsen

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