Armenia's Economic Pulse

[Siamanto]

Re: Armenia's Economic Pulse

ARMENIAN MINING GIANT TO START WORK ON MAJOR COPPER DEPOSIT
By Astghik Bedevian

Radio Liberty, Czech Rep.
Oct 2 2007





A leading Armenian mining company said on Tuesday that it is pressing
ahead with the development of a massive copper and molybdenum
deposit in the country's north despite strong resistance from local
environmentalists.

Gagik Arzumanian, chief executive of the Armenian Copper Program (ACP),
was confident that the Liechtenstein-registered company will soon get
final government clearance to start work on the Teghut deposit. He
said it is already making preparations for open-pit operations in
the wooded area estimated to contain 1.6 million tons of copper and
about 100,000 tons of molybdenum.

"We know of no circumstances that can call into question the project's
implementation," Arzumanian told RFE/RL.

Buoyed by record-high international prices for non-ferrous metals,
ACP plans to spend $270 million on turning the wooded area located
in the northern Lori region into a huge mine. It intends to extract
more than 30,000 tons of copper and molybdenum ores there per annum
starting from 2012.

The project, if implemented, will lead to the destruction of 357
hectares of rich forest, including 128,000 trees. Hence, the outcry
it has sparked among Armenian environment protection groups. They say
that the Teghut mine would wreak further havoc on Armenia's forest
that have already shrunk dramatically since the 1990s.

Hakob Sanasarian of the Armenian Union of Greens warned on Tuesday
that crop-growing and other agricultural activity in the area close
to Georgia would also be hit hard. "Even in nearby forests, which
are not supposed to be chopped down, it will be dangerous to collect
fruits and berries," he said.

ACP admits the heavy environmental cost of its plans but says it will
be more than offset by 1,400 new jobs which it has pledged to create in
the economically depressed area. The company has also pledged to build
new schools and make other investments in the local infrastructure.

The Armenian government clearly accepts ACP's arguments, with the
Ministry of Environment formally giving its mandatory go-ahead to
the Teghut project earlier this year.

"It is beneficial for the state because new jobs will be created, more
taxes will be paid to the state budget, and local infrastructure will
be upgraded," said Gagik Haroyan, a senior official at the ministry's
Geological Agency. "If there is a deposit of natural resources,
it must be exploited."

Non-ferrous metals and ores are currently Armenia's main export
products. The local mining sector is dominated by ACP and the
German-owned Zangezur Copper-Molybdenum Plant operating in the
southeastern Syunik region.

http://www.armenialiberty.org/armeniareport/report/en/2007/10/92B51BF0-8612-48A3-B494-50ADDBB4C0E6.asp

..........

THE START OF EXPLOITATION OF TEGHUT COPPER-MOLYBDENUM DEPOSIT IN ARMENIA REQUIRES $ 150MLN, A SPECIALIST THINKS

ArmInfo News Agency, Armenia
Oct 9 2007

ArmInfo. The start of exploitation of Teghut copper-molybdenum
deposit in the North of Armenia requires $ 150mln, as a minimum,
the Head of the Department of Nature Utilization Economy and Mining
Industry of the Armenian Ministry of Trade and Economic Development
Artur Ashoughyan said at a press conference, Tuesday.

According to him, years will pass before the investor starts to make
profit from the deposit's exploitation. He named Teghut a difficult
deposit in view of complete absence of ways of communication. Teghut is
the second largest copper and molybdenum deposit in Armenia following
the one in Kajaran. However, there are no roads, power transmission
lines, dams, tailing damps and other necessary ways of communication
there, he said. A. Ashoughyan thinks it necessary to implement this
project, which may create a sufficient raw material base in Armenia
and ensure development of the mining sphere.

To note, the Russian Vneshtorgbank-VTB (Bank for Foreign Trade) is
ready to grant a credit of $200mln to Armenia Copper Programme (ACP)
for commissioning Teghut deposit. Gaining of credit will make it
possible to mine and process 7mln tons of ore from Teghut deposit,
annually. Teghut deposit is promising and it is the second with
its copper and molybdenum reservoirs in Armenia following the one
in Kajaran. The approved reserves make up 1,6mln tons of copper and
99 000 tons of molybdenum. The contents of copper in a ton of ore is
0,4% and in the concetrate-33%. The contents of molybdenum in a ton
of ore is 0,02%, and in the concentrate-51%".

http://www.arminfo.info/index.php?show=archive&number=20071009_213300_eng_4373

[Siamanto]

Re: Armenia's Economic Pulse

Energy Production & Trade




Energy Production

GAZPROM INTERESTED IN RUSSIA-ARMENIA-IRAN OIL REFINERY

Tehran Times
Oct 11 2007
Iran

Gazprom said it is still positive about joint project between Russia,
Iran, and Armenia to construct an oil refinery in Armenia.

Gazprom Neft - the oil arm of Russian energy company Gazprom - is
reportedly considering an investment of $1.7 billion to build the
joint oil refinery, which would process oil pumped from Tabriz in
northern Iran, "The Messenger" reported.

Gazprom officials say it will process 5-6 million tons of oil
annually. Some would be used by Armenia; most would be shipped back
to Iran.

Valery Golubev, head of Gazprom's Investment and Construction
Department, commented that the project is still in the offing but an
appropriate 400 hectare site for the refinery has not yet been found.

Some Russian commentators suggest the project is motivated by political
rather than financial interests, as usually the most economically
productive location for an oil refinery is near a major pipeline
route or at a seaport.

