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Update No: 254

The Armenians are being drawn into the anti-terrorist coalition even though they are far from any likely attack. They are in a not dissimilar situation from Israel, a non -Moslem except for Georgia, nation surrounded by Moslem ones hostile to them. There are of course big differences all the same.
The US, nevertheless, views Armenia as a potentially useful ally and no less a figure than Donald Rumsfeld, US Defence Secretary, took time off to visit Yeveran in December to meet President, Robert Kochanyan, and Defence Minister, Serj Sargsyan, to discuss bilateral military cooperation. The US is now interested in a military presence in the Caucasus as well as Central Asia.
This cannot have gone down too well in Moscow. But the Russians are having to come to terms with the fact that the US is vastly their superior in military affairs, indeed is vastly superior to anybody else these days. Armenia has previously been definitely in the Russian sphere of influence, helped to victory in the war with Azerbaijan in the early 1990s by covert Russian assistance. The war has left the fatal legacy of a blockade by Azerbaijan and Turkey until the Armenians retreat from the 20% of Azeri territory they hold.
This has crippled economic performance; for its trade with its neighbours to the South and West has long been important to Armenia. It is importing three times as much as it is exporting, the sign of a grave disfunctioning of the economy. That it can happen at all is due to the generosity of international agencies, the World Bank, the IMF, etc and the extensive Armenian diaspora, who are being supportive with aid and foreign investments.
What is desperately needed is a negotiated end to the conflict over Nagorno- Kharabakh. Sooner or later there will be a compromise, and the sooner for Armenia the better. Even the diaspora, a very extensive one, consisting of many more abroad than in Armenia, are fed up with the intransigence of the hardliners. Until they relent, Armenia is unlikely to recover much in the way of attracting foreign investment or recover from its post-Soviet malaise.
The economy is doing well on official figures GDP up by 9.6% last year. But this is from a devastatingly low base. People were denuding the landscape of trees for fuel during the war. That is no longer happening and a semblance of normality is being restored. Yet the country has a long way to go before it becomes prosperous. That will take decades, not years. First the dispute with Azerbaijan needs to be resolved.

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AVIATION

Armenian Airlines resumes Yerevan-Paris flight

The Armenian Airlines has resumed direct flights to Europe, which were interrupted on 21st January due to an engine problem with an A-310 aircraft, the head of the main department for civil aviation (MDCA) under the Armenian government, Oganes Yeritsyan, said at a news conference in Yerevan, Mediamax News Agency has reported. 
He added that flights to Paris were resumed on 31st January by a Tu-154 aircraft, which is on lease from Russia. Yeritsyan stated that the payment for leasing the aircraft had not yet been agreed completely with the Russian side. 
Yeritsyan said that the fault in the engine of the A-310, which is on long lease by the Armenian Airlines, would not influence the decision to lease another aircraft in March this year.

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FINANCIAL NEWS

World Bank calls for more favourable entrepreneurial milieu in Armenia

Positive moves have been established in the restoration of Armenia's economy over the past 10 years. Economic growth in the republic can be tracked in industry, construction, the service and energy spheres, said the World Bank resident representative in Armenia, Owaise Saadat, presenting the World Bank report "Transition to a market economy: analysis and lessons of the first decade in the countries of Eastern Europe and the former Soviet Union." According to him, research undertaken by the World Bank in Armenia shows that the country faces two problems, that of unequal distribution of economic growth and that of uncertainty about its the country's stability, Arminfo News Agency has reported.
Saadat noted the creation of new jobs among the principal factors affecting economic growth. He said that the share of new enterprises in the general employment of Armenia comprised 26-28 per cent, while according to the estimates of World Bank experts, economic growth starts only after new enterprises change from passive "receptacles" of consumable resources into active competitors that quickly increase their share in general employment and attract the most highly qualified employees. Data available shows that new enterprises need to reach a threshold of 40 per cent in terms of their share in general employment to become the "engines" of growth, Saadat said.
Saadat asserted that one of the obstacles to economic growth in Armenia is an under-developed entrepreneurial and investment milieu. He noted that in 2001 the government of Armenia carried out a number of reforms that increased opportunities for the private sector. However, today there is a need for additional reforms aimed at increasing exports and the improvement of management and marketing in the country's private sector. 
In order to stabilise economic growth, Armenia needs to set up an enterprise restructuring agency, which would also stimulate investments and exports, while governmental assistance should target specific areas, the World Bank representative believes. The World Bank is ready to assist in this.
Saadat noted that the restoration of transition economies is affected by two factors, one of which is the market order and the other is stimulation. Market order prompts old enterprises to free their assets and labour, which then are transmitted to restructured and new enterprises, while stimulation forms a policy aimed at the creation of a favourable and competitive environment for investment and the consumption of labour and assets.

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FOREIGN INVESTMENT

Armenia hands over chemical giant to British company for management

The Armenian government adopted a decision on 31st January to hand over the Nairit 1 closed-type joint-stock company, the only producer of chloroprene rubber in the CIS, to Britain's Ransat Group which intends to invest US$20m in the plant over the next three to four years, Armenian Trade and Industry Minister Karen Chshmarityan told journalists, Arminfo News Agency has reported. 
He said that the money would be channelled into resuming and improving the plant's operations, which had been idle for over three months, and purchasing new equipment, engineering development and marketing. The agreement on handing over 98 per cent of shares of Nairit-1 for management is expected to be signed within 10-15 days. The investor is to put the plant into operation 60 days after signing the agreement. It is planned to hand over the chemical giant for management for one year. Then, the government will discuss the possibility of selling it to the British company, the minister noted. 

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TELECOMMUNCATIONS

Armenian telecom giant to sell shares in domestic market

ArmenTel intends to sell part of its shares in the domestic market. Talking to the Noyan Tapan News Agency correspondent about this, Asmik Chutilyan, head of the ArmenTel public relations department, pointed out that it had not been decided yet how many shares would be put up for sale. The final decision on this issue will be made after it is agreed with the company's shareholders.
Ninety per cent of ArmenTel shares belong to the Greek company OTE and 10 per cent to the Armenian government. Armenian Minister of Transport and Communications, Andranik Manukyan, said that ArmenTel was intending to sell 20 per cent of its shares.

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