Armenia's Economic Pulse

[Lernakan]

Re: Armenia's Economic Pulse

"IF THE ECONOMIC GROWTH CONTINUES AT THE AVERAGE RATE OF THE LAST 5 YEARS, ARMENIA WILL REACH THE MEDIUM INDEX OF THE EUROPEAN COUNTRIES IN 2023"
By Aghavni Harutyunian

AZG Armenian Daily #142
28/07/2007

On July 26, Armenian-European Policy and Legal Advice Center (AEPLAC)
presented its "The Armenian Economic Trends: 2006 Annual Report"

"Annual Economic Report - 2006" contains in-depth analyses of the
main macroeconomic developments in Armenia in 2006, with extensive
international comparisons by using a number of indicators, said the
European Director of AEPLAC Kenneth Myunter

According to AEPLAC's Senior Expert of Economic Issues Artashes
Shaboyan, the analyses consists of various chapters which cast a light
upon key topics such as composition, structure and per capita levels of
the Gross Domestic Product, and a sectored structure of the outputs,
which includes industrial production, agriculture, construction and
other sectors. These are followed by chapters related to inflation,
labor market, financial / banking sectors, the state budget, external
debt and developments in the external sector.

According to the report, GDP rose three times in the last 5 years,
from that only 61% is the real growth.

Inflation in the economy is 14%; the rest 25% was formed because of
the devaluation of the US dollar against the Armenian dram.

Providing 13,3% economic growth in 2006 Armenia became the fifth in
the list of the 181 countries. Azerbaijan gained the first rank with
its unprecedented indices of the economic growth in the last two years.

If the economic growth in Armenia continues at the average rate of the
last 5 years, Armenia will reach the medium index of the 27 European
countries in 2023.

The key branch in GDP: the construction's high rates of growth
continue, moreover, it provided half of the GDP growth in 2006. It
is one of the peculiarities of the economic development of Armenia
during the last years.

At the same time the index of the apartments' construction is not
high as compared with the CIS countries.

In regard to the industry, GDP decreased in the spheres of cigarette,
chemistry and gold xxxellery

A growth of productivity is recorded in the agricultural sphere.

The 2,9% index of inflation is close to the medium index of the 27
European countries.

Unemployment decreased and reached to 7,4%, the medium monthly wages
increased.

Head of the World Bank's Armenian Office Aristomene Varudakis spoke
about the following challenges for Armenia: development of other
branches besides construction, adoption of the amendments of the
second generation, improvement of the investments' atmosphere,
stimulation of the rivalry, etc.

[Siamanto]

Re: Armenia's Economic Pulse

TEN YEARS FOR FORMATION OF ARMENIA'S SECURITIES MARKET

ARKA News Agency, Armenia
July 27 2007

YEREVAN, July 27. /ARKA/. Ten years are required for complete formation
of Armenia's securities market, said Chairman of the Central Bank
of Armenia (CBA) Tigran Sargsyan. According to him, the rates of
development of Armenia's securities market are conditions by the rate
of implementation of programs of the OMX operator, which intends to
purchase the Armenian Stock Exchange (ArmEx) and the depositary.

"The terms of development of Armenia's securities market are acceptable
for Armenia, and the principal program is the OMX's entry to Armenia's
market," Sargsyan said.

According to him, the CBA is rendering assistance to the development
of Armenia's securities market by affording enterprises ampler
opportunities to enter Armenia's financial market, offering new
instruments to them.

'We are making our first steps in the development of securities
market, and it is natural that the companies that will be the first
to issue their bonds on the market will be able to make use of the
CBA's assistance," Sargsyan said.

He pointed out that the bonds of the CBA-rated companies will be
equaled to government bonds as to their reliability and liquidity
during REPO transactions between the CBA and commercial banks.

He pointed out that all the companies have equal rights to be rated
by the CBA. Sargsyan added that the CBA has no intention to limit
the terms of this instrument.

"Specifically, the Valleta Company with its initial public offering is
supposed to set an example to all the organizations seeking alternative
sources of financing and play an essential role in the reduction of
shadow economy," Sargsyan said.

In September 2005, the CBA published the first rating of Armenia's
enterprises. The CBA was monitoring 30 enterprises in 2005, with 15
of them getting the first-calls ratings. If enterprises get higher
ratings, the CBA publishes their names with their consent.

The CBA is ready to accept bonds of the companies with high ratings
(A, B, C) as a security during REPO transactions banks. A privileged
scale of credit risks during the allocation of bank credits is intended
for the highly rated companies.

