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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: 265 - (28/01/03)

Armenia is facing an election year. The president, Robert Kocharian, faces re-election. He is confident of winning, as well he might given the spectacular record of success in economic terms.

'There are lies, damn lies and statistics'
It is not quite clear whether the quotation in question is hyperbole or bathos. But it has some sort of pertinence for Armenia today without doubt.
The authorities keep putting out the most upbeat statistics imaginable. Kocharian gave a New Year address to the nation in which he said that growth of GDP for 2002 would come in at 12.5%, the highest in the civilised world. 
"What we had planned has mainly been achieved," he told the country's leading business people, quoted by ArmenianLiberty. "In particular, we have succeeded in maintaining political stability and have done everything to ensure that pre-election developments do not affect the economy."
It is open to question, however, whether his next statement is not a pre-election development of a sort; he claims GDP growth will accelerate (even above 12.5%) "on the back of an expected 16% increase in industrial production and 50% surge in exports."
Kocharian can also boast that the budget is in surplus, a more achievable and assessable event. If it was not the government would be forking out. Kocharian's supporters say he needs an additional five-year term in office to significantly raise living standards which remain low despite several years of robust growth.
In contrast to the above, his opponents have always questioned the credibility of official statistics, saying that most Armenians feel little improvement in their lives.
Still, positive economic trends were recognised by the IMF earlier last year when it revised its 2002 growth projections for the Armenian economy from 7.5 to 9.5 per cent.
IMF representative in Yerevan, James McHugh, described as "very favourable" the macroeconomic situation in Armenian, in an interview with RFE/RL in November. McHugh also praised the government for drafting a "realistic" budget for this year.
The recently approved budget anticipates a nearly 330 per cent increase in state revenues and expenditures. The targets are based on government expectations of continued expansion. They look decidedly overblown.

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ENERGY

Kanaker plant back in action

Armenian President, Robert Kocharian, recently attended a ceremony that put into operation the 5th and 6th units at the Kanaker hydro power plant that had been standing idle for a protracted period of time. The plant's restoration was accomplished with the help of a loan made available by German KfW bank under a 1997 agreement between the two governments, Armenpress News Agency reported. Speaking at the ceremony, Armenian Energy Minister, Armen Movsisian, said the plant was of key importance for further development of the Armenian power grid. "It not only generates reserve volumes of energy but also provides water to industrial enterprises located in the northern section of the capital," Movsisian stressed.

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FOREIGN ECONOMIC RELATIONS

Armenian president woos German business

Armenian President Robert Kocharyan said in Berlin that he welcomed the direct involvement of German business in the Armenian economy, Medidax News Agency has reported.
A Mediamax special correspondent reported from the German capital that the Armenian president said this at a meeting with leading German businessmen in the union of industrialists of Germany.
Kocharyan noted that in 2002 the trade turnover between Armenia and Germany amounted to US$60m. "This figure can and must grow. In Armenia we have firm institutional bases to support your activities in our country," the Armenian president said.

