The European Times - Armenia

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ARMENIA


WORK AND HABIT LIFE STYLE BY INTERNATIONAL STANDARDS

“Zangezur Copper – Molybdenum Combine” CJSC 15, Lernagortsneri Street, Syunik Marz, Kajaran town | 3309 Kajaran, Republic of Armenia Phone + Fax: +374 285 33870 | zcmc@arminco.com | zcmc@mail.ru


Content

Armenia • Prime Minister Working to Ensure Positive Change 4 • Dynamic Modern Economy at the Crossroads of Europe

• Zangezur Copper Molybdenum Combine CJSC • Mining Sector Attracting Major Investments • Deno Gold Mining Company • Energy Sector Achieving Sustainability and

• Armenia’s Fact File • Rich Cultural Heritage

• Armenia Renewable Resources and Energy Efficiency

INTRODUCTION and Asia

6 8 10

BUSINESS & INVESTMENT OPPORTUNITIES • Armenian Development Agency Smoothes the Way for International Investors

• AmCham Lobbying for Better Business Environment • Development Centre Providing Essential Support for SMEs

• Developing Stronger Ties with the EU • Exceptional Attractions for Foreign Investors

12 13 14 15 16

38 39 41

International Standards

42

Fund

44

TRADE & INDUSTRY • Ministry of Economy Aims to Attract International Investment to Armenia

• Stepping Up Exports of Diverse Range of Products • Muran & Megna • Regional Silicon Valley • Nairit

46 47 49 50 52

CONSTRUCTION & INFRASTRUCTURE

CITY OF YEREVAN • Yerevan’s Mayor Highlights City’s Investment Appeal • Deputy Prime Minister Encourages Public-Private Partnerships • Yerevan: Ideal Business Base

19 20 21

• Urban Development Ministry Building Tomorrow’s Armenia

• Long Tradition of Innovative Construction

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TRANSPORT & COMMUNICATIONS INTERNATIONAL FINANCIAL INSTITUTIONS • Bringing Armenia Closer to the EU • World Bank Supports Armenia, an Important Link

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between EU and Asia

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Economy

25

• International Support for Armenia’s Developing

FINANCE & INSURANCE Economy

• Central Bank Ensures World-Class Standards • Financial Sector Meeting International Standards • ACBA Crédit Agricole • Ardshininvestbank • Rosgosstrakh Armenia

27 28 29 32 33 34

• Agriculture Main Driver of Armenian Economy • Agriculture Playing a Key Role in Armenia’s • Yerevan Brandy Company

65 66 68

HEALTH • Ministry of Health Spearheading Healthcare Reforms 70 • Impressive Progress in Healthcare and Pharmaceuticals 71

TOURISM

ENERGY & NATURAL RESOURCES • Energy Sector Offers Outstanding Development

60 61 62

AGRICULTURE Development

• Ministry of Finance Helping to Foster Knowledge-Based

Potential

• Ensuring Top Quality Infrastructure for Transport • TV and Radio Broadcasting Network of Armenia • Key Transport and Telecom Hub

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• Spectacular Attractions for International Visitors 74 • Hertz 77 • Golden Tulip Yerevan and Best Western Congress Hotel 78

Director: Lieve Luyten

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ARMENIA

Prime Minister Working to Ensure Positive Change Prime Minister, Tigran Sargsyan aims to make sure that Armenia’s development keeps pace with global trends so that the country can serve as a productive, prosperous member of the international community. He says, “The world is getting smaller and smaller very quickly, and Armenia must move forward rapidly in order to be included in the increasingly integrated global community. If our infrastructure lags behind, so will our economy.” For more than a decade, Armenia has been working with international organisations and funding agencies to build the foundations for the country’s future. The government has established key partnerships with the World Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, the EU, and the governments of Russia, China and Japan, among others, in order to bring new technologies and know-how as well as financial support to Armenia.

Energy and infrastructure projects The energy sector and infrastructure projects have received particularly significant support from international funding organisations, but more investment is needed. Concerning the crucial power sector, for example, the Prime Minister says, “Our goal is to build more reliable power plants with renovated technologies.” A major infrastructure project in the works is a new airport, which is being built with the support of the World Bank and organisations in Europe and the US, with key input from the private sector. The Prime Minister explains, “We have adopted a new concept for the airport. We are getting technical expertise from the EU and the US concerning the airport’s design as well as for new legislation for air traffic and for the logistics facilities which

4

Tigran Sargsyan, Prime Minister

will serve the airport. The government has granted the concession for managing the airport to an independent Argentinian owner, Eduardo Eurnekian who owns several airports around the world.”

Success stories for foreign investors The Prime Minister highlights the importance of the private sector in Armenia’s development plans, and points out that many foreign investors have already achieved success in Armenia. He explains, “There are success stories in all sectors, such as in information technology, which is a tremendously important sector for Armenia, as well as the mining sector, where German investors have had outstanding results. In addition, Armenia has established a global reputation for its cognac and brandy and for cutting diamonds; the diamonds are brought here to be cut and then exported.” To attract more foreign investors, Armenia has ensured a level playing field for them. “We do not differentiate between foreign and domestic entrepreneurs. It is crucial for us to create an equal opportunity for everybody. We believe that in the


Introduction

long run this strategy will attract foreign investors,” Tigran Sargsyan says. He adds that the government is working to provide more information to the international community concerning investment opportunities in Armenia, and that local organisations like the country’s chess team, which has won a number of international tournaments, can help make people around the world more aware of Armenia’s intellectual resources.

Integration with EU a top priority

IT sector continues to grow

A major challenge for Armenia, according to the Prime Minister, is to change local people’s attitudes. He says, “Our nation experienced genocide and suffered through a totalitarian regime for 70 years. Now we must help our people to change their mentality and move forward to become part of our new, better, modern country. This is a very complex task which cannot be accomplished with just one strategy, but further integration with the EU will definitely take us closer to this goal.”

Armenia is upgrading technologies in all areas, a drive that has already proved successful in the information technology sector. “We now have 230 enterprises in the IT sector here in Armenia, and even during the global crisis they have grown by an average 10%, which reflects the high level of expertise in this field in Armenia,” the Prime Minister points out proudly. The Prime Minister also cites mining and chemicals as high-potential growth sectors. Armenian enterprise Nairit, for example, is already ranked the fourth largest rubber producer in the world. “We have established a very promising business partnership with China concerning rubber production,” he adds.

Western Europe is set to play a leading role in Armenia’s future development, and EU investors are particularly welcome. “We are trying to enhance our integration with the EU. Armenia already shares European values, but the EU is changing very quickly and Armenia must keep up with this process. We know that further integration with the EU will bring more stability to Armenia,” Tigran Sargsyan says.

Concerning his role as Prime Minister, Tigran Sargsyan concludes, “Our aim today as leaders in Armenia is to do what is necessary to bring about positive change. The important thing is to look at the big picture.”

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ARMENIA

Dynamic Modern Economy at the Crossroads of Europe and Asia Armenia, strategically located at the crossroads of Asia and Europe, has a rich cultural heritage and a promising future. Ever since its independence from the Soviet Union in 1991, Armenia has been building a thriving open market economy. The country’s government is democratic, headed by President Serzh Sargsyan and Prime Minister Tigran Sargsyan.

Strategically located to become transport hub Armenia is strategically located in a growing region and aims to position itself as an international transport hub. It shares borders with Azerbaijan and the Azerbaijan-Naxcivan region (a primarily Armenian populated region assigned to Soviet Azerbaijan in the 1920s), Georgia, Iran, and Turkey. Turkey closed the common border with Armenia in 1994, but in 2009 senior Armenian leaders began pursuing rapprochement with Turkey. Trade between Armenia and Iran has been increasing rapidly. To enhance its attractions as a trade hub, Armenia is investing significantly in infrastructure upgrades with the support of international organisations, including the World Bank, the United States Agency for International Development, the European Bank for Reconstruction and Development, and others. Major projects include the North-South Corridor and ties to regional railway systems as well as upgrades for local roads and airports. Armenia has already made significant progress in modernising its telecommunications infrastructure and has attracted a number of top international investors in telecommunications, including Orange.

Armenian people a key strong point Armenia aims to build on its strong points to foster a successful modern, knowledge-based economy. The Armenian people are one of the country’s key attractions for investors. Thanks to a long tradition

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Mountain of Ararat

of supporting education, the literacy rate is 99.4%, and Armenian culture has traditionally encouraged entrepreneurship. The government is currently promoting closer ties between local universities and the business sector to ensure top quality human resources for Armenia’s developing economy. Diaspora Armenians, many of whom live in the US, the EU and Russia, are a major source of revenues for Armenia, accounting for significant investment in the country’s private sector as well as in real estate. Armenia’s official language is Armenian, but with two different, but mutually intelligible, dialects: Eastern Armenian (spoken mainly in Armenia, Iran and the former Soviet republics) and Western Armenian (spoken primarily in the Armenian Diaspora). The country’s population is 97.9% Armenian, with Yezidi (Kurds) making up 1.3% of the total; Russians 0.5%; and other nationalities 0.3%.

Economic transformation since 1991 The structure of Armenia’s economy has changed substantially since 1991, with sectors such as construction and services replacing agriculture and industry as the main


Introduction

contributors to the economic growth. Under the Soviet system, Armenia developed a modern industrial sector, supplying machine tools, textiles, and other manufactured goods to other Soviet republics in exchange for raw materials and energy. Following independence, Armenia dismantled the huge agro-industrial enterprises of the Soviet years and has switched to small-scale agriculture while implementing a privatisation programme, particularly for its small and medium-sized enterprises. Today, Armenia’s industrial activities include diamondprocessing, software development, food processing, and the production of brandy, metal cutting machine tools, forging and pressing machines, electric motors, tires, knitted wear, hosiery, shoes, silk fabric, chemicals, trucks, instruments, microelectronics and jewellery. The country is also building up a strong mining sector, taking advantage of its deposits of copper, molybdenum, zinc, gold, silver, lead, marble and granite.

Double digit economic growth Armenia’s economy grew by an impressive 12% from 2002 to 2007 and continued to achieve double digit economic growth until the global recession began to hit the country hard in 2009, when GDP dropped by around 15%. Armenia’s macroeconomic performance began slowly improving in September 2009, however, and the Armenian government predicts that economic growth will get back into positive territory in 2010 although at a modest 1.2%. As Armenia’s president, Serzh Sargsyan, commented recently, “2010 will be a year of economic recovery for the country.” The International Monetary Fund (IMF) and the World Bank have made similar forecasts and predict a stronger upswing beginning in 2011. According to IMF projections, Armenian GDP growth will accelerate to 3% in 2011 and gradually reach 4.5% in 2014.

Reforms continue The government has impressively managed to reduce poverty, slash inflation, stabilise Armenia’s currency, and make progress in implementing economic reforms. Current challenges include continuing to promote private sector investment, fighting remaining corruption, and continuing to achieve economic reforms. International financial institutions and other international organisations are providing support for Armenia

A cross stone in the Khosrov Forest State Reserve

during the current global recession to help keep its development on track, and the Armenian government has proven its commitment to creating incentives for foreign investors in order to stimulate the expansion of the country’s private sector. Given its history of entrepreneurship, its hardworking population, its rich cultural heritage and its strategic location, Armenia has the essential elements for building a thriving modern economy.

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ARMENIA

Armenia’s Fact File Country Name:

Republic of Armenia

Aria:

29,743 sq km (total)

Location:

South Western Asia, east of Turkey

Climate:

Highland continental, hot summers, cold winters

Population:

2,967,004 (July 2009 est.)

Language:

Armenian (97.7%), Yezidi (1%), Russian (0.9%), other (0.4%) (2001 census)

Capital:

Yerevan

Religion:

Armenian Apostolic (94.7%), other Christian (4%), Yezidi (1.3%)

Elections:

Parliamentary elections (2003, 2007); Presidential elections (1998, 2003, 2008)

Constitution:

Adopted by nationwide referendum July 5, 1995; amendments adopted through a nationwide referendum November 27, 2005

Legal System:

Based on civil law system; has not accepted compulsory ICJ jurisdiction

Suffrage:

18 years of age; universal

ECONOMY

Currency:

Armenian dram (AMD)

Independence:

September 21, 1991 (from the Soviet Union)

GOVERNMENT

GDP (Purchasing power parity): €11.9 billion (2009 est.) GDP – per capita (PPP): €4,196 (2009 est.) GDP – composition by sector: agriculture: industry: services:

18.6% 33.5% 48% (2009 est.)

Government type: Republic Budget: Head of government: President Serzh Azati Sargsyan

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revenues: expenditures:

€1,319 billion €1,682 billion


Introduction

Labour Force:

Natural gas – consumption:

1.93 billion cu m (2008 est.)

Natural gas – exports:

0 cu m (2008 est.) 1.93 billion cu m (2008 est.)

1,481 million (2007 est.)

Labour Force by occupation: agriculture: industry: services:

46.2% 15.6% 38.2% (2006 est.)

Natural gas – imports:

Unemployment rate:

7.1% (2007 est.)

FOREIGN TRADE Exports:

ENERGY

€508 million (2009 est.)

Export products: Pig iron, unwrought copper, nonferrous metals, diamonds, mineral products, foodstuffs, energy

Electricity – production:

5,584 billion KWh (2007 est.)

Electricity – consumption:

4,776 billion KWh (2007 est.)

Electricity – exports:

451.3 million KWh (2007 est.)

Electricity – imports:

418.7 million KWh (2007 est.)

Oil – production:

0 bbl / day (2008 est.)

Oil – consumption:

48,000 bbl / day (2008 est.)

Oil – exports:

0 bbl / day (2007 est.)

Oil – imports:

45,200 bbl / day (2007 est.)

Import countries: Russia (19.3%), China (8.7%), Ukraine (7%), Turkey (6.1%), Germany (5.8%), US (4.9%), Iran (4.6%) (2008 est.)

Natural gas – production:

0 cu m (2008 est.)

(Information provided by the World Factbook (www.cia.gov))

Export countries:

Russia (20.2%), Germany (17.2%), the Netherlands (12.2%), Belgium (8.5%), Georgia (7.7%), Bulgaria (5.7%), US (4.9%) (2008 est.)

Imports:

€1,811 billion (2009 est.)

Import products: Natural gas, petroleum, tobacco products, foodstuffs, diamonds

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ARMENIA

Rich Cultural Heritage Armenian landscapes portrayed in the works of foreign artists.” Armenia is also a music-loving nation, known for its folk music for centuries since the days when travelling musicians played throughout the country. Popular instruments are the kamancha, kanun (dulcimer), davul (doubleheaded hand drum), oud (lute), and, most importantly, the duduk. The Armenian duduk, a cylindrical tube made of apricot wood, predates Christianity and is one of the oldest double reed instruments in the world. The country’s most famous duduk player is Djivan Gasparyan.

