Country Report Armenia November 1998 Main report

Economic policy: FDI surges as privatisation moves ahead--

The government is pushing ahead with privatisation despite an outcry by the opposition in parliament about the price of the sell-offs. The government can point to a 100% increase in privatisation revenue to $77.7m in the first nine months of 1998, compared with revenue of only $800,000 in 1994-97. It can also refer to positive spillovers, for example in the form of increases in the price and volume of grapes since the sale of the Yerevan Cognac Factory, and the healthy pace of economic growth.

Alongside the government's emphasis on the privatisation of large enterprises through attracting strategic investors, the governments has made efforts to actively encourage foreign investment. The prime minister has recently toured the United States to establish ties with private investors. Mr Kocharian has targeted the Armenian diaspora to encourage investment from this quarter. These measures are starting to yield results. FDI has surged from a total of $98.8m in 1993-96 to $97.3m in the first nine months of 1998 alone.

--and voucher privatisation comes to a close

Voucher privatisation got under way three years ago, when vouchers with a face value of Dram20,000 ($40) were handed out to every Armenian citizen. These are due to expire on December 31st 1998. Between 1994 and January 1998 a total of 7,271 enterprises--1,250 large and 6,021 small enterprises--were privatised using vouchers or cash auctions. However, voucher privatisation has failed to bring substantial revenue (cash sales have raised $800,000) for the state budget, nor did it turn most citizens into shareholders. The government can therefore be expected to oppose another issue of vouchers vigorously, although this is favoured by Yerkrapah, the largest faction in parliament.

© 1998 The Economist lntelligence Unit Ltd. All rights reserved
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