However, Gazprom replies that with effective management, the refinery
could be economically profitable and may offer competition for
Azerbaijan, the main oil exporter in the South Caucasus.

However, Regnum reports Gobulev as saying, "Building an oil refinery
in Armenia is interesting for Gazprom from the geopolitical point
of view."

http://www.tehrantimes.com/index_View.asp?code=154756

Lragir, Armenia
Oct 19 2007

OIL REFINERY COSTS 1.7 BILLION DOLLARS

The technical feasibility and economic justification of the oil
refinery in Armenia will be offered in November 2007, said the
Armenian minister of energy Armen Movsisyan.

The refinery will be built in Meghri. Russia and Iran said likely to
participate in this project. The plant will refine up to 7 million
metric tons of oil annually and costs 1.7 billion dollars. Another
one billion dollars will be spent on transportation infrastructure.

http://groong.usc.edu/news/msg207324.html

INTERNATIONAL CONFERENCE ON GEOTHERMAL ENERGY LAUNCHED IN YEREVAN

ARKA News Agency, Armenia
Oct 18 2007

YEREVAN, October 18. /ARKA/. International conference focused on
geothermal energy and its development prospects in Armenia launched
on Thursday in Yerevan.

Radik Martirosyan, president of Armenian National Academy of
Sciences, said at the opening ceremony that the event's aim is to
make Armenian entrepreneurs familiar with international experience
of using geothermal energy.

"Development of alternative energy sources is a quite pressing
problem to Armenia because of own organic energy resources shortage",
Martirosyan said.

French Ambassador to Armenia Serge Smessov stressed the importance
of geothermal energy because of the necessity of alternative energy
sources.

"Development of alternative energy sources is very important to
Armenia, which has no own energy resources", he said.

He said that France has a rich experience in this area, which can be
applied also in Armenia.

The ambassador expressed hope that Armenia's cooperation with French
specialists will enlarge room for developing geothermal energy and
putting all plans into practice.

This two-day conference is organized by Armenian Energy Ministry
along with French Embassy in Armenia.

Participants of the event will discuss international experience and
outline geothermal energy exploitation prospects in Armenia.

Armenia conducted geothermal researches yet in 60s and embarked on
intensive search in 1978.

Hakavan-Zangezur volcano-rich areas are being explored now.

The researches conducted over the period between 1980 and 1988 laid
ground for assumption that magma source may be found here in 1500-
to 2000-meter depth.

http://www.arka.am/eng/energy/2007/10/18/6648.html

Russia & CIS Business and Financial Newswire
October 18, 2007 Thursday 6:55 PM MSK

Feasibility study for new Armenian NPP to be ready by next summer

Armenia is planning to build a new nuclear power plant and put it
into operation by 2016-2017, Armenian Deputy Energy Minister Areg
Galstian told an international energy conference in Yerevan on
Thursday.

The conference was devoted to Armenia's geothermal energy potential.

The technical and economic feasibility study for the new NPP will be
ready by mid-2008, and after that, technical requirements for the
plant's construction will be developed, Galstian said.

A new 1,000-megawatt power generating unit will be built on the
territory of the existing NPP, which is to be shut down by 2016, he
said.

http://groong.usc.edu/news/msg207404.html

ARMENPRESS

ARMENIA TO HAVE TWO MORE WIND POWER PLANTS

YEREVAN, OCTOBER 19, ARMENPRESS: An Italian and an
US-based companies are set to launch construction of
two wind power plants in Armenia in 2008, deputy
energy minister Areg Galstian said yesterday.
The deputy minister was speaking at an
international conference in Yerevan on geo-thermal
power potential of Armenia.
He said one of the plants with a capacity of 90
megawatt will be constructed in Karakhach and the
second with a capacity of 25 megawatt in Sotk.
Armenia has one wind power plant built by the
Iranian Sanir company. It comprises 4 units each
offering 660 kW of electricity. The plant is located
in north eastern Armenia. The government of Iran
donated $3.5 million to build it.
Galstian also said the nuclear power plant in
Metzamor will be shut down in 2016, but he added that
the government plans to build a modern nuclear power
plant instead with a capacity of 1,000 megawatt.

http://www.armenpress.am/eng/news/econom.htm

Energy Trade

ARMENIAN-RUSSIAN GAS COMPANY PLANNING TO EXPORT ELECTRICITY

ArmInfo, Armenia
Sept 12 2007

Yerevan, 12 September: The HayRusgazard closed-type joint-stock company
is not just a gas company, it also intends to take an active part in
the electricity business in the region, the chairman of the council
and general manager of HayRusgazard, Karen Karapetyan, told a news
conference today.

He said that Armenia is pursuing a liberal policy with regard to power
export to neighbouring countries that experience a shortage of power.

The second Iran-Armenia gas pipeline is being built in Armenia as an
alternative to the northern main gas pipeline, which creates extra
energy in the republic.

"We have acquired Hrazdan-5 [power station] and are planning to
export electricity," Karapetyan said. He added that the company has
been exporting electricity to Georgia since 2002.

We should recall that Armenia stopped exporting electricity to Georgia
last year because Georgia does not need it and has its own resources.

Moreover, the price of power export from Armenia has risen due to
the strengthening of the dram [national currency].

http://www.redorbit.com/news/business/1064110/armenianrussian_gas_company_planning_to_export_electricity/index.html

RUSSIA, ARMENIA TO COOPERATE IN ENERGY SPHERE

ITAR-TASS News Agency
September 25, 2007 Tuesday

Russia and Armenia have agreed to cooperate in the energy sphere.