Academia Gallery

Armenia has a rich cultural heritage which includes writing, the visual arts, dance and music. Still today, the arts are highly prized in the country. Visitors to Armenia can get a taste of the country’s arts and history in numerous museums in Yerevan, especially interesting ones being: the National Museum, with its focus on Armenia’s history; the Museum of Manuscripts, a collection of priceless manuscripts which serves as a tribute to the Armenian veneration for learning and the written word; and the new Cafesjian Centre for the Arts, which attracted some 20,000 visitors to its opening in November 2009. The Cafesjian Centre, a project by a prominent Diaspora Armenian family based in the US who also owns Cascade Bank, features a sculpture park, terraced gardens and art galleries. For its opening, the centre

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hosted the first exhibition ever held in Armenia of the great Armenian-born painter Arshile Gorky. The new arts centre, budgeted at over €28 million, displays more than 5,000 works of art collected by the Cafesjian family. It is a tribute to Armenian culture and a gift to Armenians who might not otherwise have been able to view the works of art other Armenians have created.

Ancient and contemporary arts Focusing on contemporary Armenian artists, the Academia Gallery, established in Yerevan in 1999, regularly organises ambitious exhibitions and is currently hosting a show of Gagik Ghazanchyan, one of Armenia’s most influential modern artists. Gallery owner Gor Vardanyan partners with the British Council and other organisations in mounting exhibitions and hosting arts-related events. He says, “We are planning two more projects, one on figurative art, including the Armenian custom of body painting, and another on

Armenian dance dates back to prehistoric times and was depicted in cave paintings. Other arts and crafts with a long tradition in Armenia include lace making, carpet weaving and stone carving. Armenia is an arts-loving nation whose people cherish their cultural traditions.


• Armenian Development Agency Smoothes the Way for International Investors • Developing Stronger Ties with the EU • Exceptional Attractions for Foreign Investors

Business & Investment Opportunities

“Armenia is already an excellent base for exporting to Iran and CIS countries and we have the potential to import products, improve them, and export them to new markets.” Robert Harutyunyan, General Director Armenian Development Agency


ARMENIA

Armenian Development Agency Smoothes the Way for International Investors The Armenian Development Agency (ADA) is working to develop Armenia’s competitive advantages and to make these better known to international investors. During the current global financial crisis, the agency is playing a more proactive role in promoting Armenia worldwide and engaging the Armenian government’s co-operation in projects with particularly strong investment appeal. Robert Harutyunyan, General Director, explains that one of ADA’s key roles is to facilitate the investment process for foreign investors. “We help investors research potential partners in Armenia and avoid bureaucratic tangles. We organise site visits and generally help to facilitate the investment process in Armenia,” he points out. ADA is making sure investors are aware of Armenia’s investment incentives, which include its highly educated labour force, natural and cultural heritage and potential to produce various products, including organic foods.

Trade hub on a new Silk Road Armenia’s location is another significant advantage. Robert Harutyunyan notes that Armenia has made considerable progress in developing its infrastructure to take advantage of its capacity and to serve as a trade hub, including building new road connections to Bandar-Abbas port in Iran and Poti and Batumi ports in Georgia. “With these roads and ports, we can build a new route between Europe and China, a new Silk Road through Armenia,” he says. The World Bank, the Asian Development Bank and the governments of Armenia and Iran are supporting these infrastructure initiatives. Armenia welcomes not only capital but also technology and knowledge transfer investments. As Robert Harutyunyan says, “We want to comply with EU standards in our exports which means we need the right kinds of technologies and know-how to meet those standards. The most important role for ADA today is to discover new export markets for Armenian goods. We have a project with AWEX

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Robert Harutyunyan, General Director Armenian Development Agency

through UNIDO, the first Belgian-Armenian project, which will exemplify our active participation in international business partnerships.” ADA welcomes contacts with potential investors and Robert Harutyunyan urges European investors to come to Armenia and observe what the country has to offer. He says, “Armenia is already an excellent base for exporting to Iran and CIS countries and we have the potential to import products, improve them, and export them to new markets. Our undeniable strength is our knowledge of Middle Eastern culture. Armenia can be a link between the EU and the Middle East and Asia.”


Business & Investment Opportunities

AmCham Lobbying for Better Business Environment The American Chamber of Commerce in Armenia (AmCham), established in 2000, has made a long-term commitment to a county which it, believes has significant potential but which still faces a number of challenges. AmCham Armenia has 80 member companies from many countries which are active in a wide range of sectors.

says, “Customs rates can change drastically since customs officials can interpret legislation arbitrarily which results in unfair over-taxation of importers and consequently increases the cost of doing business. Customs authorities continue to negatively appraise the value of imported goods for taxation purposes based not on invoice value but on higher reference values of its own design. We encourage the government to eliminate this approach.”

While AmCham cannot address Armenia’s larger economic challenges by itself, it plays an important role in Armenia’s economic development through its promotion of international business standards, transparency and rule of law.

In spite of the challenges, Armenia offers a number of attractions for investors, including easy procedures for starting up a company, skilled labour, and growth opportunities in several sectors, including banking and financial services, information technology and tourism.

David Atanessian, President, explains that AmCham is trying to do its part to ensure a more attractive business environment in Armenia. He says, “We would like to see a specific forum to deal with tax and customs issues rather than just commenting on them after new tax and customs rates are introduced.”

Need to upgrade legislation “The biggest challenge of doing business in Armenia is the country’s customs legislation,” David Atanessian believes. He

David Atanessian believes that Armenia should focus on strengthening its ties with the EU. He says, “European values are similar to Armenian, and in order to compete with EU nations we need to bring Armenia’s educational system and business environment in line with EU standards. We need to create appropriate conditions locally, encourage and engage the Armenian Diaspora in Europe and globally to focus more on developing Armenia. One priority for AmCham is an open border between Armenia and Turkey. AmCham Armenia

David Atanessian, President Amcham Armenia

was one of the first local business chambers to sign a joint statement with AmCham Turkey calling our governments to establish diplomatic relations and open borders. Overall, AmCham believes strongly in Armenia’s future. David Atanessian concludes, “Armenia presents a challenging environment, but also significant business opportunities. I am proud of the AmCham members who have established business operations in Armenia by bringing so much needed knowledge and expertise to this emerging market. I am confident that the roster of leading US and EU firms doing business in Armenia will only grow with AmCham’s active support.”

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ARMENIA

Development Centre Providing Essential Support for SMEs The Small and Medium Entrepreneurship Development National Centre of Armenia (SME DNC) was established by the government in 2002 to spur on the growth of Armenia’s small and medium-sized enterprises (SMEs). Today, the organisation has set up 10 offices throughout the country where entrepreneurs can receive all kinds of support. Armenia now has around 100,000 SMEs, and over the past five years, SME DNC has assisted more than 20,000 operating and start-up SMEs. Ishkhan Karapetyan, Executive Director, explains that SME DNC provides information and technical assistance concerning sales promotion, meeting ISO standards, the creation of web pages, design and more. Training is another focus for SME DNC, which offers training programmes and assistance in such issues as signing contracts and participating in international trade shows. All SME DNC’s services are provided free of charge. Concerning financing for SMEs, SME DNC can offer loan guarantees, seed capital and partial subsidising of credit interest rates, and has established Universal Credit Organisation namely “SME Investments” UCO CJSC, which provides direct credit and equity financing to private companies. In 2008, SME DNC has launched advocacy programmes and hotlines for SMEs. SME DNC is serving as a liaison between SMEs and state revenue committee, funding organisations and regulatory bodies. Ishkhan Karapetyan says, “We are becoming a connecting point between entrepreneurs and the government concerning the issues touching interests of business community. We regularly organise discussions with SMEs, business service providers and business associations as well as with government officials.”

Enterprise Europe Network SME DNC is also the only organisation in Armenia which is involved in the Enterprise Europe Network

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Ishkhan Karapetyan, Executive Director SME Development National Centre of Armenia

(EEN), the major EU initiative for support to SMEs. EEN involves 44 countries and 600 business organisations throughout Europe. “Through EEN, we can give Armenian SMEs information about how to find EU partners and how to enter the EU market,” Ishkhan Karapetyan says. SME DNC has already helped to set up several partnerships between Armenian and EU companies.

Support for foreign investors SME DMC is also ready to assist foreign investors to launch businesses and joint-ventures in Armenia. Ishkhan Karapetyan says, “We can provide foreign investors with all the necessary information concerning how to register a business, taxation system, administrative procedures and more, all offered free of charge by our specialists. We can also provide co-financing. We will do anything we can to help.” SME DMC is helping to make Armenia’s investment climate more attractive and better known. Ishkhan Karapetyan explains, “We want to promote Armenia as a quality brand which offers excellence, knowledge and stability.”


Business & Investment Opportunities

Developing Stronger Ties with the EU Since its independence, Armenia has been focusing on developing stronger ties with the EU, currently its number one trade partner and one of its main sources of foreign direct investment. The co-operation between the two economies was formalised in 1999 in the Partnership and Co-operation Agreement (PCA), which details a legal framework for EU-Armenia bilateral relations and co-operation in many areas.

Network, which is probably the biggest and most comprehensive European business support system created by the European Commission.

In 2004, a new phase in EU-Armenia relations began with the inclusion of Armenia in the European Neighbourhood Policy (ENP), which provides for a more comprehensive political and economic dialogue. In 2006, the EU and Armenia adopted a five-year ENP Action Plan which sets targets for priority areas, including democratisation, socio-economic reform, poverty eradication, energy co-operation and other issues.

The way forward

In 2007 Armenia has been invited to align with the CFSP statements and declarations on a case-by-case basis. By aligning itself with these statements Armenia demonstrates its commitment to the common values and, at the same time, get a better insight into EU’s position of issues on the foreign policy and security agenda. Armenia is a member of the EU Eastern Partnership initiative, launched in May 2009, which brings together EU member states and six partners: Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine. The Partnership is

As of January 2009 Armenia is beneficiary of special incentives in foreign trade (particularly which concerns the import of Armenian origin products to the European Union) under the EU GSP+ special incentive arrangement for sustainable development and good governance. It offers additional tariff reductions in export to EU.

Embassy of Armenia in Brussels

aimed at creating a jointly owned agenda of cooperation which should support the political and economic reforms thus contributing to the overall stability and sustainable development. Integration processes are being developed in economic areas. Legislation approximation in almost all sectors was run in past years and the process is currently actively ongoing. The Armenian National Standardisation Authority became partner of the European Standard Association/ CEN, and Armenia started to approximate and use “EN” standards in its industrial products. Armenian SME Development National Centre became a full member of the Enterprise Europe

Armenia is now waiting for the EU to open negotiations on an EU-Armenia Association Agreement, which would replace earlier agreements and set a new, more in depth framework for mutually beneficial co-operation in many areas, including through the proposed EU-Armenia Deep and Comprehensive Free-Trade Agreement (DCFTA). As Armenia’s EU Mission points out, “The DCFTA will be a huge step forward in Armenia’s economic integration with the EU. It will bring about a truly integrated liberal trade and economic system in line with EU standards.” Another major issue is visa facilitation, which is a significant element for the promotion of people-to-people contacts and better understanding between the population of the EU and the partner state. All these initiatives illustrate Armenia’s commitment to become further integrated and closer to the EU and creating a more attractive environment for European partners and investors.

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ARMENIA

Exceptional Attractions for Foreign Investors Armenia offers outstanding attractions for investors, including a strategic location, a hardworking and skilled population, low labour costs, a stable banking system, access to fast-growing CIS and Middle East markets, an investor-friendly government, many high potential growth sectors, and strong support from international organisations. The government of Armenia has a very positive and open attitude towards foreign investments and has created investment incentives aimed at stimulating the country’s export-oriented activities while also creating new jobs. Reforms in Armenia’s economy, infrastructure and macroeconomic fundamentals have added to Armenia’s appeal for investors.

High potential sectors Over the past decade, Armenia has recorded significant foreign investments in many sectors, with a concentration of investments in telecommunications and transportation, power and utilities, food processing and packaging, mining and metallurgy, wholesale and retail trade, and high-tech electronics engineering and assembly. The government has targeted the following sectors as offering particularly strong investment potential: information technology, electronics, mining, chemicals and pharmaceuticals, jewellery and diamonds, food and drinks, textiles and clothing, and tourism.

Multinationals targeting Armenia Multinationals who have made major investments in Armenia include telecom group Orange, Veolia, FedEx, Hertz, Best Western, British Airways, Lufthansa, Air France, Air Arabia, British American Tobacco, Caritas, Castel Beer, Coca-Cola, Bulvinos Chemicals, GlaxoSmithKline, Marriott International, Golden Tulip, LLD

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Diamonds (Israel), Chronimet, Rusal, Hellenic Communications (OTE), Pernod Ricard, Philip Morris, Renco, Gazprom and Siemens, among many others, and the list grows longer every year. A number of information technology enterprises have set up successful operations in Armenia, including Lycos Europe, HPLA, EPG Labs, Synopsis, Virage Logic and others. Armenia’s banking sector now includes HSBC, several Russian banks (Armsavingsbank, Areximbank, Unibank and others), Mellat Bank (Iran), ArmSwiss Bank (a Swiss-Armenian joint venture), and BTA Investbank, a leading CIS bank. Armenia’s financial services market, including the insurance market, is expanding rapidly and represents strong investment potential. Armenia has a number of highly respected universities which are not only providing a skilled workforce for


Yerevan State University

investors but are also partnering with the private sector in research and development initiatives.

Improved transport infrastructure Over the past decade, around €200 million has been invested in improving Armenia’s transport infrastructure to help take advantage of the country’s strategic location. Armenia is located on the Europe-CaucasusAsia international transport corridor, the TRACECA corridor (the route of the ancient Silk Road), which has become the main liaison connecting Europe to Asia over the past decade. Armenia is also on the European North-South corridor, which stretches from the Baltic Sea coast to India.

Incentives for foreign investors The Armenian government is working hard to streamline the investment process. A new tax reform programme was approved by the government in 2008 which has simplified taxation procedures, and customs regulations are also being upgraded. The country’s law on foreign investments specifies that Armenia offers a liberal, open door attitude towards foreign investors; that investors’ rights are protected; that an equal playing field has been created to provide equal opportunities for domestic and foreign investors; that large investments will have particularly strong support from the government; and that special incentives are available for investments in strategically important sectors and activities. The American Bar Association has judged Armenia’s law on investments to be one of the most liberal and successful of any emerging economy. In the Index of Economic Freedom, Armenia ranks very high (27th place worldwide), and its economy is rated “mostly free”.

Specific incentives include 100% foreign ownership, the availability to foreigners to have long-term leases on land and freehold ownership of property; no import duties on raw materials and no export duties; refunds for VAT payments on exports; free foreign currency exchange; no restrictions on remittances; losses carried forward up to five years; no restrictions on locations for investments; and protection provided through a number of bilateral agreements as well as through Armenia’s membership in the World Trade Organisation. Armenia’s privatisation programme has created significant investment opportunities for investors in a wide range of sectors. Successful privatisations include ArmenTel, the Yerevan Brandy Factory, Armenia and Ani Hotels, Armenian Savings Bank, Electric Networks of Armenia (electricity distribution), Zangezour Copper Molybdenum (the country’s biggest mining asset), and a concession for operating Zvartnots International Airport.

