Jan van Bilsen: “Much needs to be done to further improve the investment climate in the country”
Mr Jan van Bilsen is IFC’s newly appointed Regional Manager for the South Caucasus.
– IFC is involved in a lot of projects in Armenia. Given the forecasts that Armenian economy will have a very low growth rate in 2015 (some institutions predict even stagnation) how would you assess the potential of new FDI into Armenian Economy?
– The global economy is still fragile and this impacts Europe and Central Asia, where the environment is extremely challenging. Countries in the region, including Armenia, are still adjusting to this new economic reality.
However, certain more competitive sectors in Armenia like agribusiness and mining offer significant potential. We are helping to mobilize the power of the private sector to create jobs and opportunities.
In this fragile environment, much needs to be done to further improve the investment climate in the country, including ensuring political stability.
IFC has recently initiated the Armenia Investment Climate Reform Project II, implemented by the World Bank Group, which will provide advisory support to the government on improving the country’s investment climate.
– The Government reduced profit tax rate from 20 percent to 2 percent for exporting companies who have annual turnover more than AMD 50 billion (app. $104 million). Can this initiative encourage foreign investments? What should be done to accelerate this process?
– In general, competitive economies attract much more foreign investment than less competitive ones.
If this initiative is used to increase the overall competitiveness of the economy, it should lead to an increase in foreign investment. There are several steps that can help encourage foreign investment, including streamlining the legal framework on investment policy, removing barriers to entry, and protecting investors’ rights.
We believe the Armenian government is best placed to make the final decisions on how to achieve this goal.
The IFC Armenia Investment Climate Reform Project, implemented by the World Bank Group, is committed to supporting the government in this important endeavor. The project aims to provide advice to the government in the areas of investment policy and inspections reform.
– IFC is one of the key shareholders in the Amulsar gold mine project in Armenia. It seems to be the biggest investment project in Armenia for 2015. What are your expectations from the project?
– IFC holds slightly less than 8 percent of the share capital issued by Lydian International, the parent company developing the Amulsar project. Generally speaking, IFC supports the development of private sector activities that help create jobs and contribute to the growth of Armenia’s economy. Among other goals, we aim to foster a sustainable mining sector in Armenia, with internationally accepted best mining practices implemented in all IFC-supported projects.
The implementation of the Amulsar project is expected to generate many tangible economic benefits for Armenia, including increased tax revenue for the state, direct and indirect employment opportunities in rural areas, and increased export revenues, should the gold be exported. The project is part of our efforts to support companies with the potential to grow, ease poverty, and spur long-term growth.
We apply the same high environmental and social standards to every project IFC finances, regardless of the industry or sector. The Amulsar project is subject to the same standards. We closely monitor the project to ensure it complies with IFC’s environmental and social standards throughout implementation and operation.
– A lot of activists are against the Amulsar project. They say that it would be more preferable to develop agriculture and IT rather that mining, which harms the environment. Is it possible to have responsible mining in Armenia? And can agriculture and IT replace the added value provided by mining at this moment?
– IFC invests in mining projects because these can generate substantial benefits and promote economic development. Key economic benefits include increased government revenues, locally and nationally, the growth of local businesses, and considerable job creation – all of which tends to bring additional job opportunities to typically remote regions. Successful mining projects also lead to greater infrastructure investment and the growth of manufacturing, community programs, and local supply chains.
Global studies have shown that in some cases as many as 20 indirect jobs are created for each direct job at a mining operation. The oil, gas, and mining projects in IFC’s global portfolio alone contributed more than $4.7 billion to government revenues, employed 92,000 people, and supported local communities with $49 million of community-related spending in 2013. In the same period, total spending by IFC client companies in oil, gas, and mining on goods and services from local and national suppliers approached $7.8 billion around the world.
Globally, mining is a challenging sector. IFC believes that by focusing on transparency and on companies maintaining their social license to operate and applying best environmental and social industry practices, IFC can help countries use their natural resources to benefit their people. IFC believes that responsible mining can be successfully implemented in Armenia and we are making all reasonable efforts to assist the Amulsar project in achieving this objective. The potential impacts of the mine will be evaluated and documented in all dimensions and mitigation measures shall be implemented.
By Babken Tunyan