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FOREIGN LOANS

EBRD signs three projects in Armenia

The EBRD is extending a US$3 million working capital facility to Armenian Copper Programme (ACP), a private Armenian company operating the only copper smelter in the Caucasus region, to secure its supply of raw materials and improve operational efficiency. The loan was signed within days of two other EBRD deals in Armenia - to strengthen a local bank and to extend a programme that promotes foreign trade.
The ACP facility will be used to increase the production of copper and build up reserves of raw materials. It will also free up the company's resources to permit further spending on environmental-protection measures.
It is the EBRD's first industrial project with a local Armenian sponsor. Olivier Descamps, the Bank's Business Group Director for Southern and Eastern Europe and the Caucasus, said Armenian Copper Programme plays a vital role in the Armenian economy, not only as an important player in the copper industry but as the largest employer in one of the poorer regions of Armenia.
Valery Medzhlumyan, ACP's chairman, said that the Bank's support was vital to enable the company to make full use of its production capacity and to prepare for a reconstruction of the existing smelter aimed at environmentally friendly copper production.
At the same time, the Armenian financial sector is getting a boost from the EBRD. To support micro, small and medium enterprises, the Bank is extending a US$1 million loan to Anelik Bank. The funding is made available under the Multi-Bank Framework Facility established in July 1999 to provide equity and senior debt to commercial banks in Armenia. The proceeds will be on-lent to Armenian entrepreneurs, who will be able to borrow up to US$100,000 each. There is no minimum loan size under the facility, which aims to promote grass-roots entrepreneurship. The loan is the second under the facility, following an agreement with Armeconombank in September 2000. 
Moreover, the EBRD is extending a US$500,000 guarantee facility to Armeconombank under the EBRD Regional Trade Facilitation Programme, which aims to promote foreign trade with central and eastern Europe and the CIS by providing guarantees for trade transactions to international confirming banks. The governments of Switzerland, the Netherlands (through FMO and Ministry of Foreign Affairs), Norway, Austria and Germany (via KfW) provide financial support to the Trade Facilitation Programme.
For further information contact: Julia Zilberman, EBRD, tel: +44 20 7338 6640; E-mail: zilbermj@ebrd.com 

Yerevan services debt settlement to Ashgabat

Armenia has begun servicing its remaining US$11m debt to Turkmenistan and will have fully repaid the end of February, New Europe reports. The process followed the signing of a bilateral agreement restructuring the debts incurred by Armenia while importing Turkmen natural gas in the mid-1990s. Under that agreement, the Armenian government is to repay Turkmenistan with domestically manufactured goods. The deal with Turkmenistan, which will reduce Armenia's overall external debt to US$960m, came a month after an assets-for-debt settlement with Russia.

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MINERALS & METALS

Diamonds account for 35 per cent of Armenia's exports in 2002

In 2002, Armenia produced and exported diamonds worth US$180m compared with US$100m in 2001, the chief of the gold and diamond industry department under the Armenian Trade and Economic Development Ministry, Gagik Mkrtchyan, has told Arminfo News Agency.
He said that the increase in the volume of production was mainly achieved by the acceleration of small diamond-cutting enterprises' activities. The largest enterprise, Israeli businessman Lev Livayev's Shogakn close-type joint-stock company, produced about 40 per cent of the overall output and export of diamonds.
Mkrtchyan noted that in 2002, Armenian enterprises purchased 367,000 carats of raw diamonds from Alrosa [Russian diamond company] whereas under the intergovernmental agreement the quota for last year was 400,000 carats.
Some of the diamonds were not purchased because the quality of diamonds did not correspond to their cost, he explained. Over 600,000 carats were purchased from Belgium and Israel.
Mkrtchyan said that Armenian diamond-cutting enterprises market about 1m carats in diamonds per year, although the potential for this is about 1.5m. Armenia has 53 diamond-cutting enterprises, employing about 4,000 people. The average salary is over 100,000 drams (US$180).
According to preliminary information from the national strategic service, the share of processed diamonds in the general structure of exports of 2002 made up 35.5 per cent.

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PRIVATISATION

Armenia privatises 93 companies in 2002 - state property ministry

In 2002, Armenia privatised 93 enterprises (companies), of which 60 were privatised through direct sales, 18 were put out to tender, 12 were auctioned and three on the basis of state shares, Noyan Tapan News Agency has reported.
Revenues from the privatisation amounted to 3,201,430,000 drams (US$5,426,000), of which 2,169,757,000 drams were received from the privatisation of enterprises and 1.3bn drams from the privatisation of small facilities, the spokesman for the Armenian State Property Ministry, Manuk Ter-Stepanyan, said.
The Armenian government adopted 21 decisions on the liquidation of companies in 2002, Ter-Stepanyan said. Courts declared 21 companies bankrupt, the bankruptcy procedure has been launched for 20 companies, seven were liquidated and another 17 companies are currently in the process of liquidation.

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