ADA: One-stop shop for investors The Armenian Development Agency (ADA), which has a comprehensive web site in English, acts as a “one-stop shop” agency for investors, assisting them in setting up their business in Armenia, helping in project implementation, performing a liaison role with the government, and providing information on investment opportunities in the country as well as investment related regulations and laws. ADA also helps to find international markets for products, undertakes market studies and seeks out partners for joint ventures aimed at increasing the volume of exports and the development of Armenian enterprises. ADA organises international conferences, business forums, trade fairs and exhibitions, and is ready to assist new investors enter the high potential Armenian market.

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• Yerevan’s Mayor Highlights City’s Investment Appeal • Deputy Prime Minister Encourages Public-Private Partnerships • Yerevan: Ideal Business Base

City of Yerevan

“Yerevan municipality is the number one supporter of any foreign investor in Armenia.” Gagik Beglaryan, Mayor of Yerevan


City of Yerevan

Yerevan’s Mayor Highlights City’s Investment Appeal Yerevan, Armenia’s capital, is the hub of the country’s business and cultural activities and home to 52% of Armenia’s working population. Yerevan and its suburbs also account for around half of Armenia’s production (including 99% of its information technology enterprises), 88% of its construction activities and 84% of its retail trade. Even during the global financial crisis, construction continues in Yerevan, supported in part by Armenians who have emigrated but want to build property in the city. Gagik Beglaryan, Yerevan’s first elected mayor, points out that the city’s importance as an industrial centre has grown since the Soviet years since many industrial facilities built in rural areas in that time have since closed down. He says, “Around half of Armenia’s industry was once in rural areas and half around Yerevan, and now the Armenian government is trying to restore this balance. We in Yerevan fully support this effort.” The mayor also actively supports the government’s drive to bring foreign investment to Armenia. He explains, “Human potential is the number one incentive for foreign investment in Armenia. Here in Yerevan, we are developing new strategies to reduce the risks of investing in Armenia and especially in Yerevan. We are amending Yerevan’s legislation to remove any obstacles for investors.” The mayor has established partnerships with international organisations, including the World Bank, with which Yerevan municipality now works directly on such issues as transport and communications for the city. The municipality also works closely with Armenia’s federal government. Yerevan municipality partners with French firm Véolia concerning the city’s water supply network and with the Asian Development Bank on new road and underground construction. The mayor anticipates significant loan support from the European Bank for Reconstruction and Development for the rehabilitation of Yerevan’s underground system this year.

Gagik Beglaryan, Mayor of Yerevan

Support for foreign investors Gagik Beglaryan and Yerevan municipality successfully supported French telecom operator Orange in its entry to the Armenian market and are ready to help any foreign investor. Concerning hotel construction, for example, the city can provide low cost land in neighbourhoods adjacent to the city centre where new three-star hotels are particularly needed. Transport and communications projects are another strong investment opportunity in Yerevan. Gagik Beglaryan says that this year Yerevan will announce an international tender for a waste management project, another high-potential investment option. The mayor concludes, “Yerevan municipality is the number one supporter of any foreign investor in Armenia.”

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ARMENIA

Deputy Prime Minister Encourages Public-Private Partnerships Armenia has impressively achieved macroeconomic stability and now the government’s goal is to diversify the economy and bring it up to Western European standards. The private sector has a key role to play in achieving this goal. Armen Gevorgyan, Deputy Prime Minister and Minister of Territorial Administration, explains, “We want to rely on the private sector to bring in new resources, rather than government funding. Armenia’s strategy is to create the kind of regulatory and business environment which will encourage investment and allow the private sector to flourish. Over the past 18 months we have managed to create an open and transparent dialogue between the public and private sectors.” The government is working with the World Bank, the Asian Development Bank (ADB), the European Bank for Reconstruction and Development and other international organisations to ensure that Armenia is investor friendly. Key projects in the works that are creating investment opportunities include the construction of the North-South Road Corridor and an irrigation project with the Millennium Challenge Corporation. “Such projects are designed not only to bring in funding but also to foster the exchange of knowledge. We want to make Armenia more competitive internationally,” Armen Gevorgyan says.

High-potential sectors Armen Gevorgyan cites information technology, agriculture, food processing, chemicals, construction and tourism as sectors with particularly strong investment potential. “Any progress in any sector means progress for all. The government is doing its best during these difficult times of global crisis to make things as easy as possible for the private sector,” he points out.

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Armen Gevorgyan, Deputy Prime Minister and Minister of Territorial Administration

In his role as Minister of Territorial Administration, Armen Gevorgyan is overseeing the government’s drive to promote regional development within Armenia. He says, “Armenia has 915 communities in 10 marzes (provinces) plus Yerevan, the capital. Our aim is to provide equal opportunities throughout the country and to improve quality of life and standards in all provinces through upgrading regional infrastructure, schools and hospitals.” Challenges for Armenia include fighting bureaucracy and corruption and upgrading the country’s legal system. The government is counting on the private sector to help achieve these aims. “We believe that public-private partnerships can help create a more transparent, just system here in Armenia,” Armen Gevorgyan says. He adds that Armenia welcomes foreign investors, and concludes, “I have never met an investor who has started a business in Armenia and not been satisfied.”


Yerevan: Ideal Business Base Yerevan is set to remain Armenia’s main economic hub in the future. The city now accounts for almost all of Armenia’s production, is home to over half the country’s working population, and is the centre of the country’s financial services, information and communications sector, and research and development activities as well as its seat of government. Armenia’s top higher education institutions, which are providing skilled labour as well as potential research and development partnerships for investors, are also based in Yerevan. Gagik Beglaryan, Yerevan’s first elected mayor, welcomes foreign investors to the city and its surrounding areas. He explains that investors in Yerevan can count on the support of world-class business services, including a number of foreign banks, law firms, consultants and other services providers. Yerevan also offers high quality of life thanks to its modern infrastructure, lively cultural scene and easy access to locations all over the world via flights from the city’s international airport.

Orange has set up operations there. Future initiatives include a project to rehabilitate the city’s underground system with the support of the European Bank for Reconstruction and Development, and a high potential tender for waste management services. Yerevan’s mayor and municipal government are ready to assist foreign investors open businesses in the city. They have already streamlined procedures for investing there and have updated legislation to reduce risks for investors still further. Gagik Beglaryan explains, “Yerevan municipality has provided all around support and excellent conditions for Orange to have a successful launch in Armenia. This is not just words: we have implemented our own municipal legislation to protect foreign investors here.”

Multinationals setting up operations in the city

Yerevan municipality can also provide land for projects, including for the new three star hotels the city needs. As the mayor points out, “This is a mutually beneficial cooperation. When we provide land, investors bring job opportunities.” Investors in transport, communications and residential property development in Yerevan also benefit from advisory assistance provided to the city by the World Bank and the Asian Development Bank to encourage investment in these sectors.

The city has already attracted a number of major international investors. Veolia is working with the city concerning its water system, and French telecom giant

Founded in 783 BC, Yerevan is one of the world’s oldest cities, but it is becoming one of the most modern and forward-thinking European business hubs.

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• Bringing Armenia Closer to the EU • World Bank Supports Armenia, an Important Link between EU and Asia • International Support for Armenia’s Developing Economy

International Financial Institutions

“We are considering doubling our budget for Armenia in the next budgetary phase, which is 2011 to 2013. This would enhance the EU position as one of the most significant donors in the country. Armenia has become a priority for the EU.” H. E. Raul de Luzenberger, Head of the EU Delegation


International Financial Institutions

Bringing Armenia Closer to the EU The European Union strongly supports Armenia’s development into a modern democratic society. The EU also contributes to the settlement of conflicts in the Caucasus and to the improvement of relations between the countries of the area. Over the past 4 years, the EU has allocated €98.4 million in direct support to Armenia, including budgetary transfers to Armenia’s national budget. Additional millions of euros have been given to help ensure the country’s food security and the stability of its financial sector, among other kinds of support. As a new form for support, the EU Advisory Group, launched in 2008, provides European experts to counsel the Armenian authorities on development strategies in areas of common interest. The Head of the EU Delegation to Armenia, H.E. Raul de Luzenberger explains: “We are considering doubling our budget for Armenia in the next budgetary phase, which is 2011 to 2013. This would enhance the EU position as one of the most significant donors in the country. Armenia has become a priority for the EU.”

Association agreement with the EU The European Commission has been helping Armenia develop growth strategies which will strengthen the country’s ties to the EU. Armenia’s involvement in the European Neighbourhood Policy and the Eastern Partnership initiative has helped boost the country’s integration with the EU as well as with regional markets. A new generation of trade agreements is the next step forward. Raul de Luzenberger says: “We will offer association agreements between the EU and the countries of the South Caucasus at some time in the future. Such an agreement should contain what we call a ‘deep and comprehen-

H.E. Raul de Luzenberger, Head of the EU Delegation to Armenia

sive free-trade agreement’, which means not only a traditional free-trade agreement but one which includes substantial reforms. This is a difficult task for Armenia, but the aim is to enable Armenia to export a wider range of products to the EU market without duties and respecting the high EU norms and standards on quality and consumer protection and other important sectors.”

Intellectual capital While Armenia will certainly benefit from closer ties to the EU, it also has a lot to offer, including its intellectual capital. Raul de Luzenberger points out: “Armenia has very high quality education and the level of knowledge and culture here is very high, so there is a lot of potential to be developed for example in areas like design, fashion, cinema or other cultural fields in which Armenia is already making important contributions.” For investors, Armenia’s attractions include its strategic location, a proactive government which has demonstrated its commitment to reforms, and several sectors with strong growth potential. Raul de Luzenberger singles out mining, energy, services (including tourism), chemicals, electronics, software and cultural ventures as areas with particularly promising prospects. He concludes: “Investors need to know more about the modern Armenia.”

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ARMENIA

World Bank Supports Armenia, an Important Link between EU and Asia The World Bank is demonstrating its confidence in Armenia. According to Aristomene Varoudakis, Head of the World Bank Yerevan Office, the bank doubled its support for Armenia for the period 2009 to 2012 compared to the four previous years, and anticipates that its total investments in the country for this period will reach €393.6 million. Around €107.3 million of this will be in the form of concessional loans with low interest rates. Around €322 million will be channeled towards specific projects, including gas and drinking water supply facilities in villages, irrigation, and rural roads. The remainder is earmarked for the state budget, in support of a broad-based programme of reforms. “Our objective is to help Armenia, and our programme focuses on two goals. The first is to help the country mitigate the consequences of the global economic crisis through supporting the government in maintaining funding of social services and healthcare, and the second goal is to help Armenia improve its competitiveness to create a sustained and growing economy after the crisis,” Aristomene Varoudakis explains. Social services, energy, infrastructure and SMEs are the main targets for World Bank funding in Armenia. The bank is contributing to the major North-South Corridor project, invests in renewable energy and electricity transmission, and has provided €35.7 million for commercial banks to support them in lending to SMEs. The World Bank is also helping to improve Armenia’s communications infrastructure through support for projects that will bring Internet access to rural areas and through initiatives like establishment of a new technology park in Gyumri. “We are supporting both the government and the private sector. In private sector investments, we focus primarily on SMEs,

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Aristomene Varoudakis, Head of the World Bank Yerevan Office

the information technology and energy sectors,” Aristomene Varoudakis explains. The World Bank recommends Armenia to foreign investors because of the country’s liberal business environment that includes a very low level of trade protection; the ease of doing business (number four in the CIS countries); a skilled, bilingual and highly educated labour force; and reasonably good infrastructure. Aristomene Varoudakis says, “Of course there are problems, but we believe overcoming the obstacles is mostly a question of time as there is commitment to critical reforms. The government is now negotiating important free-trade agreements with the EU, which can help make Armenia a very attractive economic hub. Armenia is a link between the EU and Asia, and if the border with Turkey reopens, Armenia’s importance will become even more visible. Armenia is a frontier of Europe, and frontiers have always provided a lot of investment opportunities.”


International Financial Institutions

International Support for Armenia’s Developing Economy When Armenia became independent of the Soviet bloc, it had to restructure its economy completely from a centrally planned system geared to supplying the needs of the Soviet Union to an independent system which needed to supply the country’s own needs as well as forge a presence in the global marketplace. Such a dramatic transformation requires strong commitment from both government leaders and the local population since the transition period is always difficult, and every country faced with such changes must rely on outside help to get it started on the road to development. Armenia has benefited from the support of a number of international organisations which have demonstrated their faith in the country’s long term prospects, including the World Bank, the International Monetary Fund (IMF), the European Bank for Reconstruction and Development (EBRD), and the International Fund for Agricultural Development (IFAD).

“Concessions loans” are another source of support. These have been provided mainly by the World Bank, the IMF, the EBRD and the IFAD, as well as bilateral donors, mainly the US and Germany. The third form of support is public and private investment involving equity and financing. International organisations providing such support in Armenia include the International Finance Corporation (IFC) and the EBRD, along with bilateral organisations like the US Overseas Private Investment Corporation (OPIC), KfW Bank (Germany), and JICA. Support from such organisations has helped put Armenia on the road to developing a thriving modern economy and to achieving its goal of supporting itself independently.

During the period immediately after the Soviet years, aid for Armenia was mainly geared to supplying the population’s basic needs, but as the Armenian economy began to mature, international assistance began to be employed for infrastructure improvements, healthcare and education projects, public utilities, and institutional reforms. In addition to international funding organisations, Armenia has been supported by bilateral donors. The US has been the top source of financial aid for Armenia; other major supporters are Germany, France, Japan, the Netherlands, Switzerland, the UK, and Italy.

International funders confident in Armenia’s long-term prospects Foreign aid for Armenia can be divided into three different types. One is “foreign official transfers”, of which the main providers have been the United States Agency for International Development (USAID), the EU Technical Assistance to CIS Countries (TACIS) programme, the Japan International Co-operation Agency (JICA), and the US Lincy foundation, a private charitable organisation.

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• Central Bank Ensures World-Class Standards • Ministry of Finance Helping to Foster Knowledge-Based Economy • Financial Sector Meeting International Standards

Finance & Insurance

“We consider that the IMF and World Bank have been our best partners during these hard times of crisis, by helping us stay stable and keep inflation under control.” Tigran Davtyan, Minister of Finance


Finance & Insurance

Ministry of Finance Helping to Foster Knowledge-Based Economy Tigran Davtyan, Armenia’s Minister of Finance, explains the significant progress Armenia has made in transforming itself from a part of the vast Soviet system to an individual nation with a market-based economy. The main goal of the Ministry of Finance, which oversees the country’s financial sector, is to help maintain the macroeconomic stability Armenia needs in order to support future development. Creating a human capital-based economy is a top priority. As Tigran Davtyan explains, “A knowledgebased economy is necessary for Armenia since it is a small country with limited options on the international market, so we must develop our strengths in sectors which require knowledge, skill and education.” He cites diamond cutting, information technology, and services (including tourism) as potential growth sectors for Armenia, and adds that for these sectors to thrive, international standards must be implemented. Infrastructure must also be improved to help Armenia take advantage of its strategic location to become a regional transport hub.

