Export Promotion Tool: Agency offers insurance opportunity to Armenian exporters

Export Promotion Tool: Agency offers insurance opportunity to Armenian exporters


To increase export volumes, which recorded a nearly 4-percent decline last year, the government of Armenia offers new tools, particularly pre-export financing insurance.

According to Vazgen Abgaryan, the executive director of the Export Insurance Agency founded in 2013, a study of the producers’ market in Armenia showed that some exporters have good buyers and established export contracts, but do not have sufficient working capital to get raw material, to produce products, and to conduct export transactions.

“Our new tool will give commercial banks and universal credit organizations an opportunity to provide exporters with loans without strict bail conditions as a means of replenishment of the latter’s circulating assets. If there is an accident, and an exporter fails to export goods or repay the loan, we will compensate 90 percent of the damage suffered by the bank,” he said at a conference dedicated to the Armenian Government’s financial support of export opportunities.

Within a year in practice, the 100 percent state-owned agency, signed 30 export insurance agreements, worth $1.2 million, with businesses. The insurance covers foreign buyers’ non-payment risks. They may include commercial risks, which are connected directly with the foreign buyer and take a form of general inability of the foreign buyer to fulfill his payment obligations (insolvency/bankruptcy) or refusal to pay without any legal reason. They may also include political risks causing the default of payment by the foreign buyer as a result of events in the foreign buyer’s country such as: administrative decisions or legislative measures, restrictions in conversion of currency, war, revolution, civil disturbances, natural calamities, etc.

“There is a demand in the market, but exporters need time to understand how this system operates,” said Abgaryan.

“For example, in 2014 and in early 2015, there were businessmen who were sure that their foreign partners would not have problems of paying them, but life showed that their partners were unable to pay and Armenian exporters had financial problems,” he said, adding that until now only manufacturers of alcoholic beverages and canned food, as well as mining companies have insured their exports.

Deputy Minister of Economy Hovhannes Hovhannisyan said that only Armswissbank had applied to the insurance agency for cooperation so far. He said that the insurance company uses a variety of flexible tools, the results of which will be possible to assess in at least 3-5 years.

“These tools will be more effective in the course of time. And now, in the beginning, of course, it may not be revolutionary for the economy, but for some businesses it is already revolutionary,” said Hovhannisyan.

The authorities of Armenia are not limited to one form of promotion of export. Recently, by the invitation of the government, Aimee Larsen, the head of the U.S. Generalized System of Preferences (GSP) program, has come to Armenia. She was expected to have discussions with Armenian businessmen about possibilities of exporting Armenian products to the US market on preferential terms.

Experts assess positively this visit and the United States’ willingness to import Armenian products at preferential terms, to which the implementation of the export risk insurance by the government may contribute.

In 2015, Armenia exported almost $63 million-worth goods to the United States. They included aluminum foil, metal jewelry, juices and mineral waters.