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Posted 25 January 2001 - 10:31 AM


Exclusive interview of ex-Minister of Finance and Economy of Armenia, the head of directors' board of Armagrobank Edward Sandoyanto the chief editor of ARKA news agency Galina Davidyan

ARKA - How do you assess the process of reforms in Armenia?

Sandoyan - Within the 10 years of reforms in Armenian economy and social relationship, neither the government nor the society has had enough time to stop and to assess what is done. All the time, there have occurred internal and external, local and global conflicts among parties, factions, groupings and the conflicts were more political than economic. The dynamics of main macroeconomic indicators, characterizing the level of RA economy development, testify to the fact that since 1996 and especially in 1997-1998 our country did manage to stop the softening of economy, in real sector as well. In 1998 we even managed to double the fiscal effect of earnings into state budget. The tax profits of the period increased the level of 1996 twice, and these were the net profits of state budget, which were received due to a maximal use of fiscal policy's administrative mechanisms. Some years later, we managed to achieve results in all the sectors of state management and economy. Today, the situation has changed. Total search for the guilty and their lash is going on. There is apathy in the society and this obstructs development badly. All this is just the result. The processes are rooted in the fact that the reforms were ineffective, most of the measures were taken untimely. Retrospection of the reforms' period indicate that there would not have been economic depression in 1999-2000 if the reforms had been taken in time and effectively. In case if the reforms were the correct ones, we would not have faced a political crisis no matter what internal and external impacts there were.

ARKA - What is the concrete cause for an detrimental activity of some of Armenian banks?

Sandoyan - I agree, some of the banks are operating in the red at present and most of them are likely to face serious problems in future. It is too common and banal to gear to drop of interest rates on T-bills. It is a very complicated and multifaceted problem. The main reason for worsening of the banking system profitability is the same problem which provokes the low level of economic development on the whole and investments activity, particularly. The complex of market infrastructures, necessary for market economy functioning, is either absent or underdeveloped or in the process of formation in our country. We have inherited the distorted form of transition period from the totalitarian system to market relations' system and an eastern model of economy development, which, at best, in 15-20 years will imitate the worst of Asia and Latin America. The most important thing is that we did not manage to form an institute of property. In 1991-2000 privatisation was going at full paces - small, medium and big privatisation of real sector and land. But the relations of property are not formed yet, in the full sense. Property means presence of all the necessary infrastructures, affirming the proprietary rights and providing the validity of the right. We do not have it. Distortion of proprietary right on land and capital in real sector of economy, agriculture and industry has brought to the situation when we lack the structures providing capital flows, which is the main constituent part of economy. We do not have capital market, real estate market is in a horrible state. It is not the proprietor's right on real estate that is the object of sale-purchase, it is the real estate itself, nothing like this happens at developed markets. We were late too when we have established the cadastre of land and real estate. What we are naming a proprietary right is absurd. These are limited rights of a proprietor who has no opportunity to set his proprietary right to market, to realise the right and to provide the liquidity of the property. I think that we should try to fetch up what we have lost and we should start it by creation of infrastructure for markets of real estate, capital and land. In this, we have to settle the issues of legislation, administration, and corresponding business segments' stimulation.

ARKA - What about banking sector of Armenia?

Sandoyan - Banking sector is just an element, a buffer zone in communication system providing funds and capital flows into financial sector. In the system, banks are operating jointly with financial organisations - insurance, investments, trust companies, pension funds, credit companies, co-operative firms. These are the structures dealing with "long" money, investments or accumulative ones. Philosophy of "long" money initially differs from what is known as money. In developed states the funds of pension funds and insurance companies make 80% of all the resource bases of commercial banks, without them there is no banking system or economy. Today we see that at the Armenian market there are no structures creating the "long" money, which are supposed to be used by banks providing their flow into economy and into long-term investment projects of real sector development. Particularly, we have no insurance market. It is a great omission. Insurance is not just financial relationship, it is a social protection of citizens.