The CBA-published rating includes 29 enterprises.

http://groong.usc.edu/news/msg197697.html

[Siamanto]

Re: Armenia's Economic Pulse

CAPITALIZATION OF 'ARMROSGAZPROM' CJSC WILL EXCEED $1,5BLN AT THE BEGINNING OF 2009

arminfo
2007-07-24 09:53:00

At the end of 2008 and at the beginning of 2009 the authorized capital
of Armenian-Russian "ArmRosgazprom" CJSC will amount to $850-900mln,
and the capitalization, according to the estimations of the company's
specialists, will exceed $1,5bln, Chairman of the Board, Director
General of "ArmRosgazprom" CJSC Karen Karapetyan said on Monday.

According to him, from today on the company is preparing to start
Initial Public Offer. For that purpose international audit has already
been conducted in the company for 4 years. From the current year on
the "Ernst and Yang" company is conducting the audit. K. Karapetyan
recalled that "ArmRosgazprom" CSJS has already placed coupon
obligations in a 1bln AMD emission volume, with a circulation period
of 18 months and with 9% annual percentage rate. The emission volume
in 1bln AMD is a bit more than 0,5% of the company's assets, the
Director General noted. He added that the company intends to emit
obligations with a volume of 5bln AMD in the nearest future.

Director of the Central Bank of Armenia Tigran Sargsyan said that the
emission of obligations of "ArmRosgazprom" CJSC arouse much interest in
the financial system of the country and, presently, the demand exceeds
the supply by several times. He added that "ArmRosgazprom" CJSC plans
to conduct a rating of the Central Bank's enterprises, which will
give the commercial banks, interested in the company's obligations,
an opportunity to transact deals with the Central Bank. In that way,
for the Central Bank will consider the obligations of "ArmRosgazprom"
CJSC as liquid assets and the latter will work with commercial banks
through REPO agreement, he clarified.

He noted that the entrance of such system forming structure as
"ArmRosgazprom" CJSC into the bond market is a guarantee for the
dynamic development of that market. He added that in the nearest
future two more of the best enterprises in Armenia will be involved
in the bond market. T.

Sargsyan expressed hope that, thanks to "ArmRosgazprom" CJSC's
cooperation with Stockholm burse OMX, which plans to buy "Armenian
Stock Exchange", the company will start IPO. This will mean integrating
Armenian and world bond markets, he said.

To recall, "ArmRosgazprom" CJSC was founded in December 1997 and is
the exclusive importer of natural gas into Armenia. As a result of
"ArmRosgazprom" CJSC's extra emission by $111,8 mln, the company's
authorized capital increased from the former $280mln up to $391,8mln.

"Gazprom" JSC raised its share in "ArmRosgazprom" CJSC's authorized
capital from the former 45% up to 57,59%. The share of the Armenian
Government in the company's authorized capital, accordingly reduced
from 45% to 34,7%, and the share of "Itera" company reduced from the
former 10% up to 7,71%.

http://groong.usc.edu/news/msg197203.html

[Siamanto]

Re: Armenia's Economic Pulse

[It is true that $12M is a negligible amount, but establishing business relations with Citigroup may become of value. Siamanto.]


WESTERN BANKS UNVEIL 'HISTORIC' LENDING SCHEME FOR ARMENIA
By Anna Saghabalian

Radio Liberty, Czech Rep.
Aug 3 2007

The European Bank for Reconstruction and Development (EBRD) and
a leading U.S. financial services group unveiled on Friday a joint
lending program for small and medium-sized Armenian companies seeking
cheap credit.

The EBRD and the Citigroup financial conglomerate said they will
each lend $6 million to one of Armenia's largest commercial banks,
ACBA-Credit Agricole, that will manage the scheme. Under the terms
of an appropriate agreement signed in Yerevan by the three sides,
ACBA-Credit Agricole will in turn use the money to extend loans to
expanding small and medium-sized firms.

According to the ACBA chairman, Stepan Gishian, the maximum amount
of a single loan to be provided under the scheme will be set at
$300,000. He could not specify the cost of such borrowing, saying
only that it will be below his bank's current lending rates.

ACBA, in which the French bank Credit Agricole is the principal
shareholder, currently makes loans repayable in up to five years, with
interest rates varying from 16 to 22 percent. With inflation in Armenia
remaining in single digits and the national currency increasingly
strong, such rates are hardly affordable for many small firms.

