World Bank director lauds Armenia’s crisis management and calls for urgent reforms

by Armenian Reporter staff

Published: Thursday October 22, 2009

Prime Minister Tigran Sarkisian and World Bank Managing Director Ngozi Okonjo-Iweala inaugurating a new World Bank facility in Yerevan. Tigran Tadevosyan / Photolure

Yerevan - Commending Prime Minister Tigran Sarkisian's government on its handling of the effects of the global economic crisis on Armenia, World Bank managing director Ngozi Okonjo-Iweala told journalists in Yerevan that the government has to confront certain additional challenges "to assure further development of the country's economy."

Among these challenges are diversification, greater domestic competition, further reform of tax and customs administration, the creation of a "strong and independent judicial system," and "zero tolerance" of government corruption.

"I think you can only go so far" with Armenia's current economic model, Ms. Okonjo-Iweala, the number-two figure in the World Bank leadership, added. "Armenia is a lower middle-income country. If it wants to become a high-income or upper middle-income country, it cannot do so with this kind of economic structure. That is clear."

Country partnership

Ms. Okonjo-Iweala arrived in Armenia on October 17, met with the prime minister and members of the government, local business and civil society representatives, and toured several rural communities to inspect the implementation of infrastructure projects financed by the World Bank. She also had a lunch meeting with President Serge Sargsyan on Sunday, October 18.

After eight years of double-digit growth in the gross domestic product, Armenia saw its economy shrink by 18.4 percent in the first eight months of 2009. "The situation in the economy would be worse" had the government not responded to the crisis as it did," Ms. Okonjo-Iweala said.

The World Bank in June launched a Country Partnership Strategy in Armenia to assist the country in resuming growth and reducing the impact of the financial crisis on the poor. With a commitment of about $1.3 billion for 54 projects, the World Bank also aims to help Armenia lay the foundation for a more competitive economy for rapid post-crisis growth.

End oligopoly

Speaking to journalists, Ms. Okonjo-Iweala called for diversification in the economy, and less reliance on construction and remittances from abroad as the main drivers of growth. Remittances have accounted for just under a fifth of GDP. Information technology and other sectors of the economy need greater attention, she said.

Ms. Okonjo-Iweala suggested, "You strongly have to work to make sure that the economy is not captured by oligopolistic structures," referring to the domination of certain businesses by a small number of entrepreneurs who are also involved in politics.

"You have to fight corruption very strongly if this economy is to have a chance to grow in the future," she stated. The Armenian government has stepped up its anticorruption efforts in recent years.

Ms. Okonjo-Iweala noted that the prime minister is "strongly wishing to move on reforms." She said, "I think he fully realizes that these challenges are there and that if they are not tackled it will be an impediment for the economy."

Mr. Sarkisian declared tax reform a top priority shortly after being appointed prime minister in April 2008. Together with the president, he swiftly managed to reduce bribery and favoritism within the Customs Service.