ARKA - How essential is the issue of unredeemed credits?

Sandoyan - Unredeemed credits is a great burden for banks of Armenia. Credits are not redeemed and the legal lien of creditor is realised extremely slowly. The problem is common for all the banks and it causes much losses. As a results, in banks there are huge sums of material assets, which are unrealised. The materialised cash assets are mortifying funds' flows in interbanking system. This is a very serious problem for banks. Though even the banks possessing assets have no place to invest them.

ARKA - How could the legislation on farming entities' insolvency assist in the issue?

Sandoyan - International experts think that the higher is the level of legislation on enterprises' insolvency, the higher is the level of economy in the countries. The latest studies of EBRD indicate that Armenia, together with Georgia, Belarus and Albania, ranks the last as to the level of effectiveness of legislation on insolvency, bankruptcy. Due to the problem, Armagrobank has 6 billion AMD off-balance losses, 3 billion AMD of which are directly connected with the government within the last 5 years. These are the credits allowed under the pressure of government to agriculture farms. The issue of the losses redemption is still unsettled. Insolvent enterprises are not able to redeem the debts, as a result our country is still losing much money directly or indirectly and bankrupts are still tainting economy. The subjects should be bankrupted. By saying bankrupt I do not mean to liquidate. I am speaking of exchanging the owner. It is necessary to have effective mechanisms for proprietary rights realisation via auctions. Due to lack of opportunity to realise their requirements on credits banks had great losses and lost a chance of increasing their capitalisation. Within the 9 years we have created a banking system with total capital of 33 billion AMD and total assets of 191 billion AMD. We have to admit the fact that we have no banking system as such, we have no capitalisation for implementation of projects in our economy.

ARKA - What can be done by banks for improving of their financial state?

Sandoyan - It is necessary to attract funds into banking sector. At present the annual volume of transfers ranges from $150 million to $400 million. In particular, Armagrobank has 7 channels providing money flows from all over the world. This is the main source of people's existence in case if salary profits of citizens make 15% in total profits. While going through the banks, the funds do not stay in them, they flow into black economy. The tax system does not allow them to function in economy and in respect of this the main financial flows circle beyond the banking system at present. Population does not trust the banks and that is why it is of great importance for the state to settle the issue on establishment of deposits' insurance institute. Protection of petty depositors is of political importance. The draft law on deposits' insurance is elaborated by Union of banks of Armenia. It includes serious tasks for government and CB. In particular, the draft law involves the offers to grant an exemption to sector of retail services on the bases of simplified tax, to fix maximal rate of taxation so that not to connect the rate of tax with volume of service and goods' realisation. In the case it would be profitable for tax-payers to work in cashless form, the payment card system will start functioning. The banks are ready for it.

ARKA - Can we state that Central bank of Armenia will re-consider banking normative so that to restrict credit organisations' risks?

Sandoyan - We are a bit late with reformation of CB banking normatives standards. For already a year Union of banks of Armenia has been working with CBA in the direction. In the framework of CBA, there is submitted a document, including recommendations on all the aspects of banking regulation and supervision. We need changes, very much is out of date and retards development of banks. CB requirements to increase banks' total capital normative is not real today. It is just administrating, which was justified at the stage of banking system formation. At present we have a healthy system of finance units, which are financially provided, have a good management and up to date technologies. Economy by its inadequate development of accounting and tax discipline repulses banking system. At present we are working in different plains. Ours are international accounting standards, complete openness, transparency[ of balance. Theirs are "black turnovers, unmanageable funds' flows and undeveloped proprietary rights. It is very difficult to co-operate with the undisciplined subjects in the terms of imperfect judicial-legal relations. That is why the state should protect banks institutionally.

ARKA - How do you assess the situation at the financial market of Armenia in connection with T-bills' interest rates reduction?

