39th Session of the SME Development Sub-Council Led by RA Minister of Economy Gevorg Papoyan

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Sub-Council

The 39th session of the SME Development Sub-Council was held on March 31 under the chairmanship of RA Minister of Economy Gevorg Papoyan.

At the beginning of the session, the Head of the Investment Council of Armenia, Hovsep Patvakanyan, presented a comprehensive report on the implementation of previously discussed issues. The report was followed by discussions of the agenda items.

Two issues were included in the agenda. The first concerned establishing the possibility of paying, in installments, the cadastral value of land plots allocated for the construction and maintenance of public and industrial facilities in case of their alienation.

The issue relates to state- or community-owned land plots allocated and duly developed for the construction and maintenance of public and industrial facilities (except for those defined under Article 60 of the RA Land Code), which, pursuant to Article 64(8) of the RA Land Code, were transferred free of charge—by operation of law—to legal entities and individuals who, prior to November 26, 2005, held rights to use or lease those plots free of charge (permanent use).

In cases of change of ownership of such land plots (through sale, donation, exchange, or transfer to founders following the liquidation of legal entities, including for the satisfaction of creditors’ claims or enforcement), there is a mandatory requirement for a one-time payment of the cadastral value, which is imposed on the acquiring party. As a result, potential buyers often avoid acquiring such land plots due to the significant financial burden, especially considering their typically large size.

The draft proposes to allow installment payments of the cadastral value for land plots allocated for industrial purposes in Yerevan, and for both public and industrial purposes in other communities, if the cadastral value exceeds AMD 10 million. At least AMD 10 million must be paid upfront before the state registration of ownership rights. Additionally, provisions are proposed regarding the mortgaging of the land plot and other guarantees.

During the session, positions on the issue were expressed by representatives of the Enterprise Incubator Foundation EIF Aram Khachatryan, the Center for Socio-Economic Research Haykaz Fanyan, and the Investment Council of Armenia Hovsep Patvakanyan. No substantial objections were raised; however, the need for further discussion and refinement of certain provisions was noted. Summarizing the discussion, the Minister of Economy suggested that the developers of the draft engage once again with all stakeholders to incorporate the proposals voiced during the session and circulate the draft in accordance with the established procedure.

The next agenda item concerned certain issues related to guarantees in public procurement procedures.

The following problems were presented:– Potential participants in procurement procedures sometimes obtain bank guarantees but subsequently do not participate, creating unnecessary financial exposure for banks and limiting the principal’s access to other financial products.– The guarantor is not informed whether the supplied goods, works, or services are accepted within the procurement procedure, leading to uncertainty regarding the termination of the guarantee. A similar issue arises in cases of partial performance contracts.

The issues were presented by members of the Union of Banks of Armenia, particularly representatives of Ardshinbank, Armswissbank, and Acba Bank. Sergey Shahnazaryan, Head of the Procurement Policy Department of the RA Ministry of Finance, noted that there were no objections to the issues raised and expressed readiness to continue discussions in a working format and implement the proposed changes.

Funded by the UK Government's Good Governance Fund and supported by the European Bank for Reconstruction and Development.