Armenia's Economic Pulse

[Siamanto]

Re: Armenia's Economic Pulse

The Agriculture Sector (Part III)

ARMENIA TO BE FULLY SUPPLIED WITH HIGH-QUALITY SEEDS OF GRAIN CULTURED PLANTS IN 2011

Noyan Tapan
Nov 8, 2007

YEREVAN, NOVEMBER 8, NOYAN TAPAN. Armenia is not supplied with
high-quality seeds, and the RA ministry of agriculture is taking
steps in this direction, the head of the ministry's plant growing
development and plant protection department Garnik Petrosian said at
the November 8 press conference.

According to him, private economic entities are mainly engaged in
seed growing in Armenia, and they need serious assistance. With this
aim the ministry has prepared the 2007-2011 program on development
of seed growing, which has been approved by the government.

The department head informed those present that this year farms engaged
in seed production have received subsidies of about 36 million drams
(about 107 thousand dollars). In 2008, this amount will be increased,
with the total annual cost of the program making about 105 million
drams. At the end of the program - in 2011, the country will be fully
supplied with high-quality seeds of grain cultured plants.

It was mentioned that 60 tons of "super elite" autimn sowing wheat
seeds and 15 tons of spring sowing barley seeds will be imported
under the same program this year.

http://www.nt.am/news.php?p=0&c=0&t=0&r=0&year=2007&month=11&day=08&shownews=106207&LangID=1#106207

AGRICULTURAL MACHINERY ASSEMBLY POINT CREATED FOR FOUR RURAL COMMUNITIES OF ASHOTSK REGION WITH ASSISTANCE OF UNDP AND NORWEGIAN GOVERNMENT

Noyan Tapan
Dec 6, 2007

YEREVAN, DECEMBER 6, NOYAN TAPAN. An assembly point of agricultural
machinery has been created in Bavra for agricultural development
of Ashotsk region in Shirak marz. The governor of Shirak marz Lida
Nanian stated at the December 5 opening ceremony of the assembly
point that it will mainly service Saragyugh, Sizavet and Tavshut
village communities. In her words, the assembly point was created
with the assistance of the Norwegian government and the United Nations
Development Program (UNDP).

The UNDP Resident Representative to Armenia Consuelo Vidal said that
the four communities of Ashotsk region have been involved in the
2007-2009 complex development program of the UN, which will help
increase the efficiency of agricultural work in these communities
and their incomes.

According to the head of Bavra community Koryun Sumbulian, the creation
of the agricultural machinery assembly point will allow local farms
to cultivate more land plots. The assembly point has nine pieces
of agricultural machinery, inlcluding four wheeled tractors made
in Belarus.

http://www.nt.am/

ARMENIA TO SHOWCASE ITS AGRICULTURAL PRODUCTS AT BERLIN FAIR

ARMENPRESS
Jan 17 2007

YEREVAN, JANUARY 17, ARMENPRESS: Over 30 Armenian companies producing
brandy, wines, vegetable and fruit preserves, honey and dried fruits
will showcase their products at International Green Week fair in
Germany's Berlin that opens today.

Armenian agricultural minister David Lokian will lead an Armenian
delegation participating in it.

Armenian companies were assisted greatly by German KfW bank and GTZ
organization.

Farming issues and global supply and demand will be discussed at a
special forum and an international conference of agriculture ministers
during Green Week, which runs until January 27.

More than 400,000 visitors are expected to attend the exhibition,
which is now in its 73rd year. Around 100,000 products are on display
by 1,610 exhibitors from 52 countries.

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

YIELD OF CEREALS TO TOTAL 435-437,000 TONS IN ARMENIA IN 2007

ARKA
Nov 8, 2007

YEREVAN, November 8. /ARKA/. The yield of cereals, as per the
preliminary information, is to total 435-437,000 tons in Armenia in
2007, which is twice as much as in 2006 (213,000 tons), Chief of the
Department for plant cultivation, forestry and plant protection of
Armenia's Ministry if Agriculture Garnik Petrosian said.

According to him, the reasons for the unprecedented high yields are
favorable natural and climatic conditions and on-time fertilizing
measures.

Particularly serious work has been done to ensure timely imports
of nitrogen fertilizers provided to farms through state subsidies,
Petrosian said. He also stressed the importance of the measures to
grant 3,400 tons of high-quality seeds mainly to mountainous farms
that suffered from drought.

In spring, the Ministry of Agriculture imported 1,300 tons of
high-quality barley seeds that provided high yield - up to 50-60
centners from a hectare - in all regions of Armenia.

The yield of cereals is to average 24 centners from a hectare this
year, whereas the annual average indicator previously was 17-20
centners from a hectare, Petrosian said.

http://www.arka.am/eng/economy/2007/11/08/6915.html

FRUIT PRODUCTION DECLINES BY ABOUT 50 THOUSAND TONS IN ARMENIA THIS YEAR

Noyan Tapan
Nov 8, 2007

YEREVAN, NOVEMBER 8, NOYAN TAPAN. Fruit production amounted to 235
thousand tons in Armenia this year - against 283 thousand tons in
2006. The head of the plant growing development and plant protection
department of the RA ministry of agriculture Garnik Petrosian said
at the November 8 press conference that the apricot crops declined
by about 35 thousand tons, making only 13-14 thousand tons.

According to him, 220 tons of grapes was produced, which is more by
about 20 thousand tons than in 2006. Grapes were purchased by 30
processing companies. The main purchasers were the Yerevan Brandy
Company (29 thousand tons) and the Yerevan Wine, Vodka and Brandy
Enterprise (20 thousand tons).

G. Petrosian announced that 435-537 thousand tons of grain was
harvested in the country this year - against 213 thousand tons in
2006. The average crop yield of grain made 24 centners. In his words,
this growth is due to favorable climatic conditions and to efficient
masures aimed at improvement of seed supply. In particular, 3,400
tons of high-quality wheat seeds were given gratis to farms in the
autumn of 2006.

The department head said that 570 thousand tons of potato was
harvested this year, which is more by about 30-35 thousand tons than
in 2006. Production of melons and watermelons has also increased.

In his words, that by late 2007, the Armenian government will allocate
subsidies of 200 million drams (about 606 thousand USD) for the import
of 20 thousand tons of nitrogen fertilizer.

http://www.nt.am/news.php?p=0&c=0&t=0&r=0&year=2007&month=11&day=08&shownews=106203&LangID=1#106203

[Siamanto]

Re: Armenia's Economic Pulse

Transportation Links: The Armenian Railroads (Part I)

ARMENIA LOOKS TO THE PRIVATE SECTOR FOR RAIL NETWORK

Railway Gazette International, UK
Jan 16 2007

IN SEPTEMBER, the government of Armenia invited bids for a concession
to renovate and operate the country's rail network, following an
initial prequalification announcement in June.

Armenia is currently implementing a wide range of economic reforms,
supported by the US government, the World Bank, the European Union
and the Asian Development Bank amongst others. Restructuring is
already underway in the energy, water and communications sectors,
and Armenian Railways has been established as a joint stock company
wholly owned by the Ministry of Transport & Communications.

'Our desire is to make the railway more productive and less dependent
on government', explained Transport Minister Andranik Manukyan,
addressing a pre-bidding roadshow held at the headquarters of
the European Bank for Reconstruction & Development in London on
September 6.

'Armenia wants a successful railway', he emphasised. 'The government
has taken action to strengthen the railway, improve the regulatory
environment and reduce risks for the private sector. This concession
will protect the economy of Armenia and enhance the contribution that
will be made by rail transport.'

At the World Bank's suggestion, US-based consultancy HWTSK was
brought in to assess the condition of the Armenian rail network
and advise on the scope for involving the private sector. The World
Bank and the Armenian government provided US$15m in 2002-04 to fund
the rehabilitation of 72 km of track, and the EU's tacis programme
funded the installation of a new optic fibre communications network
by Siemens which was completed in 2005. The government is currently
negotiating funds for further infrastructure rehabilitation.

