Armenia's Economic Pulse

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ECONOMY OF ARMENIA REMAINS "COMPETITIVE ON THE WHOLE"
By Ara Martirosian

AZG Armenian Daily
04/07/2007

In order to preserve the competitiveness, the Government of Armenia
should invest additional efforts, according to the Head of IMF
delegation in Armenia

After the meeting with the representatives of RA Government, Central
Bank, International donors and Armenian businessmen, the Head of
International Monetary Fund (IMF) mission's Armenian group Ms. Marta
Castello-Branco met with the reporters in Armenia, on July 2.

Summarizing the recorded indexes of Armenian economy of the first 5
months of 2007, she stated that the indexes remained "impressive",
as the growth of GDP exceeded the expectations and the inflation was
consonant with the purposeful index.

According to the representative of IMF, Armenia is notable for
its combination of high economic growth and low inflation in the
region. Armenia has recorded progress in tax-collecting sphere,
though there are more opportunities of progress in this sphere.

Ms. Marta Castello-Branco stressed the importance of preserving the
high rates of the economic growth and the urgency of further reducing
of poverty.

At the same time she expressed concern over the rapid rise of wheat in
international market, which might have an influence upon the economic
growth index of Armenia.

The economic growth index may be influenced also by Central Bank,
which buys dollar to reduce the rapid shakings of currency value.

The next possible factor on the economic growth index is that fewer
expenses are run up in the first half of this year and the increase
in the expenses of the second half of this year may record surplus
inflation.

There are three main issues in the economy of Armenia according to
IMF representative of Armenia: the amendments in pension system,
gas subsidization and competition of economy.

IMF welcomes the new project of the Armenian Government to improve the
pension system. The pensions are very low in Armenia at present. It's
necessary to increase the subtractions for the pensions and to raise
the pensions. It may also influence the inflation index.

The next issue is the subsidization of gas, as the subsidization time
of the gas ends by the end of 2008, and after it the gas prices will
rise rapidly. There is a big threat that the consumer prices will also
have a rapid rise influenced by the gas prices. IMF representative
advised the Government to reduce the subsidization gradually. And
also to subsidize only socially not provided strata.

The issue of the competition of Armenian economy is connected with
the valuation of Armenian dram. In spite of a great number of inflows
of foreign currency, which have a negative influence on some export
spheres and the households that are dependent on private transfers,
the IMF records that the economy of Armenia remains "competitive on
the whole". In order to preserve the competitiveness, the Government
of Armenia should invest additional efforts to improve the business
environment and to increase the productivity.

http://groong.usc.edu/news/msg194911.html

[Siamanto]

Re: Armenia's Economic Pulse

A BANK WITH GERMAN CAPITAL BEING FOUNDED IN ARMENIA

Noyan Tapan
Jul 03 2007

YEREVAN, JULY 3, NOYAN TAPAN. The CBA Board on July 3 preliminarily
approved the bank activity licensing of the ProKredit Bank CJSC
in Armenia.

According to the report provided to Noyan Tapan by the CBA Press
Service, the ProKredit Bank CJSC's three founders, the ProKredit
Holding AG and the Development Bank (KfW-Kreditenschaft fur
Wiederaufbau), as well as the European Bank for Reconstruction and
Development (EBRD) have applied to the Central Bank of Armenia with
the mediation to found ProKredit Bank CJSC.

http://groong.usc.edu/news/msg195020.html

[Siamanto]

Re: Armenia's Economic Pulse

FOREIGN INVESTORS TOOK THE FANCY OF IMMOVABLES, BANKS AND ENERGY IN ARMENIA
Narine Kirakosyan

ArmInfo, May 22, 2007.
2007-07-03 12:11:00

Interview of Head of the Department of Consulting Services of 'Ameria'
Company Gagik Sahakyan

If the Armenian entrepreneurs, having a business-project, used to
apply for professional consultation at the end of 90s for attraction
of investments, today they apply for advise regarding increase of
productivity of investments in economy and profitability of their
business. As the saying goes," contribution demands wit" and investors
often apply for this "wit" to "Ameria", the leading company in the
market of consulting services in Armenia. "Ameria" specializes in four
main spheres of professional activity: managerial consulting; audit;
accounting and tax consulting; juridical consulting; investment and
banking services.