Russian Prime Minister Viktor Zubkov told reporters after his talks
with Armenian Prime Minister Serzh Sarkisyan in Moscow on Tuesday
that the two countries have a "clear energy programme, and a fairly
reliable relations have formed in this field".

"Armenia already has excess production of energy, in which it can
trade," Zubkov said.

The two countries' cooperation is promising in the construction of a
nuclear power plant and the modernisation of already existing energy
reactors, he said.

"All this will be a strong stimulus for Armenia for development and
trade with other countries. The country can make big money on that."

Sarkisyan said the "biggest hindrance to cooperation is a lack of
convenient transportation communications".

"The liquidation of this limitation could strongly increase our trade,
the growth of which has been 72 percent over the first half of this
year," he said.

"Armenia is buying a lot of oil products not in Russia, but in other
places, even though raw materials are Russian."

This occurs because of a lack of transportation links.

Their development would lead to a "sharp increase in trade",
Sarkisyan said.

http://groong.usc.edu/news/msg203678.html

[Siamanto]

Re: Armenia's Economic Pulse

AGREEMENT ON SALE OF ARMENIAN STOCK EXCHANGE AND DEPOSITORY TO BE SIGNED IN LATE OCTOBER OR EARLY NOVEMBER
Author: Karapetian Rita Editor: Eghian Robert

Noyan Tapan News Agency
Oct 10 2007
Armenia

YEREVAN, OCTOBER 10, NOYAN TAPAN. The amendment to the Law on
Securities Market will provide the Armenian government with a
legislative opportunity to sign an agreement on sale of the Armenian
stock exchange and depository with Swedish-Finnish company OMX AB.

The chairman of the Central Bank of Armenia (CBA) Tigran Sargsian told
this to reporters at the end of the discussion of the bill on the
amendment to the indicated law and the legislative package related
to it at the RA National Assembly on October 10. According to him,
the agreement will be signed in late October and early November -
immediately after the law will come into force.

"Following this, the stock exchange business will be conducted by
market rules in Armenia. It means that we open the way for foreign
investors, allowing them to make investments and develop the stock
exchange and the depository in our country," the CBA chairman stated.

At the same time T. Sargsian pointed out that there are many norms
used in international practice which have not yet been included in
the law. In his words, the Law on Securities Market will be improved
step by step: in 2008, a new legislative package will be submitted
and an attempt will be made to use new mechanisms and principles in
parallel with developing the market.

On the same day the National Assembly discussed in second and third
reading the indicated legislative package, whose adoption will be
voted on soon.

......

CENTRAL BANK KEEPS CONFIDENTIALITY OF TALKS WITH SWISS OMX STOCK OPERATOR

ArmInfo Agency, Armenia
Oct 10 2007

ArmInfo. Because of confidentiality Armenian Central Bank does not
want to divulge the details of the of talks with Swiss OMX stock
operator, as a result of which the latter will become the owner of
Central Depository and ArmEx, chairman of Armenian Central Bank Tigran
Sarkisyan told journalists and added that they will inform about the
final results of the talks.

To note, according to the signed Memorandum, ArmEx and Central
Depository should come forward as a commerce organization but not
self-regulated organizations. The new status will make attracting of
foreign investments possible. For this reason there is a necessity
of changing of the acting legislation of Armenia with an accent of
its transmission to the European model of funds market regulation, in
particular experience of Estonia and Slovenia was used. As a result
several points appeared in the law according to which regulation
of funds market will be more effective and flexible, which will
make it possible to integrate Armenian finance market with the
stocks of European states. In particular, OMX will give to Armenian
company-emitters access to international capital without the listing
process out of the country

http://www.arminfo.info/index.php?show=archive&number=20071010_231600_eng_4395

[Siamanto]

Re: Armenia's Economic Pulse

ARMENIA A MODEL FOR DEVELOPING NATIONS

BusinessWeek

http://www.businessweek.com/globalbiz/content/oct2007/gb20071023_163908.htm?chan=globalbiz_europe+index+page_top+stories

Oct 23 2007

Economic reform and investment by Armenian expatriates have helped
the country boost GDP by more than 10% a year for a decade by S. Adam
Cardais

To appreciate just how far Armenia has come in the last 15 years,
it helps to imagine yourself living through an Armenian winter in
the early 1990s.

It's the middle of January, it's five degrees below zero, and you
and your family have only two hours of electricity a day -- such
was the abysmal state of the energy sector in a country crippled by
the dissolution of the Soviet Union, a traumatic earthquake in 1988,
and war with neighboring Azerbaijan.

But Armenia has been "radically transformed," in the words of one
World Bank official, since its independence from the former Soviet
Union. Today, the average Armenian has electricity around the clock.

An influx of cash and a series of reforms have taken Armenia from
economic basket case, with GDP plummeting 50 percent between 1990
and 1993, to "Caucasian tiger," to quote a World Bank report issued
earlier this year. It has become a model transition economy that
should continue prospering with a second wave of reforms.

GDP has increased more than 10 percent a year for a decade largely
thanks to robust investment in a booming construction industry by the
Armenian diaspora in Europe and the United States. Sharp growth in the
services sector, including the financial sphere, and retail trade are
also contributors, according to the European Bank for Reconstruction
and Development.

"Given the fact that it doesn't have natural resources, its growth is
quite impressive," says Heike Harmgart, country economist for Armenia
at the EBRD.