The concessionaire will also be expected to provide investment
funding. According to the consultants, AR needs around US$170m to
modernise the network, of which half would go on infrastructure
works and half on replacement of largely life-expired traction and
rolling stock.

Traffic bounces back The AR network is predominantly single-track,
with 736 route-km active and approximately 110 route-km out of service
due to the border closures and a landslide. The entire network is
electrified at 3 kV DC. AR has 41 main line electric locomotives,
mostly ex-Soviet designs of classes VL8, VL10 and VL11. There are
also 56 diesel locos, mostly used for shunting, together with 68 EMU
cars. Hauled stock comprises 189 coaches and 3657 wagons, of which
barely half are operational.

AR's traffic statistics clearly show the problems under which the
railway has been labouring for the past 20 years. In 1988 the railway
carried 30 million tonnes of freight and 5 million passengers.

Traffic was hit badly by the Spitak earthquake in December 1988 which
severely damaged the line around Gyumri. Then came the breakup of
the Soviet Union, and Armenian independence in 1991. Harsh economic
conditions saw a 50% fall in traffic across all the railways in
the region.

The war between Armenia and Azerbaijan in 1992 led to the border with
Turkey being closed in 1993, cutting all transit traffic. However,
there has been an upturn in recent years, due in part to a booming
economy described by local business leader Arsen Ghazaryan as 'a
Caucasian Tiger'. Armenia is currently recording double-digit GDP
growth year on year.

>From a low point of 1·4 million tonnes in 2000, AR's freight traffic
has crept upwards to 2·7 million tonnes in 2006, and the target for
2007 was 2·8 million. According to AR's First Deputy General Manager
Vahagn Karagiozyan, freight traffic in the first eight months was
400000 tonnes ahead of the previous year, and he was confident that
traffic would top the 3 million mark by the year-end. 'We have the
potential to double our traffic in the next few years', he predicted
confidently.

Around 60% of AR's freight business is international, but with four
of the five border crossings closed, all traffic has to be routed
via Airum on the line to Tbilisi. Longer-distance traffic moves via
Georgia's Black Sea ports of Poti and Batumi, which are linked by
train ferry to ports in Russia and Ukraine.

Passenger traffic, however, has been declining steadily since a
post-independence peak of 1·3 million passenger-journeys in 2002.

Rehabilitation of the local road network, coupled with the roundabout
rail routes, makes the typical road trip between three and five
times faster than rail. This has hit AR hard. Today the railway
runs just one local and five inter-city trains a day, plus a daily
international service to and from Tbilisi and a summer-only train
to and from Batumi. In 2006 passenger traffic totalled just 675 000
journeys, or barely 27 000 passenger-km.

Nevertheless, Manukyan insists that passenger operations should
continue. 'A railway which does not have a passenger service
is incomplete as a transport undertaking', he explains. 'Despite
falling traffic in recent years, we still believe that passenger
operations are an integral part of the railway. When the tender bids
are assessed, advantage would be given to a bidder with a desire to
keep the passenger operations, all other things being equal.'

Concessioning process Having looked at various models for
privatisation, including the separation of infrastructure from
operations, HWTSK recommended that a vertically-integrated concession
would be the most appropriate model.

An initial concession period of 30 years is envisaged, with an
option for further extensions. CPCS Transcom is acting as transaction
adviser, preparing tender documentation and assisting the government
in assessing the bids.

As well as appointing external advisers, the Ministry of Transport
& Communications has established a Project Implementation Unit to
develop the concession, together with a separate working group dealing
with legal and regulatory issues. PIU Director Alexander Bakhtamyan
insists that 'we intend to conduct an open, equitable and transparent
international tender.'

Prequalification bids were due by September 21, and groups led by
Russian Railways and Rites were shortlisted in October. However,
Rites has subsequently withdrawn from the process, leaving RZD as
the only party likely to have submitted a final bid on December 21.

Financial bids are to be opened on January 8, and the ministry hopes
to announce the winner on January 15, with a view to handing over
control of the network during 2008.

According to Gayan Torozyan, who heads the regulatory working group,
the new railway law setting the framework for concessioning was
'almost ready to go to the national assembly for ratification' at the
end of September. This will be followed in due course by secondary
legislation to put the detailed concession terms in place.

With World Bank support, the government will take responsibility for
funding the retirement or retraining of redundant staff, leaving
the concessionaire free to recruit only as many employees as it
feels necessary.

Manukyan insists that 'the government does not want to interfere
in the business activities of the concessionaire', although it is
planning to put in place some provision for open access, mainly so
that Georgian Railways could run to Yerevan or through to Turkey if
the border re-opens. The consultants believe that open access provision
would provide the concessionaire with a degree of competitive pressure,
although there is unlikely to be enough traffic to attract independent
operators.

'The concessionaire will have exclusive rights to manage the
infrastructure, but a clause will provide rights for others to use
network at pre-determined access fees', explains Torozyan. The
methodology for setting access charges 'will be agreed by the
government and implemented by the concessionaire', probably requiring
the production of some form of annual network statement.

The government also wants to retain the right to set maximum tariffs
for 'commodities of strategic importance', although Torozyan says
there will be a 'regulatory commission' to protect all parties.

According to Bakhtamyan, there will be no government subsidy for
the operation of passenger services, which will continue to be
cross-subsidised from the profitable freight business.

In parallel with the tendering process, PIU has started to draw up a
draft concession agreement, which will form the basis of negotiations
with the preferred bidder.

International connection Given the high proportion of international
traffic, maintaining a continuing relationship with Georgian Railways
will be critical to the success of the Armenian concession.

At the September roadshow, concerns were expressed about the Georgian
government's announcement in August that it intended to award a 99-year
concession to run the country's rail network to an international
consortium (RG 9.07 p524) through a negotiated procedure, rather than
by means of an open tender.

That proposal has since been withdrawn, and the Georgians are
now looking at some form of international tender with the aim of
privatising their railway by the end of 2008. The Armenian government
remains confident that any new owners would continue to honour the
current traffic arrangements. 'International freight and passenger
tariffs have been set through a bilateral agreement between the
governments, and will be protected for the next three years',
insists Manukyan.

He believes that the winning bidder of the Armenian concession would
be well placed to win a tender to operate the Georgian network as
well. That would permit closer integration of the two railways to
restore a truly international business, he suggests.

CAPTION: One of Armenian Railways' few main line passenger services
links Yerevan with Yerashk. An EMU is seen here awaiting departure
from the capital CAPTION: Consultants have recommended withdrawal of
all passenger services in Armenia because of dwindling ridership, but
the government has pledged to retain them as part of an integrated
network. This is the station in Yerevan CAPTION: The key junction
and marshalling yard at Massis is controlled from a Soviet-era
signalbox. Despite four of Armenia's five border crossings being
closed, international freight is seen as a potential growth market
for the railway in the future

http://www.railwaygazette.com/news_view/article/2008/01/8075/armenia_looks_to_the_private_sector.html

CONCESSIONAL MANAGEMENT THE ONLY WAY TO SAVE ARMENIAN RAILWAYS, MINISTER SAYS

ARMENPRESS
Oct 25, 2007

YEREVAN, OCTOBER 25, ARMENPRESS: Transport and communication minister
Andranik Manukian said yesterday handing the Armenian Railways to a
concessional management is the only way to salvage the aging system
and maintain it as a government property.

Speaking during a parliament Q&A session he said since the collapse
of the former Soviet Union the only investment in the system were $16
million of a World Bank credit for a major repair of a 72-km section
of the railway from Yerevan to Ayrum, while the entire length of the
railway is 306 km.

