Clare Nuttall in Astana -

For more than a year, Yerevan has been anticipating the opening of the first Carrefour supermarket, expected shortly after the French retail giant launched in neighbouring Georgia in September 2012. However, the chain's entry into the Armenian market has been held back reportedly by a group of local oligarchs who control the lucrative imports of food and fast-moving consumer goods (FMCG) to the country.

While Armenia has seen an opening up of sectors such as air transport in 2013, the country's economy remains one of the most monopolised in the region, according to a World Bank report. The high concentration of ownership among a handful of powerful individuals is a significant barrier to competition and economic growth.

Opposition to Carrefour's entry to Armenia is believed to be led by Samvel Alexanian, the ultimate owner of both Armenia's largest supermarket chain, Yerevan City, and its largest food importer, Alex Grig. Alexanian's control over the prices of two key imports - flour and sugar - would be threatened by the entry of the world's second largest retailer to the market. Alexanian is also rumoured to have rented the largest retail space at the Dalma City Mall in Yerevan for a Yerevan City supermarket to prevent Carrefour from using the space.

Carrefour is now expected to set up its first Yerevan store at another mall, Yerevan Mall, which is due to open in February, and the French chain is advertising for local staff. In his latest statement on the issue, France's ambassador to Armenia, Henri Reynaud, told a press conference in December that the launch was imminent. "It should not be forgotten that France is the number one investor in Armenia. I would like to inform you that the entrance of Carrefour to Armenia is expected in mid-2014," Reynaud said, according to Armenpress.

Government officials including Prime Minister Tigran Sargsyan have also weighed into the case. Sargsyan promised in early 2013 to do everything possible to ensure that Carrefour was able to enter the Armenian market. However, the lengthy delays have highlighted the level of power wielded by the businessmen who hold sway over many parts of the economy.

Barriers to entry

A World Bank report published in November singles out monopolisation and a lack of competitiveness as one of four key problems holding back development of the economy, along with problems connected to investment, job creation and transport links. "Competition is... of crucial importance for the dynamism of the economy. Pro-competition reforms and effective implementation of antitrust rules can lead to significant productivity gains and consumer savings," reads the report titled "Republic of Armenia: Accumulation, Competition and Connectivity".

"Barriers to competition exist in different sectors partly because of the characteristics of government contracts, discriminatory rules and inadequate regulations, and particular aspects of market structure," says Ulrich Bartsch, the World Bank senior country economist and co-author of the report.

According to the World Bank report, Armenia has a larger share of monopolies than other countries in the region, with 60% of markets exhibiting "an oligopolistic or monopolistic market structure". Problem sectors include air transport, gas, electricity, railways and professional services, as well as retail. "Insufficient competition affects regulated sectors such as utilities and natural monopolies, and certain markets with a small number of firms, such as petroleum, sugar, wheat, and cut flowers," says the report. "Competition is limited because of barriers to entry, ownership concentration, market dominance, and vertical and horizontal integration."

A study by the Yerevan-based Hrayr Maroukhian Foundation, with support from the Friedrich-Ebert-Stiftung foundation, published earlier in 2013 agrees that certain sectors are "highly monopolized", which "has led to abuse of market power, market distortions, lack of economic competition for goods and services they provide, and persistent market entry barriers."

Progress was made in some areas during 2013, most notably in the air transport sector. Armavia, which dominated the sector until early 2013, declared it was filing for bankruptcy in April. This paved the way for an opening up of the sector, with the government drawing up an "open skies" strategy after consultancy McKinsey & Company completed a study of the sector. Any airline meeting technical standards can now operate on routes between Armenia and Russia, and connections to other destinations such as Dubai have also been opened up, resulting in a sharp fall in prices.

Bartsch tells bne that the bank was "very pleased" with developments in Armenia's aviation sector since the report was compiled. "Following Armavia's exit, and the declaration of "open skies" by the Armenian government, we have seen a number of indications that competition in the sector is improving, and foreign operators are improving the connectivity of Armenia with the rest of the world," Bartsch says.

Armenia's National Competitiveness Foundation forecasts that the cost of air tickets - previously around 60% higher than in neighbouring countries - will drop by between 10% and 50%, resulting in a 20-25% increase in passenger numbers.

However, the opening up of the air transport sector has not been matched by progress in other parts of the economy. In the retail sector, there is still no firm date for Carrefour's launch, while monopolisation increased in the gas sector in 2013. As Yerevan moved closer to Russia in the second half of the year, the government agreed to sell the 20% of ArmRusGazprom still controlled by the state to Gazprom, which already owns 80% of the company.