And the most laudable aspect of that growth, World Bank economist
Aristomene Varoudakis says, is "that macroeconomic stability has
been preserved. Inflation has remained low," between 3 percent and
4 percent. Last year was an exception to this trend, with inflation
climbing to 5.6 percent, but the International Monetary Fund forecasts
a fall to 4 percent in 2007.


REFORMS REAP REWARDS

This fiscal discipline is an indication the government has backed
up the bountiful diaspora remittances, which are more good fortune
than anything else, with sound policy. Indeed, remittances alone
don't make Armenia a model transition economy. A series of early,
sustained governmental reforms enabled the country to capitalize on
the cash inflow.

For instance, the government eliminated wage controls and privatized
the majority of land and small businesses in the mid 1990s to encourage
investment in construction and other sectors. The central bank has
also been a key reformer, streamlining its operations and improving
supervision over the banking industry to spur a dynamic financial
services sector in a short period.

More recently, a new credit bureau to bolster small business lending
and a modernized bankruptcy law have further improved the investment
climate, two reasons Armenia ranks 39th out of 178 economies in the
World Bank's "Doing Business 2008" report.

On all of these reforms, Armenia has been wise to cooperate closely
with international institutions such as The World Bank and the IMF.

"The Armenian government has been listening to institutions very well,
which is positive," Harmgart says. "The government has always been
open minded."

It would be hard to overstate the benefit this economic revolution
has brought the population. According to the World Bank report, the
poverty rate has fallen from more than 55 percent in the early 1990s
to 30 percent. Extreme poverty had dropped to 5 percent two years ago.


GENTRIFYING NEIGHBORHOOD

The good news for the region is that Armenia's prosperity isn't
unique. Georgia's economy is growing at just under 10 percent and is
one of the leading reformers in the world, at No. 18 on the "Doing
Business 2008" report. Azerbaijan posted a whopping 34.5 percent GDP
growth in 2006 thanks to its thriving oil industry.

As in these countries, though, there's still a lot of progress to
be made in Armenia. Tax evasion remains rampant. It's extremely
costly for an individual or business to file taxes, and tax revenues
are only 15 percent of GDP, one of the lowest rates in the region,
resulting in less money for strengthening the economy or fighting
poverty through spending on education or health care.

The government is trying to increase tax compliance by introducing
a system that allows payers to submit their returns by post or
electronically, publishing a list of the country's largest contributors
in a sort of ego-driven motivator, and opening specialized collections
units, but more progress is needed.

Corruption, though becoming less pronounced, is also a major concern,
as is Armenia's over-reliance on the construction industry. Though
analysts predict Armenia will sustain double-digit growth in the short
and medium term, it has to begin diversifying its economy by making
trade more dynamic and attracting new knowledge-based investments,
such as IT companies.

Reforms in corporate transparency, competition, and education will be
central to realizing this goal, but "these are more complex reforms
than the first round," Varoudakis points out.

Armenia has without a doubt taken great strides, but nothing highlights
progress like starting from nothing. If the country wants to remain a
"Caucasian tiger," it had better prioritize these difficult reforms
now.

These will take a lot longer than turning on the power.

[Siamanto]

Re: Armenia's Economic Pulse

DRAM VALUATION GROWS DEEPER
Vasak Tarposhyan

Hayots Ashkharh Daily
Oct 23 2007
Armenia

After the stabilization recorded in summer, during the last month
the process of the valuation of dram resumed.

Though it deteriorated for a while, when it was 342 against dollar,
nevertheless it lasted for some days, immediately after which the
strengthening of dram resumed. This tendency grew deeper particularly
during the recent week and at present the exchange rate of dram against
dollar fluctuates between 320-325. That is to say in one week national
currency became stronger by 13 drams. For a long period of time it
was stable (337-338 drams).

We should underscore that such an exchange rate of dollar has been
recorded in Armenia in 1994, 10 months after putting the national
currency into circulation.

Besides dollar, dram has been valuated against other currencies as
well. This means the process of strengthening the national currency
is on.

The regular stage of the valuation of dram started after the abrupt
growth of the prices of certain goods.

Similar manifestations created serious risks in terms of the provision
of the anticipated level of the growth of prices. Moreover because the
growth of price coming from external factors are still preserved. And
there are very little chances to stop this tendency in Armenia. The
law on the protection of economic competition doesn't work and this
consequently creates serious problems in the provision of stability
of prices.

Perhaps it was not accidental that in October Central Bank had to
increase the refinancing interest rate to alleviate the existing
risks of the growth of prices. After adopting the policy of planning
the growth of prices, the change of refinancing interest rate is a
so-called influencing factor on the financial market. By this the
Central Bank gives certain signals to the participants of the market.

In this case the increase of the refinancing interest rate means
increase of the price of dram.

In parallel with this shares were released two times, last week.

Thus as we know the Central Bank involved additional sum of dram. The
reduction of the sum of dram, particularly in the condition of the
increase of currency means, naturally leads to the strengthening of
the national currency. Whereas unlike the refinancing interest rate,
the influence of releasing shares, on the currency market is expressed
in a very short period of time.

On the other hand, but for the tendencies of the strengthening of dram
during the recent days, the situation in the foreign exchange market is
rather quiet. Usually in such cases the deals in the foreign exchange
market liven up. Whereas from October 15-21 only 4,4 million dollars'
sale - purchase was realized here. During some bargaining processes the
deals made up 300 - 350 thousand dollars, a very low index. Similar
passiveness is a very rare phenomenon in this market. During those
days the average deals in the foreign exchange market made up 600
thousand dollars.