Officials present at the signing ceremony, emphasized the fact that
it is the first time that an Armenian bank borrows a substantial
amount of cash from a Western bank on a commercial basis. "We are
talking about purely market-based relations," Gishian said, pointing
out that similar lending programs have until now been implemented in
Armenia only by non-commercial development institutions like the EBRD
and the World Bank.

Michael Weinstein, head of the EBRD office in Yerevan, described
the deal as a "historic" event for Armenia. He said the London-based
lending agency helped to negotiate it as part of its growing presence
in the country. "We now pay a lot of attention to the Caucasus region
and Armenia in particular," he said. "We hope that our involvement
in Armenia will continue and deepen."

The EBRD has spent some $180 million on loans to and equity purchases
in various Armenian companies ever since it opened an office in Yerevan
in the mid-1990s. A large part of the sum has reached the country in
the past few years.

http://groong.usc.edu/news/msg198245.html

[Siamanto]

Re: Armenia's Economic Pulse

ARMENIAN BUSINESSMEN HAVE INSUFFICIENT COMPREHENSION OF SOCIAL INVESTMENTS' SIGNIFICANCE

Noyan Tapan
Aug 09 2007

YEREVAN, AUGUST 9, NOYAN TAPAN. More than 25 representatives of
Armenia's business community participated in the August 9 seminar
on corporate social investments held in Yerevan, during which
the experience of Russia, the US and the UK in this sphere was
presented. The Eurasia Foundation' new program aimed at developing
Armenian businessmen's skills at making strategical social investments
was launched at the event.

In the words of the director of Eurasia Foundation Juliet Stein,
strengthening local businessmen's strategical potential to make
corporate investments will result in positive, lasting changes
in the country. The deputy ambassador of the US to Armenia Joseph
Pennington said that following suit of rich Americans, prominent
Armenian businessmen have begun to invest part of their profit in
the social sphere, as well as education and culture.

Studies conducted among Armenian businessmen show that they have
insufficient comprehension of the significance of social investments.

According to surveys, social investments usually do not exceed 1% of
the annual income of the given company. Most of social investments
are made in such spheres as social assistance, science, culture,
health care, and education. As a rule, these investments are one-off,
unplanned and do not make part of long-term programs or strategy
on social investment: they are made in the form of humanitarian or
charitable assistance, individual sponsorship or one-off grants.

The executive director of the Union of Manufacturers and Businessmen
of Armenia (UMBA) Gagik Makarian underlined the importance of the fact
that the ideas of collective contracts, creation of trade unions,
as well as the idea of trade union - employer - government social
partnership have been included in the new Labor Code of the RA. He
noted that the cooperation of these structures has been put at a
new level.

G. Makarian at the same time said that making social investments
ensures reduction in tax liabilities for businessmen abroad, whereas
such practice is absent in Armenia. According to him, the Union of
Employers currently at the stage of formation will deal with this
problem.

http://groong.usc.edu/news/msg198661.html

[Siamanto]

Re: Armenia's Economic Pulse

ARMTECH'07 RESULTS EXCEEDED THE ORGANIZERS' EXPECTATIONS

arminfo
2007-08-07 18:47:00

The results of Armenian Technology Congress'07 (ArmTech'07)
exceeded the organizers' expectations, Director General of Technopark
"Viasphere", Co-Chairman of the Organizing Committee of the Congress
Aram Vardanian said at a press conference on Tuesday. The Congress
was held in San-Francisco, 4-7 July.

According to him, more than 350 entrepreneurs from Armenia, Diaspora
and big offshore companies participated in the Congress's work. Not
only big Armenian companies, some of which were granted Diplomas
of California Senate, but also beginners were presented at the
Congress. He noted that the country's biggest accomplishments in the
spheres of information, high technology and laser technology, the
newest technologies of alternative energy sources, as well as reports,
technical and business articles were presented at the event. "During
the event Armenian companies attracted international investors'
big interest, and some of them got concrete proposals", A. Vardanian
emphasized. He noted that launching of the Congress's site, opening
of an office in Armenia and organizing of regional smaller similar
congresses are planned till the next ArmTech 2009. It was already
suggested that a regional ArmTech Congress be held in Venice. "As
a result and also thanks to integration into the world community of
high technologies, more than 20 000 work places will be created in
IT sphere in Armenia", he added.

For his part, the coordinator of the data clusters of IT program
USAID CAPS (Competitive Armenian Private Sector) Garegin Chugaszyan
noted that such large-scale congresses are popular particularly in
the countries of East Asia and West Europe.

According to the Director General of SYNOPSYS Armenia Rich Goldman,
entrepreneurs from Armenia, San-Francisco, Los-Angeles, France,
Russia, the Middle East, South America made their contribution in
organizing ArmTech'07.

