Armenian Economy

[nairakev]

Philippines and Indonesia have a large maritime zones, which Armenia doesn't have. Secondly Indonesia and Philipnes have a very low social security policy (if none at all).

Armenia needs peace and peaceful neighbours. It's islolated by neighbouring Turkey, Azerbaijan, instability in Georgia and by Iran which is not an economic eldorado either. Besides Iran, is isolated itself because of its islamic regime. Most of transportation routes to Armenia go by air, this boost prices and makes armenian products expensive. No competetion with Russian, Georgian or even Turkmen products. Armenia needs peace and transportation routes.

[nairakev]

$30 mln is what as minimum serious western information start-ups raise during their fundraising campaign. And this is the governmental investment of Armenia for the development of information technologies. Redicilous sum!
Someone in boards was talking about Armenia becoming Sillicon Valley. where do you get money for that? Dream dreamer!

[MJ]

ARMENIA IS INTERESTED IN INCREASE IN TURNOVER WITH EUROPE, KOCHARIAN SAYS

 

Mediamax

4 June 2001

 

YEREVAN

 

In his exclusive interview to Mediamax Armenian President Robert Kocharian

expressed today his satisfaction with the dynamics and productivity of

development of political relations between Armenia and European Union.

Visit of Kocharian to the Headquarters of the European Union in Brussels

starts Tuesday. During the visit President will meet with EU, European

Commission and European Parliament top officials.

'We are linked by serious economic interests, too. About 40% of our trade

exchange fall on countries of European Union. The export of Armenia to those

countries makes $107 million. These are serious figures, and we are

interested in their further increase,' Armenian President said. He noted that

the bilateral economic cooperation with EU countries is also being developed,

particularly with Belgium, France, Great Britain, Germany, Italy, Greece.

'There are about 150 enterprises in Armenia partially or wholly based on

European capital. Our businessmen more often find business partners in

different European countries, and we promote the attraction of European

capital into the Armenian economy. Certain work is being done also in

connection with large projects. Issue of Armenia's energy security is of top

priority in our relations,' Robert Kocharian said.

At the same time, the President noted that there was an undeveloped potential

of economic cooperation. 'We are doing everything to develop this sphere of

our relations.'

[nairakev]

MJ, do you know any enterprise in Armenia based on european capital besides Armintel?

[MJ]

Yes, Naira, for example, few software companies. Additionally, the Yerevan Brandy Factory. Yerevan Aluminum Factory (if we consider Russia to be a European country). Hotel Armenia. I am sure there are few more.

[Berj]

Bristol Myers Pharmaceutics, HSBC (both UK), Mannes-Valleks mining (Germany), Hotel Yerevan (Italy).

[nairakev]

Yeah, right!
Brandy factory is bought by French Paul Ricard multinational. Is the Metsamor Nuclear Power Station still 100% public?

[MJ]

I think so. It's hard to imagin a private nuclear power plant in Armenia.

[nairakev]

Or 50% of steak in Korea? :-)

....
I thought one could imagine all in Armenia.



[ June 06, 2001: Message edited by: naira ]

[MJ]

It is even harder to imagine private anything in (North) Korea.

[nairakev]

LOL ... and is it easy to imagine (North) Korea investing smth in Armenia?

[MJ]

They'd better not...

[nairakev]

It's hard to imagin a private nuclear power plant in Armenia.

What about 90% private Armintel? Armenia's telecom is almost completely belongs to a foreign investor. What d'you think about this?

[MJ]

No problem with foreign ownerships. However, Nuclear Plants are national security issues in any country. They cannot be private, I think.

[nairakev]

In US Nuclear Plants are mostly private...

Talking about Armintel's 90% ownership. May be it is important as well for some security reason's to keep the majority of shares governmental. Armintel is the monopolist. And there is no way to compete for other companies. If government had kept its majority it could at least regulate prices and policies in strategic areas of the national telecom market.

[MJ]

In US Nuclear Plants are mostly private...

 

Yes. You are right about this. But I don't think it can or should happen in Armenia.

 

Talking about Armintel's 90% ownership. May be it is important as well for some security reason's to keep the majority of shares governmental. Armintel is the monopolist. And there is no way to compete for other companies. If government had kept its majority it could at least regulate prices and policies in strategic areas of the national telecom market.

 

I think everybody agrees that serious/criminal mistakes have taken place when privatizing ArmeniTel.

[nairakev]

I think everybody agrees that serious/criminal mistakes have taken place when privatizing ArmeniTel.

 

Are there any serious accusations or investigations? This whole "ArmeniTel" story just makes me furious. So damn irresponsible and criminal. I hear many armenians saying that they are paying "dragon-style" bills and no quality improved. ArmeniTel was a moneylaundrying I guess. When and who did take the privatization decesion. And how many foreign companies are there. Got any idea? MJ, you are my undercover armenian link ...

 

[ June 07, 2001: Message edited by: naira ]

[nairakev]

Brrrrrrrrrr! Something went wrong with this message... please, skip it!

 

 

[ June 07, 2001: Message edited by: naira ]

[MJ]

The only thing that I know is that a former minister (Boghbadyan) has been jailed. Don't know any other details.

 

What kind of underground source may I be, if you just revealed it?

[nairakev]

Not fear, honey!
No one knows all of yo indentities.
Besides noone seriously cares about it.
Do you think someone reads our threads...

[MJ]

No multiple identities, here.

 

I do care.

[nairakev]

LOL... This was really funny!

[MJ]

Glad to entertain you.

[alpha]

Armenian dram might go down the same route as Latvian lat, if current macroeconomic trends continue, economic growth combined with huge current account deficit. Tigran Sargsyan should keep its eye on emergin market currency movements and somehow control abberate credit movements and the flactuations of dram vs. major currencies.