The deals of the foreign exchange market become active particularly
when the central Bank partakes in the bargaining process. That is
to say, during the pervious days Central Bank manifested a neutral
stance towards the market. What was it that led to the strengthening of
dram? It is not a secret that in the condition of a big flow of dollar
and a certain sum of dram time after time Central Bank involves dollar
from the market, not to allow further strengthening of dram. Though
during the recent days dram became stronger with 9-10 units Central
Bank preferred not to interfere in the market processes.

The foreign exchange market became active on October 22. That day the
volume of sale and purchase was almost two times more (8 million 150
thousand drams).

Of course even this abrupt interference didn't lead to stopping the
valuation of dram, it continued on October 23.

Anyway the activeness of the foreign exchange market will preserve
during the coming two three days, after which the exchange rate of
dram will become stable.

http://www.armtown.com/news/en/has/20071024/198565433

......

MONEY REMITTANCES TO ARMENIA IN NINE MONTHS REACH $1.2 BILLION

ARMENPRESS
Oct 11 2007

YEREVAN, OCTOBER 11, ARMENPRESS: Money remittances from Armenians
working in Russia, USA and other countries to relatives in Armenia
in January -September of this year rose almost 30 percent from a year
ago to $1.2 billion.

These figures were unveiled today by Armenian Central Bank governor
Tigran Sarkisian, who spoke at the opening of an international
conference on retail banking services in Yerevan.

Sarkisian said the Central Bank forecast was a 10 percent growth. The
bulk of money transfers- 70 percent- are coming from Russia.

Sarkisian said handling money remittances have become a very lucrative
business in Armenia. Unlike Armenia, money remittances to Russia
make annually some $700 million while transfers from Russia reach
$3 billion, according to Garegin Tosunian, chairman of the Union of
Russian Banks.

According to Tigran Sarkisian, local commercial banks have earned
8.5 billion Drams this year from providing money transfer services,
by 2 billion drams more form a year ago. He said also no bank is
dominating in this sector and because of competition the banks have
to lower their commission charges.

http://groong.usc.edu/news/msg205810.html

[Siamanto]

Re: Armenia's Economic Pulse

ROARING AHEAD: HOW HAS ARMENIA MANAGED TO SLASH ITS POVERTY RATE AND BECOME A MODEL FOR OTHER DEVELOPING NATIONS?
by S. Adam Cardais

Transitions Online, Czech Republic
Oct 23 2007

To appreciate just how far Armenia has come in the last 15 years,
it helps to imagine yourself living through an Armenian winter in
the early 1990s.

It's the middle of January, it's five degrees below zero, and you
and your family have only two hours of electricity a day - such was
the abysmal state of the energy sector in a country crippled by the
dissolution of the Soviet Union, a traumatic earthquake in 1988,
and war with neighboring Azerbaijan.

But Armenia has been "radically transformed," in the words of one
World Bank official, since its independence from the former Soviet
Union. Today, the average Armenian has electricity around the clock.

An influx of cash and a series of reforms have taken Armenia from
economic basket case, with GDP plummeting 50 percent between 1990
and 1993, to "Caucasian tiger," to quote a World Bank report issued
earlier this year. It has become a model transition economy that
should continue prospering with a second wave of reforms.

GDP has increased more than 10 percent a year for a decade largely
thanks to robust investment in a booming construction industry by the
Armenian diaspora in Europe and the United States. Sharp growth in the
services sector, including the financial sphere, and retail trade are
also contributors, according to the European Bank for Reconstruction
and Development.

"Given the fact that it doesn't have natural resources, its growth is
quite impressive," says Heike Harmgart, country economist for Armenia
at the EBRD.

And the most laudable aspect of that growth, World Bank economist
Aristomene Varoudakis says, is "that macroeconomic stability has
been preserved. Inflation has remained low," between 3 percent and
4 percent. Last year was an exception to this trend, with inflation
climbing to 5.6 percent, but the International Monetary Fund forecasts
a fall to 4 percent in 2007.

REFORMS REAP REWARDS

This fiscal discipline is an indication the government has backed
up the bountiful diaspora remittances, which are more good fortune
than anything else, with sound policy. Indeed, remittances alone
don't make Armenia a model transition economy. A series of early,
sustained governmental reforms enabled the country to capitalize on
the cash inflow.

For instance, the government eliminated wage controls and privatized
the majority of land and small businesses in the mid 1990s to encourage
investment in construction and other sectors. The central bank has
also been a key reformer, streamlining its operations and improving
supervision over the banking industry to spur a dynamic financial
services sector in a short period.

More recently, a new credit bureau to bolster small business lending
and a modernized bankruptcy law have further improved the investment
climate, two reasons Armenia ranks 39th out of 178 economies in the
World Bank's "Doing Business 2008" report.

On all of these reforms, Armenia has been wise to cooperate closely
with international institutions such as The World Bank and the IMF.

"The Armenian government has been listening to institutions very well,
which is positive," Harmgart says. "The government has always been
open minded."

It would be hard to overstate the benefit this economic revolution
has brought the population. According to the World Bank report, the
poverty rate has fallen from more than 55 percent in the early 1990s
to 30 percent. Extreme poverty had dropped to 5 percent two years ago.

GENTRIFYING NEIGHBORHOOD

The good news for the region is that Armenia's prosperity isn't
unique. Georgia's economy is growing at just under 10 percent and is
one of the leading reformers in the world, at No. 18 on the "Doing
Business 2008" report. Azerbaijan posted a whopping 34.5 percent GDP
growth in 2006 thanks to its thriving oil industry.