"All of them reached their main aim: a long-term partnership network
was established. During the discussions a certain platform was created,
which will serve a basis for further cooperation, for identifying
and settling priority IT problems", he emphasized.

To recall, Armenian Foreign Minister Vardan Oskanyan, Advisor to
the Armenian President on Economic Issues Vahram Nersisian, Synopsys
President and Chief Operating Officer Chi-Foon Chan, the President of
Viasphere International Tony Moroyan and other high rank officials
participated in the ArmTech'07 work. The event is devoted to the
global unification of Armenian society, as well as of specialists
interested in the development of technology sphere in Armenia.

The primary sponsors of ArmTech'07 are VivaCell and Synopsys, Inc.

http://groong.usc.edu/news/msg198501.html

RUSSIAN DIAMONDS FOR ARMENIA

Mining Journal Online, UK
Aug 9 2007

The government of Armenia has secured a supply of rough diamonds
from Russia for the country`s cutting and polishing plants. Under
the agreement, Alrosa will provide Armenian companies with part of
its rough-diamond production that is not economically viable to be
cut in Russia.

The agreement was signed during a visit to Yerevan this week by
Alrosa`s president Sergey Vybornov, who met with Armenia`s president
Robert Kocharyan and prime minister Serzh Sargsyan. Armenia`s minister
of trade and economic development, Nerses Yeritsyan, explained that
the agreement will allow for renewed diamond-cutting activities,
and that, longer term, Alrosa would extend the co-operation to the
xxxellery sector.

In the recently published `From Mine to Mistress` book, Chaim
Even-Zohar notes that planned (but unattainable) polished exports for
2006 from Armenia were US$400 million. In actuality they only reached
US$245 million, which still represents over 30% of the nation`s
overall exports. This dependency on diamonds led the International
Monetary Fund to warn of a "serious threat to Armenia`s overall
export performance".

Diamond sales by Alrosa to Armenia is not a new development; Alrosa
has previously been committed to sell the country 450,000 ct/y of
gem-quality rough, supposedly at `attractive` prices. However, as Mr
Even-Zohar notes, Russia has previously reneged on that undertaking.

In 2005, Armenia processed some 800,000 ct of rough, of which only
180,000 ct were supplied by Alrosa.

The most important foreign diamond investors that are operating
in Armenia include Lev Leviev (Israel), Tache (Belgium), Rosy Blue
(Belgium) and Arslanian Brothers (Belgium).

http://groong.usc.edu/news/msg198685.html

[Siamanto]

Re: Armenia's Economic Pulse

TENDENCIES IN REAL ESTATE MARKET IN THE FIRST SIX MONTHS OF 2007
By Ara Martirosian

AZG Armenian Daily
16/08/2007

What tendencies have been recorded in the first six months of 2007,
what is the situation compared with the first and second six months
of last year, what prices have been recorded in June and what may we
expect in the coming months in this market?

All these questions can get their answers from the analyses of Cadastre
State Committee of Real Estate.

According to it, transactions increased in the first six months of
2007 as compared with the first and second six months of 2006.

Alienations gain a large part in transactions - 40 percent, from
which sales and purchases - 87 percent.

The rest are donations and interchanges.

The biggest parts of sales and purchases have the apartments of
residential buildings - 2/3 of a total.

The recorded 7029 transactions are a little more as compared with
the same period of last year. Here a decrease of transactions by 18,5
percent is recorded as compared with the second six months of 2006.

Anyway, the prices of the apartments have been increased in Yerevan
as compared with the first (by 30,6 %) and the second (by 16,1 %)
six months of 2006.

The same situation is in the provinces (marzes) of Armenia - the
prices of the apartments increased here by 48,3 percent as compared
with the same period of the last year, and by 19,8 percent compared
with the second half year of 2006.

The average market price of one square meter of residential
buildings' apartments in Yerevan made 258 thousand drams in June of
2007: in Center - 454 thousand drams, Arabkir - 372 thousand drams,
Kanaker-Zeytun - 273 thousand drams, Davitashen - 246 thousand drams,
Shengavit - 244 thousand drams, Agapnyak - 237 thousand drams, Nor
Nork - 228 thousand drams, Malatia-Sebastia - 226 thousand drams,
Erebuni - 221 thousand drams, Avan - 217 thousand drams and Nubarashen
- 124 thousand drams.

Out of Yerevan the highest prices have been recorded in Abovian: one
square meter - 145 thousand drams, in Vagharshapat - 126 thousand
drams, Ashtarak - 107 thousand drams, Jermuk - 102 thousand drams
(the prices here increased twice).

2964 transactions on sales and purchases of detached houses were
recorded in the first six months of 2007: 560 in Yerevan. The
transactions decreased by 16,5 percent as compared with the second
six months of 2006, and increased by 15,4 percent compared with the
first six months of 2006.

The average market price of one square meter of 250 square meter
construction and 400 square meter house of a personal plot is the
following in different parts of Yerevan: in Center - 469 thousand
drams (about $1350), Arabkir- 376 thousand drams, Kanaker-Zeytun -
275 thousand drams, Davitashen - 250 thousand drams, Shengavit -
245 thousand drams, Agapnyak - 241 thousand drams, Nork-Marash -
233 thousand drams, Malatia-Sebastia - 229 thousand drams, Erebuni -
225 thousand drams, Avan - 219 thousand drams and Nubarashen - 127
thousand drams.

The most expensive houses are again in Abovian. Here the average
market price of one square meter of 200 square meter construction
and 1000 square meter personal plot is 149 thousand drams. Then comes
Vagharshapat - 130 thousand drams, Tsaghkadzor - 127 thousand drams,
Ashtarak - 109 thousand drams and Nor Hachn - 104 thousand drams.

http://groong.usc.edu/news/msg199121.html

[Siamanto]

Re: Armenia's Economic Pulse

Foundation for Economic Development
104 North Belmont Street, Suite 200

Glendale, Ca 91206
Tel: 323.888.0049
Fax: 323.888.0043



PRESS RELEASE
: August 20, 2007

Contact: Taleen Mardirossian
Tel: 818-500-1918



Armenia: Promoting Economic Activity and Investment through an Improved
Business Environment



By Karen Grigorian



Courtesy of the CALIFORNIA TRADE OFFICE



In the early '90s, the Armenian government successfully implemented its
first generation of reforms, which provided a strong foundation for
sustainable growth. Since 1994, the Armenian economy began to show signs of
recovery from a major contraction experienced during 1991-93 when the
country lost nearly 60% of its output. This transformation rapidly
accelerated from the beginning to mid-2000 thanks to a focused effort aimed
at improving the overall business environment and the supporting framework
for investment. The country continued enjoying relatively high rates of
economic expansion and recorded an incessant double-digit growth since 2002.
Demand for Armenian products abroad also grew significantly.



This strong performance has been largely dependent on financial assistance
from the Diaspora, World Bank, USAID, UN organizations, European Union, and
bilateral donors. Acceleration in private-sector investment, reflecting an
improving business environment, is also a determinant cause of this
performance.



The government's economic policy adopted Private Sector Development (PSD) as
one of its key elements since the beginning. This is mainly evident from the
massive privatization effort undertaken by the state where about 90% of the
economy was sold to private entities, as well as in the enactment of a
number of economic policies that supported the growth of the private sector.
These actions set the tone for the coming economic growth.



Armenia's good performance in the last 3 years, in particular, was
reinforced by a certain diversification of the economy. While agriculture
and food processing continued to grow, the light industries sector also
showed signs of vitality and at times a very strong recovery. The backdrop
for all this remained a solid and stable macroeconomic framework and an
improved fiscal performance. The latter is a significant achievement for the
state, i.e. while the fiscal situation improves and becomes stronger, the
government has more flexibility in terms of revenue mobilization and public
expenditures. This also means more flexibility to undertake larger and
long-term initiatives rather than crisis management. The government, indeed,
now enjoys a much better prospect for controlling the economy and planning
its development.



The achievements attained by Armenia came at a cost and despite some serious
constraints. Particularly, to-date, transport costs within and out of the
country remains high and freight forwarding is still a complicated affair in
respect to other countries in the region. Nonetheless, the economy continues
to develop -- not to a lesser degree thanks to Diaspora interventions. From
this perspective, the importance of Armenians living outside of Armenia
should not be overlooked. Remittances by family members living abroad remain
a very important part of the economy and appear as the single biggest source
of foreign currency source for Armenia. This is also telling from the
point-of-view of Armenians who have successfully established themselves in
foreign countries and continue to support their relatives and friends.