Tigran Davtyan, Minister of Finance

The Ministry of Finance works closely with the World Bank, the International Monetary Fund, the World Trade Organisation and other international players. “We consider that the IMF and World Bank have been our best partners during these hard times of crisis, by helping us stay stable and keep inflation under control,” Tigran Davtyan says.

Armenia’s economy has already been fully liberalised, with less than 10% state-owned companies left. All the country’s 22 banks are private and the Ministry of Finance urges more international banks to enter the market. “We welcome all new banks that would like to come to Armenia to help raise standards through competition,” Tigran Davtyan says.

The Ministry of Finance managed to steer the country through difficult conditions in 2009 but had to raise the budget deficit from less than 1% before the global crisis to 7.5%. “We are now implementing various institutional reforms and we are planning big investments in infrastructure, which will require the help of international funding institutions,” the minister explains.

The Ministry of Finance will continue to help secure the stability of Armenia’s financial sector. The minister adds, “Our strategic vision is to provide more favourable conditions for both local and foreign investors. Armenia has a long tradition of promoting education and entrepreneurship, and as a small country, we have the potential to implement changes quickly.”

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ARMENIA

Central Bank Ensures World-Class Standards Armenia has made great progress in bringing its financial sector up to world-class standards. The financial sector is overseen by the Central Bank, whose Governor, Arthur Javadyan, points out, “During the last decade the Armenian financial and banking system has changed drastically, evolving from an overcrowded system with unstable institutions to one with fewer institutions, but which is amongst the most stable within the CIS countries.” He adds that Armenia’s banking sector, which accounts for 92% of all financial sector activity, is the sector’s most stable segment. The Central Bank has instituted a number of reforms to upgrade Armenia’s securities market, insurance companies, capital markets, and protection for institutional investors. The Armenian stock exchange has been acquired by the NASDAQ OMX group, a move which will help integrate Armenia’s financial sector into global markets. The banking system continues to play a key role in the economy. It has increased its lending by around 46% per year and has achieved a 30% annual growth in assets over the past five years. In addition, the Central Bank has welcomed a number of foreign players to Armenia’s banking sector, including Crédit Agricole, HSBC, Procredit and others.

Arthur Javadyan, Governor of the Central Bank

Strong regulatory environment attracts foreign investors

Arthur Javadyan points out that the Central Bank has established productive partnerships with international financial institutions such as the World Bank, the International Monetary Fund, the Asian Development Bank and the European Bank for Reconstruction and Development. He explains, “Except for broad cooperation over a wide spectrum of issues, we have worked with some donors to refinance local currency lending to small and medium-sized enterprises. We have also launched programmes with them to develop different sectors, including renewable energy.”

In fact, the Central Bank has made sure that Armenia’s financial sector offers significant investment attractions. Arthur Javadyan says, “We have a very good framework for investment in our banking sector. The Central Bank serves as a megaregulator, overseeing not only banks but also insurance companies and the securities market. We are tough supervisors, and this reassures foreign investors.”

The Central Bank has also developed programmes to help Armenia survive the current global financial crisis. Even during the crisis, investment continues to flow into the country’s financial sector, a sign of confidence in its long-term potential. Arthur Javadyan says, “We will see more foreign banks enter the market in the near future. They are attracted by the financial sector’s stability and they trust our tough, but reasonable approach.”

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© Arzumanyan Babken

Financial Sector Meeting International Standards Armenia’s financial sector is one of the country’s success stories. It is overseen by the Central Bank of Armenia (CBA) and the Ministry of Finance, and its current strengths illustrate the effectiveness of the strategies the government has employed. International accounting standards for banks were introduced in Armenia in 1999, and in 2003 the government initiated a rigorous programme to streamline Armenia’s banking sector, which resulted in the liquidation of several weaker banks and the implementation of phased increases in minimum statutory capital requirements for remaining banks. The European Bank for Reconstruction and Development (EBRD) has implemented the Armenia Multi-Bank Framework Facility II, aimed at supporting the increase of financial intermediation in Armenia through medium-term credit lines to local commercial banks for lending to commercial customers. Since the

facility was launched in 2006, over €79.3 million has been disbursed to 11 banks.

Strong presence of foreign banks Armenia’s banking sector now includes 22 private banks, including foreign banks, and all of them are steadily upgrading their operations and services to match international standards. The Governor of the Central Bank, Arthur Javadyan, predicts that more foreign banks will enter the market this year. ACBA Crédit Agricole, part of the French Crédit Agricole group since 2006, is one successful bank with foreign ties. Ranked number one in Armenia in assets under management, number of ATMs, and profits, the bank was upgraded by Moody’s Investors Service in August 2008. HSBC Armenia, 70% owned by the global HSBC group, is another successful foreign investor. The commercial

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ARMENIA

bank recently implemented cutting edge telephone and Internet banking services. ArmSwissBank, with 100% Swiss capital, is now involved in a partnership with EBRD concerning financing for trade-oriented enterprises and small and medium-sized companies, and with the World Bank to finance larger enterprises. Local banks are also expanding their products and services and getting recognition from international ratings agencies. Both Ardshininvestbank (ASHIB) and VTB Bank Armenia saw their ratings boosted in 2008 by Moody’s and Fitch respectively.

Local banks supporting private sector Armenia’s banking sector has been playing a crucial role in spurring on the country’s private sector. Ardshininvestbank (ASHB), ranked number one in Armenia’s banking sector and the 16th largest enterprise in the country, specialises in loans to large industrial enterprises and provides a range of services for the mining sector and other sectors, including supporting ArmRosGazprom. ProCredit Bank, licensed in 2007 and operating since 2008, is a development oriented full service bank focusing on lending to very small, small, and medium-sized enterprises. Its shareholders are ProCredit Holding, KfW (Germany) and the EBRD. Unibank, established in 2001, participates in the International Fund for Agricultural Development (IFAD) programme for encouraging investments in rural areas and in the programmes of the National Centre for Assistance to Small and Medium Enterprise Development, as well as in ABN AMRO International Bank’s risk management programme. In spite of the crisis, top Armenian banks continue to perform well. Ameriabank, an investment bank offering corporate, investments and other retail services, reported that it was able to carry through all its planned programmes last year and that it plans to develop a pension accumulation scheme.

Insurance sector offers growth potential Along with strengthening the banking sector, the government has also been encouraging the growth of non-banking financial institutions, including insurance

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providers, investment funds and brokerage companies, all of which are playing a key role in attracting foreign investments. Araratbank, for example, has offered bonds issues and demand for its second bond issue in 2008 exceeded supply. An important foreign entry is NASDAQ/OMX, the Armenian Stock Exchange. The CBA and the Ministry of Finance are currently working to develop a thriving insurance market in Armenia. CBA Governor Arthur Javadyan points out that the bank has been overseeing the insurance market since 2006 and has instituted a number of reforms to upgrade the sector to provide additional security for investors. The government is well aware that a developed insurance market is an important factor in attracting investors to the Armenian economy. Lobbying is now underway to make third party liability and health insurance obligatory in Armenia, which would stimulate rapid development in the insurance market in the future. One local player predicts that the number of his company’s premiums could be increased by 10 to 20 times if this legislation is approved. Armenia’s insurance market is currently estimated at being worth around €14.4 million, with around a quarter of the total made up of aviation insurance. Only around 0.4% of risks are currently insured in Armenia, an indication of the market’s significant growth potential. One mission for Armenia’s insurance providers is to make individual customers


Finance & Insurance

recognise the value of insurance coverage. Today, around 95% of the clients of local insurance companies are from the corporate sector.

Applying international standards Armenia’s insurance companies provide a full range of insurance products and operate according to international standards, with reinsurance backing from some of the world’s best known reinsurance firms. London-Yerevan is one example of a successful foreign investment in the insurance sector. Among the top three insurers in the market, it is a 100% owned subsidiary of Londongate Group, which includes companies in the UK, Eastern Europe, CIS countries and Africa. Another successful foreign player is Cascade Insurance (US), which offers comprehensive insurance coverage to retail and corporate clients and reinsurance capacity to other Armenian insurance companies. Another leading firm, ISG Insurance, specialises in aviation coverage. Rosgosstrakh-Armenia, registered by the CBA in May 2008, is growing rapidly. Its president, Danil Khachaturov, says that his company aims to promote “an insurance culture and the development of everything related to financial institutes and risks.” Rosgosstrakh-Armenia is owned by Rosgosstrakh Holding (RGS), Russia’s largest insurance group, which in 2007 became the first Russian insurance company to pass the €1.44 billion mark in gross written premiums. These and other investors are demonstrating their confidence in Armenia’s long-term growth potential.

Recovering from recession The CBA says that Armenia’s economy is now beginning to recover from recession. The CBA steadily cut the costs of borrowing in 2009 but raised its benchmark refinancing rate by 50 basis points to 5.5% on January 21 this year and announced that it will tighten its fiscal and credit policy further. Aristomene Varou-Dakis, Armenia Country Manager for the World Bank, said recently that Armenia’s low public debt levels of about 15% of GDP give the country enough scope to keep its economy on track this year through available financial sources. The IMF and the World Bank will be providing €386 million and €393 million respectively, and another €358 million is expected from Russia to help support Armenia’s recovery.

ARKA: up-to-date information For up-to-date information on Armenia’s financial sector and economy in general, award-winning ARKA news agency is a reliable source. The agency co-operates with leading international news services and provides information to various private and public-sector organisations, both domestic and foreign. ARKA’s clients include the Armenian Central Bank, the World Bank, the International Financial Corporation, Yerevan Brandy Company, KPMG, HSBC Bank Armenia, Armimpexbank, Conversebank, National Television of Armenia, Delovoy Express weekly, and others. ARKA has a comprehensive web site available in English.

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ARMENIA

ACBA Crédit Agricole

Dynamic Local Bank Ready to Partner with EU Investors ACBA Crédit Agricole, part of the French Crédit Agricole group since 2006, is ranked number one in Armenia in assets under management, capital, loans, number of ATMs, and profits. The bank was founded 15 years ago by a group of agricultural co-operatives which continue to hold shares; French banking group Crédit Agricole acquired a 28% share of the bank in 2006. In 2009, ACBA Crédit Agricole had €296 million (US$25 million) in assets under management, and it was the banking sector’s leader in profits in the first nine months of 2009, at a time when other local banks were reporting losses. General Manager, Stepan Gishyan, explains that the bank has built up an extensive network of 36 branches throughout the country and that it is continuing to expand its branch network, product portfolio, and credit and loans capacity. “We are an example of an Armenian success story,” he says. ACBA Crédit Agricole partners with all the major international organisations operating in Armenia, including the European Bank for Reconstruction and Development (EBRD). “All the credit lines we have received from the EBRD are very successful and the EBRD and all other international lending organisations are very happy with their partnerships with us,” Stepan Gishyan points out.

Reputation for innovation The bank is known for innovation. It founded Armenia’s first leasing company in 2003 and has helped to upgrade Armenia’s financial sector regulatory environment through proposals it has made to the government. ACBA Crédit Agricole operates according to EU standards and offers the latest products and services. This year it launched its own information communication network, as a strong emphasis is put on leading in technology standards as well.

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Stepan Gishyan, General Manager

ACBA Crédit Agricole has a strong record in corporate citizenship, supporting a number of educational and cultural initiatives, and it will continue to spearhead Armenia’s economic growth. “We have not stopped giving credit or loans during the current crisis as other banks have, and we continue to launch new products, including a recent co-operation with American Express. We will be the exclusive partner of American Express in Armenia as of 2010,” Stepan Gishyan says. The bank is very confident about Armenia’s future. “Armenia offers a good business climate and there is a lot of room for other investors,” Stepan Gishyan says. He welcomes potential investors to count on ACBA Crédit Agricole as their reliable banking partner in Armenia, and concludes, “Our European clients will find no differences between our services and those they can find back home.”

ACBA Crédit Agricole 1, Byron Street, 0009, Yerevan Republic of Armenia Phone: +374 10 56 58 58 - Fax: +374 10 54 34 85 acba@acba.am - www.acba.am


Finance & Insurance

Ardshininvestbank

Banking Sector Leader Serves Corporate and Retail Customers Ardshininvestbank (ASHIB) is ranked number one in Armenia’s banking sector and is the 16th largest enterprise in the country. Nerses Karamanukyan, who is the new Chairman of the ASHIB Management Board, explains, “We are the most professional bank in Armenia in providing loans and support for large industrial enterprises.” ASHIB provides a wide range of services to Armenian mining, energy, engineering, machine-building, construction sectors, as well as to the country’s other fast growing clusters of economy. It is also the bank of choice for the country’s main universities and utilities companies, such as gas, electricity, water suppliers and telecom providers. Having the largest branch network throughout the country, the bank serves retail customers, too. ASHIB has issued the largest number of VISA cards among the Armenian banks and is one of the major operators of the private money transfers market. “These services, as well as others, targeted on individuals, will be further enhanced by the newly created retail arm in the bank,” Nerses Karamanukyan says.

Partnering with customers An emphasis on personalised service is one secret of ASHIB’s success. As Nerses Karamanukyan points out, “Our clients are our partners, not only when they are flourishing but also when they are experiencing difficulties. We are here for them. Our motto is ‘we are strong together’.” ASHIB grew out of two large banking enterprises, one providing services to the industrial sector and the other serving the agriculture sector. This has given ASHIB its expertise in serving large enterprises, but ASHIB is also committed to being a bank for the people of Armenia. “If you go to some small towns in the regions, our brand is recognised simply as ‘the bank’ as we have been there for over 80 years,” Nerses Karamanukyan explains.

Nerses Karamanukyan, Chairman of the Management Board

Through its loans, ASHIB is providing essential support for Armenia’s economic growth. “We provide loans from US$500 dollars (€335) for small farmers up to millions of dollars for our big industrial companies. We are a universal bank with all kinds of customers,” Nerses Karamanukyan explains. The bank has received strong support from the IFC and is recognised as having one of the strongest corporate governance structures of any bank in the country. ASHIB is very positive about the future of Armenia. Nerses Karamanukyan cites the country’s potential to serve as a regional transport hub when the border with Turkey is opened and he sees strong prospects in financial services and exports, for example of cement to Georgia and Russia, as well as to other neighbouring countries. To potential investors, he says, “Armenians are well-educated, target-oriented and results-oriented people, and by investing in this country you can be sure that if you set clear distinct goals, you will achieve them.”

Ardshininvestbank CJSC Republic of Armenia, Yerevan 0015 13, Grigor Lusavorichi street Phone: +374 10 59 05 01 Fax: +374 10 56 74 86 office@ashib.am www.ashib.am

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ARMENIA

Rosgosstrakh Armenia

Dynamic Insurer Aims to be Number One in Armenia ROSGOSSTRAKH ARMENIA, a branch of Russia’s leading insurance group, plans to become the leader in Armenia’s developing insurance market. The company was launched in Armenia in May 2008 and has already registered impressive growth. Gagik Grigoryan, Executive Director, says that Armenia’s insurance sector offers significant growth potential. “The penetration of the market is below 1% in Armenia now, so we have a lot of work here,” he says. ROSGOSSTRAKH ARMENIA offers non-life-insurance products which include accident, assistance, deposit, financial loss, general liability, guarantees, health (including for employees and for physical injuries), motor vehicle, property (including cargo and fire), and third-party motor vehicle insurance. It is the only company in Armenia to insure deposits. Gagik Grigoryan explains that ROSGOSSTRAKH ARMENIA is fully-owned by ROSGOSSTRAKH Russia; however the Armenian firm has the autonomy to make rapid decisions to ensure efficiency while also benefiting from the expertise of its mother company, ROSGOSSTRAKH.