Manukian said two companies, one from Russia and the other from
India, have made bids in a tender. He said the winning company will
be announced on December 15 and the subsequent talks are expected to
be over by January 15 next year.

The winner of the tender will have to transfer $10 million as
concessional payment and pay 2 percent of its incomes to the
government The railway tariffs will be set by the Pubic Services
Regulatory Commission.

"In a couple of years Armenian Railways will lose its carriages and
locomotives as they are in their last days. Armenia does not have
extra $170 million to repair the railroads and buy new carriages and
this is the main reason that prompts us to hand it to confessional
management,' Manukian said.

http://www.armeniandiaspora.com/archive/115451.html

ARKA News Agency, Armenia
Dec 4 2007


Armenian parliament approves bill on railway transport


YEREVAN, December 4. /ARKA/. The RA Parliament has approved in the
second reading the bill `On railway transport'. RA Minister of
Transport Andranik Manukyan said that the new law will serve as legal
underpinnings for private management of the railway.

The bill regulates the legal and economic relations in the operation
of railway transport in Armenia.

`The bill is aimed at ensuring uninterrupted and stable operation of
railway transport,' Manukyan said.
The bill entitles the RA Public Services Regulatory Commission to set
rates and make calculations.

The Minister reported that special tariffs for goods of strategic
importance will be set. In presenting reports on the maximum tariff,
the manager is supposed to inform the Government of the tariffs for
strategic goods.

On October 12, 2006, the RA Government made a decision on 30-year
concession of the Armenian Railway Company, with the right to 20-year
prolongation. Two companies won a tender for concession - Russian
Railways Company and Rail India Technical and Economic Services
(RITES).

The envelope with the feasibility report is to be opened on December
21, and the financial proposals are to be made public on January 8,
2008. The tender winner will be known on January 15.

The Armenian Railway Company is owned by the Government.-0--

http://www.armeniandiaspora.com/archive/119149.html

[Siamanto]

Re: Armenia's Economic Pulse

Transportation Links: The Armenian Railroads (Part II)

ARMENIA'S TRANSPORT MINISTRY: "RR" CONCESSION PROPOSALS ON MANAGEMENT OF "AR" ADVANTAGEOUS

ARKA News Agency
Jan 10 2008
Armenia

YEREVAN, January 10. /ARKA/. The concession bid proposals of the
"Russian Railroads" (RR) open joint stock company are very good,
Armenia's Minister of Transport and Communication Andranik Manukian
said at the government briefing in commenting the transfer of "Armenian
Railroads" (AR) closed joint stock company for concession management.

He said that the RR is expected to repair the most dangerous sections
of the railroad and the infrastructures, Ayrum-Giumri, Dilijan-Ijevan
in particular.

The Minister reported that the RR suggest building a new branch line,
rehabilitating Akhurian terminal, bringing the Armenian railroads in
line with the modern technical requirements, increasing the volume
of transportation and capacity of the railroads.

The Minister also said that the Armenian Railroads will remain a
state-owned company that is managed by the Russian company. "In
our opinion, they will be more efficient managers, particularly
because we would not be able to make such extensive investments,"
the Minister said.

Manukian reported that 805 of 1,125 kilometers of Armenia's railroads
are within the competence of the AR. The company provides steady
profit. In 2007, 3mln tons of cargos were transported through the AR
against 2.7mln tons in 2006.

Two companies - the "Russian Railroads" and Indian RITES (Rail
India Technical and Economic Services) - have been pre-qualified
for participation in the tender on concession management of the
"Armenian Railroads" closed joint stock company. Later RITES refused
to participate in the tender as it decided to take part in a tender in
Africa; consequently, the "Russian Railroads" became the only bidder
in the tender held in Armenia.

According to the investment package opened on December 21, the RR
plans to invest $570mln in the AR, including $230mln in the next five
years. If the blockade around Armenia is raised, the Abkhazian railroad
is opened and railway communication rehabilitated, investments will
reach $2bln 130mln.

In its bid package opened on January 8 the "Russian Railroads" offered
bulk payment of 1.7bln Drams concession fee to Armenia's state budget
and this proposal is not under consideration currently.

The "Armenian Railroads" closed joint stock company is 100% state
company that owns the main part of the country's rolling stock and
practically the entire railroad infrastructure (930.8 km as per the
information of Armenia's National Statistical Service). ($1=307.09
AMD).

http://www.arka.am/eng/transport/2008/01/10/7670.html

RUSSIANS PLAN TO RESTORE RAILWAY COMMUNICATION BETWEEN ARMENIA AND TURKEY AND AZERBAIJAN

Lragir
Jan 10 2008
Armenia

On January 10 the minister of communication and transport Andranik
Manukyan stated in a briefing that the Russian Railways which is the
only tenderer for the Armenian Railways and will most probably win
the tender, plans to restore railway communication with Turkey and
Azerbaijan in 2009-2010.

The minister says in 2009 the Russian company plans to restore
communication between Armenia and Turkey and in 2010 with Azerbaijan.

The minister repeated that the Russian manager plans to invest about
600 million dollars in the Armenian railway infrastructure, and as
soon as the blockade of Armenia is lifted, the investments will reach
21 billion 100 million dollars. Andranik Manukyan says according to
the bid package, the Russian company bids one-time payment of 1.7
million dollars to the government of Armenia. Andranik Manukyan says
the bid is under consideration.

He says the Russian company's bid for the concession is favorable,
and as soon as the Russian Railways takes up the management of the
Armenian railway, it will improve the state of the railway, repairing
the dangerous parts of the rails in the north of Armenia, replacing
the trains, the infrastructure, build new rails, modernize and boost
cargo shipment capacity.

At the same time, the railways remain the property of Armenia,
Andranik Manukyan explained. He says Armenia thinks the management
by the Russian company will be more effective than by the ministry
which now controls the Armenian railways, ARKA reports.

The result of the tender will become known on January 15. The only
tenderer is the Russian Railways which will win the tender. An Indian
company had also bid for concession but it stopped halfway.

http://groong.usc.edu/news/msg216523.html

RUSSIAN RAILWAYS WINS TENDER IN ARMENIA

ITAR-TASS, Russia
Jan 16 2007

YEREVAN, January 16 (Itar-Tass) -The Russian Railways Company will be
officially named on Wednesday as the winner of an international tender
for the concessional management of the Armenian Railways Company for
a period of 30 years. A ceremony with the participation of Russian
Railways President Vladimir Yakunin will be held in Yerevan.

The terms of the concession provide for 170-million-dollar investments,
but Russian Railways offered a far great sum - 570 million dollars
of investments, with 230 million dollars to be invested in the coming
five years.

According to Armenian Minister of Transport and Communication Andranik
Manukyan, the investments of Russian Railways will be even greater,
if the border with Turkey is opened, and railway traffic to Armenia
by the Azerbaijani railway and via Abkhazia is resumed.

Russian Railways will contribute 5.5 million dollars to the Armenian
budget as a one-time concession payment. Under the terms of the lease,
Russian Railways will allocate 2 per cent of its annual turnover to
the Armenian budget, along with current taxes and fees.

Manukyan reminded that the Armenian Railways Company would continue
to be the property of the Armenian government, and Russian Railways
would only manage it.

The Armenian railway was built on the order of the government of
the Russian Empire in the second half of the 19th century. The first
train came from Tiflis (now Tbilisi) to Alexandropol (later Leninakan,
now Gyumri) in February 1899 after covering 220 kilometres. A total
length of the railways belonging to the Armenian Railways Company is
1,125 kilometres. It includes 75 railway terminals and four terminals
on the border with Georgia, Azerbaijan and Turkey.