As in these countries, though, there's still a lot of progress to
be made in Armenia. Tax evasion remains rampant. It's extremely
costly for an individual or business to file taxes, and tax revenues
are only 15 percent of GDP, one of the lowest rates in the region,
resulting in less money for strengthening the economy or fighting
poverty through spending on education or health care.

The government is trying to increase tax compliance by introducing
a system that allows payers to submit their returns by post or
electronically, publishing a list of the country's largest contributors
in a sort of ego-driven motivator, and opening specialized collections
units, but more progress is needed.

Corruption, though becoming less pronounced, is also a major concern,
as is Armenia's over-reliance on the construction industry. Though
analysts predict Armenia will sustain double-digit growth in the short
and medium term, it has to begin diversifying its economy by making
trade more dynamic and attracting new knowledge-based investments,
such as IT companies.

Reforms in corporate transparency, competition, and education will be
central to realizing this goal, but "these are more complex reforms
than the first round," Varoudakis points out.

Armenia has without a doubt taken great strides, but nothing highlights
progress like starting from nothing. If the country wants to remain a
"Caucasian tiger," it had better prioritize these difficult reforms
now.

These will take a lot longer than turning on the power.

S. Adam Cardais, a former business editor at The Prague Post, is a
freelance journalist based in Berlin.

http://www.ceeol.com/aspx/issuedetails.aspx?issueid=fca4b970-c0a3-496f-97be-29a21487b706&articleId=07b1576f-c443-4185-bd5e-3845acad9a63

[Siamanto]

Re: Armenia's Economic Pulse

EASING ARMENIA'S TRANSITION TO A MARKET ECONOMY

World Bank Group, DC

http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/IDA/0,,contentMDK:21216113~menuPK:3266877~pagePK:51236175~piPK:437394~theSitePK:73154,00.html

Nov 19 2007

With independence in 1991, Armenia suffered a severe economic
contraction. Between 1990 and 1993, GDP dropped by more than 50
percent. This led to hyperinflation, a budget deficit that reached a
high of 55 percent, factory closures, little electricity supply, and
large-scale emigration. About 80 percent of the population survived
on humanitarian assistance and more than half the population lived
below the poverty line.

A series of 10 projects-spanning a dozen years-supported Armenia's
economic reform program to restore and maintain macroeconomic
stability, create conditions for economic growth, and improve
living conditions. These broad areas would form the foundation for
the transformation of the economy from a centralized model to a
market-based one. The program included a rehabilitation credit for
1995-1996, five structural adjustment credits between 1996 and 2004,
two structural adjustment technical assistance credits between 1996
and 2002, and two poverty reduction support credits beginning in
2004 and ongoing. The technical assistance projects supported the
implementation of the eight adjustment operations by providing the
necessary expertise for strengthening institutions.

Over this 12-year period, Armenia has achieved spectacular income
growth - by about 10 percent on average per year, rising to 13-14
percent in 2005 and 2006 - and poverty reduction - from 56 percent
in 1998 to 30 percent in 2005.

Highlights: Financial Discipline and Public Sector Management -
Economic stabilization: inflation fell to 0.6 percent in 2005 from 176
percent prior to the adjustment program; the budget deficit fell from 9
percent to 1.9 percent; growth has averaged about 10 percent per year.

- Improving budget management through the adoption of a rigorous
medium-term expenditure framework to manage the scaling-up of sector
reforms.

- Improving customs and tax administration and broadening the tax base.

- Improved payment discipline in energy: collections increased from
30 percent to 85 percent.

Private Sector Development - Removal of nearly all price controls
and trade barriers.

- Adoption of key financial legislation early in the program: a real
property code, bank insolvency law, bankruptcy law, collateral law.

- Reduction in bureaucracy: Armenia ranked 34 in the World Bank
Group's Doing Business 2007 report.

- Privatization of nearly all state-owned enterprises.

Social Development - Adoption of a poverty reduction strategy that
provides a powerful tool for policy formulation.

- Significant increase in budget allocations for health and education,
doubling from 2002 to 2006.

- Family poverty benefit and pensions increased by more than 50
percent during 2002-04.

- The 10 projects totaled US$410 million of which US$382 million came
from IDA financing and US$28 million from other sources-principally
the Netherlands, as well as Argentina.

- Operations were in rapid succession, providing sustained financial
and technical support to the government and generating a critical
mass of reforms that helped to raise living standards.

- More than just providing critical deficit financing, the projects
also provided a genuine opportunity for the government to benefit from
external expertise. Technical assistance came from IDA and bilateral
donors, with significant support from the Japanese Policy and Human
Resources Development fund.

- Parallel investment operations in water, health, education and power
were mutually reinforcing. For example, improved energy regulation
and ownership policies supported by policy-based credits were matched
by investment lending in energy.

- These policy operations were closely linked to IMF stabilization
and poverty reduction programs.

- IDA is providing two more Poverty Reduction Support Credits that
focus on supporting the government to strengthen corporate and public
governance, including tax and customs, and competition policy and
human development. These policy-based projects are closely linked
with on-going sector-specific projects.

- The completion of the credit series will coincide with
the parliamentary and presidential elections of 2007 and 2008,
respectively. Future policy-based lending will depend upon budgetary
needs and the government's commitment to pursuing a reform agenda.