€1.38 million in premiums ROSGOSSTRAKH ARMENIA is now ranked fifth in the local

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insurance sector and it is growing rapidly. It boosted its total premiums from €30,000 (AMD15 million) in September 2008 to an anticipated €1.38 million (AMD800 million) by the end of 2009. “The company’s development has been beautiful, and by the end of 2009 we should be the country’s fourth largest insurer concerning premiums,” Gagik Grigoryan explains. The acquisition of local insurer London-Yerevan, currently number two in the market, will give ROSGOSSTRAKH ARMENIA a significant boost. “London-Yerevan already employs Western European processes,” Gagik Grigoryan points out. He says other mergers or acquisitions might also occur and one deal is currently under discussion. ROSGOSSTRAKH ARMENIA aims to help upgrade Armenia’s insurance sector, inspire clients’ trust and help to boost coverage. “We have a lot of work to do to make the public here more aware of the benefits of insurance, and we are ready to do it,” Gagik Grigoryan says.

ROSGOSSTRAKH ARMENIA’s portfolio is currently around 95% corporate clients. Raising the percentage of individual clients requires not only informing the public but also the government’s support for compulsory motor third party liability insurance and other types of required insurance. This is expected to happen in 2010, providing a major boost to the insurance sector. ROSGOSSTRAKH ARMENIA has positioned itself to take advantage of the anticipated growth. Gagik Grigoryan says, “We have the expertise and the right technologies, and Armenia offers good conditions for foreign investors.”

ROSGOSSTRAKH ARMENIA Insurance CJSC 1 Northern avenue, Yerevan, 0001, Armenia Phone: +374 10 59 10 10 Fax: +374 10 50 07 70 info@rgs.am www.rosgosstrakh.am


• Energy Sector Offers Outstanding Development Potential • Mining Sector Attracting Major Investments • Energy Sector Achieving Sustainability and International Standards

Energy & Natural Resources

“Armenia aims to have closer ties to the EU and we want to bring all our systems up to EU standards.” Armen Movsisyan, Minister of Energy and Natural Resources


ARMENIA

Energy Sector Offers Outstanding Development Potential Armenia’s energy facilities urgently need modernisation. According to Armen Movsissyan, Minister of Energy and Natural Resources, the country’s Metsamor nuclear power plant is nearing its expiration date, while most of the country’s thermal energy facilities are several decades old and inefficient; it takes 380 grams of conventional fuel to produce one kilowatt hour of electrical energy, whereas modern plants can produce one kilowatt hour of electricity with only one half of this amount of conventional fuel. Large hydroelectric power stations are not a solution for Armenia since its water resources are limited.

Armen Movsissyan, Minister of Energy and Natural Resources

Faced with these challenges, the government has launched an extensive campaign to upgrade the energy sector by modernising and adding new facilities to the Metsamor nuclear power plant, renovating the country’s thermal energy facilities to meet modern standards, implementing renewable energy systems, and ensuring a stable and efficient transport network to import energy supplies and to distribute this energy to individual and corporate customers. “We aim to be integrated into the regional energy system,” Armen Movsissyan says.

Upgrades underway at Metsamor nuclear power plant Armenia is making progress in achieving these ambitious goals. Experts from the US and the EU conducted an extensive study of the Metsamor

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Energy & Natural Resources

nuclear power plant, and the conclusion was that a new power unit that meets international standards should be built at the same site. “We have already begun preliminary works. Many international organisations and countries of the world, such as the US, France, Russia, Czech Republic, Great Britain, IAEA and EU are helping the modernisation and safety upgrading of the operating unit and have been very positive about the results,” the minister says. The government is currently encouraging investment in the renewable energy sector. To support the construction of renewable energy facilities, Armenia has created the Renewable Resources and Energy Efficiency Fund, financed by the World Bank and the European Bank for Reconstruction and Development. The fund was launched with a total €10.3 million, with the EBRD and the World Bank sharing the costs. An additional fund totalling €13 million was established by KfW Bank. “We recently signed a memorandum to boost this fund to €20 million,” the minister says. Around 70 small hydropower plants have already been built with the help of the fund, and another 70 plants are planned. “We need small hydropower plants since our water resources are limited. Studies have shown that Armenia also has potential to develop wind energy and geothermal energy as well,” the minister explains.

Opportunities for foreign investors Foreign investors are targeting Armenia’s energy sector, including an Italian company which is ready to start construction on a 100 megawatt wind energy plant. The government of Japan has provided a soft loan for the implementation of a combined cycle system for a thermal energy plant, and over the past five years investors from France and other countries have built hydroelectric power plants in Armenia. Siemens, Areva and Alstom are a few of the foreign companies operating in the country, who participate in the procurement for the high voltage grid. Armenia welcomes foreign investors in its energy sector. As Armen Movsissyan points out, “Our legislation ensures that Armenia is open to the outside world; we cannot close ourselves off. The government has adopted policies that facilitate investment in our energy sector and is working to make sure that Armenia offers a level playing field for investors. Investments are protected and the growth potential is significant.”

Hrazdan Thermal Power Plant of Armenia

The public and private sectors work together effectively in Armenia. Public energy enterprises include the operators of the power system and of the high voltage system as well as the Metsamor nuclear power plant, which by law is not open to privatisation, and the Vorotan Cascade hydroelectric station, also not open to privatisation. The minister points out, “Armenia’s legislation makes sure that there is no big difference between private and state companies. The system encourages constructive horizontal co-operation.”

Development strategies an example for other countries In fact, the World Bank has praised Armenia for its investor friendly regulatory environment and for its development strategies. “The World Bank says that Armenia’s development programme can be taken as an example for other developing countries,” Armen Movsissyan says. Armenia particularly welcomes investors from Western Europe. The minister points out, “The best equipment in the energy sector is coming from Western Europe, and we have a lot of things to learn from Western European energy companies. In addition, Armenia aims to have closer ties to the EU and we want to bring all our systems up to EU standards. We want to integrate Armenia’s economy with that of the EU as much as possible. We have already made great progress in modernising our energy network and we will continue along this path.”

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ARMENIA

Zangezur Copper Molybdenum Combine CJSC

Thriving Mining Enterprise Continues to Expand Zangezur Copper Molybdenum Combine CJSC (ZCMC), one of the world’s leading producers of molybdenum concentrate, was founded in 1951 and privatised in 2005. The company is 60% owned by the German Cronimet group, and it illustrates the potential of foreign investments in Armenia.

ZCMC CJSC is also collaborating with enterprises such as Caterpillar (US) and the French-German AREVA group to build cutting-edge power substations in the region. Banking group BNP-Paribas, after investigating the company’s operations, has awarded it a €21.4 million (US$32 million) credit line, which is a testament to ZCMC CJSC’s reliability and prestige. Maksim A. Hakobyan, General Director

ZCMC CJSC was the target of around €226.3 million (US$309 million) in investments between 2005 and 2009, and it boosted its production of copper concentrate by an impressive 63% over this period. ZCMC CJSC’s General Director, Maksim A. Hakobyan says, “We have a very efficient management and work style in line with western standards, and we have earned the trust of our shareholders.” Even during last year’s economic crisis, ZCMC CJSC managed to

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boost its production of copper and molybdenum concentrates by 50% and 3.2% respectively in comparison to 2008. Maksim Hakobyan explains that new technologies and methods are one reason for this strong increase.

Ambitious goals for the future ZCMC CJSC’s current goals are to continue to upgrade technologies, increase production, and reach EU standards in all activities, including in environmental protection. The company has formed a number of international partnerships, one of which is with Finnish company Outotec concerning the treatment of copper concentrate to produce clean metallic copper. ZCMC CJSC is currently establishing a new milling complex which will be one of the biggest of its type in the CIS region. “The main strategy of our company is to have treatment infrastructure for copper and molybdenum which meets western standards,” explains Maksim Hakobyan.

ZCMC CJSC also works with a number of other foreign and local private sector enterprises, both large and small. Along with its satellite companies, ZCMC CJSC provides employment for more than 10,000 people. Maksim Hakobyan urges international investors to invest in Armenia. He says, “Professionalism is absolutely crucial in building relationships and overcoming obstacles in any sphere. If you have goals and the determinations to achieve them, it will happen, and Armenia definitely has both.”

“Zangezur Copper – Molybdenum Combine” CJSC 18, Lernagortsneristreet Syunik Marz, Kajaran town 3309 Kajaran, Republic of Armenia Phone + Fax: +374 285 33870 zcmc@arminco.com zcmc@mail.ru


Energy & Natural Resources

Mining Sector Attracting Major Investments Armenia’s mining sector, overseen by the Ministry of Energy and Natural Resources, is a key contributor to the national economy. Ore concentrates and metals accounted for just over half of Armenia’s exports in 2009, solidifying their status as the country’s most important export products.

© Zangezur Copper

Boosting revenues despite global crisis The global recession negatively affected the Armenian mining sector in the second half of 2008, forcing some mining enterprises to lay off workers or halt production altogether. In spite of the crisis, however, the country’s leading mining and metallurgical companies managed to end 2009 with significant production and revenue gains thanks to a rally in global prices of copper and other base metals. Official statistics show that these companies’ combined production of non-ferrous metals and metal ore concentrates grew by roughly 14% to reach around €310.5 million in the first eleven months of 2009. Data released by the National Statistical Service (NSS) in January 2010 show that the growing value of copper, Armenia’s main mining product, in world markets was the key factor behind the sector’s recovery. Copper prices more than doubled in 2009, rising by more than 36% between November 2009 and January 2010 alone. Analysts predict that copper prices may well continue to rise to reach the pre-crisis peak level of about €6,591 per tonne in the months ahead. However, the NSS has also reported decreases in the production of other non-ferrous metals extracted in Armenia, notably molybdenum and zinc, whose international prices have been bouncing back more slowly.

Robert Falletta, General Manager, explains that Dundee anticipates doubling or tripling production at the mine thanks to the expansion of its underground operations; the owners are also analysing the potential of open pit mining at the site. Dundee has implemented the latest technologies in the mine and has become a leader in instituting environmentally friendly mining practices. It was the first mine in the region to recycle its water.

Armenia’s biggest industrial enterprise

Significant foreign and local investment

Zangezur Copper-Molybedenum Combine, 60% owned by leading German group Cronimet, is Armenia’s biggest industrial enterprise. The company managed to boost its production of copper by 50% and of molybdenum by 3.2% last year in spite of the economic crisis, to reach totals which were almost double what the company achieved in the Soviet years. Zangezur is currently setting up a multimillion dollar facility which will be one of the biggest concentrating mills in the CIS countries, in partnership with Caterpillar (US) and others. Banking group BNP-Paribas has awarded the company a €21.4 million credit line.

Armenia’s mining sector has attracted significant investments by major local and international enterprises. Global player Dundee Precious Metals has invested in Armenia’s successful Deno mine, and

Other mining sector leaders are the Armenian Copper Programme, which owns and operates the region’s only copper smelting facility; Global Gold Corporation (listed on the New York Stock Exchange); GeoProMining (GPM

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ARMENIA

Gold, a Russian investment); Armenal, which produces aluminium foil; and Lydian International (whose Armenian subsidiary is Geoteam), which is very active in exploration and is the only mining company which has discovered new deposits since the Soviet years. Lydian International, based in the UK and listed on the Toronto Stock Exchange, mines gold in Armenia in Amulsar and in neighbouring Saravan and Gorhayk. In May 2009, Lydian was granted a 25 year mining license by the Armenian government; the license is 95% owned by Geoteam CJSC. The company invested around €4.39 million in exploration at Amulsar last year and expects to invest around €3.29 million this year. Official initial estimates of mineral resources at Amulsar show 31 million tonnes of ore and 1 million ounces of gold; the study was completed in March 2009 by an independent company, CSA Global Ltd (UK). GeoProMining recently announced that in 2009 GPM Gold mined 476,200 tonnes of ore and produced 944 kg 369 g of gold, or 30,362 troy ounces, at its mine

in Armenia. The operation mines and processes an average of around 40,000 tonnes of ore monthly, or 30,000-40,000 troy ounces annually. GPM Gold aims to increase its mining and processing activities significantly over the next few years to reach up to 150,000 tonnes per month. Another strong result for 2009 was reported by Armenal, owned by the Russian aluminium group Rusal. Armenal nearly doubled production of aluminium foil at its Yerevan factory last year.

Legislative framework being upgraded The Armenian government is upgrading the legislative framework for the country’s mining sector with the help of the World Bank, the European Bank for Reconstruction and Development and the International Finance Corporation. This move will help to attract even more investment to a sector which is set to continue to play a major role in Armenia’s economic development.

© Nairit

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Energy & Natural Resources

Deno Gold Mining Company

Expanding its Armenian Operation Deno Gold Mining Company (DGMC) is set to expand rapidly and increase production and profits significantly thanks to major project developments currently underway. Robert A. Falletta, General Manager, explains that global group Dundee Precious Metals has made significant investments in Deno Gold since it took over the Armenian company in 2006, and these investments are now paying off. He says, “We have begun expanding our underground operation, which will essentially double our current production, and we are planning to have the mill expansion systems operating by August 2010. We are projecting continuous growth as production ramps up to meet planned mill feed target rates.” Explaining the company’s strategy, Robert Falletta says, “The expansion of the underground and mill operations is the first phase and when we boost production, especially with the current metal prices, we will have the cash we need to further develop other resource avenues. In addition to its underground operations, DGMC is evaluating the potential for open pit mining in the same location, and test results have been very positive to date. This operation is a long-term project of 20 years or more, which

will begin in two to three years if further research confirms open pit viability. “Flotation upgrades complete the first phase of expansion involving new UG mining equipment and improvements in mining methodology,” Robert Falletta noted. Additional flotation, grinding and crushing facilities will be required when the open pit becomes reality, as reported by Robert Falletta this will help the mine become even more productive and flexible with the open pit and underground mining simultaneously. Further expansions will depend on the established open pit reserves. DGMC sells its products worldwide and recent discussions and the potential opening of the Armenian border with Turkey would give the company more options for efficient transport of concentrates leaving and supplies entering the country. Further modernisation in progress In parallel with the current physical expansion, Deno Gold has been steadily modernising its equipment and upgrading the skills and health and safety standards of its 1,100 employees and aims to further mechanise its operation to boost efficiency. As Robert Falletta points out, “This mine has huge potential but this would not have been realised under the old operation systems and personnel development. By always looking for a way to improve how we do our business, we can secure and enhance our expansion plans.”