Sandoyan - The present rare of T-bills is good. Reduction of rates on T-bills was a super task for the government within the last few years. As a matter of thing I think that in the period of independence we managed to achieve two major success: to form a stable market and to achieve a sharp drop of profitability level on internal liabilities. Here again we face the problem of untimileness. Today's rates on T-bills are far from real ones. It is necessary to consider riskiness of market and political risk of the country. We need more marketness and less interference of CBA. CBA jointly with the Ministry of Finance should provide formation of T-bills market real profitability, which have market value first and are mechanisms for deficit financing secondly. Today's rates of R-bills profitability makes 18-22%, it make be an obstacle for investment,. Our country will have no future without direct investments. Our main task is to make Armenia attractive for investors. We posses enough potential for it. We have an intellectual and cheap labour force, we managed to maintain strategically most important systems - energy, gasification, irrigation, potable water system. Capital will rush to the countries like Armenia, where it is possible to start technological processes, to implement various technologies. To achieve it we need to create superliberal terms for free inflow of capital.--

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Posted 25 January 2001 - 11:05 AM


Exclusive interview of the Chairman of Central bank of Armenia Tigran Sarkissyan to Editor Chief of ARKA News Agency Galina Davidyan.

ARKA - Mr. Sarkissyan, what can you say about the monetary-credit policy of Central bank of Armenia for 2001, its main goals and tasks.

Sarkissyan - Central bank of Armenia plans to pursue a more expansive monetary-credit policy in 2001. This will provide the annual inflation rate, which is expected to be 4 per cent, according to preliminary estimation. We are going to focus on control over money demand, in the respect of inflation regulation. Monetary aggregate indicator is forecasted on the basis of GDP nominal value, which is expected to grow better than before. According to our forecasts, in 2001 the monetary aggregate will increase by some 10.5 per cent annual rate (at inflation and real economic growth indicators - at 4 per cent and 6.5 per cent, respectively). The high rate of monetary aggregate will be mainly caused by formation of aggregate demand's considerable growth which is connected with substantial foreign exchange receipts, expected during the celebration of 1700-th anniversary of Christianity adoption.

ARKA - What is the inflation indicator going to be by the end of 2000 and what are the factors, causing its departures from the program indicator? What inflation scenario does CBA envisage for 2001?

Sarkissyan - The reason for the low level of inflation used to be commented on in the reports, issued by CBA. Really, in monetary-credit program for 2000, inflation was planned at some 5 per cent, compared to the end of 1999 and at 3 per cent annual rate, compared to January-December 1999. As of January-October 2000, the indicators were -2.8 per cent and -0.9 per cent, respectively. It is worth mentioning that the program indicators of inflation were estimated and set separately, with consideration of demand and supply factors' influence. It is well-known that the pursued monetary-credit and budget policy affect considerably the whole demand formation. And as to supply, it is influenced by the main factors, such as imported goods' prices, state-regulated prices, real salary and indirect taxes. In the program on monetary-credit policy for 2000, Central bank appointed to presence of definite risks, including the above-mentioned factors. The risks were distributed in the external, tax-budget and monetary-credit fragments and were the following: in external segment they were connected with unforeseen changes in world prices, the prices on imported goods from partner-states and expected income and transferts' volumes. In tax-budget segments the risks were caused by changes in schedule of external funding receiving and volumes, low fulfilment of budget and a sharp departure of indirect tax volumes. In monetary-credit segment, the risks did not directly correlate to prices. The most palpable from the mentioned risks, which affected the low inflation formation were the following: in tax-budget fragment - low performance of expenditures, caused by low supply of external funds and low level of yield collection (at 3.9% GDP growth in 9 months). The level of indirect taxes' collection was also low. The main factor affecting the low inflation in external sector is a lower growth of prices on imported goods than it was planned, in case of a lower than expected devaluation of AMD. CBA monetary-credit policy was expansive and effective. This is testified by a higher rate of monetary aggregate and base indicators than it was planned and interest rate's reduction. As for regulated prices (such as per minute payment for telephone conversations and tariffs on irrigation, which would have brought to a considerable growth of prices for agricultural products), they did not change and thus the fixed inflation in the right volume was low. CBA forecasts that inflation in Armenia by the end of 2000 will be 0-1 per cent, depending on budget fulfilment. In 2001, according to preliminary estimation the annual inflation will not exceed 4 per cent's limit.