[Siamanto]

Re: Armenia's Economic Pulse

Armenia's Securities Market

CBA CHAIRMAN BELIEVES THAT ARMENIA CAN PROVIDE FINANCIAL SERVICES FOR OTHER CIS COUNTRIES

Noyan Tapan
Nov 20 2007

YEREVAN, NOVEMBER 20, NOYAN TAPAN. The Central Bank of Armenia
(CBA) expects that Armenia may become a financial center of regional
significance. The CBA Chairman Tigran Sargsian stated at the Yerevan
State University Department of Economics on November 20 that for this
purpose Armenia should provide such financial services to local and
foreign residents that will be high-quality, exclusive and cheap
services and they will also have some advantages over financial
services provided in other countries.

In the words of the CBA chairman, a "political bid" to invite
supportive partners for solution of the problem should be presented on
the way of forming a regional financial platform in Armenia. A famous
financial operator - the Swedish-Finnish OMX AB company has already
expressed its willingness to act as a partner. T. Sargsian added
that a comprehensive draft on forming a regional financial center
in Armenia should be worked out by respective experts. The terms and
measures of the center's formation will be stipulated in the draft.

T. Sargsian presented the versions of forming a regional financial
center's model in Armenia. One is the model of Beirut, which has
functioned successfully for three decades. By this model, customers
are offered private banking technologies and services which are not
provided in Europe and the US. According to him, Lebanese banks are
now trying to find regions where they will be able to continue working
in this way, in particular, the entrance of Byblosbank into Armenia
is conditioned by it.

T. Sargsian also considers it possible to use Ireland's experience:
by providing specialized banking services, Ireland has become a back
office for hundreds of first-rate banks. T. Sargsian said that HSBC
Bank is forming a back office in Armenia, and it envisages "to service
all its functions in CIS countries from here".

In the opinion of T. Sargsian, Armenia is one ot two steps ahead
of CIS countries in terms of its banking sector's regulation field,
"and our commercial banks may have relative advantages in providing
specific banking services for these countries".

http://groong.usc.edu/news/msg211515.html

EBRD APPRECIATES QUALITY OF LAW ABOUT SECURITIES MARKET OF ARMENIA

ARKA News Agency
Nov 15 2007
Armenia

YEREVAN, November 15. /ARKA/. The European Bank for Reconstruction
and Development (EBRD) appreciates the quality of the country's law
about securities market of Armenia, says EBRD report on countries
with transitional economy.

The law about corporate management has also been appreciated in the
report. The quality of the law about bankruptcy is assessed as "medium"
and the law about transactions on security in Armenia is evaluated as
"not working".

The new law "About Securities Market" was passed on October 11. The
law was developed on the basis of the model of securities markets of
Estonia and Slovenia. Under the new law, banks and credit organizations
should have right to directly participate in securities market without
special license. Apart from that, the Central Depository and the
Stock Exchange of Armenia should be commercial organizations.

The transactions with security are regulated by the Civil Code of
Armenia and cover such securities as pledge, advance payment, forfeit,
guarantee and other means provided by under the law or agreement.

http://www.arka.am/eng/economy/2007/11/15/7016.html

OMX SAYS BUYS ARMENIAN STOCK EXCHANGE
Reporting by Adam Cox, editing by Sue Thomas

Reuters, UK
Nov 21 2007

STOCKHOLM, Nov 21 (Reuters) - Nordic and Baltic stock exchange company
OMX (OMX.ST: Quote, Profile, Research) said on Wednesday it had bought
the Armenian stock exchange and the Central Depository of Armenia.

Terms were not disclosed.

OMX is buying 100 percent of the shares in the exchange, known as
Armex, and the depository. It said in a statement the deal was in
accordance with a letter of intent signed in April.

"In addition to the share purchase agreement, OMX and the government
of Armenia have also signed a cooperation agreement outlining joint
efforts to support the long-term development of the capital market
in Armenia," the Nordic and Baltic bourse owner said.

OMX's board is considering a cash offer of 265 crowns per share from
state-run Borse Dubai, which has teamed up with U.S. exchange Nasdaq
(NDAQ.O: Quote, Profile, Research) to buy the Nordic and Baltic
exchange owner.

The firms have said the offer has received acceptances representing
47.6 percent of OMX shares.

Regulators have given the green light for the Nasdaq-Dubai deal.

http://today.reuters.com/news/articleinvesting.aspx?type=comktNews&rpc=33&storyid=2007-11-21T103650Z_01_L21141130_RTRIDST_0_OMX-ARMENIA.XML

ARMEX REORGANIZED INTO PUBLIC CORPORATION

ARKA
Nov 9, 2007

YEREVAN, November 9. /ARKA/. The Armenian Stock Exchange (ARMEX)
self-regulating organization has been reorganized into public
corporation.

ARMEX members made such a decision during a special meeting on November
9, 2007.

By the RA law on the Securities Market Regulation, creditors of
a self-regulating organization have a right to demand from ARMEX
additional guarantees for the fulfillment of obligations, discharge
or early release, as well as compensation seven days after the
notification.

A self-regulating organization, ARMEX was established on the basis
of 21 brokerage companies and was registered by the RA Securities
Commission on February 13, 2001. The organization has been organizing
exchange trade in securities and foreign currency since July 6, 2001.

