The loan marks ADB’s first private-sector infrastructure investment in Armenia and the Caucasus region and comes at a critical time for the Armenian economy. After growing 13.8% in 2007, the country’s gross domestic product expanded only 6.8% in 2008 and the National Statistics Office has reported a 14.4% contraction in 2009.
“Commercial funding for this and other projects dried up because of the global financial crisis so this loan is critical in bringing in much-needed external investment that we hope will increase the confidence of the international business community in investing in Armenia,” said Philip Erquiaga, Director General of ADB’s Private Sector Operations Department.
The loan will help fund the $173 million cost of a new two-story terminal building to supplement an existing concourse, helping Zvartnots International Airport to increase the number of destinations it serves and boost the frequency of flights. By the time the terminal is operational in 2012, the airport should be able to handle about 3.2 million passengers a year, up from the current 1.8-2.0 million.
Armenia’s estimated 7-million-strong diaspora, which still has strong social and economic ties with its homeland, is also expected to take full advantage of the improved air services.
“For a landlocked country, good infrastructure – and civil aviation in particular – is vital as a means of quickly distributing goods and services. Faster transport should fuel economic growth and increase tourism,” said Shantanu Chakraborty, Senior Investment Specialist in ADB’s Private Sector Operations Department.
Armenia has a very limited railway system and the road infrastructure is in urgent need of fresh investment. As well as this latest loan, ADB has also provided $550 million in loans and technical assistance to the road sector alone to improve the country’s transportation links.
Zvartnots International Airport, privatized in 2002, is operated by Armenia International Airports (ArIA) under a 30-year concession granted by the government. ArIA is a wholly-owned subsidiary of American International Airports, a New York-based airport holding company that holds concessions to manage airports in Argentina, Ecuador and Uruguay.
The floating-rate loan from ADB’s ordinary capital resources carries a 10.5-year maturity with a grace period of 3.25 years. The European Bank for Reconstruction and Development and the Deutsche Investitions-und-Entwicklungsgesellschaft are also providing loans equivalent to $40 million and $20 million respectively to the project. ArIA will finance the remainder of the project cost through equity, subordinated loans and internally generated funds.