The annual capacity of Armenian Railways is three million tons of
cargoes and five million passengers. A through capacity of the Airum
railway terminal, on the border with Georgia, is 30 pairs of trains
a day. According to forecasts of transport specialists, railway
transportation in Armenia will be doubled by 2010.

http://www.itar-tass.com/eng/level2.html?NewsID=12259898

[crusader1492]

Re: Armenia's Economic Pulse

Toursits Increased In Armenia, Family Vacation Affordable


Last year 510 thousands tourists arrived in Armenia which is for 33% high compared with 2006, as Armenia attracts tourists and travelers for those searching for affordable family vacations and adventure travel due to its long history, mountains and rich Christian culture.

According to Mekhak Apresyan, the head of tourism department at the Ministry of Trade and Economic development, once the number of the hotels were too few in our country. Today there are approximately 70 hotels and 35 of which are in Yerevan.

According to Apresyan, Armenia is well presented in the international tourism and travel market, which has its positive impact on its development.

Apresyan said that the condition of ecotourism in Armenia is more than sufficient, but there are lots of things to do.

[Siamanto]

Re: Armenia's Economic Pulse

The Inflation Report (Part I)

ACCORDING TO IMF OFFICIAL, MORE EFFICIENT POLICY OF INFLATION TARGETING SHOULD BE CONDUCTED IN ARMENIA FOR NEUTRALIZATION OF INFLATION RISKS

Noyan Tapan
Feb 22, 2008

YEREVAN, FEBRUARY 22, NOYAN TAPAN. Among inflation risks in Armenia in
2008 are the considerable foreign currency inflow, a high GPD growth,
the 60% increase of pensions, as well as a rise in prices of foodstuffs
and power-bearing substances, the director of the IMF Armenia Office
Nienke Oomes stated during a lecture-dicussion on February 22.

According to her, in order to neutralize these risks, the appropriate
Armenian bodies should conduct a more efficient policy of inflation
targeting (in particular, extension of competition among banks,
reduction of the dollarization level, development of the financial
markets), contrubute to reduction in prices of imported goods, tighten
the fiscal policy and provide more information about the inflation
targeting policy.

It was stated that in 2007, inflation was quite high in Armenia and
made 6.6% at the end of the year. According to the IMF official, this
index was not so high as compared with other countries. In her words,
one of the reasons for relatively low inflation in Armenia is the
Central Bank of Armenia's (CBA) policy aimed at inflation targeting
rather than at controlling the exchange rate. In other CIS countries,
the exchange rate of the national currency against the rates of
foreign currencies is stable but the inflation is high.

N. Oomes expressed an opinion that the low level of inflation in
Armenia is also due to the strict tax and budgetary policy conducted
by the ministry of finance and economy, thanks to which the deficit
of the RA state budget is much less than in other CIS countries.

In her words, 6.6% inflation in Armenia was mainly conditioned by a
high growth in prices of foodstuffs, particularly, bread, butter and
vegetable oil, which accounted for 4.5% of the overall inflation. 99%
of the growth of food prices in Armenia was due to the growth of
international prices rather than to an artificial rise of prices on
the domestic market. The prices of these goods grew as much as in
CIS countries.

The IMF official reminded that the inflation in international markets
was caused by a growth of consumption of bread, butter and other
foodstuffs in China and India: 45% of the world population live in
these countries.

She said that the fact that the consumption and prices of fuel
obtained from plants is increasing in parallel with the growth in
prices of hydrocarbon fuel also contributes to a rise in food prices
worldwide. About 50% of the overall inflation in international markets
is due to the growth of the demand of the populations of China and
India, while the other 50% is due to a decline in the supply.

http://www.nt.am/news.php?p=0&c=0&t=0&r=0&year=2008&month=02&day=22&shownews=110028&LangID=1#110028

ARMENIA SHOULD TAKE STEPS TO TACKLE INFLATION -IMF

Reuters
Monday December 10 2007

WASHINGTON, Dec 10 (Reuters) - Armenia's economy is growing at a
double-digit clip that has helped ease poverty, but the country must
take steps to curb price pressures, while the currency will probably
continue to appreciate, the IMF said on Monday.

"Monetary policy will need to be tightened in light of rising
inflationary risks," the International Monetary Fund said under a
regular review of Armenia's poverty-reduction facility, which expires
next May.

Consumer inflation is projected to average 6.3 percent next year,
up from 4.3 percent in 2007, the IMF said, with economic growth of
11 percent this year and 10 percent in 2008.

The central bank raised interest rates in three steps of
aquarter-percentage point each between July and November. The banking
rate is now 11 percent and the repo rate 5.75 percent.

In addition, the central bank lifted its inflation target to 4 percent
from 3 percent, a move that the IMF said it had opposed.

"A firm commitment to a medium-term inflation target will be critical
for anchoring price expectations and building credibility in the
transition to full-fledged inflation targeting," the IMF said.

The Armenian dram was also expected to continue to advance against
the dollar due to persistent foreign-exchange inflows, which may harm
the country's export competitiveness.

This means Armenia must step up efforts to lift domestic competition
and keep fiscal policy tight, the IMF said.

It also warned that mounting infrastructure and poverty-reduction
spending will increase budget pressures, and it urged the government
to meet this demand for additional public finance by strengthening
tax collection methods.

(Reporting by Alister Bull; Editing by Jan Paschal )

http://groong.usc.edu/news/msg213851.html

CBA FORECASTS 5.4% INFLATION FOR 2008

YEREVAN, JANUARY 15, NOYAN TAPAN. According to forecasts of the Central
Bank of Armenia (CBA), by the version of the unchanged level of
interest rates, inflation will make 5.4% in Armenia in the 12-month
period following December 2007 and 6.3% in the second quarter of 2008.
The base scenario of inflation until the end of the second quarter 2008
includes the version that a growth in prices of bread products, butter
and vegetable oil will contribute to the growth of the cumulative
consumer price index by 3.8%, while the growth of gas prices due to the
supposed end of budgetary subsidizing will contribute to the growth of
this index by 1.2%. These forecasts were announced at the December 29
sitting of the CBA Board.

According to the CBA press service, by CBA's forecasts, the formation
of higher international oil and food prices (including grain prices)
than is expected may contribute to higher actual inflation than the
forecast index, while the increase of oil prices will depend on both
geopolitical and external economic developments. Besides, it may be
also contributed by a higher than forecast growth of the consumption
component in the overall demand and further positive deviation from the
balanced level of consumption, as well as by higher than expected
growth rates of crediting of the economy.

The registration of a lower actual inflation index than is forecast may
be contributed by an increase in foreign currency amounts of exports
(as a result of higher than forecast prices of base metals), as well as
by a fall in prices of imported goods under conditions of greater
capital inflow, as a result of appreciation of the dram.

At the same time, developments in the agricultural sector which mainly
depend on climatic conditions may involve risks of both a fall and rise
in prices.

Taking into account the developments in the fourth quarter of 2007 and
the CBA's forecasts for the further 12-month period, the CBA Board
registered that despite some stabilization of oil and food prices, the
inflation pressures from the external environment remained at the end
of the fourth quarter of 2007 and will remain in the forecast period.
In case of absence of unexpected shocks in the external environment,
these pressures will be milder than in the past period. The CBA Board
also stated that the impact of the internal environment created smaller
inflation pressures than was forecast - in the fourth quarter of 2007,
while it is possible that combined with most expanding tax and
budgetary policy, the high growth rates of private consumption will
increase inflation pressures to some extent in the forecast period. In
these conditions the CBA Board still sees risks in ensuring the 2008
target inflation index.

At the same time the CBA Board discussed the seasonal manifestations,
which are typical of Armenia's economy and financial sector and are
most pronounced at the beginning of a year, particularly a sharp
decline in demand for money in January, due to which a rise in interest
rates cannot have the desired effect on interest rates in the interbank
market. It was underlined that the consistent tightening of the
conditions of the monetary and credit policy by the CBA in recent
months allows to refrain from raising the interest rates at the given
moment.