Armenia is one of the most liberal and open market economies in the region
and even globally according to a number of recent studies and surveys. Moody's
just rated Armenia Ba2, while the Economic Freedom Index released by the
Heritage Foundation and Wall Street Journal ranked Armenia 27th out of more
than 150 countries. The latter uses 50 indicators such as capital flows and
foreign investments, banking and financial systems, monetary, budget and
trade polices, salaries and prices, state interference in the economy,
property rights and regulations and black markets. This demonstrates that
progress in trade and price liberalization, increased investments in
infrastructure, privatization or closure of most state-owned enterprises,
and efforts to streamline government regulation, have considerably enhanced
the business environment.



The 2006Annual Administrative and Regulatory Cost Survey also suggests
noteworthy improvements in the business environment. When asked about the
general satisfaction with the quality of regulations, administrative
requirements and bureaucratic behavior of state agencies, only 38% of
Armenian businesses considered it as a problematic constraint, while the
average rating was 3.50 (somewhat satisfied)[1]. This percentage is
calculated as the sum of the number of companies responding very
dissatisfied, dissatisfied and somewhat dissatisfied. This is a
considerable improvement over the results of the 2004 and 2000 surveys, when
respectively more than 60% and 71% of companies were dissatisfied with the
overall quality of business regulations. It is also worth noting that in the
2006 Survey large companies were somehow more dissatisfied (45.83% of large
companies) with government regulations than medium (41.41%) and small-sized
(35.03%) enterprises. Furthermore, companies operating in different sectors
of the economy have almost the same level of dissatisfaction with government
regulations - commercial companies being a little more constrained with the
overall quality of business regulations.



In spite of all commendable improvements, corruption remains a key area of
constraint and needs to be addressed. Armenia's ranking in the Corruption
Perception Index has not improved marginally between 2000 and 2004, thus,
indicating persistent administrative barriers/discretion to doing business.

Transparency International Corruption Perception Index


Rank 2000 (1-90)
Rank 2004 (1-133)
Score 2000
Score 2004

Slovenia
28
29
5.5
5.9

Estonia
27
32
5.7
5.5

Hungary
32
40
5.2
4.8

Lithuania
43
41
4.1
4.7

Czech Republic
42
54
4.3
3.9

Latvia
57
57
3.4
3.8

Poland
43
64
4.1
3.6

Turkey
50
77
3.8
3.1

ARMENIA
76
78
2.5
3

Russia
82
86
2.1
2.7

Azerbaijan
87
124
1.5
1.8



There are also overall concerns regarding the tax, customs and general
public administration areas. Firms, especially small and medium-sized ones,
still feel there is room for improvements in this area. Many argued that
dealing with taxes and other regulatory requirements is time consuming, not
transparent and adds to the overall cost of doing business. In other words,
it evidently puts strain on the private sector's capacity to do business
since dealing with administrative issues is time-consuming and costly.



On the other hand, Authorities seem to be genuinely pushing for improvements
allowing for transparency and openness. In the tax and customs systems, they
aim to make it easier for clients to interact with these agencies, although
it is obvious that it is not enough to change pertinent laws, but,
institutional cultures must also be changed. However, sustained effort and
time are needed for bringing about institutional change. Sustained effort
means that the government has to commit itself to progressive improvement
aimed at eradicating this cancer from the system. Some of it can be dealt
with by obvious administrative changes such as the ongoing implementation of
self-declarations for taxes and customs that aim at reducing contact with
customs and tax officials.



Another important area for consideration in terms of improving the business
climate is the need to reduce the overall transaction costs for doing
business. This doesn't just mean bills for utilities or transport, it also
means time and other wasted efforts. This area needs to be progressively
improved and adjusted over time. Confidently, progress is already being
made, but certainly there is no impression that this is a very easy task.



The Administrative Barriers Study prepared by the Foreign Investment
Advisory Services (FIAS) of the World Bank Group suggests that, in general,
there have been notable improvements in a number of administrative
procedures affecting businesses since 2000 -- including business
registration and licensing. While strongly commending these achievements, it
is important to record that the more difficult tasks of ensuring efficient
and fair tax and customs administration, transparent privatization and lease
of public land and construction coordination remain to be tackled.
Therefore, it is of critical importance that the government recognizes and
prioritizes some fundamental issues that have not been fully addressed over
the last several years. While certain areas, such as enterprise
registration, licensing and title transfer registration have seen consistent
improvements, there are plenty of administrative procedures that remain
complex and cumbersome, especially for smaller businesses and new entries
(both local and foreign).



Comparing Armenia with other countries based on the official time for
company registration indicates that there is still room for reductions to
catch up with best practice countries in terms of simplicity and speed of
enterprise registration and related institutional arrangements (such as
information sharing among government institutions, use of single
registration form and identification number).



