EBRD Vice President: the Bank has invested over €2 billion euros in 205 projects in Armenia to date - EXCLUSIVE
YEREVAN, January 18. /ARKA/. European Bank for Reconstruction and Development (EBRD) Vice President Mark Bowman visited Armenia earlier this week. In an exclusive interview with ARKA news agency, he spoke about the discussions in Yerevan, the bank’s projects, named also the factors of economic growth as well as confirmed the bank’s growth forecast for Armenia for 2023.
ARKA - Please tell us about the agenda for your meetings with senior officials and representatives of the private sector in Armenia.
Mark Bowman - During our time here, we met with our international development partners, diplomatic community and the government officials. In our meetings with development partners, we focused on financing opportunities, policy dialogue, and potential donor coordination efforts. We have strong links with all development partners here with a strong record of accomplishment and we want to capitalise on this, to move forward in projects, including bigger ones in sustainable infrastructure and renewable energy.
We also met with the ambassador of the United Kingdom to Armenia and the head of the Investment Council of Armenia. UK (through its Good Governance Fund), the EBRD and the Investment Council have secured numerous reforms to strengthen the business environment here. We are very much looking forward to building on this cooperation moving forward, to make Armenia even more attractive for the foreign and domestic investments. We have also met with cabinet ministers, the governor of the central bank and his colleagues. In our conversations, we reiterated our support for Armenia’s ambitions in green transition, private sector development, capital markets development, regional connectivity and policy reform. We will continue to support the government with our trademark business model of investment combined with the policy engagement and technical cooperation.
ARKA - What decisions are expected to be made, how do you assess the prospects for further cooperation?
Mark Bowman- There are some truly remarkable projects in the pipeline for 2023, but we cannot disclose details just yet. Nevertheless, I can tell you that one of the topics discussed in detail was potential construction of the Sisijan-Kajaran road. We are currently leading the project preparation effort for this project. The project is set to improve the economy of the underserved Syunik region. In the wider context, will better connect Armenia to the so-called Middle Corridor transport route.
We also discussed the organisation of our upcoming annual meeting and business forum, which is set to be held in Yerevan in 2024. As part of this event, together with local stakeholders, we will be attracting prominent participants to Armenia from around the world, ranging from leading government officials, financial and corporate executives to entrepreneurs, civil society and international media. We are very much looking forward to this event.
ARKA- Please tell us about the EBRD projects in Armenia: recent signings, plans and strategy, in particular regarding Yerevan infrastructure. What investment plans does the EBRD intend to implement in 2023?
Mark Bowman - We are long-standing partners of Armenia where we have invested over €2 billion euros in 205 projects to date, over 90% of which is in private sector. With Yerevan, we have had a long and special relationship as it was one of the first cities to join our trademark Green Cities programme. We have recently financed, together with EU and E5P fund, greener buses for Yerevan, which are joining the municipal fleet as we speak. Forty buses have already been delivered and another 47 are on their way.
In the past, we have supported Yerevan Metro rehabilitation, by upgrading the metro-cars, constructing drainage tunnel and necessary infrastructure. The Bank intends to continue the investments in the metro infrastructure in particular improvement of its energy efficiency.
In several districts of Yerevan, the water supply and waste water removal infrastructure has been rehabilitated by the Bank’s support and co-financing facilities of EU and EIB. The EBRD is financing the modernisation of street lighting in 28 streets of Yerevan. Apart from financial support, we are also helping Yerevan Municipality and Yerevan Bus Company with the integration of transport management and ticketing systems. However, there is still a lot of room for improving transport infrastructure in Yerevan, and the Bank stands ready to support it, if the city decides to use our assistance.
ARKA - Please describe the prospects of the Middle Corridor and EBRD infrastructure projects in Armenia, in particular, the benefits of the Sisian-Kajaran road for the Syunik region; Meghri and Bagratashen projects in the broader context of Armenia's accession to the Middle Corridor.
Mark Bowman - We are supporting Armenia to become better connected at national, regional and international levels through modernisation of its road infrastructure, but also by enhancing its northern and southern border crossings, and by improving of its nationwide customs system. Recently, Prime Ministers of Georgia and Armenia opened the Friendship Bridge at the Bagratashen border crossing. Co-funded by the EBRD, this was a significant milestone in the development of the regional transport infrastructure.
In the south of Armenia, we recently teamed up with the European Union to finance the modernisation of the Meghri Border Crossing Point.
Now we are leading the financing effort for the Sisijan-Kajaran road. The road is set to improve the economy in Armenia’s south, but in the wider context, it will better connect Armenia to the so-called Middle Corridor transport route.