Robert Falletta, General Manager

The mine is serving as an example for other companies in its environmental protection measures; it was the first company in the region to recycle its water and is committed to achieving western standards. Looking forward to a positive future, Robert Falletta confirmed DGMC will continue to contribute to Armenia’s social and economic development. “We are recognised in Southern Armenia as a significant contributing player and plan to remain so as Dundee Precious Metals definitely looks at DGMC as a long-term investment.”

Deno Gold Mining Company 4 Gortsaranaien Street Kapan 377810, Republic of Armenia Phone: +374 10 28 36 71 Fax: +374 10 28 36 71 info@dundeeprecious.com www.dundeeprecious.com

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ARMENIA

Energy Sector Achieving Sustainability and International Standards Armenia’s energy sector offers enormous investment potential since the country is still in the process of rebuilding and modernising its energy infrastructure and it has significant energy resources to be developed, including renewable energies.

Working to implement EU standards The Armenian energy sector has already come a long way since the Soviet era. As Armen Movsisyan, Minister of Energy and Natural Resources, points out, “The energy sector in Armenia has passed through many difficult years, but through this we have established a system which is working, unlike the energy systems in our neighbours Azerbaijan and Georgia. We now have a sustainable electrical power infrastructure and we have developed skilled human resources in the energy sector. We are striving to implement EU standards, and welcome help from Europe. The EU has built up its own modern energy sector over decades; here in Armenia, we are trying to do this in just 20 years, and we can do it with the support of the EU.” The government has reorganised the electricity and gas sectors, created an energy regulatory commission, and introduced international accounting standards for the energy sector. According to the United States Agency for International Development (USAID), which has helped fund many of Armenia’s energy projects, points out, macro-level reforms have been substantially completed in Armenia’s energy sector and the sector has been put onto a sustainable path. Armenia currently fulfils around 40% of its energy needs through nuclear power, with 30% to 35% from hydropower sources and the remainder from thermal power. Gas, nuclear fuel, and oil are the country’s main energy fuels. The focus on nuclear power is a result of problems in receiving supplies of other energy sources from abroad because of long standing political conflicts throughout the region. While much of the

42

energy sector has been privatised, remaining state-owned companies include the operator of the country’s high voltage infrastructure, the Cascade hydroelectric power station, and the Metsamor nuclear power plant, all of which are being upgraded.

Upgrades for electricity networks of Armenia One key project will bring about important improvements in the Electricity Networks of Armenia (ENA), the electric power utility responsible for maintaining supplies and distribution of electricity. It is owned by InterRAO (Russian Federation). The project is budgeted at €52 million, of which €45 million will be provided through a loan from the European Bank for Recon-


Energy & Natural Resources

struction and Development. The project will upgrade and modernise ENA’s obsolete low voltage infrastructure, improve efficiency, and install meters to reduce losses and improve the reliability of supply. International agencies, bilateral donors and funding organisations are also involved in a crucial effort to expand and modernise the Metsamor nuclear power plant and to upgrade all Armenia’s energy production facilities – most of which were neglected in the Soviet years and are outdated – to improve efficiency.

Huge potential for renewable energy The renewable energy sector is an important growth area for Armenia, and the government has created the Renewable Resources and Energy Efficiency Fund to help spearhead the development of renewable energy projects and to promote energy efficiency. Studies have shown that the country has significant potential in hydropower, geothermal, solar and wind energy. With the support of local and international investors, dozens of small hydropower plants have already been built in Armenia, with more on the way, and an Italian investor is building a wind farm. Between 2004 and 2007, 26 non-heat energy efficiency and renewable energy pilot projects were designed and completed with the support of the USAID, which also supported a project to install reliable heating systems in 38 Armenian schools,

improving the working conditions of over 20,000 students and teachers. Another goal for Armenia’s energy sector is greater integration with other regional energy systems. Construction of a pipeline to deliver natural gas from Iran to Armenia was completed in December 2008, and significant quantities of natural gas are expected to flow through it to fuel the Metsamor nuclear power plant once the plant’s renovations are finished sometime this year.

Level playing field for foreign investors Foreign investors are reassured by Armenia’s legislation guaranteeing them a level playing field. “The main issue for the government is to create an attractive business environment to attract investors, and that is why, over the past five years, we have seen such significant involvement by foreign investors in our energy sector. For example, the 70 hydropower stations which have been built in the past few years were all projects by foreign investors from France, Germany, Norway and other countries,” Armen Movsisyan points out. The minister adds that Armenia welcomes continued foreign investment in its energy sector, particularly from the EU. He says, “Armenia wants to be part of the EU family, and investing in Armenia’s energy sector can not only promote regional stability and Armenia’s development but also lead to returns for investors.”

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ARMENIA

Armenia Renewable Resources and Energy Efficiency Fund

Innovative Fund Supports Energy Initiatives Armenia Renewable Resources and Energy Efficiency Fund (R2E2 Fund), an independent fund established by the government in 2006, is mandated to support the development of the country’s energy sector facilitating investments in renewable energy and energy efficiency. Tamara Babayan, Director, explains that in 2006, with World Bank support, the fund launched Urban Heating and Renewable Energy projects which are nearing completion, and this year it launched a Geothermal project with more World Bank funding. R2E2 has also received funding for the preparation of a new energy efficiency project. R2E2 Fund closely works in partnership with the government, for example in a current initiative to upgrade heating systems in Armenia’s schools. R2E2 Fund also provides financing for commercial banks in Armenia to offer credits to families so that they can improve their residential heating systems; more than 8,000 people have benefited from this project. R2E2 Fund also provides connection to the gas network and safe heaters to disadvantaged families; this programme will help around 10,000 families. Concerning private sector initiatives, over the past two years

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Tamara Babayan, Director

Representing Armenia and its investment potential is another mission for R2E2 Fund, which regularly attends international meetings on energy issues. Tamara Babayan explains, “Everyone knows we are a key player in renewable energy and energy efficiency. We can offer investors concrete facts about why they should invest in Armenia, including incentives and challenges.”

alone R2E2 Fund has financed the construction of 26 small hydropower plants. “The government gives certain guarantees concerning the construction of small hydropower plants (up to 10 megawatts capacity), as well as other renewable energy projects, particularly the guaranteed purchase of electricity during the 15 years after commissioning and a fixed tariff system makes investments in this sector possible. We provide assistance to potential investors providing professional consultancy,” Tamara Babayan says.

R2E2 Fund has already established a partnership with a number of international organisations and projects, foreign experts and companies and welcomes the chance to form new partnerships. Tamara Babayan says, “We are transparent, uphold EU standards, and we have highly trained specialists on our staff. We can serve as a liaison with the government and we are known for sound financial management. R2E2 Fund has proved its ability to serve as a reliable partner. Our mission is to make Armenia’s potential a reality.”

Focus on new energy technologies R2E2 Fund is currently focusing on projects involving new energy technologies, including wind and solar power, and has already attracted foreign investment in wind power projects as well as strong interest in solar power initiatives. R2E2 Fund also completed a study by Enertech/BBI Consortium on Armenia’s bioethanol potential.

Armenia Renewable Resources and Energy Efficiency Fund Proshyan 1st lane, 32 apt. Yerevan, Republic of Armenia Phone: +374 10 545 222 Fax: +374 10 541 732 info@r2e2.am www.r2e2.am


• Ministry of Economy Aims to Attract International Investment to Armenia • Stepping Up Exports of Diverse Range of Products • Regional Silicon Valley

Trade & Industry

“Our ministry has two main goals: to boost Armenia’s competitiveness significantly by expanding the role of Armenia’s economy in the international arena and the presence of Armenian goods and products in global markets.” Nerses Yeritsyan, Minister of Economy


ARMENIA

Ministry of Economy Aims to Attract International Investment to Armenia Armenia’s Ministry of Economy is playing a vital role in helping to coordinate the development of diverse economic sectors and to attract international investment to Armenia. Nerses Yeritsyan, Minister of Economy, explains that Armenia’s overall strategy is to ensure the growth of a knowledge-based economy. He says, “Our ministry has two main goals: to boost Armenia’s competitiveness significantly by expanding the role of Armenia’s economy in the international arena and the presence of Armenian goods and products in global markets; and to ensure that Armenia is self supporting rather than dependent on international aid. We will achieve this through better mobilising domestic resources, encouraging foreign direct investment, and boosting tax revenues while reducing institutional expenses. All of this will bring us to a knowledge economy, which is the common denominator for our ministry in its activities in different sectors.”

Public-private partnerships Along with reducing dependence on international aid and promoting non-concessional rather than concessional loan support, the ministry is working to promote the public-private partnership model as a means of maximising investments and ensuring the

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Nerses Yeritsyan, Minister of Economy

transfer of knowledge and technologies. “Knowledge transfer will also bring capital, so building these kinds of partnerships is an efficient way to boost the value of investments,” the minister explains. To make Armenia a more attractive investment choice, the government is improving the country’s regulatory environment, including its inspection system, and implementing EU standards in every sphere of activity. “We have a major reform agenda which includes everything from customs regulations to ensuring that EU criteria are met, as our goal is to sign Deep and Comprehensive Free Trade Agreement with the European Union,” Nerses Yeritsyan says.

Sectors with strong potential in Armenia include mining, tourism, agriculture (such as organic farming), healthcare services and information technology. In fact, the minister believes Armenia could become the region’s Silicon Valley thanks to its strengths in IT and engineering. Armenia has already come a long way. As the minister points out, “Armenia inherited a collapsed economy from the Soviet years. Now that we have restructured our system, it is time to focus on development. Armenia has an ambitious population and a strategic location which allows the country to serve as a link between the EU, Russia, the Middle East and Asia. The big picture is that we are making Armenia a knowledge-based economy.”


Trade & Industry

Stepping Up Exports of Diverse Range of Products Armenia has been steadily diversifying its industrial and trade activities, attracting international investors in a wide range of sectors. From the information technology and telecom sector, which recently saw the entry of global leader Orange, to the textiles and garments sector, which includes a company manufacturing uniforms for the New York City police department, Armenia is demonstrating its potential as a base for all kinds of industry and trade.

© Armen Khachatryan

According to government statistics, between 1995 and 2005 alone, Armenia attracted around €720 million in foreign investment, mainly in telecom and transportation, power and utilities, food processing and packaging, mining and metallurgy, high-tech electronics and IT, and retail and wholesale trade.

International trade growing To boost exports, the government of Armenia has adopted liberal trade legislation and has entered into a number of international trade agreements. These include full membership in the World Trade Organisation and the World Customs Organisation, as well as bilateral free trade agreements with CIS countries. The EU is the country’s top source of imports and preferred market for exports, followed by the CIS countries and the US. Armenia’s top trading partners by country are Russia, Belgium, the US, Germany, the UK and Iran. Concerning bilateral trade with the US, the US House of Representatives has approved Permanent Normal Trade Relations Status (PNTR) for Armenia, and now Senate confirmation is under discussion.

Regional trade hub With its strategic location and rapidly improving infrastructure, Armenia aims to establish itself as a key regional trade hub. Its trade with Turkey alone totalled €220 million in 2009, according to the Armenian

Chamber of Commerce, even though the border between the two countries is closed and goods must be transported via Georgia and Iran. Armenia’s trade with Iran is also growing. Iran is now Armenia’s eighth biggest trade partner and the two countries recently signed a Memorandum of Understanding concerning joint projects which include the Armenia-Iran railway, a power plant on the Araks River, and an oil terminal and pipeline.

Meeting international standards Armenia has been steadily bringing its industrial and trade activities up to international standards. It uses the harmonised system of tariffs classification concerning imports and abides by the 1994 General Agreement on Tariffs and Trade (GATT). Armenia has created a national certification body, Armexpertiza, which issues certificates of quality for tobacco and alcohol products.

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ARMENIA

Diamond Industry

UN trade convention implemented As of January 2010, Armenia became an even more attractive base for trade-oriented enterprises when the United Nations Convention on Contracts for the International Sale of Goods (UN CISG) entered into force there, making Armenia the 73rd country to be a party to the convention. The CISG establishes a comprehensive code of legal rules governing the formation of contracts for the international sale of goods, the obligations of the buyer and seller, remedies for breach of contract, and other crucial legislation.

EBRD support for trade-oriented enterprises Investors in foreign trade-oriented operations in Armenia can benefit from the EBRD Trade Facilitation Programme (TFP), which promotes foreign trade in Central and Eastern Europe and the CIS countries through providing guarantees covering a wide range of goods and services, including consumer goods, commodities, equipment, machinery, and power supply as well as cross-border engineering, construction, shipbuilding, technical and other services.

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The TFP also supports the transfer of innovative trade finance solutions and know-how to its countries of operations, including Armenia. The EBRD is also increasing the availability of financing to private businesses in Armenia with a trade finance facility for ArmSwissBank for supporting small and mediumsized enterprises (SMEs).

Wide range of goods and services Industrial enterprises in Armenia are now successfully exporting a diverse range of products which include pig iron, unwrought copper and other non-ferrous metals, cables, electrical goods, information technology, processed diamonds, jewellery, molybdenum, gold, copper, silver, synthetic rubber, alcohol, cigarettes, canned food, natural juices, mineral water, processed coffee, software and more. The list grows longer almost daily. Successful enterprises in the tobacco sector, for example, include Armenian-Canadian joint venture Grand Tobacco; SPS Cigaronne Co., which launched unique hard filter holder cigarettes on the international market; and global giant Philip Morris, which distributes its products in Armenia and has a 16.4% share of the Yerevan cigarette market.


Trade & Industry

From diamonds to ICT Diamond processing and jewellery production make up another successful industrial sector for Armenia. Armenia’s polished diamond output and exports totalled over €286 million in 2006. Advantages for investors include skilled diamond cutters, competitive labour costs, modern equipment, and a favourable tax regime for imports of raw materials and exports of finished products. Another growing activity is coffee processing; successful enterprises include Black Gold, Jaffa Gold, Latino, Lous Astgh, and Moya Semya.

IT sector attracting investors Armenia’s IT sector, a backbone of the economy, has been boosted by support from the US Agency for International Development (USAID) Competitive Armenian Private Sector (CAPS) programme, which helps IT businesses in Armenia improve the quality and productivity of their output, upgrade their business and marketing practices, and build productive partnerships. The government’s strategy for the IT sector up to 2030 creates many opportunities for investors. The government states that it aims to “develop an advanced information and knowledge-based society in Armenia with sophisticated ICT infrastructure, high computer literacy, high computerisation and Internet penetration rates, a large domestic IT market, and widely deployed e-government and e-commerce systems.” It also aims to “transform the Armenian IT industry from a provider of low-end outsourcing services focused on cost advantages into an R&D powerhouse offering higher value-added research, development, and engineering services in specialised technology segments.”

