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BARRIERS TO ENTRY IN THE ARMENIAN MARKET
Balkans.com Business News
Jan 21 2014
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bne - 21.01.2014
For more than a year, Yerevan has been anticipating the opening of the
first Carrefour supermarket, expected shortly after the French retail
giant launched in neighbouring Georgia in September 2012. However, the
chain's entry into the Armenian market has been held back reportedly
by a group of local oligarchs who control the lucrative imports of
food and fast-moving consumer goods (FMCG) to the country.
While Armenia has seen an opening up of sectors such as air transport
in 2013, the country's economy remains one of the most monopolised in
the region, according to a World Bank report. The high concentration
of ownership among a handful of powerful individuals is a significant
barrier to competition and economic growth.
Opposition to Carrefour's entry to Armenia is believed to be led
by Samvel Alexanian, the ultimate owner of both Armenia's largest
supermarket chain, Yerevan City, and its largest food importer, Alex
Grig. Alexanian's control over the prices of two key imports - flour
and sugar - would be threatened by the entry of the world's second
largest retailer to the market. Alexanian is also rumoured to have
rented the largest retail space at the Dalma City Mall in Yerevan for
a Yerevan City supermarket to prevent Carrefour from using the space.
Carrefour is now expected to set up its first Yerevan store at another
mall, Yerevan Mall, which is due to open in February, and the French
chain is advertising for local staff. In his latest statement on the
issue, France's ambassador to Armenia, Henri Reynaud, told a press
conference in December that the launch was imminent. "It should not
be forgotten that France is the number one investor in Armenia. I
would like to inform you that the entrance of Carrefour to Armenia
is expected in mid-2014," Reynaud said, according to Armenpress.
Government officials including Prime Minister Tigran Sargsyan have
also weighed into the case. Sargsyan promised in early 2013 to do
everything possible to ensure that Carrefour was able to enter the
Armenian market. However, the lengthy delays have highlighted the
level of power wielded by the businessmen who hold sway over many
parts of the economy.
Barriers to entry
A World Bank report published in November singles out monopolisation
and a lack of competitiveness as one of four key problems holding
back development of the economy, along with problems connected to
investment, job creation and transport links. "Competition is... of
crucial importance for the dynamism of the economy. Pro-competition
reforms and effective implementation of antitrust rules can lead
to significant productivity gains and consumer savings," reads the
report titled "Republic of Armenia: Accumulation, Competition and
Connectivity".
"Barriers to competition exist in different sectors partly because of
the characteristics of government contracts, discriminatory rules and
inadequate regulations, and particular aspects of market structure,"
says Ulrich Bartsch, the World Bank senior country economist and
co-author of the report.
According to the World Bank report, Armenia has a larger share of
monopolies than other countries in the region, with 60% of markets
exhibiting "an oligopolistic or monopolistic market structure".
Problem sectors include air transport, gas, electricity, railways and
professional services, as well as retail. "Insufficient competition
affects regulated sectors such as utilities and natural monopolies,
and certain markets with a small number of firms, such as petroleum,
sugar, wheat, and cut flowers," says the report. "Competition is
limited because of barriers to entry, ownership concentration, market
dominance, and vertical and horizontal integration."
A study by the Yerevan-based Hrayr Maroukhian Foundation, with support
from the Friedrich-Ebert-Stiftung foundation, published earlier in
2013 agrees that certain sectors are "highly monopolized", which "has
led to abuse of market power, market distortions, lack of economic
competition for goods and services they provide, and persistent market
entry barriers."
Progress was made in some areas during 2013, most notably in the air
transport sector. Armavia, which dominated the sector until early 2013,
declared it was filing for bankruptcy in April. This paved the way
for an opening up of the sector, with the government drawing up an
"open skies" strategy after consultancy McKinsey & Company completed
a study of the sector. Any airline meeting technical standards can
now operate on routes between Armenia and Russia, and connections to
other destinations such as Dubai have also been opened up, resulting
in a sharp fall in prices.
Bartsch tells bne that the bank was "very pleased" with developments
in Armenia's aviation sector since the report was compiled. "Following
Armavia's exit, and the declaration of "open skies" by the Armenian
government, we have seen a number of indications that competition
in the sector is improving, and foreign operators are improving the
connectivity of Armenia with the rest of the world," Bartsch says.
Armenia's National Competitiveness Foundation forecasts that the cost
of air tickets - previously around 60% higher than in neighbouring
countries - will drop by between 10% and 50%, resulting in a 20-25%
increase in passenger numbers.
However, the opening up of the air transport sector has not been
matched by progress in other parts of the economy. In the retail
sector, there is still no firm date for Carrefour's launch, while
monopolisation increased in the gas sector in 2013. As Yerevan moved
closer to Russia in the second half of the year, the government agreed
to sell the 20% of ArmRusGazprom still controlled by the state to
Gazprom, which already owns 80% of the company.
bne-Clare Nuttall
http://www.balkans.com/open-news.php?uniquenumber=187635
From: Baghdasarian
Balkans.com Business News
Jan 21 2014
Share on facebook Share on twitter Share on email Share on print More
Sharing Services
bne - 21.01.2014
For more than a year, Yerevan has been anticipating the opening of the
first Carrefour supermarket, expected shortly after the French retail
giant launched in neighbouring Georgia in September 2012. However, the
chain's entry into the Armenian market has been held back reportedly
by a group of local oligarchs who control the lucrative imports of
food and fast-moving consumer goods (FMCG) to the country.