Head of the Department of Consulting Services of "Ameria" Company
Gagik Sahakyan kindly agreed to answer a number of questions of
ArmInfo correspondent.

Mr Sahakyan , your company, founded in 1998, has soon become the
leader in the Armenian market of consulting services. You introduced
the international experience in this sphere and showed understanding
of the local peculiarities during solution of complex problems in
more than 30 spheres of economy and public activity. What is the
evolution of consulting services over the last years?

In 1998-2000, we were more addressed a request to find investors. The
entrepreneurs had ideas, however, the political-economic situation
of those years was accompanied by lots of financial problems, which
had to be solved.

Our specialists also assisted in developing a strategic plan of
development, directed to potential investors. Then they started
addressing more for support during restructurization of production,
i.e. when it is necessary to determine the points of "increased danger"
in the business system, reveal the inner reserves of the enterprise,
enhance its investment attractiveness. Then, the domestic enterprises,
which lost the external markets, had to find new target markets,
for which our specialists examined the market demands. In addition,
if the market was free for almost all the business undertakings in
the midst-end, 90s, now big competition exist in the market and our
clients seek for the ways of competitiveness increase.

However, evolutional development exists here as well. For example, at
the end of 90s, we advised the Armenian entrepreneurs on processing
of agricultural production, who lost the market, to refuse from
production in glass container, aimed at the final consumer, and
start production of concentrated juice, tomato and other products
in big aseptic barrels aimed at industrial consumers. This saved the
companies' resources and allowed entering the international markets
with confidence. However, now, when the financial state is stable and
upgrading is completed, we advise again to switch over to production
aimed at the final user. Although it requires considerable marketing
efforts but enables to work in more profitable segments. Today,
the business development evolution has reached the level when the
majority of our clients address us for the purpose of increasing
efficiency of their business processes. This includes optimization
of organizational and functional structures of companies, development
and implementation of informational control systems, etc.

What sphere do the investors prefer today to invest money in?

The investors are greatly interested in developer projects. Of course,
initially, the investors wish to study the financial peculiarities in
the area of construction of the housing real estate, its profitability
and the possible concomitant risks. The agricultural and processing
sectors, which need enlargement of technological opportunities,
also regenerate. At the same time, unfortunately, the textile and
engineering industries are in crisis. The facilities of metal mining
industry remain rather demanded for investments. It is pleasant to
note that despite the positive conjuncture in external markets,
the majority of companies, which exploit the large deposits, are
guided by experience of the efficient foreign management and attract
qualitative resources as to increase efficiency of the processes.

Some interest is also observed in the area of information technologies.

You render consultations in the banking sphere as well. It would be
interesting to know your assessment of the situation.

I would characterize the situation in the banking system of Armenia as
stable with all the pluses and minuses typical to this stability. In
fact, we have a rather predictable banking system, a relative security
of investments, low inflation level, on one hand. On the other hand,
most of the banks are passive in their investment activity, that
negatively affects potential development of the industry. Here, we
lag behind many countries, including the CIS developing countries. For
example, the situation in Georgia in this aspect has radically changed
over the last years. The banking system here develops more rapidly. I
think the point is that the key free resources of the banking system
are mainly concentrated on the building and development projects where
the level of risk is more predictable than in industry. However, I
am sure that investments in the banking sphere will grow and lead to
diversification of the banking services and use of new technologies
that, in its turn, will cause toughening of competition and natural
strive for broadening of the client base via a literate and more
aggressive policy.

There are foreign investments in the energy sphere of Armenia,
especially in the small energy. This is a profitable sphere for
investors. Why the energy prices are so high in Armenia?

The power generation in Armenia is carried out by three main sources
and the prime cost of each of them vastly differs. The hydropower
plants assure 20% of the total energy output, the nuclear power
plant generates the cheapest electric power and assures 40% of the
demand. The heat power plants generate the same volume of power and
the prime cost of each kW makes up more than 3 cents. I think our
electric power prices are not so high taking into account that 1 kW
at night costs 15 drams and 25 drams in daytime. This is a fair price
which allows the energy-generating plants to gain rational profit
and attract new investments for upgrading of plants and construction
of new powers. Moreover, it should be noted that the policy of
tariffs especially stimulates investments in the renewable energy
resources. The investment activity, observed in the sphere of HPP,
is stipulated for this fact, especially as the operational life of
Hrazdan hydropower plant ends in 2017, and that of Metsamor Nuclear
Power Plant ends a year earlier. Construction of new NPP is undecided,
especially since this project is very expensive.

Therefore, the extensive network of HPP may become a partial
alternative to it.

At last, can you comment on the prospects of development of tourist
business in Armenia?

If the matter concerns the tourism development as such, it is
necessary to get concentrated on the directions of the sphere where
the investments may give results. You see, there are prerequisites
for the religious tourism development, there is an extreme or an
echo-tourism, which may and must be developed in Armenia. Having all
the resources - historical and cultural objects - one could develop
a tourist infrastructure meeting the international standards. For
example, one could design places for souvenir-trade, small hotels,
restaurants and other infrastructures with attraction of designers and
landscape architects, taking into account the opinion of the Church.

At the same time, the tourists are attracted not only by sightseeing,
but the rest and entertaining programmes as well. As for the resort
town of Tsakhkadzor, one cannot say that it has become a resort. Here
the main problem is not the absence of investments but of a concept
according to which this area is developed. The investors made great
contributions where and how they liked, however, in most of cases,
the resort development logic was not taken into account during the
hotel construction. High prices in the hotels is another problem to
be fortunately solved by the market. High prices seem to dictate
high-level service. In fact, the service in these hotels should
pass a long way to meet the international standards. In a nutshell,
Tsakhkadzor has no style that is typical to a mountain-ski resort,
and this omission should be completed if the investors wish to repay
their expenses and the state - to stimulate development of a definite
niche in tourism.

http://groong.usc.edu/news/msg195004.html

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Re: Armenia's Economic Pulse

ARMENIA'S FOREIGN DEBT GROWS BY $45 MLN IN 1Q07, TO $2.1 BLN

RIA Novosti, Russia
July 3 2007

YEREVAN, July 3 (RIA Novosti) - Armenia's gross foreign debt grew
by $45.2 million in the first three months of 2007, to $2.1 billion
as of April 1, the national statistics service of the South Caucasus
republic said Tuesday.

The Armenian government's foreign debt stood at $1.0 billion, the
private sector's foreign liabilities amounted to $367.5 million,
monetary authorities owed $185.1 million and commercial banks $201.5
million, while direct foreign investment in the form of loans totaled
$292.1 million, the service said.

Long-term liabilities accounted for 68.9% ($1.4 billion) of the
republic's foreign bill.

Armenia's gross foreign assets increased by $27.3 million in the
reporting period to $1.4 billion as of April 1, the statistics
service said.

As a result, Armenia's net foreign debt grew by $72.5 million, to
$718.4 million in the reporting period, the statistics service said.

http://groong.usc.edu/news/msg194937.html

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Re: Armenia's Economic Pulse

DILIJAN - A FINANCIAL CENTER?
By Ara Martirosian

AZG Armenian Daily
27/06/2007

Serge Sarkisian's suggestion for changing Armenia into a regional
financial center

The Chairman of the Union of Armenian Banks Stephan Gishian summarized
the results of 2006 in the annual meeting of the union on June 25.

According to Gishian an intense competition was recorded among the
21 banks of Armenia in 2006. Thanks to it the service level rose and
the services were developed.

In 2006 all the banks had profits - 17.1 billion drams in total. The
banks' assets increased by 20% - 544 billion drams, the deposits
exceeded 150 billion drams.

Stephan Gishian was sure that this year the results would be better,
but he mentioned that there were also many things to do.

The deposits are only 5% of GDP in Armenia, while in European countries
it is 50%. The banking level is very low in the regions.

The Chairman of the Union of Armenian Banks called all the bankers
to put more efforts in order to direct money turnover to the banks
and to reduce the shadow.

The Prime Minister Serge Sarkisian in his speech assured that Armenian
banking system is involved in the world financial processes. He also
mentioned that the role of banking system in the development of the
economy is unsatisfactory, that's why the specific weight of the
loans in GDP does not exceed 10%.

The Prime Minister also spoke about the projects that the Government
would realize together with the Central Bank and Union of Armenian
Banks.

The first proposal is to change Armenia into a regional financial
center. Taking into account not-proportional development of the
Armenian regions and that most of the people who live out of the
capital are deprived of making use of the banking system, the Prime
Minister proposed choosing a medium or a little town in Armenia and
changing it into a financial center. "For example, Dilijan or another
town. It will also contribute to the development of the whole region",
he said.

The Chairman of the Armenian Central Bank Tigran Torosian responded
to the proposal of the Prime Minister and said that the Central Bank
and the Union of Armenian Banks would discuss what investments and
how long it would take to change one of the Armenian towns into a
financial center.

The Chairman of the Central Bank mentioned that the annual 20-30%
development of the banking system was not enough for the aim of
increasing the role of the banks in the development of the economy. It
might be at least 40%.

He also attached importance to the growth of the involvement of natural
and juridical persons in the banking system. The bank clients' number
increased only by 8.5% (60.000 people) and was 763.000: 723.000 -
natural persons and about 40.000 - juridical persons.

The next issue is the strengthening of the competition of banking
system. 5 foreign banks will start their business in the Armenian
banking system soon: "Armpostbank" with Dutch capital, Russian
"Gasprombank", Lebanese "Byblos" bank, Austrian "Rayfazen" and German
"Procredit" banks.

Tigran Torosian attached importance to the development of hypothec
market and mentioned that in the next 5 years it is planned to increase
the volumes of crediting to 350 billion drams instead of present 30
billion drams.

Not-compatible companies leave the insurance sphere.

In the security market the Swiss OMX will get the Armenian Stock
Exchange and Central Depositary and will start the development of
this sphere.

The Chairman of the Central Bank also promised to create 600 billion
drams savings 5 years later in virtue of the reforms in the pension
system.

http://groong.usc.edu/news/msg194105.html

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Re: Armenia's Economic Pulse

ARMENIA CAN MEET 30-40% OF ITS ENERGY NEEDS WITH OWN ENERGY RESOURCES IN NEXT 15-20 YEARS

Noyan Tapan
Jun 27 2007

YEREVAN, JUNE 27, NOYAN TAPAN. Armenia can meet 30-40% of its energy
needs with its own energy resources in the next 15-20 years. The
RA Deputy Minister of Energy Ara Simonian told reporters on June 27
that Armenia's energy strategical program attaches special importance
to the development of renewable, alternative energy. In particular,
it is important to build small hydropower plants. Small hydropower
plants currently generate 200-230 million kwh of electricity, and
there is potential for constructing 270 small hydropower plants with
the capacity of 600-700 million kwh in the next 15-20 years. Their
construction will ensure 15% of the total energy consumption.

According to A. Simonian, the construction of three big hydropower
plants, namely the Meghri hydropower plant with the capacity of
130-140 megawatts, the Shnogh plant (75 megawatts) and the Loriberd
hydropower plant (60 megawatts) is also of key importance.