Over the past four years, a variety of changes have occurred in various
locating processes that have helped to accelerate land acquisition and
planning approval procedures. Although significant progress has been made,
further streamlining measures should be implemented to remove existing
development barriers for investors. Attention should be given to further
streamlining the existing land and construction processes, which remain
cumbersome for investors and are not always transparent or accountable.



The activities of the Business Support Council (BSC) were instrumental in
bringing a number of investment climate issues to the agenda of the
government in recent years.

The BSC served as the high-level forum for identifying administrative
barriers, addressing them at the technical level through public-private
sector dialogue, and implementing reform in a comprehensive manner that
ensures accountability within government and to the business community.



Following the findings of the FIAS study, an action plan was developed by
BSC. A critical component of this effort is to assist the Armenian
government in implementing the proposed action plan for the removal of
administrative barriers to investment, which could serve as a tool for
achieving ongoing and sustained improvements.



Experience suggests that an action plan is most effective when it is
detailed, when it accurately presents the concerns of businesses, when it
includes feasible solutions that are the result of public consultations, and
when it mandates responsibilities and imposes realistic deadlines. It
should also contain performance indicators to evaluate if the desired impact
is being achieved. In Armenia, the level of public-private interaction that
took place in preparing the agendas of the Business Council meetings and
follow up on the originally agreed action plan was not sufficient to tap
into the full potential of such an instrument.



In summary, there is no reason to believe that the momentum created in the
country cannot be sustained (despite a number of risks), and, if progress
continues this way, confidently, the economic growth will benefit all
segments of Armenian society.



Please Visit our Web Site: www.armenia.ca.gov



----------------------------------------------------------------------------
[1] On a six -point scale, where 6 stands for very satisfied, 5 - for
satisfied, 4 - for somewhat satisfied, 3 - for somewhat dissatisfied, 2 -
for dissatisfied and 1 - for very dissatisfied.

http://groong.usc.edu/news/msg199419.html

[Siamanto]

Re: Armenia's Economic Pulse

AZG Armenian Daily #153, 25/08/2007


Armenia-Russia relations

PUTIN PROMISES $1,5 BILLION INVESTMENTS

On August 23, Russian and Armenian presidents Vladimir Putin and
Robert Kocharian met in Sochi (Russia). Vladimir Putin expressed his
content with development of Armenian-Russian bilateral relations:
increase in commodity turnover and allied cooperation in political
sphere, "Novosti Armenia" agency informed.

Russian President V. Putin assured of $1,5 billion Russian investments
in the Armenian economy in 2007.

In his turn, Robert Kocharian mentioned that Armenian-Russian
relations develop in all directions: there is evident increase in
investments, commodity turnover, military-technical and political
cooperation.

There is an evident development process of mutual relations, according
to the Armenian president, and the Armenian side expresses its perfect
willingness to contribute to that process.

It's worth to mention that this kind of meetings between the Russian
and Armenian presidents at the Russian president's residence "Bocharov
Ruchey" in Sochi have become a tradition for the two presidents. As
many politicians mention, those meetings aim to regulate bilateral
relations of the two states: to give a new impetus and quality to
them.

It's the forth meeting of the presidents Putin and Kocharian this
year; the second in Sochi.

It's worth to mention, that if before we could say that the political
issues were preliminary in the Armenian-Russian relations, today the
situation has changed. The economic factor is a dominant issue in
Armenia-Russia bilateral relations: over the first six months of 2007
the trade turnover between the two countries increased by 70% and at
the end of the year it will probably exceed $500 mln.

Russia has become the Number One country with its investments in the
Armenian economy ("Gasprom", "Vimpelcom", "Rusal" and other giant
organizations).

On the other hand, there are serious problems in political relations
of these two states: the mass media of the two countries write about
it from time to time.

If the Russian politicians and experts do not hide their
dissatisfaction at the Armenia-NATO developing relations, then we are
not satisfied with the military relations of our military ally with
Azerbaijan and Turkey.

Anyway, according to the Russian media one of the main issues of the
Kocharian-Putin meeting is the military-political relations between
the two states. According to the analysts, being a member of
Collective Security Treaty Organization (CSTO), Armenia wants to
deepen the mutual military relations with Russia. It means that these
meeting will take place with the motto "Deepening of bilateral
military relations".

In the background of the new developments in the region, the
Armenian-Russian bilateral military relations have gained a new
meaning and come from the interests of our country's national
security.

In this context, we can perceive the logic of the Armenia-NATO
deepening relations.

