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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: 266 - (27/02/03)

The Armenian government is claiming that the economy is growing at a phenomenal rate, a 12.5% rise in GDP being notched up in 2002. President Robert Kocharian, puts it down to political stability.

A master of electoral and other ceremonies
There is a presidential election under way, which Kocharian is likely to win. He almost did so first time round on February 19th, winning 48.3% of the vote against 27.4% for his nearest rival, Stepan Demirchian, the son of the former communist boss of Armenia. There were allegations of electoral fraud. The run-off will be on March 5th. 
Kocharian has every reason to put things in a good light. He is claiming that GDP growth will accelerate on the basis of an expected 16% rise in industrial production and a spectacular 50% climb in exports. The authorities, he says, have boosted their tax revenues and met the 2002 budgetary targets. "For the first time in post-Soviet Armenia's history the state budget is being implemented by 100%," he said.
Kocharian is in a re-election campaign that his supporters hope will give him another five-year term. The literary trope most in evidence in electoral campaigns in the post-Soviet sphere - outside the Baltic states - is hyperbole. Few credit the statistics on their own terms. Anyway, Armenia is very much a two nations society with half the population living below the bread line. Hence the need to rig the vote.

Doubts about statistics
The reasons to doubt the figures, whether of electoral victory or growth, are obvious. Armenia, however, is not like Turkmenistan which claims even higher growth rates, for instance, a surge of 21% in GDP in 2002. The difference is that the Armenian authorities cooperate with the IMF and other financial institutions, while the Turkmen ones do not.
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 Armenia, 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.

WTO membership is the key to export success
The least credible figure is the surge in exports by 50%. But it comes from a very low base due to an embargo on trade with Turkey and Azerbaijan imposed after Armenia seized 20% of the latter's territory at the conclusion of the war over Nagorno-Kharabakh.
The key to recent success is membership of the World Trade Organisation (WTO). "Armenia's membership in the WTO provides an opportunity to increase exports year after year, since new and more predictable markets are now opening up before our businessmen," Kocharian said. "In order to use this opportunity efficiently, the government is prepared to provide all the necessary services to businesses through a specially established Information Centre," he added.
Kocharian also welcomed the fact that such meetings with businessmen had become traditional and the number of participants was constantly increasing, thus signalling a booming enterprise market in the country.
Head of Union of Manufacturers and Businessmen of Armenia, Arsen Kazarian, stressed the importance of continuing stability and the civilised course of political processes in the country.
The most valuable boost that Kocharian could deliver, however, to the economy would be to have a peace treaty with Azerbaijan, lifting the Turkish and Azeri embargoes on trade. That will have to await the aftermath of the election.

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FOREIGN ECONOMIC RELATIONS

Moscow mayor urges direct cargo transport links with Armenia

One third of the overall trade and economic cooperation between Armenia and Russia is with Moscow, Mayor Yuriy Luzhkov said in Yerevan on 30th January, Arminfo News Agency has reported.
The main problem in the development of bilateral economic cooperation is the lack of direct transport connections. The delivery of Armenian goods through other countries results in a waste of time and great expense.
Luzhkov said that new routes were being sought to transport Armenian cargo to Russia and vice versa. In particular, he pointed to the Iranian section of the North-South transport corridor.
The mayor said that it was necessary to study the feasibility of such a route, which envisaged the transport of cargo to an Iranian Caspian port and to Russia's Astrakhan by ferry.
Speaking about cultural ties, the mayor said that the big Armenian diaspora in Moscow carried out very effective activities for the development of the capital and were playing an active role in the scientific and cultural life of the city.

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FOREIGN INVESTMENT

Swiss company to invest in Karabakh plant

The Swiss company, Sircap Armenia, intends to invest about US$700,000 in the construction materials plant of Stepanakert.
The company told the Arminfo News Agency correspondent that about US$70,000 had been invested in the plant so far. New schemes are being drawn up to manage the plant. It is planned to fit up its workshops with up-to-date technical equipment and expand the range of goods. The plant manufactures various kinds of marble and granite slabs and blocks. It is planned to open a workshop to produce gifts. The products of the plant are sold mainly in Nagornyy Karabakh and Armenia. It is planned to expand the market to the CIS in the future.
The Swiss company privatised the Stepanakert construction materials plant last year. The investor owns 70 per cent of the shares of the plant.

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FOREIGN LOANS

Armeconombank clinches EBRD loan, supports SMEs

Armenian commercial bank Armeconombank has received US$500,000 in additional low-interest loans from the European Bank for Reconstruction and Development (EBRD), which are designed to support local small- and medium-sized businesses. CBN reported that under the agreement signed by the two sides in Yerevan, Armeconombank will lend the money to Armenian companies involved in external trade. Armeconombank chief executive, Ashot Osipian, said many of them lack cash to expand their import and export operations.
It should be noted that such a credit represents EBRD's second lending scheme for Armenian small businesses. In September 2002, the London-based credit institution, which promotes market reforms in former Communist states, allocated US$1m to Armeconombank for that purpose. The latter has already utilised the funds.
The EBRD representative in Georgia and Armenia, Nikolay Hajinsky said the first programme has been a success. "I must stress that this is only the beginning of our cooperation. We have more ambitious plans," he told reporters.
According to Armenian central bank Chairman, Tigran Sarkisian, direct contacts with Western lending agencies are essential for local banks. "I think that strengthens trust in our banking system," he said after the recently held signing ceremony.
Armeconombank's main shareholder, Khachatur Sukiasian, agreed that continued cooperation with the EBRD was strengthening his bank's credibility and image. He said that is why the bank does not seek substantial profits from the scheme.
Osipian said businesses meeting the programme requirements would be able to borrow the fresh EBRD funds at an annual interest rate of 8-12% or far below the average market rate.
The EBRD provided a total of US$4.5m in loans to various Armenian companies last year, and according to Hajinsky, plans to allocate at least as much this year. The bank's investments in the Armenian economy would have been much higher if it had not abandoned plans to purchase a 20% stake in Armenia's power distribution network.

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