Under conditions of various opinions about reduction of inflation
pressures from the external environment, the deviation of inflation
from the central position of the target interval, and the possible
scenarios of further changes in interest rates, the CBA Board discussed
the options of either raising the CBA refinancing interest rate or
leaving it unchanged.

As a result, at the December 29 sitting the CBA Board made a decision
to leave the CBA refinancing interest rate unchanged - 5.75%. The pawn
credit and deposit interest rates were fixed at 8.75% and 2.75%
respectively.

At the same time the CBA Board expressed a willingness to be consistent
in the issue of correcting the interest rates if inflation pressures
from the internal and external environments do not decline.

http://www.noyan-tapan.am/news.php?p=0&c=0&t=0&r=0&year=2008&month=01&day=15&shownews=108400&LangID=1#108400

ANNUAL MINIMAL CONSUMER BASKET TOTALS AMD 277,718.5 IN ARMENIA IN
FOURTH QUARTELY PERIOD OF 2007

ARKA News Agency
Feb 1 2008
Armenia

YEREVAN, February 1. /ARKA/. The annual minimal consumer basket totaled
AMD 277,718.5 (about $73) in Armenia in the fourth quarterly period
of 2007, the RA National Statistical Service reports. The monthly
minimal consumer basket amounted to AMD 23,143.2 (about $73) in the
reporting period.

The annual minimal consumer basket (including the actual price in the
fourth quarterly period of 2007) totaled AMD 430,463.7 ($1,357.6)
in the reporting period (the monthly minimal basket totaling AMD
35,872 or $113.1 monthly).

Bellow is the annual rate of products per capita: bread-made products -
AMD 49,808.4 (the share of bread being AMD 32,868 with 91.3kg annual
consumption), meat - AMD 56,385.2 (36.5kg), milk products - AMD
54,864.8 (milk - AMD 21,761.3 with 73 liters of annual consumption,
ghee - AMD 16,249.8 with 7.3kg annual consumption, cheese - AMD
11,674.4 with 9.1kg annual consumption), potatoes - AMD 17,018.3
(91.3kg), vegetables (cabbages, onions) - AMD 15,319.1 (109.5kg),
fruit (apples) AMD 26,243.5 (182.5pcs), vegetable oil - AMD 6,755.4
(7.3kg), margarine - AMD 3,275.6 (3.7kg), fish - AMD 33,028.6 (11kg).

The RA Ministry of Health helped form the consumer basket. The latter
is based on the World Bank's (WB) survey of 6,816 households carried
out from April 1, 2004 to March 31, 2005. This consumer basket
significantly differs with its constitution from the previous ones.

According to WB, the monthly consumer basket should amount to AMD
17,877.4 ($56), the minimal consumer basket totaling AMD 27,710
($87.4).

In Armenia, the share of the basic salary (AMD 20,000 or $63) in
the minimal consumer basket, minimal food basket and average monthly
salary is 55.8%, 86.4% and 23.2% respectively.

The share of the average monthly salary in the country's minimal food
basket was 240.7% in 2007.

According to NSS, GDP per capita totaled AMD 973,021 ($2,844), the
basic average monthly salary amounting to AMD 76,922 ($225).

1mln 168,000 people were economically active in Armenia in 2007
with 92.9% (1,085.3) being involved in economy. 82,500 people were
unemployed in the reporting period. Armenia's resident population
totaled 3mln 229,900 on January 1, 2008 ($1 - AMD 306.84).

http://www.arka.am/eng/economy/2008/02/01/7913.html

[Siamanto]

Re: Armenia's Economic Pulse

Part 1 of 2

REVALUATION OF ARMENIAN DRAM LOWERS INFLATIONARY EXPECTATIONS, POTENTIAL

ARKA News Agency
Feb 4 2008
Armenia

ARKA: Mr. Sargsyan, what preliminary estimates of the country's key
macroeconomic indicators for 2007 can you make?

Sargsyan: 13.6% macroeconomic growth was recorded in Armenia in
January-November 2007, which growth was mainly facilitated by such
sectors as construction, services and agriculture. In January-November,
a 2.7% increase was recorded in the industrial sector, and a 9.1%
increase without the diamond-cutting industry.

The increase was mainly due to the food industry, particularly due to
the confectionary industry, the production of alcoholic beverages,
tinned food and natural juices. The increase was also facilitated
by the nonferrous industry, namely, the production of aluminum and
ferromolybdenum, and that of building materials, particularly cement
and lime.

The agricultural sector recorded a 9.6% increase, mainly due to a 10.6%
increase in plant cultivation. Bumper fruit and vegetable harvest
was gathered thanks to favorable weather conditions in Armenia last
year. The cattle-breeding industry recorded an increase as well,
mainly due to an increase in the output of meat and eggs.

In January-November 2007, the construction sector recorded a
19% increase, mainly due to capital investments in transport and
communication, particularly due to large investments made by mobile
operators, as well as due to road construction carried out on the funds
allocated by the Lincy Foundation. The increase was also facilitated
by intensified energy construction, particularly the construction of
small hydro-power plants, as well as the construction of the second
section of the Iran-Armenia gas main.

A 13% increase in the service sphere was mainly facilitated by a
considerable increase in the amount of transport and communication
services, as well as in the volume of trade (primarily wholesale and
the trade in cars). The amount of services rendered by all types
of transport increased, and the primary reason for the increase
in communication services is the increase in mobile communication
services.

Moreover, an approximate 20% rise in wages was recorded on the labor
market along with reduction of unemployment and higher rates of
increase in labor productivity - by about 13% against 12.5% in 2006.




ARKA: How well have the principal provisions of the monetary
management program been implemented? What were the major obstacles
to the accomplishment of the tasks set?

Sargsyan: The major obstacle we encountered in implementing our
monetary management policy involves the world commodity markets,
which not only sprang a surprise on us, but also exerted serious
influence on all the processes of global economy. First of all, this
is a rise in prices for food products, bread, baked goods and butter.

Also, the prices for oil and oil products have risen since the
beginning of the year. This all seriously influenced prices worldwide,
with special damaged caused to transitional economies, as the share
of the aforementioned products in the basket of goods there is rather
large compared with developed countries. So the inflation exceeded
the planned level in all the countries in transition. I would like to
note that inflation exceeded the planned level by about 4% in all the
countries of the Commonwealth of Independent States (CIS). Inflation
is to reach about 12% in Russia, and rather high inflation is expected
in Georgia. In Azerbaijan inflation may be twice as high as in Armenia.

Armenia is expected to end this year with inflation about 7%. With
monetary factors alone considered, inflation would not exceed 3%
(about 2.6%), the cause of the rest 4% being the rise in prices on
the world markets.

As regards the principal provisions of the monetary management policy
of the year, most of them have been implemented. The increase in
the monetary base and money supply exceeded the planned level, the
primary reason being the fact that the economic growth rates exceeded
the planned level, which made the Central Bank serve the real sector
by means of emission, which was actually done.

A special feature of the year is also the huge amount of foreign
exchange the Central Bank has purchased from the market. By our
preliminary estimates, this index will exceed last year's index by
about 40% and reach $350mln.

Despite this, further AMD revaluation against the USD has been
observed and is to make about 17%. However, this process facilitated
the reduction of inflationary pressures and potential.

By and large, the major obstacles we have encountered this year are:
first, the world prices, second low-level price elasticity, which
testifies to the need for measures to step up competition on the
domestic market for the AMD revaluation to be accompanied by control
over import prices.




ARKA: The Central Bank has been managing all the market segments for
the second year. What are the results?

Sargsyan: First of all, the Central Bank is trying to smooth away
the existing serious differences between individual segments of the
country's financial market. It is no secret for anybody that Armenia's
banking system has made considerable progress and meets international
standards now, which cannot be said about the insurance market, the
securities market and the pension system. So it is obvious that more
rapid reforms are necessary to smooth away the existing differences.

