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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: 257 - (30/05/02)

The Armenians, if one trusted the statistics, are doing very well. GDP growth is reported as growing by 6% in 2000 and 9.8% in 2001, while it is projected in the more problematic context of slower world growth today, to be 6.5% in 2002.

Economy in adversity
But foreign investment is derisory, around US$100m per year. This year Armenia is likely to receive one fifteenth of the FDI that Azerbaijan will - of course the Azeris are having an oil boom. But the discrepancy is not solely due to that.
Whereas Azerbaijan can trade freely with its neighbours excepting Armenia, (which is a self imposed constraint), Armenia cannot trade with either Azerbaijan or Turkey, that are maintaining a strict trade embargo. The repercussions are enormous and include a disincentive for potential investors to site their Caucasus operations in Armenia. Georgia is the better bet, able to trade with everybody, or Azerbaijan with cheap energy and a special relationship to Central Asia and the Middle East, including above all Turkey. 

President remains optimistic
What Armenia really needs is a settlement of the Nagorno-Karabakh dispute (see above profile of the country). But President Robert Kocharyan, himself once a president of the enclave, is always talking up the economy as the way forward, rather than a negotiated settlement with Azerbaijan.
The economy grew by an astonishing 20% in the first quarter of the year according to him, helped by an even greater rise in exports, some 40%. The highest recorded rate of growth in Armenia, it will create 25,000 new jobs in the course of the year, the president claims. Growth last year of 9.8% had created 40,000 jobs.
Opposition figures dispute the figures, which anyway are recording a comeback from the devastatingly low base of a war-stricken economy. The president would be better advised to knuckle down to serious talks with the Azeris than indulge in hype. The aged, ailing president of Azerbaijan, Haidar Aliyev, is a promising interlocutor, keen to see his son succeed him. What better than after a successful peace deal?

The World Bank in support
Armenia has not quite been forgotten by the international agencies. The World Bank, for instance, is extending a small US$1.3m loan to the Armenian Government Agency (ADA) to help it in its task of facilitating foreign investment and exports. The World Bank organised an investment conference on Armenia last May in New York. It is worth noting that the Armenian 'lobby' in Washington D.C., is reputed to be second only in influence to that of Israel. 
Its president, James Wolfensohn, urged Western companies to invest more heavily, confirming that the country's leadership is committed to the free market. But they are not going to be impressed just by words; they would want action. And here the regime is not very impressive.

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ENERGY

Ukraine interested in construction of Armenia-Iran gas pipeline


Should Ukraine win the bid, it is ready to take an active part in the construction of the Iran-Armenia gas pipeline, the Ukrainian ambassador to Armenia, Volodymyr Tyaglo, told an Arminfo News Agency's correspondent on 26th April .
Speaking about the refusal of the Ukrainian Intercontact company to privatise the Yerevan-based Nairit plant, Tyaglo said that he is currently studying the reasons for the Ukrainian company's refusal. "I am not yet fully informed and have not reached the crux of this matter," Tyaglo said.

Armenia looks to expand market for electricity exports

Armenia is able to export electricity worth US$100m every year, the republic's energy minister, Armen Movsisyan, said on 2nd May, ITAR-TASS News Agency has reported.
The minister recalled that electricity worth US$5m is currently being supplied to Georgia. Work is continuing actively to increase export deliveries to Iran. The minister does not rule out the prospect of expanding the sales market in the Middle East.
The head of Armenia's energy ministry believes that all the other states of the southern Caucasus, and in particular, Azerbaijan, Georgia and Turkey, are experiencing electricity shortages, as are the states of the Middle East, and in particular, Afghanistan, Iraq, Pakistan and Syria.

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FOREIGN ECONOMIC RELATIONS

EU becomes Armenia's major economic partner


Out of 2,100 foreign companies active in Armenia, 313 are from EU member countries, as they have invested US$295m in the Armenian economy, almost one third of all foreign investments. Last year Armenia's exports to EU countries stood at US$88.6m and EU imports to Armenia amounted to some US$252m. These figures were provided by Deputy Trade and Economic Minister, Tigran Davtian, as reported by Armenpress, as a proof that EU was Armenia's major economic partner.
Speaking to reporters after completion of the second session of EU-Armenian economic cooperation sub-committee, Davtian claimed the overall business climate in the country was improving, a key condition for attracting more investments. Davtian said the session was mainly centred on how to overcome problems arising for Western companies in Armenia and Armenian companies in Europe. A senior EU official said more attention had been given to a practice of collecting advanced taxes in Armenia, adding that the government officials had promised to eliminate it. The official concluded that besides Armenian cut diamonds, the main product exported to EU, Armenian agriculture goods could alsobe competitive in the exporting markets.