The Bank, along with fellow IFIs is in an advanced due diligence stage, which should be completed in few months and will have more clarity on the project financing by the summer of 2023. The Bank is very much interested in moving forward with this project. On the policy side, we have recently kick started the project to support the State Revenue Committee in digitising the Customs Notification System. Once the system is in place, it will increase operational efficiency, transparency, and expediency in the customs declaration and notification system
ARKA - Let us talk about energy security and renewable energy. What is the bank's role in the regional green transition? What are the prospects and challenges for the development of renewable energy in Armenia?
Mark Bowman - Armenia has great potential when it comes to the development of renewables, in particular solar energy, and we want to help Armenia scale up its renewable energy generation. We have been working with the government on financing electricity networks, private generation and privatisation. We have also improved the regulatory and institutional framework for sustainable energy. Consequently, Armenia now allows solar energy producers to sell excess electricity to the national electricity grid.
The government’s Energy Sector Development Strategic Plan 2040 includes development of up to 1,000 MW Solar capacity by 2030 and up to 500 MW Wind capacity by 2040. Over the past few years, the government has also improved the public private partnership law.
We stand ready to further support these initiatives, which will undoubtedly increase energy independence of the country and contribute to grow the private sector and attract foreign investments.
ARKA - How would you rate the stability of Armenia's financial institutions? What is the state of the country's green finances?
Mark Bowman - Armenia’s financial institutions, in my view, have been very resilient, especially given the challenges they have faced in the last few years. At the same time, authorities have been equally successful in adopting timely fiscal, financial, and monetary policy measures, containing the effects of these crises.
This is not new. Armenia has a long and impressive track record of sound regulatory decision making, which in turn, ensures the resilience of its financial sector. This means that financial institutions were ready for recent crises, allowing them to meet the challenges without bankruptcies or capital issues.
In terms of green finance, things are definitely moving towards the right direction. We would like to welcome Armenia’s efforts to mitigate and adapt to the effect of the climate change. The country remains committed to the multilateral process and has ratified the Paris Agreement back in February 2017, and it aims to double the share of renewables in its energy generation and to become carbon neutral by the second half of the century.
The EBRD is ready to support Armenia in its ambitious path to eventual carbon neutrality.
In terms of finance, the Central Bank has recently requested our support in drafting and implementing the Sustainable Finance Roadmap to build a robust climate risk management and reporting system in the sector. We are now cooperating to identify the immediate technical assistance and advisory needs.
At the same time, credit lines targeted at energy, and in general at resource efficiency measures, have been very popular with local commercial banks. However, in terms of joint efforts, it is important for the commercial banks to effectively market and demonstrate the benefits of such investments to its clients. From our side we have range of tools to support clients in decision making, be it Advise for Small Business programs, Energy Audits, or International Advisory Programs.
ARKA - The EBRD last September predicted the Armenian economy to grow by 8% in 2022 and slow down to 4% in 2023. Has this forecast been revised at the moment?
Mark Bowman - At this stage, the forecast you mentioned stands unchanged at 4 per cent. So far, Armenia’s post-pandemic recovery has been remarkable. Trade and services both grew with double-digits. Inflow of significant number of people and businesses from Russia boosted demand for services sector, combined with the significant increase in the inflow of money transfers. Despite this positive trend, however, we cannot count on temporary factors that are driving this growth. These factors will not remain indefinitely. Therefore, now is the high time to focus on Armenia’s long-term resilience through offsetting its historical dependence on investments and remittances from the now recession hit Russian, Ukrainian and Belarusian economies.
ARKA - What, in your opinion, could serve as a growth factor for the Armenian economy?
Mark Bowman - As mentioned above, regulatory decision making in Armenia has been very stable, which is very important for foreign investments. In the long-run, this is a very positive factor for Armenia’s economic growth. There are some sectors, which can act as catalysts for the long-term growth. Armenia has very good prospects in solar power generation – the country receives a lot of sunshine and conditions are favourable for high efficiency solar power plants. Armenia also excels in the regional ICT sector, with a large pool of highly skilled professionals and several unicorns in the making.
Tourism sector can also be very attractive due to Armenia’s rich cultural heritage, tradition of hospitality, and beautiful nature.
ARKA - What does the EBRD forecast for the global economy in 2023 in the current turbulence?
Mark Bowman - We can speak of the EBRD regions, which we expect to grow on average by 3 per cent in 2023. This is a downward revision from our previous forecast in May, which stood at 1.7 percentage points. This reflects reduced supply of gas from Russia, including its impact through spillovers from slower growth in advanced Europe, as well as mounting inflationary pressures in the global economy and the EBRD regions. Taking into account an upward revision to growth in 2022 and a downward revision in 2023, output in 2023 is expected to be 0.5 per cent lower than our previous forecast. -0-