It should be noted that the largest resources were directed to the
nonbank part of the financial sector. First of all, this is the
securities sector, for which we drafted a special bill later adopted
by the Parliament. Moreover, the Central Bank approved a large number
of statutory acts.

The second segment is the insurance market, where we are cleaning the
insurance field. At the initial stage, 23 insurance companies were
operating in Armenia, whereas only nine are working now. The process
of clearing the segment is accompanied by the improvement of insurance
laws. In 2007, the RA Parliament adopted a bill on insurance companies
in conformity with European standards. The new law will allow reforms
to be implemented at higher rates.

And finally, an important achievement of 2007 is the entry of the
OMX operator to Armenia's market, which will promote the development
of Armenia's financial market in general and the formation of a real
capital market in particular.




ARKA: What is your general assessment of Armenia's financial system?
What are the financial results of the year?

Sargsyan: In general, Armenia's financial system can be characterized
as rather stable. The share of banks and credit institutions that
recorded a considerable increase is 97% now.

First of all we are happy over the banking sector, which recorded
a 70% increase in crediting of the country's economy. High-rate
increase in assets was recorded. As a result, a 3-point increase in
the assets/GDP ratio was recorded during one year - up to about 23%,
which is a rather serious result. In general, Armenia's banking system
can be said to be solidly based. The rates of the banking sector's
development are expected to exceed those of economic growth during
the next few years. It should also be noted the bank capitalization
level is rather high in Armenia in the context of financial stability -
29% against the CBA-set 12%.

Credit institutions have recorded progress as well. The banking
sector recorded a 70% increase in crediting, while credit institutions
doubled their crediting volume. The interest in credit institutions
has increased, and their number has reached 22, as many as commercial
banks. In general, credit organizations are developing at higher
rates than banks.

Nonresident entities have shown interest in the local insurance market,
and we hope that new serious players will come to Armenia next year,
and new insurance companies will launch their activities here. First
of all, the matter concerns the HSBC Group, which plans to open its
insurance company in Armenia. We have been negotiating with it for
a long time. Besides, we hope for another European insurance company
to come to Armenia. One Russian and one Ukrainian insurance company
are expected to launch their activities in Armenia as well.




ARKA: What is your view of 2007 in the context of the entry of new
banking brands to Armenia's market?

Sargsyan: The Central Bank is welcoming this process. We are vitally
interested in first-rate participants entering Armenia's banking
sector, which, on the one hand, promotes competition in the sector,
and on the other hand, will contribute to the development of financial
intermediation in Armenia.

Thus, we can state that the emergence of the German ProCreditBank
will promote competition in the retail sector. The Russian Troyka
Dialog Company will introduce new technologies and products on the
securities market. The Lebanese Byblos Bank will introduce corporate
management culture and private banking, which is well-developed
in Lebanon. Finally, the Russian Gasprombank will promote banks'
competition for large enterprises.

All this is rather promising for Armenia's financial sector, if we
consider the fact that it is due to new players that the Armenian
banking system's capital increased by about 40% in 2007.




ARKA: Since the banking system remains the largest player on the
financial market, what is your assessment of the current stage of
development of Armenia's banks. What are the forecasts for 2007
and 2008?

Sargsyan: First of all, noteworthy is a considerable decrease in net
external assets of the banking system in 2007 - by approximately 82bln
AMD. As a result, the system's net external assets for the first time
proved to be negative - minus 71.6bln AMD (over $200mln).

This means that our banks started attracting more funds from
nonresidents and investing them in Armenia, primarily in the country's
economy. Another important feature is a lower dollarization level in
the country. First, AMD credits doubled.

Secondly, a decrease in the share foreign-exchange deposits was
accompanied by an increase in the share of AMD deposits - up to 53%.

Assets increased by 41% and amounted to 741bln AMD, the share of
AMD assets being 65% - a 7% increase. The share of assets in the GDP
increased from 19.8% in 2006 to 23% in 2007.

The banking system's liabilities increased by 43% during one year
and amounted to 580bln AMD, and individual deposits increased by 34%
and amounted to 191.6bln AMD. The number of banks' clients increased
by 150,000 or 20% and reached 913,000, and the number of accounts
reached 1,000,000 - a 15% increase.

The capital increased by 34% or by 41bln AMD and reached 161.6bln
AMD. Nine banks replenished their authorized capital with 27mln AMD.

The banking system's net profit is to total 23.5bln AMD - a 40%
increase compared with 2006.

As regards forecasts for 2008, we hope that the development of the
banking system will doubly exceed that of the real sector. The raising
of the financial intermediation level requires the development of the
banking system at higher rates. Also, we expect the Dutch Postbank
in Armenia next year.




ARKA: Early this year you mentioned three "problematic" banks in
Armenia, which received low marks by the CAMELS system. Have the
problems of the banks been resolved, and are all the banks operating
without any problems?

Sargsyan: All the three banks have improved their financial situation
this year. At present we have no banks that would not meet economic
requirements and have any supervision-related problems with the
Central Bank. In this aspect, all the problems have been resolved. Of
course, competition will encourage banks to pay more attention to
the management level. It is no secret that it is primarily a bank's
management that accounts for its success or failure. So next year we
will pay more attention to raising the management level at banks.




ARKA: Early this year you stated the intention to introduce principles
of protecting consumers' interests in the banking system.
At what stage is the process, and what progress in the accomplishment
of the tasks has been made?

Sargsyan: The Parliament has adopted a number of normative documents.

We have started putting into practice the requirements for banks'
activities to become more transparent. Clients must be ware of the
services rendered by banks, of the interest rates and of the prices.

The Central Bank's web-site contains full information on the services
rendered by all the local banks.

We also plan the introduction of a system of universal interest rates
with due regard for clients' other expenses. This will help banks'
clients to be aware of the real cost of credits.

New bills have been drafted, which take into account the best
international experience and are aimed at the protection of clients.

The laws are supposed to regulate crediting process, ensure the
protection of clients' rights and make the services rendered by banks
opener. Specifically, we have drafted bills "On financial ombudsman",
"On consumer crediting", "On order of attracting deposits".

The Central Bank has also prepared a new concept of financial
arbitration. All the aforementioned procedures and concepts will be
submitted to the Government and Parliament in 2008.

............

http://www.arka.am/eng/interviews/2008/02/04/7916.html

[/quote]

[Siamanto]

Re: Armenia's Economic Pulse

Part 2 of 2


REVALUATION OF ARMENIAN DRAM LOWERS INFLATIONARY EXPECTATIONS, POTENTIAL

ARKA News Agency
Feb 4 2008
Armenia

...........
ARKA: What other new legislative amendments concerning Armenia's
financial system, particularly banks, credit institutions, insurance
market and stock market , were adopted in 2007?

Sargsyan: In 2007, the Central Bank seriously mitigated the bank
management and banking supervision requirements, which allowed banks
to manage operational risks using market mechanisms. The bank liquidity
requirements were mitigated as well. The first step toward Basel-2 was
made. Specifically, a standard approach to credit risk calculation was
introduced. For financial services to be more available in Armenia's
regions and rural communities, banks were allowed to carry out field
crediting.

As I have already noted the newly adopted laws allowed of radical
changes in the management of securities and insurance markets. The
relevant legislation was brought to conformity with European
standards. The new law on insurance prohibits life and nonlife
insurance of only one legal entity. New requirements for and standards
of corporate and risk management were set for insurance companies.

In conformity with the new law on the regulation of securities, the
Armenian Stock Exchange and the Central Depository were transformed
to open corporations and later sold to the Swedish OMX stock exchange
operator. Minimal requirements to capital were set for professional
market participants. The new law allows banks to be immediate
securities market participants.