Muran & Megna Providing Top Quality Vehicles to Armenian Market The family-owned Muran & Megna, active in the auto sector, has been providing top quality services to the Armenian market for over 30 years. Achot Chakhmouradian, General Manager, whose father founded the enterprise, says that Muran & Megna began with sales of imported vehicles from Russia, and now the company imports and sells Nissan and Renault cars. The company offers the widest range of vehicles to its clients including the very popular SUVs, as well as develops the most efficient financial solutions and credit terms in the market. The small size of the Armenian market has not been a disadvantage for Muran & Megna. Achot Chakhmouradian says, “Our experience is that small markets allow you to achieve positive results very quickly. Nissan and Renault have been surprised by our results; we sold around 1,000 cars in 2008. It’s not how big a country is but rather how business-oriented it is.”

Achot Chakhmouradian, General Manager

The company has been so successful that it has been asked to share its experiences with other Nissan and Renault dealerships worldwide. Regarding similar such successes of Armenia companies, Achot Chakhmouradian adds, “Most of the press reports about Armenia are about political issues. No one reports on our economic accomplishments. We are making giant steps forward here in Armenia.” With its dynamic local and foreign enterprises and its commitment to boosting its international trade activities, Armenia has positioned itself as a very attractive base for trade-oriented companies. Thus, on behalf of Achot Chakhmouradian, Muran & Megna companies extend willingness to negotiate innovative trade-oriented projects and contribute its abundant experience and immense potential to other businesses related to the automotive industry.

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Regional Silicon Valley Armenia was once known as the “Silicon Valley” of the Soviet Union for its expertise in information and communication technology (ICT), and now it is well on the way to becoming a regional ICT hub. As Armenia’s Minister of Economy, Nerses Yeritsyan, puts it, “This country has the potential to become the Silicon Valley of the region due to our strengths in ICT and engineering.”

The Armenian ICT industry has experienced rapid growth over the past decade and has become one of the country’s most dynamic and internationally competitive sectors. According to the Enterprise Incubator Foundation (EIF), Armenia’s ICT sector grew by around 30% per year between 1998 and 2006, and the number of ICT companies in the country grew by 20% over the same period. Many local start ups as well as a number of international companies have entered the market.

Foreign and local leaders Today’s ICT leaders in Armenia include Synopsis, Virage Logic, Sun Microsystems, Armenian Datacom Company (an Armenian-Norwegian joint venture which operates a 400 km fibre optic network in Yerevan), iCON Communications (a broadband Internet services provider which launched WiMAX service in Armenia last year),

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Trade & Industry

Sourcio (an Armenian IT consulting company which became the first Armenian software enterprise to receive IT Mark certification from the European Software Institute), Macadamian (a leading Armenian software outsourcing specialist), Yerevan Internet provider Cornet, and National Instruments, which opened a centre in Yerevan in 2007.

Synopsis investing in R&D, education Synopsis, a global leader in software and intellectual property for semiconductor design and manufacturing, has made a long-term commitment to the Armenian market because of the country’s potential to serve as a regional IT hub, according to Rich Goldman, CEO of Synopsis Armenia. The Synopsis Armenia team of engineers has already made headlines; Synopsis Armenia announced in April 2009 that it had developed “Yield Explorer”, an innovative new yield management tool for designing microelectronic products. Synopsis has also launched a four year educational programme focusing on semiconductor physics and microelectronics at the State Engineering University of Armenia (SEUA). Synopsis began offering educational programmes at the university in 2001, and now has programmes in 450 universities worldwide. Global player Sun Microsystems, another key investor in Armenia’s ICT sector, is setting up an education lab at SEUA in partnership with EIF. EIF and Sun Microsystems have already launched an R&D and testing centre at SEUA; a JAVA teaching lab with the Sun Academic Initiative programme at three Armenian universities; and a solution development, integration and testing centre at EIF. Virage Logic is another global leader which chose to base its regional operations in Armenia. Virage Logic’s Yerevan branch opened in 1999, and today it employs more than 120 people. In fact, the Armenian based R&D team is central to the company’s groundbreaking Self-Test and Repair (STAR™) Memory System, the semiconductor industry’s first integrated embedded test and repair memory system and the company’s first Silicon Aware IP solution. In addition to developing the STAR Memory System, the Armenian engineering team is also involved in the development of Virage Logic’s leading embedded memory products.

Advantages for ICT investors A favourable regulatory environment for ICT, the capability to develop sophisticated products (including niche outsourcing products), strong government

support for ICT investors, world-class ICT firms, and a willingness to focus on education and training to provide high-quality ICT human resources are factors which give Armenia its competitive edge as a base for ICT companies. Armenia is now developing strategies to continue to remain regionally and globally competitive in the ICT sector and to tap into the growing global outsourcing market, which is expected to reach around €135.8 billion in 2010, with the US and the UK alone outsourcing some 885,200 jobs this year.

Knowledge-based economy Minister of Economy Nerses Yeritsyan explains that Armenia’s ICT sector is crucial for the country to achieve its goal of becoming an economy based on innovation and knowledge. He says, “The Ministry of Economy has two key goals: to increase Armenia’s global competitiveness, and to foster an independent knowledge-based economy, one which will not depend on international donor support. The ICT sector, and particularly the international investor Synopsis, serve as examples to the world of Armenia’s development and investment potential.” To help foster continued growth of the ICT sector, Armenia is rapidly upgrading its ICT infrastructure. A major project supported by the World Bank aims to build 100 MB per second IT connections, while another programme aims for every person in Armenia to have access to a computer. In September 2009, USAID sponsored a conference on “Armenian ICT Competitiveness”; more than 60 representatives of the Armenian ICT industry as well as government leaders and representatives of educational institutions and media attended the event, which focused on ways to improve ICT education. Clearly, Armenia is committed to ICT.

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Nairit

Well-known Rubber Producer Aims to Expand Product Lines Nairit, founded in 1936, has included Armenia into the list of the world’s top five producers of chloroprene rubber products, along with the US (DuPont), Germany (Bayer), Japan (Denki Kagaku) and China. Nairit has achieved its leading role through applying stringent international standards to produce high-quality products, which meet the demands of the global market and its international partners and customers worldwide. Nairit is now a closed joint-stock company, in which Rhinoville Property Limited, the UK-based company, has a 90% share, with the government of Armenia holding the remainder.

Vahan Melkonyan, General Director

storage stability and predictable behaviour during the use. Due to these properties, Nairit rubber has an essential advantage in some industrial applications.

Over the past few years, Nairit has significantly expanded its sales in the EU, Russia, the US, and other countries. Compared to the previous three years the average sales volume in 2006-2008 had almost doubled. Vahan Melkonyan, General Director, explains that 99.9% of the company’s production is for export. He says, “During the Soviet years, all our products went to Russia, Ukraine, Belarus and Kazakhstan. Now most of our production goes to Europe and the US. We sell in 40 countries.”

In addition to rubber products, Nairit also produces unique carbinol syrup, ethanol lacquer, sodium hypochlorite, caustic soda (sodium hydroxide), and hydrochloric acid. Nairit’s total production capacity is now 20,000 tonnes, half of which is in rubber products. Since January 2009, Nairit has been selling its products directly without intermediaries.

Nairit’s rubber is used in a wide variety of applications and is known in many countries for its excellent

Nairit has increased its exports to Europe and US this year in spite of the global economic crisis and

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Transition to butadiene-based rubber production can triple the volume of production

semi-annual shutdown caused by an accident at its production facility in May 2009. Nairit has fully rebuilt the workshop destroyed by explosion and has modernised the technology and assemblage of the new control and safety equipment. The renovated workshop, which went back into production in September 2009, has the capacity to produce 10,000 tons per year. Nairit has invested some €31.5 million (US$46 million) this year alone in renovation and modernisation. Following the transition to butadiene technology the company anticipates sales of around €44.5 million (US$65 million) in 2010 and around €82.2 million (US$120 million) in 2011. “Transition to butadienebased production allows us to triple our production volume and will make us more competitive,” Vahan Melkonyan explains.


xxxxxx

Nairit has launched an ambitious six year modernisation programme in 2007 whose first stage includes transition to butadiene-based rubber production technology and expanding the production of chlorine. Nairit can start up butadiene rubber production in only six months since it has already laid the groundwork for this project. In the second stage of its modernisation programme, Nairit plans to upgrade its acetylene-based rubber production technology as well as to set up freight terminals and an infrastructure network. In the third stage, Nairit aims to work with its partners in Armenia and abroad to launch the production of pharmaceutical, agro chemical and chemical products for agricultural use, as well as chemical agents, acetylene spirit and glycols. With the introduction of new acetylene-based rubber production technology, Nairit can expand its product line by vinyl acetate and polyvinyl acetate. It also aims to produce other types of elastomers as well as elastomer products.

open to forming long-term, mutually beneficial partnerships with companies and investors worldwide. Such cooperation could include purchasing raw materials as well as industrial partnership with European companies. The main goal for the company is to continue investing in new technologies. Vahan Melkonyan says, “We need net investments of at least €68.5 million (US$100 million) over the next six years, and we are open to any kind of co-operation, whether through sale of shares, joint ventures or partnerships of other types.” In addition to its significant growth potential, Nairit can offer a well-established track record and products which already meet European standards. “In addition, Nairit employs 3,000 highly trained people, 2,000 of whom are very experienced experts in their fields, and our labour rates are low for such quality,” Vahan Melkonyan says. He adds, “Our investors and partners can count on us to be a transparent partner who can help them achieve significant returns on their investments.”

Production of non-organic and organic chlorine substances are based on new modern technological solutions. It is also intended to expand the product line of acetylene compounds that is the production of substances, medicines and vitamins.

Exceptional partnership potential To achieve its ambitious goals, Nairit foresees creating new small and medium-sized enterprises to employ the parent company’s capacities and technologies. Nairit is

Nairit Plant CJSC 70 Bagratunyats street Yerevan 0007, Republic of Armenia Phone: +374 10 44 01 27 Fax: +374 10 48 86 05 nairit@nairit.am www.nairit.am

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• Urban Development Ministry Building Tomorrow’s Armenia • Long Tradition of Innovative Construction

Construction & Infrastructure

“We welcome any organisation entering the country which has the objective of supporting the development of Armenia. We remember that we are building not for ourselves but for our grandchildren, so quality is of primary importance to us.” Vardan Vardanyan, Minister of Urban Development


Construction & Infrastructure

Urban Development Ministry Building Tomorrow’s Armenia Armenia’s Ministry of Urban Development plans major investments in construction projects this year which will help revive the construction sector as well as create new social, residential and educational facilities. Vardan Vardanyan, Minister, says that the government will invest €43.7 million (AMD 23 billion) in social and educational projects in 2010 compared to €28.5 million (AMD 15 billion) in 2009, and that €41.8 million (AMD 22 billion) will be allocated for housing projects. He says, “Housing projects in Gyumri and Lori, funded by the state budget, will provide free apartments for 7,000 families.” Around 75% of the construction funding will be for projects in Armenia’s provinces.

Transparent tender process The government works solely with private companies in the construction sector through the tender system. Local leaders, some of which are active beyond Armenia, are Horizon 95, White Ark, Glendale Hills and White Cottage. “The tender process is absolutely transparent. We encourage the creation of joint ventures. Our objective is for Armenian companies and joint-venture partners to learn from one another,” Vardan Vardanyan says. He adds that the ministry meets regularly with construction enterprises from many countries, including Spain or Iran. The government is now planning large-scale residential projects with both local and foreign firms, including Glendale Hills, which has projects in Yerevan and in 10 villages. “All the construction companies we work with are doing great work and are widely recognised here in Armenia,” the minister points out.

Minimising effects of economic downturn Vardan Vardanyan explains that the government is doing everything it can to minimise the effects of the current downturn in the construction sector, for example by giving tax exemptions to all construc-

Vardan Vardanyan, Minister of Urban Development

tion companies which implement projects worth at least €2.15 million up to 2012. The government is also providing guarantees for around 10 established companies seeking loan support. The minister adds, “The government also pays a percentage of mortgage loans, which will encourage and stimulate the construction market, including the market for construction materials.” Armenia is working to implement EU construction standards and is setting up bilateral partnerships, for example a deal signed in December 2009 with India, China, Iran, Indonesia, and Pakistan. Vardan Vardanyan concludes, “We welcome any organisation entering the country which has the objective of supporting the development of Armenia. The government is very friendly and transparent. We remember that we are building not for ourselves but for our grandchildren, so quality is of primary importance to us.”

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ARMENIA

Long Tradition of Innovative Construction

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Construction & Infrastructure

Armenia has been a nation of talented builders for generations, ever since one of the country’s greatest monuments, Carahunge (the Armenian Stonehenge), was constructed more than 7,000 years ago. In modern Armenia, the construction sector has been a key driver of the national economy.

Construction more than one third of GDP in 2008 Construction activity in Armenia grew from a total value of around €42.8 million in 1995 to €999.2 million in 2006. The booming construction sector accounted for around 38% of Armenia’s GDP in 2008, but slumped by around 37% in 2009 as a result of the global downturn. Now the sector is beginning to recover. Construction activity over the past decade has involved all types of projects, from residential developments for increasingly affluent Armenian citizens and Diaspora Armenians investing in property in the country, to major office, commercial, industrial and infrastructure projects. The government’s drive to spur on development beyond Yerevan has led to a number of ambitious construction projects in Armenia’s provinces, including schools, residential programmes, healthcare facilities and technology parks as well as road infrastructure. In an important reflection of the growing strength of the Armenian economy, international funding organisations provided only around 1% of the financing for construction projects in Armenia in 2006 compared to around 20% in 2003.

Keeping construction sector growing during crisis Vardan Vardanyan, Minister of Urban Development, says that the government is doing everything in its power to support the construction sector during the economic crisis. Initiatives include providing €38.5 million in loan guarantees for established construction companies; a tax holiday for investments in construction projects worth at least €2.1 million up to 2012; and €9.2 million in funding for a new mortgage company which will provide cheaper loans to stimulate residential construction. The minister says, “The government believes that it is equally important

to develop the market for construction materials. Just supporting building projects is not enough.” The government has also committed its support for several major long-term infrastructure projects, which include a new nuclear power plant, the Iran-Armenia Railway, the Yerevan-Batumi highway, a new research centre, and improvements to road infrastructure, among others.

Joint venture projects encouraged Around 25% of the government’s support for construction projects will be directed at Yerevan and its surroundings, with the bulk of the support going to projects in the provinces. The Ministry of Urban Development encourages joint venture construction projects and regularly meets with prospective foreign partners. Vardan Vardanyan says, “We recently met with nine companies from various countries, including Spain and Iran; these companies not only build but also produce construction materials. We plan to make a visit to Spain and will organise a trip for Spanish construction firms to come here.” Inflows of support from international funding organisations will help to stimulate growth in the construction sector as the economy recovers. In July 2009, the European Bank for Reconstruction and Development (EBRD) issued a €3.9 million credit and a €131,300 grant to the Elite Group CJSC, an Armenian construction company. The EBRD says that the loan is intended to boost the Armenian construction sector overall. International and private sector funding is also being directed at major initiatives which will provide oppor-

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tunities for local and foreign construction firms. These projects range from national programmes like the North-South Corridor to airport expansions, construction of new schools and healthcare facilities, energy infrastructure projects, hotel construction by Golden Tulip and other investors, and a number of rural development projects.