ARKA - Is CBA going to re-consider some standards for commercial banks so that to restrict their credit risks?

Sarkissyan - Depending on the volumes of required credits in economy, commercial banks may sometimes re-consider their credit policy. Simultaneously, the structure of credit portfolio and credit risk also suffer changes. This allows Central bank to re-consider the standards on banks' credit risks' restraint. But CBA does not plan to toughen them in the nearest future.

ARKA - Is CBA going to bring bankruptcy actions against a number banks?

Sarkissyan - CBA is operating under the law on "Banks' bankruptcy". As to commencing bankruptcy cases against some of the banks, or publishing the list of the banks, this is beyond CBA competence, according to the law on "Banking secret".

ARKA - What is the cause of some banks' detrimental activity? What opportunities are there to equalize their financial state? What is CBA attitude towards the problem banks?

Sarkissyan - The banks' detrimental activity is the result of their unfoundedly risk policy. We may state that the most negatively affecting factor is low quality of credit portfolio, in respect of which the banks face additional expenditures. The decline in banks' profitability is the result of ineffective management of credits, foreign exchange and interest risks. Very often banks are having losses due to the present level of economy development. While an effective activity of economy subjects will foster banks' financial state improvement. It is well-known that it is rather difficult to create a healthy banking system in a sick economy conditions. Central bank is constantly controlling the activity of banks. Their activity is being analysed in the process of monitoring, their problems are being revealed and measures are being elaborated for overcoming the problems. The problematic banks are constantly in sight of banking supervision. According to the "Code of banking infringements regulations" approved by CBA board on 10.06.99, it is possible to conclude agreements with the banks, with a further application of tougher supervision standards in respect to them.

ARKA - What about the state budget of Armenia for 2001? How much are the macroeconomic parameters, set in the budget, justified?

Sarkissyan - RA Central bank has its own assessment of main indicators of budget 2001 suggested by the government. But it is a preliminary assessment, which is expected to be re-considered after study of the final variant of the law on "State budget of Armenia".--

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Posted 26 January 2001 - 09:42 AM

Good topic, Alpha. I have been thinking that we need such thread, at least.

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Posted 29 January 2001 - 08:35 AM

what economy!!

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Posted 30 January 2001 - 08:19 AM

Armenia's Foreign Debt Put At $836 Million

Armenia's external debt stands at 836m dollars as of January 23, 2001. Armenia's main creditors are the World Bank - 397,946,000 dollars, the EBRD - 34,378,000 dollars, and IFAD [International Fund for Agricultural Development] - 19,496,000 dollars.

Armenia's debt to the EU is 21.4m dollars; to Russia - 108.49m dollars; the USA - 57,656,000 dollars; to Turkmenistan - 12,759,000 dollars; to Germany - 5.7m dollars, and to France - 2,469,000 dollars. The debt of the Central Bank of Armenia to the IMF is 175,694,000 dollars.

Itís heartbreaking to read articles about measly economy of Armenia. With tight monetary policy, future interest payments may not be paid. The country is having a huge liquidity crisis. I think Central Bank of Armenia should take on more liberal monetary policies. We experience stable macroeconomic results, which is financed mainly through loans, instead of internal growth.

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Posted 30 January 2001 - 08:35 AM

It's too bad, Alpha, but not so targic, I think. Many economies in the world are in a similar or worse shape.

I think they will restructure the debt. Nobody would be interested in seeing Armenia to dafault on its debt. I think it has already been done once or a couple of times.

However, it will obviously have adverse effect on the interest rates, and then, what liquidity?

It is sort of Catch 22. There is not much growth in economy, becasue the cost of borowing of the capital is extremely high. On the other hand the cost of borowing is this high, becasue there is no economic growth allowing to pay off the national debt.

Something else is needed to break off of this close cycle, and I think it lies in the political dimension.

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Posted 30 January 2001 - 10:10 AM

According to your last post MJ itís the politics that drives economics, yet the example of some Asian economies, notably Indonesia and Philippines show the opposite. I think Armeniaís problem is the lack of commercial banks that will become major players in economy. There is absolutely no financial infrastructure to promote economic growth.

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Posted 30 January 2001 - 11:05 AM

Alpha, but how can we have adequate commercial institutions in the conditions of the lack of capital stimulating the economy?

If we push too much, we will get into the issue of the chicken and the egg.

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Posted 30 January 2001 - 04:35 PM

The $836 million of debt borrowed over the last 10 years should have served as a capital stimulus. I am not sure what are the auditing standards in Armenia, but it's interesting to know what auditing and accounting standards they use, and besides KPMG are there other global accounting firms in Yerevan.

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Posted 30 January 2001 - 04:59 PM

Originally posted by alpha:
but it's interesting to know what auditing and accounting standards they use,

(Does this help?)

International Accounting Standards (IAS) were translated, adapted and accepted in Armenia over the last 12 months. An international and national training and certification program was established at the Accounting Association, and over 600 accountants have been trained. Additional training courses have included auditing (80 participants), book-to-tax reconciliation (100 participants), and financial statements for employees of the securities commission (25). Over 100 enterprise accountants have been trained in cost accounting, five accounting firms have been trained in cost conversions, and 27 enterprises have undergone full cost conversions. All enterprises are scheduled to convert to IAS by the end of CY 2001 and USAID has assisted in training accounting firms and performing cost conversions on a total of 900 enterprises.

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Posted 30 January 2001 - 05:54 PM

Last year or so, it was announced that Kirk Kirkorian's Lincy foundation is in the process of donating $100 million. This money was supposed to be used towards the economy (in the form of loans I think) as well as roads and some other projects. I haven't heard anything since and I wanted to know what is the present condition regarding that. Theoratically how significant can this be economically? How significant can the roads be in circumventing any blockades by Armenia's neighbors and in encouraging trade?

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Posted 30 January 2001 - 06:05 PM

Alpha, I think most of the debt, if not all, has been provided to Armenia for specific reasons - infrustructure transformations, energy sector, roads, etc. It was not given for investing in the commersial and indastrial enterprises. It has also been used, I think for fuel and gas purchases, etc.

BTac, the $100,000 was not donated to Armenia. It was supposed to serve asa Venture Capital, to finance the capital expenditures of local enterprises specialysing in specific areas of economy. To me the challenge would be to have that money invested in Armenia, and not flow out and be invested in the eneterprises owned by Armenians outsiide Armenia.

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Posted 01 February 2001 - 03:29 PM

What do you think the new tax cut in Armenia will give. I personally think it's a great move to stimulate the stagnant economy. But when the budget deficit is soaring, do you think it's a very wise move. I want to hear your thoughts on recent tax cuts in Armenia.

Haroutiun Khachatrian: 1/31/01

Eurasia organization
Jan 31, 2001

Armenia is embracing trickle-down tactics in an effort to foster
economic growth. The Armenian parliament has adopted unprecedented
budget and taxation legislation for 2001 aiming to streamline
revenue collection and encourage business activity. Its main
components are a substantial cut in two taxes -- income tax and
compulsory social security payments (CSSP).

These two taxes have greatly hindered employers from attracting
skilled workers by leaving them unable to offer competitive
take-home wages. Previously the income tax rate varied
progressively from 15 to 30 percent of gross wages, and the CSSP
ranged from 28 to 22 percent under a regressive scale. As a
result, an employer formerly had to pay upwards of 50 percent of
the overall payroll to the state.