ARKA: What is your assessment of Armenia's insurance market? What
is the Central Bank's current policy and forecasts? What are your
expectations of the sphere in 2008?

Sargsyan: The first result we achieved is to clear the sector of
weak insurance companies that are unable to function in conformity
with insurance standards. If we fail to clear the insurance market,
we cannot speak of solid foundations for the development of insurance
in Armenia.

Our goal is to clear the sector with further introduction of the best
standards. We have adopted a law our German colleagues assessed as
one of the best laws on insurance. All the changes are supposed to
create favorable conditions for the development of insurance business
in Armenia.

Our next step is the introduction of compulsory insurance in Armenia.

We hope that the Government will approve the concept of compulsory
third-party insurance against traffic accidents, which will promote
the development of the insurance sector. The next field is medical
insurance. The Government has included measures to develop medical
insurance in its program of action. Among the requirements for the
development of insurance business is also the development of the
institute of actuaries and the creation of a database.




ARKA: How much will the OMX's entry intensify the activities on
Armenia's stock market. Can any results be expected this year? In your
opinion, how many enterprises will be working on the stock exchange
in 2008?

Sargsyan: A priority task for 2008 is the formation of
infrastructure. We have quite a long list of measures we must implement
in cooperation with the OMX. Specifically, the matter concerns
legislative and statutory acts, formation of market institutes,
which are necessary for normal operation of the stock exchange and
depository. In other words, in 2008 we will direct all our resources
to the formation of infrastructure.

In 2007, several entities showed interest in the securities market,
and we encourage this process in every possible way, practicing the
rating of enterprises. Some of the enterprises have issued their own
bonds. In fact, we have entities on the market which will intensify
their activities after the OMX enters the market, and, naturally,
the interest in the securities market will increase.




ARKA: What inflation level is expected in Armenia in the context of
the global economic processes? How well is the bank accomplishing its
major task, namely, maintaining stable prices in the country? What
is your general opinion of inflation?

Sargsyan: Serious inflationary potential was accumulated in 2007,
which is a rather serious problem for global economy creating serious
turbulence on all the financial markets. Of course, the behavior of
China and India exerts serious influence on prices, world markets. In
this context, we have fears that the inflationary pressure from the
world markets will be rather strong in 2008.

Our goal is 5.5% highest inflation. We hope that this goal will
be attainable by the end of 2008. As regards the year 2007, I have
already noted that 7% inflation is expected in Armenia.




ARKA: Will anything be changed in your inflation targeting policy in
2008? Are our exporters now able to oppose inflation?

Sargsyan: In 2008, the Central Bank will continue implementing all
the necessary measures to switch over to full inflation targeting in
the medium-term prospect. Among the measures are the enhancement of
confidence in the Central Bank's policy, further development of the
financial system, improvement of the macroeconomic forecast system,
instruments of monetary policy, etc..

As regards the second part of the question, it is important that the
financial market participants are already offering new services to
their clients, particularly derivatives, which will allow them to have
forecast exchange rates at their disposal for a small price. Of course,
it is primarily transparent enterprises able to sign relevant contracts
with commercial banks that will be allowed to use these services. On
its part, the Central Bank will encourage the introduction of a new
culture of financial market, and the market participants must learn
to manage their currency risks.




ARKA: Do Armenian citizens trust the Armenian dram now, and how much
did the dollarization level reduce?

Sargsyan: Our citizens obviously give their preference to the Armenian
dram. Specifically, last year (2006) we reached 50% level in assets,
and this year (2007) we reached this level in liabilities.

Over 50% are funds attracted in terms of drams, and this trend will
be continued. This process is facilitated by the revaluation of the
Armenian national currency on the one hand, and by the reduction of
shadow economy on the other hand, which, in turn, stimulates reduction
of the dollarization level.

I think that approximate 10% reduction of dollarization level can
be expected in 2007 if it is estimated in the context of the share
of drams assets in our banks' gross assets as well as that of USD
deposits in the total amount of deposits.




ARKA: Does the sovereign rating assigned to Armenia produce any results?

Sargsyan: There is increasing interest in Armenia, especially in the
context of the forecasts on the ratings being made. In their turn,
our commercial banks started paying more attention to their ratings,
which facilitates the establishment of contacts with foreign partners
and attraction of new financial resources. The ratings assigned to
Armenia are of paramount importance for the country's further economic
development, especially in the context of the region.




ARKA: What is Armenia's real and specific potential to become a
regional financial center in the context of present-day geopolitical situation?

Sargsyan: First, our banking system is more advanced from the
viewpoint of management, organization, knowledge and skills compared
with the other countries of the Commonwealth of Independent States
(CIS). International experts point out a rather high level of
management and supervision in Armenia. The experience and knowledge
of employees of Armenia's banking sector play an important role as
well. Besides, we plan to direct considerable resources to sharply
increase the potential necessary for the country's financial market
to be able to render world-class services.




ARKA: At what stage is the KfW Bank's mortgage crediting program in Armenia?

Sargsyan: At present, nine commercial banks and two credit institutions
are involved in the program. It is being implemented according to
the schedule agreed on with the German side. By mid-2007, under the
program financial institutes had issued 286 credits amounting 1.6bln
AMD. By our estimates, during the first quarter of 2008 the first
tranche of the program, ~@6mln, will have been utilized. The second
~@6mln tranche is expected in April-May 2008.

In 2008, more attention will be paid to the development of the
secondary mortgage market, which is most important for us. In tote,
mortgage crediting doubled in Armenia in 2007 and amounted to 55bln
AMD - a 110% increase.




ARKA: What is the expected amount of private transfers in 2007? What
are the expected trends for 2008?

Sargsyan: I would like to note that the amount of transfers
is increasing. This is reality accounted for by our nation's
peculiarities. Two thirds of Armenians are residing abroad, and
when their economic and financial situation gets better, they are
more active in investing in Armenia. Naturally, this is a generally
positive trend for our nation.

It is no secret for anybody that Armenia is a center of economic
interests of not only our country's citizens, but also all Armenians,
and the creation of a favorable investment environment in Armenia
promotes inflow of capital, development of tourism and use of
services. This is reality which shows a long-term trend, and, if no
cataclysms occur in the world, particularly in Russia and in the USA,
the countries that are principal providers of transfers and have the
largest Armenian communities, this trend will continue.

This year our forecasts of private transfers have been exceeded. They
were expected to increase by 20-25 per cent, while the actual
increase was 40%. That is the volume of private transfers is to exceed
$1bln.

http://www.arka.am/eng/interviews/2008/02/04/7916.html

[Siamanto]

Re: Armenia's Economic Pulse

The Inflation Report: Trends and Policies (Part II)

ARMENIAN PARLIAMENTARIANS TOUGHEN RESPONSIBILITY OF ECONOMIC ENTITIES FOR UNREASONABLE RISE IN PRICES

ARKA News Agency, Armenia
Dec 17 2007

YEREVAN, December 17. /ARKA/. Armenian parliamentarians toughen the
responsibility of economic entities for the unreasonable rise in
prices for consumer goods.

When presenting the package of amendments to the Law "On protection of
economic competition" Gagik Minasyan, Chair of the Standing Committee
on Financial-Credit, Budgetary and Economic Affairs of the National
Assembly of Armenia, said that it is envisaged mainly to toughen
sanctions for unreasonable rise or fall in prices.

"If at present the State Commission on the Protection of Economic
Competition (SCPEC) imposes fines on economic entities within 2% of the
profit gained, after the amendments come into force it is envisaged
to authorize the SCPEC with the right of transferring the groundless
profit of the violators to the country's state budget," he said.

Minasyan said that thus the economic entities will be deprived of
the profit from unreasonable rise, fall or maintenance in prices.

He also pointed out that the elaboration of the package of amendments
was accounted for by the recent unreasonable rise in consumer prices
in Armenia.