 

 

Latvia struggles with currency weakness

Lat's movement has implications for emerging market currencies

By Wanfeng Zhou, MarketWatch

Last Update: 2:04 PM ET Mar 16, 2007

 

 

NEW YORK (MarketWatch) -- A year ago, a sell-off in the currency of Iceland, a North Atlantic island nation with a population of less than half a million, triggered a meltdown in emerging markets across the globe. There are growing signs that Latvia may be the next Iceland.

Speculation has been rising that the Baltic republic may soon have to devalue its currency, the lat, which is getting closer and closer to the low end of its narrow fluctuation band. The Bank of Latvia only allows the lat to trade in a 1% range against the euro.

In fact, the Latvian central bank confirmed that it has intervened in the market in the past two days by selling euros to support the local currency, according to Lars Christensen, senior analyst at Denmark's Danske Bank. The lat breached the lower limit of the trading band on Friday.

Latvia's domestic situation increasingly resembles that of Iceland last year - it has an overheated economy fueled by credit growth, soaring inflation and a huge current account deficit.

In fact, the country's current account deficit, at 22% of gross domestic product, and inflation rate, running at 6.6%, were the highest in the European Union in 2006, according to Fitch Ratings.

"It's not often that you see this sort of headline, but Latvia could be the one to watch if the recent weakness in emerging market currencies is to gather speed," said Steve Barrow, chief currency strategist at Bear Stearns.

Scary numbers

The Latvian government is trying to restore confidence in the lat by playing down the devaluation risk. But global risk aversion, which is on the rise following the sell-off in the equity markets of the past several weeks, will keep the pressure on the lat and with it, on the riskier, and more volatile emerging market currencies.

With such a narrow trading band for the lat, and with some "scary" looking economic numbers, "it seems almost inevitable that something has to give," Barrow said.

The ripple effect from a sharp slide in the lat could be significant. It was the sudden depreciation of the Thai currency, the baht, which triggered the Asian financial crisis in the late 1990s. And there was a similar domino effect from a sell-off in Iceland's krona last year.

Emerging-market currencies fell sharply between February and June 2006 after an unexpected downgrade of Iceland's outlook by Fitch. Fears of a global liquidity crunch forced investors to bail out of riskier investments.

The Latvian economy by any measure is quite small, said Danske Bank's Christensen.

Still, "the Latvian story is extremely interesting in the sense that [it] should be a reminder to people about other countries with similar problems," he said.

The current account deficit and debt liabilities make Latvia vulnerable to an increase in risk aversion because of its dependence on external financing.

Earlier this month, Fitch warned that the country looked most vulnerable to an "abrupt adjustment in capital and financial flows and slowdown in economic growth."

Gloomy outlook

Overheating is another concern. The Latvian economy has enjoyed stellar growth in recent years, reaching an all-time high of 11.9% in 2006.

In February, credit agency Standard & Poor's lowered its outlook for Latvia to negative from stable, citing "an escalated risk of a hard landing" if no corrective actions were taken. The economy is showing "clear signs of overheating," said S&P.

In an attempt to cool the economy and rein in inflation, the Latvian central bank on Thursday raised its key interest rate by a half percentage point to 5.50%.

The bank admitted that the country faced problems. "Alongside Latvia's rapid development, the economic imbalances have continued to worsen as suggested by the key macroeconomic indicators: persistently high inflation, large current account deficit, and rapidly growing external debt," the central bank said in a statement.

"The rate hike will help reduce the pressures on the lat moderately," said Danske's Christensen. "But the risks still are considerable and more rate hikes might very well be needed if the lat weakens further."

"If the narrow band is breached it will obviously be a massive blow to the credibility of the peg," he said. "It is getting harder and harder to avoid a hard landing in the Latvian economy and we therefore continue to recommend strongly to hedge exposure to the Latvian markets."

Contagion risk

The problem is that the danger doesn't stop at Latvia's borders. Its neighbors, Estonia, and Lithuania, are also showing signs of overheating, rising inflation, tightening labor markets, rapid credit growth and substantial current account deficits.

Eral Yilmaz, an analyst at Fitch, warned that a delay to euro adoption, along with weak economic conditions, is a constraint on rating upgrades for these three countries, collectively known as the Baltic Republics. A failure to address overheating could lead to negative rating actions.

"'Psychological' contagion, by which markets draw parallels between economic and financial trends across countries and react accordingly -- as seen in the Asian crisis and the emerging-markets sell-off in May 2006 -- is a risk in the Baltics," Yilmaz said.

The situation in the Baltic States is "worrying," agreed Katrin Robeck, economist at Moody's Economy.com.

"Rapid credit growth paired with growing external account deficits could contribute to capital flight and currency depreciation," she said.

"We'd be surprised if the current bout of weakness in many emerging market currencies were to end here," said Bear's Barrow. "There still seems to be plenty of bad news out there waiting to prolong the risk-reduction process. Much of [it] looks set to come from the U.S. subprime mortgage market."

"One thing that there probably isn't a debate about is that this market will get worse," he said.

Most emerging market equities, bonds and currencies are trading at fairly rich valuations, said Danske's Christensen.

Meanwhile, the ratings outlook for many of these economies is turning more negative.

On Thursday, Fitch downgraded Iceland's foreign and local currency issuer default ratings, citing new data pointing to "a material deterioration in Iceland's external balance sheet."

If there were a devaluation of the lat, "the market is almost bound to see some contagion effects given that a number of other countries in the region have similar issues, involving large current account deficits and overheated economies," said Bear's Barrow.

"And, if this contagion spreads wide enough, it could certainly cast a pall over the emerging market landscape."

 

Wanfeng Zhou is a markets reporter in New York.

Edited March 16, 2007 by alpha

[hosank]

yahi see your point