Under the new legislation, the integral value of income tax and
CSSP is fixed at 28 percent -- starting with monthly salaries that
are 20,000 drams (about USD 36) a month or higher. The share of
income tax and CSSP in this payment vary depending on the size of
the salary, but it makes no difference for the taxpayer. Armenia
becomes the first CIS country to undertake such a radical tax cut.
(While Russia has lowered the income tax to 13 percent flat, the
CSSP rate in Russia has remained well above 20 percent for the most
part of the ordinary salaries range).

Parliament offered small- and medium-sized business an additional
break by raising the threshold of VAT taxation from 3 million drams
(about USD 5,400) of annual turnover to 10 million drams (about USD
18,000). Also, the introduction of a single rate of 20 percent for
the company profit tax is set to replace the previous two-rate (15
percent and 25 percent) system.

To compensate for the decrease in revenue, some tax privileges have
been abolished, including VAT exemptions on drugs and infant food.
Interest on bank accounts also is now subject to taxation.
Officials additionally hope that events related to the celebration
of 1700th anniversary of adoption of Christianity in Armenia will
help boost income from tourism.

Nevertheless, there is some concern that new revenue streams will
not be enough to compensate for the reduction in CSSP, which is the
source of income for the State Fund of the Social Security, the
sole agency responsible for pensions and social security payments
in the country.

The tax cuts come at a time when state coffers are squeezed.
According to the State Revenue Ministry, tax collection in 2000
fell 11 percent short of targets. Budget revenues were only 84
percent of those planned, and expenditures were even lower about 74
percent of original projections. As a result, state payment
arrears, already significant (they started to accumulate as a
result of the 1998 financial crisis in Russia) grew even higher.
Political turmoil was a major factor in Armenias poor revenue
collection record in 2000, due mainly to the fallout from the
October 1999 shootings in Parliament, which left eight top
politicians dead.

The Armenian business community was pleasantly surprised by the tax
cut. The government originally discussed cutting taxes in August
1999, when the late Prime Minister Vazgen Sargssian was in office.
The prolonged period of instability in the wake of the
parliamentary assassinations delayed the adoption of the new
legislation until late 2000. So far, the government of Andranik
Margarian has proved to be consistent in implementing these
amendments, providing an important indicator that political
instability has been largely overcome.

Many observers have high hopes that tax reduction will have the
desired impact on economic activity, specifically in promoting the
growth of small businesses and a rise in wages. Today, most
businesses in Armenia are small in scale with limited
profitability, and some believe that onerous tax rates have
discouraged expansion. High taxes have also kept a lid on
salaries. Currently, the official average monthly salary is 20,612
drams or USD 37 per month).

Seeking to stabilize the economic environment, the government has
declared its intention to maintain the existing tax rates for at
least the next three years. Meanwhile, officials hope the new
legislation may also lead to some reduction in the shadow economy.
Experts caution, however, that the tax moves will have little
impact on businesses paying salaries below 20,000 drams a month.
Such small businesses employ a significant part in the labor market
in Armenia.

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Posted 04 February 2001 - 04:09 PM

I don't think that the expectation is that the money left in the hands of corporations goes back to stimulate the economy through additional investments, since there is no serious capital in the hands of local Armenian corporations.

But if the low taxes attract foreign corporation to Armenia, the revenues necessary for the Armenian Treasury may be made up through the volume, rather than the rate.

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Posted 06 February 2001 - 11:40 AM


"AZG" Armenian Daily # 20, 03/02/2001

The German KfW lending organization is preparing to release another
8 million of DM to German-Armenian Fund for realization of a
micro-loan program.