The meeting of the two presidents has also a symbolic meaning, as it
takes place close to the date of the 10th anniversary of the
Armenian-Russian friendship and cooperation strategic agreement (on
August 29, 1997). This agreement became the basis of the
Armenian-Russian wide-ranging military cooperation.

By Armen Manvelian

http://groong.usc.edu/news/msg200060.html

[Armenian]

Re: Armenia's Economic Pulse

BANK INVESTMENT BOOMING IN ARMENIA

EurasiaNet, 8/27/07

Fueled by high economic growth rates, Armenia’s banking sector is rapidly expanding, with several new, large-scale multi-million dollar foreign investments expected in the coming months.

Yerevan’s Garegin Nzhdeh Square illustrates the transition involved. The square’s sidewalks are packed with street traders, one of the clearest signs that Armenia’s "shadow economy" lingers. The lines of people at three nearby automatic bank tellers waiting to pay utility bills or get cash, however, suggests a parallel trend: the old Soviet image of banks as just a place where extra money could be stored is beginning to fade.

Armenia’s ongoing high rate of economic growth (12.1 percent for the first six months of 2007, according to official statistics) largely explains the trend. In 2000, average monthly salaries stood at roughly $55, while today they average $205. With incomes rising, residents are turning to bank loans, with interest rates ranging from 15-22 percent, to expand their purchasing power still further.

Since 2004, the banking sector has expanded at a rate of between 10 to 20 percent a year to stand currently at more than $1.6 billion. In the first six months of 2007, banking assets’ value climbed by $244 million, or about 83 billion dram, according to the Central Bank. Nonetheless, in terms of the ratio of total bank assets to Gross Domestic Product, Armenia ranks as an outsider country. This ratio, commonly used by specialists to evaluate the banking sector, was just over 19 percent by the end of 2006. In most post-Soviet countries, it can stand as high as 50 percent.

Central Bank officials put that difference down to relatively strict requirements for issuance of loans and reserve levels, among other indicators, and the Central Bank’s weekly verification of commercial banks’ balance sheets.

Some experts agree. "Indeed, Armenian banks are probably the best among the CIS countries in terms of the quality of assets," commented Tigran Jrbashian, the Armenian director of the Armenian-European Policy Legal Center, a European Union-funded think tank in Yerevan.

With additional investors moving into the field and demand for bank services growing, competition is becoming key. In addition to banks from Russia, the United Kingdom and Iran, new banks have been formed in recent years with capital from the US, Switzerland, Ukraine and Kazakhstan.

The Central Bank announced in July that Russia’s Gazprombank, Austria’s Raiffeisen Banking Group and the Lebanese Biblos Bank have indicated their intention to invest in the Armenian banking sector, either via takeovers or by creating subsidiaries. In addition, Arminfo has reported that the German-based ProCredit Holding AG, an investment company that is the majority shareholder in a bank group for transition and developing economies, and the Russian investment bank Troyka Dialog are also considering entering Armenia through similar routes.

The British-run HSBC Group Holdings, which has been working in Armenia since 1996, has announced plans to make new investments and open several new branches. Details were not available. The expansion plans of ACBA-Credit Agricole, an Armenian-French joint venture, is being backed by a $12 million loan from Citigroup and the European Bank of Reconstruction and Development.

The entrance of GazPromBank, in particular, is thought likely to fuel competition with one of the largest foreign bank players in Armenia’s market -- Russia’s VTB Bank, which took over the Armenian Savings Bank in 2004. In late July, VTB Armenia Chief Executive Officer Valery Ovsiannikov told ArmInfo news agency that the bank is looking for capital to see through proposed projects worth $500 million.

With the expansion, expert Jrbashian hopes that the quality of banking services could improve, too. Already, banks are increasing interest rates for deposits, while some are also venturing into relatively new products for the region – student loans, low-fee credit cards for account holders and cumulative interest-rate accounts that vest to accountholders’ children upon their reaching adulthood.

But more banking activity could mean higher inflation, a situation often seen in rapidly growing economies which consume large sums of money in a short time. The Central Bank has hoped that a stock market, planned for introduction in the coming year or two, could help keep that risk even lower, but, for now, as bank investment grows, the outcome is far from certain.

Bankers say that inflation could provide a clue. Despite earlier fears that inflation for July 2007 compared with December 2006 might be as high as 4 percent, the increase ranked a mere 0.6 percent. This slight jump, despite above-average growth in the banking sector, has suggested that money supplies have not yet outstripped economic activity. For now, the bets are on that the Armenian economy has room to absorb still more.

Source: http://www.eurasianet.org/department...av082707.shtml