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FOREIGN INVESTMENT

US-based fund to invest US20m in recreation complex in Armenian capital

Armenian MPs passed at the first reading, by just one vote, the government's legislative initiative on privileges in taxes, customs duties and obligatory payments. The MPs also passed at the first reading, changes and amendments to the law on the import and re-import of cultural valuables, Arminfo News Agency has reported.
According to Armenian Justice Minister David Arutyunyan, this is about offering territory to the Gafescheyan museum fund in the centre of the Armenian capital. The fund will invest US$20m over five years in completing construction of the Cascade complex and running it. The complex is located in the centre of Yerevan. Eight hectares of land adjoining the Cascade will be given to the fund. A museum of glass is planned on the Cascade's territory.

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INFORMATION TECHNOLOGY

EU unveils information-technology initiative for Caucasus

The European Union has announced a new initiative to promote economic integration in the South Caucasus and link the volatile region more closely to Europe. A high-level international conference that ended in Armenia on 16th April was the first practical step toward the launch of the EU's Caucasus Information Technology Initiative, or CITI. But as RFE/RL News Agency correspondent Emil Danielyan reported from Yerevan, the continuing bitter conflict between Armenia and Azerbaijan remains a serious hindrance to the implementation of regional projects. 
Senior government officials, business executives, and representatives of international organizations who gathered in the Armenian capital, Yerevan, agreed to promote the development of an "information society" in the Caucasus. 
In a joint declaration, they pledged to work out an action plan that will flesh out the European Union's latest initiative - the CITI. The participants in the EU-sponsored conference said the successful implementation of CITI will result in the further integration into Europe of Armenia, Azerbaijan, and Georgia.
The EU has still to work out details of the initiative, but it has already pledged financial and technical aid for the spread of information technology (IT) in the three regional states. In a video message to the conference participants, the EU's External Relations Commissioner, Chris Patten, said Brussels strongly supports the development of the high-technology sector because of its potential impact on economic development, good governance and regional integration. 
Armenian Foreign Minister, Vartan Oskanian, said the new EU effort represents an opportunity for the three impoverished countries to share in the benefits of the global IT boom. Oskanian chaired the opening and concluding sessions of the two-day forum. 
"This conference is not an end; it's only a beginning. That's how we view this. And the key to all this is that we somehow manage to provide continuity. The next thing we've got to do - not Armenia alone, but along with Georgia and hopefully Azerbaijan - is to go and knock on the European Union's door and put new questions before them."

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MINERALS & METALS

Armenian parliament approves sale of copper combine to US company

The draft law on the direct sale of 100 per cent of the shares in the Akhtala ore-dressing combine to the American company Metal Prince Ltd, which has already invested more than US$1m in the enterprise, passed its second and final reading in the Armenian National Assembly, Arminfo News Agency has reported.
The Armenian deputy minister for trade and economic development, Armen Gevorkyan, who presented the draft law, said that as well as the privatisation bill the government had approved Metal Prince's investment programme of an overall sum of approximately US$2.6m. Of this, US$1.3m are to be spent on restoring the second production line at the Akhtala ore-dressing combine and on increasing output. The remaining US$1.22m will be invested in the Shamlukh deposit which is being worked at present; specifically, the money will be spent on reconstructing and reinforcing the mine, repairing the administrative building and creating a lumber yard and other ancillary enterprises.
The Akhtala ore-dressing combine was idle for 12 years and was re-commissioned in 2000 thanks to Metal Prince's investment of US$940,000, which allowed for the restoration of Akhtala's first production line and the lower strata of the Shamlukh deposit, construction work in the main and administrative buildings and the restoration of the electricity supply. As a result in October 2001 the combine managed to get back into operation. At present its planned capacity is 800 t of copper concentrate per month with a 25 per cent concentration of copper. The combine processes the ore extracted from the Shamlukh deposit at 32-37 per cent of its capacity.
The price for the sale of the combine will be set by a future decision of the government.

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