It should be mentioned that among a dozen of other loan programs,
implemented in Armenia last year, the KfW was recognized as the
best and most flexible one. The program is distinguished from
other similar ones by a number of peculiarities, which seem to be
very profitable to businessmen, running small and medium
enterprises. One of them is the absence of a ceilings for minimum

Yesterday it was announced that the biggest ceiling was raised from
current 21 million Armenian drams to 33 million (approximately
$60,000). The annual interest rates were also lowered to 12% (for
trading companies) and to 16% for industrial companies. The KfW's
loans are made available through four Armenian commercial banks-
HaygyughPokhbank (Rural Copperaive Bank), Hayagrobank, Anelik and
Hayeconombank. From 1999 September up to 2000 a total of 1,012
loans, worth 5.5 million Euros were provided. The current
disbursement makes 697 loans worth 3.2 million Euros. This year a
number of another banks are expected to be involved in the program.
The banks will be chosen in February through a competition. Also
the geography of loans will enlarge including, besides the
provinces of Lori, Kotayk, Ararat, Armavir and Aragatsotn, another
four provinces of Syunik, Tavoush, Shirak and Ghegharkunik. Around
1,000 jobs were created as a result of KfW programs implementation.

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Posted 07 February 2001 - 03:30 PM


YEREVAN, 7 February. /ARKA/. There are favourable conditions in Armenia for promotion of non-traditional kinds of tourism. Deputy Minister of Industry and Trade of Armenia Ara Petrossyan told today at the press-conference. According to him, at the given stage the efforts of the government are directed at development of "cultural" tourism based on numerous historical and cultural monuments calculated for high intellectual tourists and which had no opportunity to become large-scale one. However, according to Petrossyan's viewpoint, the landscape and climatic conditions of different regions of the republic permit to develop sport kinds of tourism as well as so called "agrotourism",- opportunity for tourists to participate in various agricultural works. Petrossyan also emphasised necessity of regional tourism development which will enable tourists to visit several countries od South Caucasus in the framework of one route, and via the third country to Turkey. "Some of tourist operators have already included Nagorno Artsax to theirs routs",- he said.

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Posted 07 February 2001 - 07:36 PM

The following material indicates another positive shift in American policy towards Armenia. The previous US administration had prevented the extention of Export-Import Bank landing practices in Armenia, though, to the best of my knowledge, they have opperated in the realm of Azerbeijan for several years, now. I am hopefull that a lot of things are going to change for the better, on G. Bushes watch. I hope that OPIC coverage also may bee soon available in Armenia. These two institution's extension to Armenia may finally boost investments.


AmCham in Armenia
Hotel Armenia
1, Amiryan Street
Yerevan 375010
Republic of Armenia
Telephone: (3741) 599187, 599188.
E-mail: amcham@arminco.com

(February 7th, 2001) - The American Chamber of Commerce in Armenia (AmCham), representing over 40 foreign companies and organizations, was honored to have Mr. Paul Tumminia, Director for Russia and NIS
at the Export-Import Bank of the United States, as speaker to its membership meeting on February 5th, which took place at the Hotel Armenia.

As this is Mr. Tumminia's first introductory visit to Armenia, he stated that he is here looking for opportunities for US exports into the region and to gain a first hand perspective on market conditions and opportunities for US businesses in Armenia. He began by giving a presentation of the Banks activities and its policies.

The Export-Import Bank of the United States is an independent Federal agency of the United States Government, with the members of
its Board being appointed by the President. Its goal is to help the U.S. exporter become more competitive in the global marketplace through its export finance programs. It supports financing of US exports to increase or sustain jobs in the US. Ex-Im Bank does not compete with commercial lenders, but assumes the risks they cannot accept. There must always be a reasonable assurance of repayment on every transaction financed.

Mr. Tumminia then introduced various of the Banks policies and factors affecting Ex-Im Bank's participation and program availability.

Ex-Im Bank, as a government agency, operates under certain mandates, restrictions and requirements placed upon it by legislation and executive order. There are a number of such requirements, which are considered by the Bank in reaching a decision on financing, such as:

-In order to qualify for Ex-Im Bank support, the product or service must have at least 50 percent U.S. content and must not affect the
U.S. economy adversely.

- Ex-Im Bank will finance the export of all types of goods or services, including commodities, as long as they are not
military-related. Environmental considerations are also taken into

- The MARAD public resolution should be in effect i.e. that items must be shipped on US bottoms.

