Privatization Process & Policy
Introduction
On gaining its independence from the Soviet Union in 1991, Armenia made swift
progress in starting the processes of land reform and small-scale privatization.
In 1991, Armenia took the dramatic and radical step of privatizing 90% of rural
agricultural land - setting the tone for a far reaching program. The first privatization
program for the industrial estate was adopted in January 1994 along with the
establishment of a voucher scheme in October, 1994. In the same year, land became
tradable. Large-scale privatization began in April 1995 and advanced at a rapid
pace until the end of 1998 when voucher privatization ended. During 1999, there
was some slowdown in sales as the focus has shifted from certificate to cash
privatization, but it is hoped that this slowdown - which is typical for many
countries which have completed voucher privatization - will soon be overcome.
Small-scale privatization is almost complete. Sales of some of the largest companies
through international tenders raised US$ 115 million in privatization revenues
(about 6% of GDP) by October 1998.
Foreign citizens from France, Italy, Greece, India, the USA, Russia, Syria,
Iran, Egypt and Austria have acquired shares in about 60 companies privatized
through tender and open share subscription. In particular, foreign investments
have been made in power generation ("small" hydropower stations),
the hotel industry (ARMENIA, ANI, YEREVAN hotels), the food industry (Abovian
Brewery, Yerevan Cognac Factory), telecommunications (ArmenTel), and light industry.
As of May 1, 1999, privatization revenues exceeded 60 billion drams. This figure
does not include voucher privatization results.
Through June 1999, about 1500 medium and large sized enterprises (65% of total)
and 6700 small enterprises (90% of total) were privatized. More than 300 thousand
citizens have become owners of shares in enterprises in Armenia as a result
of voucher privatization.
There remain about 770 medium-sized and large enterprises approved by the National
Assembly for sale. In addition, there are over 700 unfinished construction sites
available for sale. It is hoped that the vast majority of these remaining enterprises
and sites will be offered for sale by the end of the year 2000. Objects which
are approved for privatization by the National Assembly are offered for sale,
only after the sale has been ordered by a separate decision of the Government.
A great many medium sized enterprises were sold through voucher sales. Those
companies remaining tend to be larger enterprises, for which the Government
would like to seek strategic investors and/or enterprises needing particular
attention - this includes closed enterprises, heavily indebted enterprises and
enterprises needing particular pre-privatization preparation.
The Ministry of Privatization (MOP) is responsible for managing the privatization
process, working in close cooperation with the industrial branch ministries
or local administrations which are responsible for day to day management of
enterprises and properties.
Privatization Policy
A new law on privatization and the Government's new privatization program were
adopted in December 1997, placing greater emphasis on cash sales. With the end
of voucher privatization at the end of 1998, the current privatization policy
is mainly targeted towards sales through auctions of shares in "open subscription"
and sales through tenders designed to attract strategic investors. Sales of
assets of liquidated companies are also playing an increasing role.
This emphasis on seeking strategic investors is consistent with the remaining
population of enterprises for sale - i.e. larger enterprises and enterprises
needing particular attention. Through the tender sales process, it is possible
for the Government to sell enterprises at substantial discounts from their assessed
value to investors who undertake investment and job commitments and submit credible
business plans. Since the Government recognizes the need to encourage serious
investors to create jobs and produce exportable products, it is anticipated
that privatization policy and implementation going forward will continue to
demonstrate this flexible approach.
The government has put an emphasis on the privatization of large enterprises
by attracting strategic investors and has actively encouraged foreign investors.
Foreign investors have virtually the same rights as domestic investors in privatization
Procedure and Regulations
Legal relationships concerning the privatization of state property in the Republic
of Armenia are regulated by the Law of the Republic of Armenia on Privatization
of State Property. The aim, preferences and restrictions of the current phase
of privatization are defined in the State Property Privatization Programs of
RA, adopted as laws by the National Assembly.
The fourth, 1998-2000 Privatization Program, which is currently in force, permits
(but does not require) the Government to offer for sale more than 700 companies
from urban development and power sectors, metallurgy, radio-electronics, the
machine tools industry, the construction materials industry, the chemicals industry,
road-construction, transportation services, health care facilities (sanatoriums,
polyclinics and hospitals), and sewerage.
The goals and objectives of the current Privatization Program are: