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armenia

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  ARMENIA

REPUBLICAN REFERENCE

Area (sq.km)
29,800

Population
3,336,100

Principal ethnic groups
Armenian 93.3%
Azeri 2.6%
Russian 2%

Capital
Yerevan

Currency
Dram

President
Robert Kocharian

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Background:
An Orthodox Christian country, Armenia was incorporated into Russia in 1828 and the USSR in 1920. Armenian leaders remain preoccupied by the long conflict with Azerbaijan over Nagorno-Karabakh, a primarily Armenian-populated exclave, assigned to Soviet Azerbaijan in the 1920s by Moscow. Armenia and Azerbaijan began fighting over the exclave in 1988; the struggle escalated after both countries attained independence from the Soviet Union in 1991. By May 1994, when a cease-fire took hold, Armenian forces held not only Nagorno-Karabakh but also a significant portion of Azerbaijan proper. The economies of both sides have been hurt by their inability to make substantial progress toward a peaceful resolution.

Update No: 258 - (27/06/02)

The Armenians are not having a success story with their economy, which has been languishing since independence. The festering relationship with Azerbaijan, with the trade embargo upon it by both Turkey and Azerbaijan, has been a prime factor. But so also has ancient and endemic corruption.
The Armenians, like certain other peoples, operate better abroad than at home. They contributed a far larger proportion of outstanding engineers and business leaders in the Soviet Union then their numbers warranted, such as the Mikoyan bothers, one an inventor of the MiG aircraft, the other foreign trade minister for thirty years. The pre-Soviet Armenia threw up brilliant businessmen, such as the oil tycoon, Gulbenkian, operating out of Baku.
Today the brilliant Armenian business people are generally in the diaspora. They naturally want to come back and help. But they soon get disenchanted at the venality and insider dealing. State tenders are patently rigged at the outset.

Economy grows
Things are looking up a little in the present decade. GDP growth after being largely stagnant in the 1990s, was positive in the last few years, 6% in 2000 and 9.6% in 2001, but from a very low base. GDP this year is due to rise by 6.5%.
Foreign direct investment (FDI) has seen a certain trickle flow in. But revised figures showing FDI of US$204m in 2000, US$92m in 2001 and a prospective US$80m this year, are still poor by comparison with Azerbaijan or even Georgia, whose international profile is better. Basically, only the diaspora are investing, bar some Greek and French companies. Athens and Paris both have a fair number of Armenians.

Statesmanship needed
The primary hurdle is of course the disputed enclave in Azerbaijan. President Robert Kocharian was once its president and principal warlord. Hawks can sometimes broker a good peace; Nixon and Vietnam spring to mind. But Kocharian shows no tendency in that direction. 
His last chance may be slipping away. President Haidar Aliyev is the obvious interlocutor, an old and ailing man, keen for a diplomatic breakthrough to ensure the succession for his son, Ilham. But he has a natural sticking-point all the same. He wants to see at least six of the seven Azeri provinces held by the Armenians returned to Azerbaijan. The Lachin corridor can be an exception, linking the enclave to the home country. But return of the rest is vital to allow refugees to go home.
Kocharian may just not be domestically strong enough to negotiate away what has been won with blood and much suffering. But the suffering will continue all round unless a breach is made. The West is naturally seeking a solution. So is Russia. But the real effort is needed from the two involved, Caucasian republics.

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AGRICULTURE

Armenia looks to buy Belarusian agricultural equipment 


Armenian President Robert Kocharyan visited the Belresursy concern and the Minsk Tractor Factory on the second day of his official visit to Minsk, Arminfo News Agency has reported. 
Armenia needs Belarusian agricultural equipment and, therefore, the Armenian side is looking into the prospects not only for the delivery of Belarusian tractors to Armenia, but also the possibility of them being assembled in Armenia. According to Belarus's temporary charge d'affaires to Armenia, Uladzimir Sysoyew, the Belarusian ministries concerned are currently studying economic proposals from entrepreneurs in Armenia's Tavush Region. He said the region is interested in acquiring Belarusian mini-tractors and also in assembling them. Tavush Region, in turn, has proposed that the Belarusian side could buy concrete, raw materials for the production of wine and agricultural goods from Armenia. 

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AVIATION

Armenian airport handed over to Argentinean management 


Yerevan's international Zvartnots airport has been handed over to the management of the Argentinean entrepreneur Eduardo Eurnekian for a period of 30 years, Arminfo News Agency has reported.
The Armenian Justice Ministry told Arminfo that the act of handing over and receiving the airport's property was signed on 8th June by the Zvartnots management, the main civil aviation department, the Ministry for the Management of State Property and Eduardo Eurnekian.
The Justice Ministry said that repairs to the runway and construction of a new building on the site of Terminal 2, where the VIP lounge is located, will start soon. This work should be completed within five years and Eurnekian has undertaken to invest US$35m in it. The overall value of this investment programme over 30 years is estimated at US$100m, which will make it possible to bring the airport up to international standards.
All the airport's technical ground services, except air-traffic control, have also been handed over as well. The agreement on the airport being managed in this fashion was signed by the Armenian government and the Argentinean entrepreneur on 4th October 2001.
The Armenian National Assembly recently adopted a package of legislative initiatives providing Eurnekian with tax concessions. This will allow Eurnekian to diversify his business and open a free trade (duty free) zone at Zvartnots airport, with a corresponding chain of shops and games arcades, and to organise other entrepreneurial activities. This package of documents also releases any economic entity operating on the territory of the airport, which is producing goods for export, from paying profit tax.

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ENERGY

Armenian government moots putting power grids under foreign management 

The World Bank plans to carry out a programme with the Japanese government to improve the technical condition of Armenia's power distribution grids, Mediamax News Agency has reported.
The chairman of the Armenian power regulatory commission, Vardan Movsesyan, said in Yerevan that the entire programme, which is intended to make the Armenian power grids more attractive for investment, will amount to about US$65m. 
At the present time the Armenian government is examining the possibility of transferring the country's distribution grids to a foreign company for trust management, whilst not ruling out the possibility of privatising them. Both the tenders on privatisation of the power grids organised by the government in 2001 were declared invalid because of lack of interest on the part of potential purchasers. 
Vardan Movsesyan stressed that a real solution to the problem of excessive losses in Armenia's power supply system could be found only once the grids were privatised or transferred to trust management.

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FINANCIAL NEWS

Investment in Karabakh economy over US$16m in 2001 

In 2001, capital investments by economic enterprises in the real sector of the economy of the Nagornyy Karabakh Republic [NKR] totalled 9.57bn drams [US$16.8m], of which 7.36bn drams [US$13m] or 76.9 per cent are foreign investments.
The Statistics, State Register and Analysis Department of the NKR told Arminfo News Agency that 67.2 per cent of capital investments were made in the areas of communications and transport.

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FOREIGN ECONOMIC COOPERATION

Armenia, US said ready to implement economic cooperation programme

Armenia and the US have confirmed the action programme for the implementation of the decisions adopted in Yerevan on 23-24th January at the fourth session of the Armenian-American intergovernmental commission on economic cooperation, Arminfor News Agency has reported. Armenian Minister of Finance and Economy, Vardan Khachatryan, and the US ambassador to Armenia, John Ordway, signed the document.
As Arminfo from the press service of the Finance and Economy Ministry informs, the action programme envisages, in particular, the adoption of a law on controls over exports by the Armenian side, joining the Geneva Convention on copyright and cooperation in the struggle against terrorism.
For its part, the American side will assist Armenia's admission to the World Trade Organisation, ensure access for Armenian cigarettes to the American market, and render technical assistance to the Armenian Central Bank in passing banking legislation and improving supervision of the banking system. The US will also assist the Armenian government in working out a new development strategy for 2004-2008.

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MINERALS & METALS

RusAl invests US$20m in Russian-Armenian joint venture, Armenal 

Russian Aluminum (RusAl) company has invested about US$20m in the form of fixed and turnover assets to the Russian-Armenian foil-rolling plant, Armenal, according to a reporter from RIA "Oreanda", quoting the director general of Armenal, Movses Dzavaryan. 
In words of Mr. Dzavaryan, works concerned with improvement of production quality have been carried out at the enterprise over the period of two years from the time of its foundation. These improvements have made it possible to make production competitive. "Practically all production at Armenal is intended for export to Europe and the US, and we have to play in accordance with the rules set by our competitors on their markets. One of the main rules is high quality," pointed out the director general. He noted that production volume at the enterprise has grown 1.9 times during the period of January-April of 2002 compared with the figures for 2001. 
According to the Ministry of Trade and Economic Development of Armenia, the plant Armenal produced products valued at 1.25 billion drams in January-April of 2002. This is 123% more than during the corresponding period of 2001 (US$1 = 581 drams). 
Armenal was founded on May 18th 2000. The Russian Company RusAl, owns 74% of Armenal shares, the remaining 26% shareholding being in the ownership of Kanaker Aluminum Plant (the base for Armenal). 

Canadian firm outlines finance plans for Armenian gold concern

The Canadian company First Dynasty Mines Ltd. (FDM) has extracted and processed 5,268 kg of gold equivalent in the five years that it has been working on the Armenian market, the director of the Ararat Gold Recovery Company (AGRC), Vardan Vardanyan, told an Arminfo News Agency correspondent. AGRC belongs to FDM.
According to Vardanyan, FDM intends to invest US$8-10m in the AGRC over the next 2-4 years. This investment will mainly be used for geological prospecting and to restore existing equipment and acquire new equipment for the Zod mine site.

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