- Mr. Tumminia then went through the short, medium and long-term loan programs. He stated that all loans etc. are affected by the Country Limitation Schedule. As with many other NIS countries, Armenia is closed to public and private, short, medium, as well as long-term loans. However, despite this, he is hoping to find some possibilities for pilot projects here. As an example, he stated that in Georgia, which has the same CLS rating as Armenia, there
has recently been financing for air transport which was secured by overflight revenues.

Although the Bank does not have offices out of the US, Mr. Tumminia is frequently in this region and he invited members who
had any questions or possible projects of interest, to contact him.

Further details on loans, guarantees, fees etc. may be found on the Exim website at: www.exim.gov

For further information, please contact Nanik Melkomian, Executive Director of AmCham,
at telephone numbers (3741) 599187, 599189,
e-mail address: amcham@arminco.am.

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Posted 15 February 2001 - 12:36 AM

The dream of Admiral Yessaiee on the verge of coming true.

Black Sea Trade Bank To Finance Construction of Port Caucasus Ferry Complex

YEREVAN (Combined Sources)--Trilateral negotiations for financing the construction of the Port Caucasus ferry-boat complex was held recently. The Port Caucasus Armenian-Russian joint enterprise was established for the construction of the ferry-boat complex to buy a ferry boat to ship Armenian goods from the Russian port of Novorossiysk to the Georgian port of Poti.

Negotiations were held in Salonika, Greece between the transport ministries of Russia and Armenia and representatives of the Black Sea Trade Bank. According to the Deputy Minister of Transport and Communication Hrant Beglarian, the bank has agreed to finance approximately 60 percent of the project, taking the regional importance of the program into consideration. The bank has committed to thoroughly study the project and substantiate it within 6 months in order to implement the $19 million needed. As for the financing of the rest of the 40 percent, Beglarian said that the issue is being discussed with the Russian transport ministry. The deputy minister expressed hope that the issue of financing will be solved in a month so that they start realizing the project.

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Posted 16 February 2001 - 12:48 AM

14 February


YEREVAN, FEBRUARY 14, ARMENPRESS: Out of 257 million cubic meters of the
annual flow of the River Vorotan only 157 million are used for energy
generation, the rest flows to neighboring Azerbaijan.
A senior official of the Irrigation System Development Hamlet Harutunian told
Armenpress that after bringing to completion the Vorotan-Arpa-Sevan tunnel,
165 million cubic meters of water will flow into Lake Sevan and the rest 92
million will be used for energy generation. About 100 million of 165 million
will be directed to Ararat valley for irrigation purposes, the rest of 65
million will remain in the lake for maintaining its ecological balance.
Harutunian said out of 21 km long tunnel there remained 1.7 km to drill. The
construction is supposed to be over by the end of 2001. He added that 1
billion 450 million Armenian Drams earmarked by the government for
continuation of the work will not be enough to complete it. He said the
government had asked the World Bank to allocate additional means.

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Posted 17 February 2001 - 11:33 AM

The Armenian economy finished the year 2000 on an upswing, the State
Statistics Committee reported this week. Armenia's Gross Domestic Product
(GDP) grew by about 6%, amounting to $1.9 billion. Foreign investments were
up 30% to some $180 million and trade turnover totaled about $1.2 billion,
up 13%, compared with 1999.

The overall figures remain modest reflecting Armenia's economic collapse in
the early 1990s. At that time, the country's GDP shrunk by over 50%,
heavily impacted by the disintegration of the former Soviet Union. Since
1995, the country's GDP has grown by 3-7% per year, and since 1997 there has
been a notable increase in foreign investments. Also following the break-up
of the Soviet Union, Armenia has begun focusing mostly on markets in Europe
and the Near East.

In 2000, Armenia conducted over one-third of its trade with the countries of
the European Union. Diamonds and other jewelry items made up some 40% of all
exports, with Belgium as their main destination. Foodstuffs and fuel
accounted for over 45% of all imports, originating primarily in Russia,
United States and Europe.

(Sources: Snark 2-13; Noyan Tapan 2-16)

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