The deputy minister said that in terms of using solar energy,
Armenia is considered to be a country with quite a great potential
as compared with the average European one: the average potential of
European countries makes 1,000 kwh per square meter, while in Armenia
this index makes 1,720 kwh.

http://groong.usc.edu/news/msg194172.html

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Re: Armenia's Economic Pulse

ARMENIA'S GOVERNMENT PLANS TO PROVIDE 8-10% ANNUAL GDP GROWTH IN 2007-2012

ARKA News Agency, Armenia
June 26 2007

YEREVAN, June 26. /ARKA/. Armenia's Government plans to provide
8-10% annual GDP growth in 2007-2012, runs the action plan of the RA
Government submitted to the Parliament on Tuesday. The document said
that the growth will allow Armenia entering the group of countries
with average income by the end of 2009.

The Government attaches importance to the maintenance of macroeconomic
growth from the viewpoint of stable economic growth.

With this objective it is planned to continue tax and budgetary policy
in maintaining stable tempos of economic growth and macroeconomic
stability.

At the same time, according to the Government, the reliable and
predictable money and credit policy to be implemented by the Central
Bank of Armenia is an important precondition for economic development.

According to the program, the Government planned minimum 10% growth
of annual investments. The growth of urban employment is planned 10%
or 105ths positions. Such result is planned to be achieved by means
of encouraging investments and further development of business
and investment environment as well as simplification of business
procedures.

The annual growth of labor productivity is expected to make 7% in
the coming five years.

The Government intends to provide 27-30% correlation of investments
and GDP which will be enough to provide 8-10% GDP growth.

The necessary volume of capital investments is planed to be achieved
by private investments, in some cases on the basis of cooperation
between state and private sectors.

According to the program, the level of collection of state incomes
is expected to make 0.3-0.4pct from annual GDP.

The Government also planed annual increase in pensions, as a result
of which in 2012 the average pension will exceed the index of poverty
by 1.5 times.

Besides, it is envisaged to increase financing of social, healthcare
and culture sectors. According to the program, state expenditures of
the social maintenance and social insurance system will make 6.2%,
healthcare - 2.2%, education - 3.5% of the GDP.

The program points out that the Government treats 29.8% poverty level
rather high. Significant poverty reduction is considered as one of
the main objectives of the executive power. The document envisages
significant poverty reduction, as a result of which the index will
be lower than 11.2% in 2010 and the extreme poverty - less than 1.6%.

At that the total level of poverty should not exceed 6.4% in Yerevan,
15.1%, - in other cites, 12% - in rural areas. The extreme poverty
should not exceed 0.8% in Yerevan, 2.3% - in other cities - 2.3%
and rural areas - 1.7%.

Cooperating with all the sides interested, the Government will
continue the process of considering the Strategic program overcoming
poverty and in 2007 will approve the program for 2008-2015, treating
it as the most important element of the country's stable and safe
development.

http://groong.usc.edu/news/msg194127.html

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Re: Armenia's Economic Pulse

ARMENIAN GOVERNMENT SET PRIORITIES FOR DEVELOPMENT OF MAIN ECONOMIC SPHERES

ARKA News Agency, Armenia
June 26 2007

YEREVAN, June 26. /ARKA/. The Armenian Government set priorities for
development of the main economic spheres, says the government action
program for 2008-2012 submitted to the parliament Tuesday.

The Armenian Government attached importance to the increasing of the
share of industry in the structure of economic growth, as well as to
the obtaining of a status of industrial country for Armenia.

The document stresses the importance of implementing industrial
export-oriented policy. The Armenian Government will support the
development of new and technologically advanced spheres and will set
favorable conditions to attract investments to the industrial sector.

