Wednesday, October 15 2014

 56% of the family business entities in Armenia are pessimistic about the business environment prospects in the country, according to the survey conducted by the Corporate Governance Center. The survey findings were presented on October 10 by Narine Melikyan, Director of the Corporate Governance Centre. 
The survey says that 26% of the respondents think that by 2017 the business environment in Armenia will deteriorate, and 4% believe that it will deteriorate to a tangible extent. Another 26% of the respondents think that the business environment in the country will undergo no changes within the next 3 years. "Given that most of the polled family enterprises believe that the further development of their business chiefly depends on improvement of Armenia's business environment, one can say that they are pessimistic about the business climate inalterability", said Melikyan. She added that only 22% of the respondents are optimistic. They hope the business environment will improve by 2017. Another 22% abstained from any forecasts. 

In the meantime, over the past 12 months most of the respondents experienced growth, but 59% of them pointed out that the growth rates had not changed as compared to the previous 12-month period, 15% experienced slowdown in the growth rates, 15% experienced acceleration, and 11% registered reduction. 
"As regards the problems of the family enterprises in Armenia, we classified them into two groups: internal and external. According to our surveys, one of the biggest external problems is the unfavorable market situation that has arisen due to reduction of the effective demand. 48% of the respondents think that it is the main obstacle in the way of business development", said Melikyan. 

She added that another major problem is the tax burden and the tough tax administration, as well as the difficulties in raising foreign financing - (44% each). 41% of the respondents named the growth in prices of raw materials and energy sources among the serious problems. Other problems are the lack of skilled managers (37%), the macroeconomic instability (33%), the unequal competitive environment (27%), legal difficulties (19%), the prevalence of the shadow economy (11%). Only 15% said that they have no external problems at all to conduct business. 

Concerning the internal problems, the respondents pointed out the insufficient business profitability (67%), the lack of skilled staff (56%), corporate governance problems (44%), difficulties in introduction of innovative technologies (37%), out-of-date production capacities (33%), alternation of generation (22%). 
"When summing up the internal and external problems of the family enterprises in Armenia, one can say that our key task now is to ensure financial stability. So, the question is what sources help the family enterprises to maintain their viability", she said. Melikyan added that bank loans are the key source of financing for the majority of the entities (78%). 33% named family borrowings, 15% - foreign borrowings, 7% - foreign commercial banks, 7% - international investors, 4% - stock market. Only 7% of the respondents did not apply to foreign sources of financing. 

The survey was conducted for the first time by the Corporate Governance Center with the support of the International Finance Corporation. The Center will keep conducting similar surveys.