The World Bank Board of Executive Directors today approved a US$50 million loan for theTrade Promotion and Quality Infrastructure Project for Armenia. This project is designed to strengthen the government’s capacity to promote exports, attract foreign and domestic investments, and enhance quality services to business expansion.
Armenia has a relatively low export base, dominated by a few products with low value added content, reflecting the declining sophistication of its export sectors. The country also needs to step-up private investments, notably foreign direct investment (FDI). Left unchanged, the current structure of export basket will do little to mitigate the country’s vulnerability to global competition and will lead to a lower growth trajectory. In addition, Armenia’s national quality infrastructure suffers from substantial weaknesses that hinder technology upgrading and undermine the competitiveness of its exports.
“Trade is a key driver of growth in the transition to high income. This project will support policies and programs aiming at upgrading Armenia’s physical, human and institutional assets which are crucial to sustained export competitiveness,” said Jean-Michel Happi, World Bank Country Manager for Armenia.“Raising long-term economic growth requires that the government tackle binding structural constraints to investment and exports.”
The project will specifically help: (i) improve the effectiveness of the trade promotion and quality system in Armenia; (ii) promote investment and exports by providing services to improve the capacity of local exporters to compete in foreign markets, facilitate cluster development, and attract efficiency seeking FDI; and (iii) modernize the national quality infrastructure by updating the metrological, accreditation and standards services to provide relevant quality management services to industry.
“To boost exports and FDI, Armenia needs a strong institutional framework,” said Feyi Boroffice, World Bank Task Team Leader of the Project. “The project is designed to provide adequate incentives to enhance effectiveness of the government in delivering trade promotion and quality infrastructure services to firms.”
The projectwill transform the investment, export promotion, and quality infrastructure agencies into modern service providers operating in accordance with international best practices. The proposed activities will support reforms to improve the relevant agencies and provide complementary investments for establishment of foreign representatives in key export and investment markets and the renovation of a metrology building and laboratories. As a result, it is expected to increase the capacity of firms to compete in export markets, facilitate public-private partnerships, and support the National Institute of Metrology and National Accreditation Board to obtain multilateral agreements with international bodies.
The project’s direct beneficiaries include both existing and potential exporters, who will benefit from improved service delivery under a more efficient trade promotion and quality system. Foreign-owned firms that are going to invest in Armenia will also benefit, as well as local enterprises which will receive positive spillover effects from foreign direct investments.Furthermore, by promoting industry-academia collaboration, the proposed activities will largely assist universities, research institutions and enterprises.
Total financing of the project is US$59.54 million, of which US$9.54 million will be the Government’s contribution. The World Bank will provide a US$50 million IBRD loan of variable spread with a 10 year grace period and the total repayment term of 25 years.
Since joining the World Bank in 1992 and IDA in 1993, the commitments to Armenia total approximately US$ 1,961.73 million.