The CBA (Central Bank of Armenia) and the leading Scandinavian expert
in exchange industry OMX signed a memorandum on the purchase of ARMEX
and the Central Depositary. The transaction will probably be conducted
this November.

http://www.arka.am/eng/economy/2007/11/09/6932.html

Related Posts:

Financial Markets: Banking & Securities

[Siamanto]

Re: Armenia's Economic Pulse

The Millennium Challenge Corporation has signed a five-year, $235.65 million Compact with the Government of Armenia.

Today, over one million Armenians live in rural areas and are dependent on semi-subsistence agriculture. Farmers are operating on small plots of land and are constrained by poor roads, inadequate irrigation, and an under-developed market economy.

The Armenia Compact is focused on one goal: the reduction of rural poverty through a sustainable increase in the economic performance of the agricultural sector. Armenia plans to achieve this goal through a five-year program of strategic investments in rural roads, irrigation infrastructure and technical and financial assistance to improve the supply of water and to support farmers and agribusinesses. The Program will directly impact approximately 750,000 people, or 75% of the rural population, and is expected to reduce the rural poverty rate and boost annual incomes.


Rural Road Rehabilitation
The Compact includes a $67 million project to rehabilitate up to 943 kilometers of rural roads, more than a third of Armenia's proposed Lifeline road network. When complete, the Lifeline road network will ensure that every rural community has road access to markets, services, and the main road network. Under the Compact, the Government of Armenia will be required to commit additional resources for maintenance of the road network.


Improved Irrigation
The Compact also includes a $146 million project to increase the productivity of approximately 250,000 farm households (34% of which are headed by women) through improved water supply, higher yields, higher-value crops, and a more competitive agricultural sector. This project consists of two activities:
* An infrastructure activity that aims to increase the amount of land under irrigation by 40% and will improve efficiency by converting from pump to gravity-fed irrigation, reducing water losses and improving drainage; and
* A water-to-market activity that will improve the efficiency of water delivery to farmers and boost farm productivity and profitability through technical assistance and credit support.

Administrative and monitoring and evaluation costs of the Program are budgeted at approximately $23 million.


Engaging Civil Society
In preparing its proposal for Millennium Challenge Account assistance, Armenia engaged in a comprehensive consultative process that reached out to a broad cross-section of constituents, including rural community members, NGOs and the private sector. Meetings were held outside of city centers to seek input on potential program components and various media outlets were used to reach remote areas. To increase transparency, the Government of Armenia sponsored a process that resulted in three NGOs being named as observers to the Government's MCA Board of Trustees – an inter-governmental body, chaired by the Prime Minister, and responsible for overseeing the Compact development process. Going forward under the Compact, a Stakeholders' Committee will be formed to represent the beneficiaries of the Program. The Stakeholders' Committee will be entitled to nominate voting members from Armenia's NGO sector to serve alongside the government's representatives on the Governing Council of MCA-Armenia, the entity that will be established to oversee and implement the Compact.

More...

1. Program Summary
2. Details of the Agreement.
3. 2007 Scorecard
4. Status Report

From "The Armenian Reporter"

Armenia's success brings new challenges

* MCC issues new scorecards
* Most scores reflect 2006 data

by Vincent Lima

YEREVAN -- Armenia's performance in most policy areas measured by the
Millennium Challenge Corporation (MCC) has remained steady or
improved, a scorecard released on November 14 by the U.S. government
entity shows. Armenia has graduated from the group of low-income
countries to the group of lower-middle-income countries.

The scorecard compares Armenia's performance with that of other
countries in its peer group. In its first year in the new peer group,
Armenia's performance in several categories was not above the median
for the group.

Armenia is in the second year of a five-year $236 million MCC
compact to improve rural infrastructure. (See story above.) To receive
the entire grant, Armenia must show that it is continuing reforms and
improving its overall performance on the indicators.

The scorecards include 17 indicators in three categories: ruling
justly, investing in people, and economic freedom.

In the newly released scorecard, Armenia's performance was below the
median for its new peer group in five of six "ruling justly"
indicators, including the all-important "control of corruption"
indicator. The indicators reflect performance in 2006 and do not take
into consideration the widely praised parliamentary elections held in
May 2007.

In the "investing in people" category, Armenia's performance was
below the median in three of five categories, including, surprisingly,
the "girls' primary education completion category" in which it
excelled in last year's scorecard. It is expected to surpass the
median in these categories when the 2007 data is in.

In the "economic freedom" category, which measures compliance with
free-trade policies favored by official Washington, Armenia is above
the median in all but one of six categories.

* December review

In early December, the board of the MCC will review the performance of
countries with which it has compacts. After that meeting, it is
expected to urge Armenia to work harder during 2008 to improve its
performance in the "control of corruption" indicator as well as other
indicators in the "ruling justly" category. These additional
indicators comprise "political rights" and "civil liberties," both
measured by Freedom House, "government effectiveness," "rule of law,"
and "voice and accountability," all measured by the World Bank
Institute, which also provides the data used for the control of
corruption indicator.

The MCC will closely follow reports by the OSCE election monitoring
teams, international and local NGOs, and Armenia's Central Electoral
Commission regarding the February 2008 presidential election -- and
the campaign season that has already begun.

If Armenia continues to show progress toward free and fair
elections, as it did in this year's parliamentary election, it is not
expected to face any problems with continued eligibility through the
December 2008 board meeting. The MCC has the option, however, of
suspending the program at any time.

The MCC scorecard and additional information are available at http://www.mcc.gov.

[Virgil]

Re: Armenia's Economic Pulse

The Millennium Challenge Corporation has signed a five-year, $235.65 million Compact with the Government of Armenia.

I wonder what the real price of this "aid" was?