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Government Guarantees To Construction Companies Amid Crisis

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  • Government Guarantees To Construction Companies Amid Crisis

    GOVERNMENT GUARANTEES TO CONSTRUCTION COMPANIES AMID CRISIS

    news.am
    Nov 30 2009
    Armenia

    Amid the financial and economic crisis in Armenia, the RA Government
    has provided budget guarantees to the amount of U.S. $10m to a number
    of construction companies this year for completing the construction
    of elite housing.

    Khachik Avdalyan, Assistant to the RA Prime Minister, told NEWS.am
    that U.S. $2.5m budget guarantees were provided to the Elite Group
    Company by means of the Ameria Bank. The company is to repay the money
    in three years. The Levon Amirkhanyan received U.S. $2.64m guarantees
    by means of the Prometey Bank. Also, the MG Housing Ltd received U.S.

    $3m by means of Inecobank, the individual businessman Vahe Harutyunyan
    U.S. $950,000 by means of Areximbank and the Norashen-2007 Company
    U.S. $500,000. Avdalyan said that the Government was to provide
    guarantees to two more companies. However, the Hermek Company
    encountered problems and did not receive the U.S. $1m intended for
    it, and the AVO S.M.G. refused the government guaranteed funds. "It
    is not money, but guarantees that the government provides to promote
    the completion of housing construction projects. We made this step
    to prevent mistrust amid the crisis," Avdalyan said.

    As to whether the Government is supervising the companies' activities
    to prevent misapplication of funds, Avdalyan said that "the Government
    provides guarantees only for the principal sum, without interest rates,
    which prompts the banks to conduct monitoring." Whether the Government
    made the right decision to provide funds to a sector that actually
    caused the crisis, he said that "doing nothing would be easier, but
    refusing the funding amid the crisis would create problems. Economic
    diversification will reduce the share of this sector, which has
    actually causes a grave crisis here."

    If case the construction companies fail to repay the funds,
    the Government, at taxpayers' expense, will have to sponsor the
    construction of elite housing. A NEWS.am correspondent made several
    attempts to talks with the construction companies' managers. He failed
    to find three of them.

    Alik Hovhannisyan, Director of the Levon Amirkhanyan Ltd. said that
    the company received U.S. $2.6m for completing the construction of
    elite housing in Sayat Nova St. by 2010. As to the price of 1 sq meter,
    he said with irritation: "I do not want to say, it is secret."

    Armen Mkoyan, Director of the Elite Group Company, said that the
    company received a budget guarantee for completing the construction
    of a residential building at Dzorapi 40. According to him, the
    construction is to be completed in a couple of months, the price of
    1 sq meter of housing being 300,000 AMD (about U.S. $800).
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