"It should be taken into account that Armenia belongs to those
countries the markets of which have dominating entities. This package
of amendments to laws is called to regulate their activity," he said.

4.1% inflation is recorded by the group of goods "animal and vegetable
fats" in November 2007, which is a result of rise in price for
margarine by 9.5% and vegetable fat by 6.5%. Prices for butter rose
by 3.3%.

The inflation on the group "grain products" totaled 2.7% accounted
for by rise in price for flour by 5.1%. In November, prices for bread
rose by 1.3%. Grained sugar became cheaper by 7.4% in November.

The climax of rise in prices in Armenia was recorded in October 2007
when, according to the National Statistical Service, 3% inflation was
recorded as compared to December 2006. The trend of rise in prices
for bread, flour, butter and vegetable oil continued in the country
in October and totaled 13.5%. In October the rise for bread totaled
7.4%. From the beginning of the year, the rise in prices for bread
and flour totaled 23.8% and 28.9%, respectively.

According to the state budget, the inflation in Armenia is planned at
the level of 4% (±1,5%) by the end of 2007. Earlier Chairman of the
Central Bank of Armenia Tigran Sargsyan announced that the inflation
in Armenia in 2007 will total 7%.

http://www.arka.am/eng/economy/2007/12/17/7438.html

YEREVAN FOOD PRICES 'AMONG HIGHEST IN EX-USSR'
By Shakeh Avoyan

Radio Liberty, Czech Republic
Jan 9 2008

The prices of basic food products such as bread and cooking oil are
higher in Yerevan than in the majority of other former Soviet capitals,
an Armenian government official said on Wednesday.

Gurgen Martirosian, a senior official at the National Statistical
Service (NSS), based this assertion on a comparative analysis of food
price indices in the capitals of Armenia and eight other former Soviet
republics, including Russia and Azerbaijan. The data were provided to
the NSS by the Inter-State Statistical Committee of the Commonwealth
of Independent States.

According to those figures cited by Martirosian, Yerevan boasts the
highest retail prices of cooking oil and eggs. Those products cost
less even in Moscow, one of the most expensive cities in the world
and by far the wealthiest place in the former Soviet Union.

Armenia meets its demand in cooking oil mainly through imports, and
government officials could argue that the high cost of transporting
goods to the country pushes up its cost in the domestic market. By
contrast, the bulk of eggs sold in Yerevan stores come from Armenian
poultry farms supposedly competing with each other. Speaking to
RFE/RL, Martirosian could not explain why they are more expensive
than in Moscow and the seven other ex-Soviet capitals.

Only in one of those cities, Kazakhstan's capital Astana, the average
price of bread, a staple food across the former USSR, is higher than
that in Yerevan. The Armenian capital also trails only Moscow as
well as the capital of Kyrgyzstan, Bishkek, in terms of the cost of
butter. In Martirosian's words, sugar is apparently the only basic
foodstuff whose price in Yerevan is close to the CIS average.

The official statistics reflect the increased cost of life in Armenia
which is not confined to food. New research presented by a Yerevan
think-tank last August, for example, concluded that Armenians pay more
for fixed-line phone services than residents of not only neighboring
countries but the United States.

http://www.armtown.com/news/en/rfe/20080109/200801093/

PRODUCER PRICE INFLATION MODERATES IN ARMENIA DURING 2007
by Venla Sipila

Global Insight
February 12, 2008

Industrial producer prices increase by an average of 0.6% over
2007, according to the Statistical Committee of the Commonwealth of
Independent States (CIS). This is a very low rate in peer comparison,
and follows average industrial producer price inflation rates of 0.9%
and 7.7% seen in 2006 and 2005, respectively.

Significance:The now reported further easing of already moderate
producer price inflation in 2007 was combined with accelerating
consumer price inflation. Indeed, consumer prices increased by 6.6%
year-on-year (y/y) in December 2007, while the average inflation
rate accelerated from 2.9% in 2006 to 4.4% last year (see Armenia: 2
January 2008: ). The persistently very strong domestic demand pushed
up consumer prices, necessitating the Central Bank of Armenia (CBA)
to allow the dram exchange rate to appreciate strongly over the year,
as it had little other means to sterilise the effect of strong foreign
currency inflows in the form of workers' remittances and FDI.

Indeed, the dram/US$ rate ended 2007 at 304.22, having strengthened
by some 17% over the year. This, further, acted to moderate producer
price pressure, as the strength of the dram counteracted the high
price of energy imports, moderating the upward impact of commodity
prices on domestic producer price inflation. As domestic demand is
finally expected to cool somewhat, at the same time as international
energy prices remain at high levels, demand pressure on consumer price
inflation should somewhat ease, leading further to weaker upward
pressure on the dram. Thus, producer price inflation is likely to
somewhat pick up this year.

http://groong.usc.edu/news/msg220367.html

CENTRAL BANK OF ARMENIA DRIVES REFINANCING RATE 0.25 PERCENTAGE POINTS
UP TO ANNUAL 6%

ARKA News Agency
Feb 4 2008
Armenia

YEREVAN, February 4. /ARKA/. Central Bank of Armenia decided Monday
to drive refinancing rate 0.25 percentage points up to annual 6%,
the CBA press office reports.

The report says that the bank board's members are united in thinking
that high inflation rate create adverse environment for weakening
inflation pressures on domestic economy.

At the same time, developments inside the country will heavily
depend on high pace of individual consumption growth and the taxation
budgetary policy to be widened in 2008.

The CBA board members expect the outside inflation pressure to go on
throughout this year. They think it will be possible to curb inflation
and mitigate inflation pressure only by tightening monetary conditions.

2.4% inflation was recorded in Armenia in January 2008, compared with
the previous year's December, and 6.6%, compared with January 2007.

In the state budget, inflation is planned to be 4% (+- 1.5%) by
late 2008.

http://www.arka.am/eng/banks/2008/02/04/7933.html

CENTRAL BANK OF ARMENIA RAISES INTEREST RATE
by Venla Sipila

Global Insight
February 12, 2008

The Board of the Central Bank of Armenia (CBA) has decided to increase
the annual refinancing rate by 25 basis points, ARKA reports. This
move takes the key policy rate up to 6%, and follows a hike of similar
magnitude in December, while the rate was left unchanged in January
(see Armenia: 6 December 2007: and 9 January 2008: ).The board of
the CBA remained concerned over both external and domestic inflation
sources. The CBA attributed the continued strength of domestic demand
to expansive fiscal policy. They further maintained that as external
inflation pressure is likely to persist over this year, lowering
inflation expectations and keeping the inflation rates within the
target range are likely to call for further tightening of monetary
policy.

Significance:The CBA's inflation-targeting policy has proved
relatively successful, but necessitating strong appreciation of the
dram exchange rate, in conditions of strong foreign remittance and
FDI inflows. Latest data show that inflation remained at an elevated
level in January, boosted notably by high food prices (see Armenia:
6 February 2008: ). Some moderation in Armenian inflation is likely in
the near term as growth should finally moderate from the double-digit
rates. However, some demand-side inflation pressures will remain as
domestic demand is likely to still remain robust, even if finally
easing. Moreover, oil prices are also likely to remain at very high
rates for some time to come, providing a constant source of inflation
pressure from the cost-side. In addition, the cost of food still
has a very large bearing on Armenian inflation, and development of
grain prices will also be of considerable importance for Armenia's
inflation this year. We believe that the central bank will continue
to be vigilant, stepping in with further rate rises if needed.

http://groong.usc.edu/news/msg220368.html

[aray]

Re: Armenia's Economic Pulse

Oh wow, is this thread on steroids? 305,171 postcount.

[aray]

Re: Armenia's Economic Pulse

Oh wow, is this thread on steroids? 305,171 postcount.

Now 305,517. How you fertilize it Siamanto