While Armenia has seen an opening up of sectors such as air transport
in 2013, the country's economy remains one of the most monopolised in
the region, according to a World Bank report. The high concentration
of ownership among a handful of powerful individuals is a significant
barrier to competition and economic growth.
Opposition to Carrefour's entry to Armenia is believed to be led
by Samvel Alexanian, the ultimate owner of both Armenia's largest
supermarket chain, Yerevan City, and its largest food importer, Alex
Grig. Alexanian's control over the prices of two key imports - flour
and sugar - would be threatened by the entry of the world's second
largest retailer to the market. Alexanian is also rumoured to have
rented the largest retail space at the Dalma City Mall in Yerevan for
a Yerevan City supermarket to prevent Carrefour from using the space.
Carrefour is now expected to set up its first Yerevan store at another
mall, Yerevan Mall, which is due to open in February, and the French
chain is advertising for local staff. In his latest statement on the
issue, France's ambassador to Armenia, Henri Reynaud, told a press
conference in December that the launch was imminent. "It should not
be forgotten that France is the number one investor in Armenia. I
would like to inform you that the entrance of Carrefour to Armenia
is expected in mid-2014," Reynaud said, according to Armenpress.
Government officials including Prime Minister Tigran Sargsyan have
also weighed into the case. Sargsyan promised in early 2013 to do
everything possible to ensure that Carrefour was able to enter the
Armenian market. However, the lengthy delays have highlighted the
level of power wielded by the businessmen who hold sway over many
parts of the economy.
Barriers to entry
A World Bank report published in November singles out monopolisation
and a lack of competitiveness as one of four key problems holding
back development of the economy, along with problems connected to
investment, job creation and transport links. "Competition is... of
crucial importance for the dynamism of the economy. Pro-competition
reforms and effective implementation of antitrust rules can lead
to significant productivity gains and consumer savings," reads the
report titled "Republic of Armenia: Accumulation, Competition and
Connectivity".
"Barriers to competition exist in different sectors partly because of
the characteristics of government contracts, discriminatory rules and
inadequate regulations, and particular aspects of market structure,"
says Ulrich Bartsch, the World Bank senior country economist and
co-author of the report.
According to the World Bank report, Armenia has a larger share of
monopolies than other countries in the region, with 60% of markets
exhibiting "an oligopolistic or monopolistic market structure".
Problem sectors include air transport, gas, electricity, railways and
professional services, as well as retail. "Insufficient competition
affects regulated sectors such as utilities and natural monopolies,
and certain markets with a small number of firms, such as petroleum,
sugar, wheat, and cut flowers," says the report. "Competition is
limited because of barriers to entry, ownership concentration, market
dominance, and vertical and horizontal integration."
A study by the Yerevan-based Hrayr Maroukhian Foundation, with support
from the Friedrich-Ebert-Stiftung foundation, published earlier in
2013 agrees that certain sectors are "highly monopolized", which "has
led to abuse of market power, market distortions, lack of economic
competition for goods and services they provide, and persistent market
entry barriers."
Progress was made in some areas during 2013, most notably in the air
transport sector. Armavia, which dominated the sector until early 2013,
declared it was filing for bankruptcy in April. This paved the way
for an opening up of the sector, with the government drawing up an
"open skies" strategy after consultancy McKinsey & Company completed
a study of the sector. Any airline meeting technical standards can
now operate on routes between Armenia and Russia, and connections to
other destinations such as Dubai have also been opened up, resulting
in a sharp fall in prices.
Bartsch tells bne that the bank was "very pleased" with developments
in Armenia's aviation sector since the report was compiled. "Following
Armavia's exit, and the declaration of "open skies" by the Armenian
government, we have seen a number of indications that competition
in the sector is improving, and foreign operators are improving the
connectivity of Armenia with the rest of the world," Bartsch says.
Armenia's National Competitiveness Foundation forecasts that the cost
of air tickets - previously around 60% higher than in neighbouring
countries - will drop by between 10% and 50%, resulting in a 20-25%
increase in passenger numbers.
However, the opening up of the air transport sector has not been
matched by progress in other parts of the economy. In the retail
sector, there is still no firm date for Carrefour's launch, while
monopolisation increased in the gas sector in 2013. As Yerevan moved
closer to Russia in the second half of the year, the government agreed
to sell the 20% of ArmRusGazprom still controlled by the state to
Gazprom, which already owns 80% of the company.
bne-Clare Nuttall
http://www.balkans.com/open-news.php?uniquenumber=187635
From: Baghdasarian