The program also attaches importance to complex development of chemical
and metal mining industry. The first priority in the Armenian industry
is the development of metal mining industry to facilitate the long-term
development of the country's economy, says the program. According
to the program, administrative and legislative conditions should be
improved to take the advantage of the huge potential of metal mining
industry in Armenia.

The government will remain focused also on applying products and
services of IT sector and forming "an electronic community" in Armenia
due to the great role IT sector plays in economic progress of the
country, as well as in increasing the efficiency and maintaining the
competitiveness on world markets.

Among key spheres the Armenian Government considered also agriculture
providing about 18% of GDP and 45% of employment in the country. The
program points out that the share of agriculture in GDP decreased in
the recent years due to advanced rates of growth of construction and
trade spheres, but the considerable share of agrarian sector in the
country's economy is to remain considerable and to make 14% of GDP
in 2012.

Taking into account the peculiarities of the sphere, the government
intends to conduct balanced policies - increase the efficiency through
private and state investments on one hand and implement target support
to small producers on the other hand.

Consistent efforts are to be taken to eliminate the hindrances to
rural credits and to set preconditions for introduction of insurance
against climate risks.

The program envisages a considerable increase in the state investments
in construction and improvement of rural roads. All the settlements
in Armenia are expected to have at least one normal road connected
them to international roads.

http://groong.usc.edu/news/msg194133.html

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ARMENIAN CCI TO CONTRIBUTE TO COUNTRY'S ECONOMIC DEVELOPMENT

ARKA News Agency, Armenia
June 29 2007

YEREVAN, June 29. /ARKA/. The Chamber of Commerce and Industry of
Armenia (CCI) intends to make a serious contribution to the achievement
of major goals of the country's economic development, CCI Chairman
Martin Sargsyan stated at the opening of the business conference
"Prospects of Armenia's economic development and CCI's role".

According to him, in the context of rapid development of the world's
economy, Armenia's economy has to meet new challenges.

"Processes of economic globalization not only afford new opportunities
for the development of national economies, but also pose a threat to
the countries unprepared for this rapid development," he said.

Sargsyan pointed out that Armenia's CCI has established strong ties
with numerous European and international structures, which affords
Armenian producers many opportunities for promotion on the world
markets and for involvement in international trade and economic
processes.

"Armenia's CCI can make a serious contribution to the achievement
of major goals of the country's economic development and is ready
to render assistance in resolving the problems arising on this way,"
he said.

Speaking of the effectiveness of the conference, Sargsyan said that
no governmental program can be effectively implemented without being
supported by the population and business.

"All of us have a good opportunity to jointly find solutions to the
global problems facing the country by exchanging experience and making
practical proposals," he said.

In his turn, RA Deputy Minister of Trade and Economic Development
Armen Gevorgyan pointed out that the RA CCI is one of the important
links in cooperation between the Government and business.

"The Government, particularly the Ministry of Trade and Economic
Development, attaches high importance to this cooperation," he said.

Gevorgyan added that further development of Armenia's CCI will play a
great role in forming effective business environment in the country,
particularly in the small and medium business sector.

The goal of the conference "Prospects of Armenia's economic development
and CCI's role" is the enhancement of the CCI's role in Armenia's
socio-economic development, consolidation of the CCI's cooperation
with government structures and local government bodies as well as
discussion of urgent problems with businessmen.

Armenia's CCI launched its activities in 2001 and has representative
office in all Armenian regions. It is a member of the European and
International Chambers of Commerce and Industry, World Federation
of International Chambers, Association of Chambers of Commerce and
Industry of Black-Sea countries, Business Council of the Black Sea
Economic Cooperation and the Council of Chairmen of the CIS Chambers
of Commerce and Industry.

http://www.ens-newswire.com/ens/jul2007/2007-07-06-01.asp

[Artsakh]

Re: Armenia's Economic Pulse

ways To Assist Armenia:

1) Visit Armenia And Spend A Few Bucks There

2)buy Products Made In Armenia

3)don't Buy Products Made In Turkey