Top companies continue to perform well Armenia’s top construction companies continue to perform well even during the crisis. The sector includes construction companies, developers, real estate agencies, materials and equipment manufacturers, and services enterprises. Top players include Horizon 95, White Cottage, Glendale Hills, Bosch Thermotechnik, Hyundai, Mikmetal and others. In the high potential construction materials sector, local enterprise Mikmetal is helping to support new building projects. The company, founded in 2003 to import and sell rebar and steel rods, soon began to produce hot rolled rebar and steel rods with the highest international standards and has been producing rebar frames and components since 2008. Mikmetal has its own retail outlets and has helped restore local consumers’ confidence in Armenian made construction materials. Non-government organisations are also providing assistance for construction projects. Civilitas Foundation, launched by Vartan Oskanian, Armenia’s former Minister of Foreign Affairs, supports infrastructure and other types of projects, including an initiative to bring reliable water supply systems to rural areas. Civilitas keeps observers and potential investors abreast of developments in Armenia through its web site and publications. As the Minister of Urban Development points out, “Armenia has traditions in construction that it has preserved for centuries.” Now the country is building a better tomorrow.

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New construction on Main Avenue, Yerevan


• Ensuring Top Quality Infrastructure for Transport • Key Transport and Telecom Hub

Transport & Communications

“As exports and imports play an integral role in Armenia’s economy, we want to ensure that our merchants have access to the outside world, so we must develop in collaboration with our neighbours.” Gurgen Sargsyan, Minister of Transport and Communications


ARMENIA

Ensuring Top Quality Infrastructure for Transport Armenia has placed a high priority on upgrading its infrastructure to support its continued economic growth. Gurgen Sargsyan, Minister of Transport and Communications, explains that his ministry aims “to ensure that Armenia has a first class transport system of railways and roads as well as a top-rated communications network so that our citizens and businesses can compete in the global economy.” Thanks to its strategic location, Armenia is well placed to serve as a European transport hub, and the minister recently signed the Agreement on the Development of Multimodal Transport of TRACECA (Transport Corridor Europe-Caucasus-Asia) to help stimulate transport infrastructure development. Armenia’s participation in this initiative enhances the country’s investment attractions. Armenia already has open borders with two of its four neighbours (Iran and Georgia). As the minister points out, “As exports and imports play an integral role in Armenia’s economy, we want to ensure that our merchants have access to the outside world, so we must develop in collaboration with our neighbours.” A current project for the government is to complete a planned initiative concerning rural roads construction; funding from the US Millennium Challenge Corporate was withdrawn from the project and the government

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Gurgen Sargsyan, Minister of Transport and Communications

is unable to fund it alone during the current economic crisis. Armenia needs investor support to complete the €11.52 million effort. At present, Armenia is negotiating with the Asian Development Bank as a means of obtaining funding for the project.

North-South Corridor initiative A major transport project for Armenia is the European North-South Corridor, which will position Armenia as the key transport crossroads linking Europe, Asia and the Middle East. The Asian Development Bank has provided funding for this massive project, but additional financial support is needed. Gurgen Sargsyan says, “We estimate that this project will cut travel time between countries by up to 30%. This will not only

make transport faster but will also allow transporters to cut costs significantly, which will make Armenia an even more appealing destination for further investment.” Improving Armenia’s information technology infrastructure is another top priority for the government. Armenia currently has two fibre optic cable connections to Iran and two cables to Georgia, with one more cable currently being installed (to Georgia). “This will allow our country to connect to the outside world at faster speeds. With this necessary infrastructure, we can regain our status as the Silicon Valley of the region,” the minister says. Armenia clearly offers excellent opportunities for investors and partners in logistics, transport infrastructure and information technology.


Transport & Communications

TV and Radio Broadcasting Network of Armenia

Seeking Partners for Modernisation Efforts The Television and Radio Broadcasting Network of Armenia (TRBNA), a leader in the telecommunications market in Armenia, has established partnerships with more than 50 enterprises, including international companies. Thanks to TRBNA’s extensive infrastructure, many private broadcasters, as well as cellular telephone operators and Internet service providers, either rent the company’s technical means or install their own equipment in TRBNA units. Thanks to TRBNA’s efforts, public TV and radio programmes are transmitted across the territory of Armenia. “Taking into account the commercial appeal, most private broadcasters are only interested in transmission in cities, but we are

in order to help it make a complete shift to transmitting through digital signals. Ashot Simonyan explains, “One of the challenges we have as a broadcasting company is to transform our system from analogue to digital by 2015. We made all conditions for providing the transition, now we need investors and partners.”

Ashot Simonyan, General Director

obliged to reach, and have the capacity to reach even remote villages,” says Ashot Simonyan, General Director. In recent years TRBNA has implemented a number of major projects by increasing its broadcasting quality and extending its coverage. TRBNA, through its own means and through credit financing, is working to bring EU standard services to the Armenian market.

“Armenia has now entered a new stage of introducing an electronic society to its people and here at TRBNA we strive for progressive technologies, which correspond to European standards that will make profitable conditions for market partners. Armenia has strong human resources and profit potential. In Armenia we want to progress at the same pace as other European countries, and we have what it takes to achieve this,” says Ashot Simonyan.

“The company implements its operation and development projects by itself. Generally, the equipment is purchased from the leading European manufacturers and the installation is implemented by the specialists of TRBNA,” says Ashot Simonyan.

Open to forming international partnerships TRBNA is seeking more partnerships to invest in digital technologies,

Television and Radio Broadcasting Network of Armenia CJSC 95, Hovsepyan Street, Yerevan 0047, Republic of Armenia Phone: +374 10 653 773 Fax: +374 10 655 878 simonyan@tna.am

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Key Transport and Telecom Hub Armenia, at the crossroads of Europe and Asia, is ideally located to serve as an international transport and telecom hub.

Europe, the Black Sea, the Caspian Sea and Central Asia. It includes several projects to improve road and rail connections between the countries of the South Caucasus, including the South Caucasus Railway.

Armenia shares its borders with several high potential economies – Turkey, Iran, Georgia and Azerbaijan – and is crossed by some of the world’s busiest international land transport routes. It has also developed a key role as an air transport centre.

TRACECA has already launched a wide range of technical assistance and investment projects. The investment projects include rehabilitating railway services, upgrading intermodal/terminal equipment, and creating a new cable system for communications and signalling for the railways of Armenia, Azerbaijan and Georgia.

Ambitious international transport corridor projects will enhance Armenia’s role as a transport hub. Armenia has joined forces with other countries in the International North-South Transport Corridor (INSTC) initiative and the Transport Corridor Europe-Caucasus-Asia (TRACECA) programme.

TRACECA implementing EU funds Armenia has been a TRACECA programme member since 1993, when the project was launched. TRACECA will implement EU funded technical assistance to develop a West-East transport corridor connecting

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First phase of North-South Corridor Armenia’s transport sector received a significant boost in January when the government gave the go-ahead for the construction of the North-South Transport Corridor. Gurgen Sargsyan, Minister of Transport and Communications, has announced that construction of the first phase of the North-South Road Corridor will be launched in April 2010 and will be funded by an initial loan of €43.2 million from the Asian Development Bank to reconstruct an 18 km section of road between


Transport & Communications

Yerevan and the city of Ashtarak north of the capital, and to improve the road connecting Yerevan to Ararat in the south. Last year the Asian Development Bank (ADB) announced that it would extend up to €359.9 million to Armenia to upgrade its main road corridor as part of a broader thrust to improve trade and economic growth in the Caucasus and Central Asia. The transport corridor will eventually stretch from the southern Armenian town of Meghri, on the border with Iran, to Bavra in the north on the border with Georgia. It is budgeted at around €692.4 million and is set for completion by 2016. The second phase is a road from Ashtarak to Gyumri, set for completion this year, and the third phase will be a new road from Goris to Kapan. “This corridor is a very important project for Armenia, because it will help connect the southern parts of Armenia with Georgian seaports on the Black Sea and will cut travel time by 30%,” Gurgen Sargsyan says.

Armavia airline growing rapidly Armenia is also focusing on air transport links, especially since most international passenger traffic to and from Armenia is by air. National carrier Armavia, founded in 1996, has been steadily expanding its fleet, routes and services. It adheres to international standards in safety and security, environmental protection, openness and transparency. The airline now flies 30 regular routes connecting Armenia to 13 countries. Armavia transported over 646,000 passengers in 2008. It is based in Yerevan’s Zvartnots airport and also flies from Shirak airport.

Significant FDI in communications In addition to expanding and upgrading its transport infrastructure, Armenia is rapidly modernising its communications infrastructure with the support of international investors. The communications sector is now 100% privatised, and reliable fixed land and mobile services are available in all the country’s urban areas, although mobile services in rural areas remain limited. Yerevan is connected to the Trans-Asia-Europe fibre optic cable through Iran. Additional international service is available by microwave radio relay and

landline connections to CIS countries through the Moscow international switch, and by satellite to the rest of the world. The volume of foreign investments in Armenia’s communications sector between January and June 2009 rose to €103.6 million from €100.1 million in the same period in 2008, according to Armenia’s National Statistical Service. In fact, investments in communications accounted for 52.4% of all foreign direct investments (FDI) in Armenia in the first half of 2009. The bulk of this FDI came from France, mainly to support the entry of Orange Armenia (a division of France Telecom) into the Armenian market. The second biggest investor was Russia, followed by Lebanon. Orange became the country’s third mobile operator, joining ArmenTel (owned by Russian Vimpelcom) and K-Telecom (80% owned by Russian VivaCell-MTS and 20% by Lebanon’s Fattouch Group). Thanks to the entry of these major global players, Armenia’s telecommunications services are rapidly expanding and improving in quality and variety. Businesses operating in Armenia can count on exceptional transport and communications links, and the country’s transport and telecom infrastructure continues to offer investment potential.

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• Agriculture Main Driver of Armenian Economy • Agriculture Playing a Key Role in Armenia’s Development

Agriculture

“Armenia is a beautiful country with warm sunshine, our people are very hard working, we have serious specialists, and investments are protected by the government.” Gerasim Alaverdyan, Minister of Agriculture


Agriculture

Agriculture Main Driver of Armenian Economy The agriculture sector is a mainstay of Armenia’s economy, accounting for around 18% of the country’s GDP during the period 2004 to 2008. Agriculture employs 46% of Armenia’s working population, and the sector’s revenues have been growing at an average rate of 7.4% per year. Gerasim Alaverdyan, Minister of Agriculture, singles out three growth factors for Armenia’s agriculture sector: increase in levels of seed production, livestock breeding, and agricultural machines and equipment. “With the assistance of international organisations and the Armenian government, we should secure progress in all three directions,” he says. In fact, Armenia is now 60% self sufficient concerning its food production and aims to increase that percentage to a reasonable 75-80%. The country has been steadily reducing its agricultural imports and stepping up its exports.

Gerasim Alaverdyan, Minister of Agriculture

The Ministry of Agriculture has a number of programmes underway to benefit the sector, including the installation of around 250 anti-hail facilities to prevent hail damage to crops. Fifty anti-hail stations have been completed so far and the rest are to be finished within two years. “Half of the agriculture sector’s losses due to natural factors are because of hail,” the minister explains.

Advantages for investors in Armenia’s agriculture sector include significant resources of high quality raw materials, fertile farmland, a temperate climate, trained labour, rapidly improving infrastructure and access to regional markets.

Upgrading rural infrastructure Other projects include the installation of water and gas pipelines in rural communities and the construction of new rural roads. The World Bank, OECD, the governments of various countries and other international organisations are supporting these projects, which are creating opportunities for foreign investors. As Gerasim Alaverdyan explains, the government has developed many incentives for investors in agriculture,

and local companies have already been very successful in such diverse activities as the production of candy, brandy, tobacco, wine and canned fruits and vegetables.

The opening of Armenia’s border with Turkey is expected to boost agricultural exports significantly by cutting the costs of transport and communications across the border by around 35%. “At the same time we realise, that it is necessary to take measures for strengthening competitiveness of local producers in order to withstand competition of Turkish agricultural products,” Gerasim Alaverdyan points out. The minister urges European investors to target agricultural projects in Armenia. He says, “Armenia is a beautiful country with warm sunshine, our people are very hard working, we have serious specialists, and investments are protected by the government.”

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Agriculture Playing a Key Role in Armenia’s Development 100%, and notes that Armenia is now able to export some of its agricultural production. He adds, “Out of 160,000 tonnes of meat we consume every year, we produce 125,000. We produce more than half of the 600,000 tonnes of wheat we consume each year, and we are producing enough eggs now so that we are able to export some of them. We are also exporting around 150,000 tonnes of potatoes each year.”

Tierras de Armenia, a farm in the village of Arevadasht

Agriculture has long been a cornerstone of the Armenian economy and the government aims to spur on investments in the sector to help it continue to play a key role in Armenia’s development. The agriculture sector employs almost half of Armenia’s working population and accounts for around 18% of the country’s GDP. The sector has recently been growing by almost 8% per year.

Impressive progress since Soviet years Armenia’s agriculture sector has made impressive progress since the Soviet years. Among the nations that made up the former Soviet Union, Armenia was the first to privatise its agricultural lands by breaking up large collective farms and reallocating the land to independent farmers. In 1998 the World Bank provided a fund to furnish loans for small farmers, which helped get farming off the ground again. Armenia produced around 30% of its food in 1998; impressively, it has increased that percentage to 60%. Gerasim Alaverdyan, Minister of Agriculture, says that he would like to see that percentage reach

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The minister notes that exports of wine, brandy, candy and tobacco continue to be significant for the Armenian economy. Armenia is considered to be the world’s cradle of grape vines and wine; grapes have been cultivated there for thousands of years. Armenia’s southerly location helps compensate for the cold winters. Armenia produces 48 varieties of grapes, mainly indigenous varieties of both wine and table grapes. A large percentage of the grapes go into Armenia’s famous brandy. Advantages for investors in the agriculture sector include available land and a relatively temperate climate, low-cost trained labour, high quality raw materials for processing enterprises, access to regional markets, and rapidly improving infrastructure.

Success stories in agriculture sector The agriculture sector has a number of success stories. Gerasim Alaverdyan cites Yerevan Brandy,


Agriculture

which exports 95% of its production and is owned by French group Pernod Ricard, whose Ararat brandy is a top seller; Noy, a Yerevan based enterprise producing brandy and other beverages; market leading Grand Tobacco; Grand Candy, an Armenian-Canadian joint venture; Masis Tobacco; EuroTerm, which produces juices and preserves; and award winning Artashat Cannery, which processes around 1,400 tonnes of apricots, 7,000 tonnes of tomatoes and vast amounts of other fruits and vegetables each year. Armenia also has successful producers of dairy products and livestock. “These businesses demonstrate the potential of our local agriculture sector,” the minister says proudly. The agriculture sector continues to attract investment in a wide range of activities. One key project which was recently completed is the country’s first production facility for sugar, which will create around 2,000 jobs in sugar treatment and production, according to Gerasim Alaverdyan. Another innovative project is Tierras de Armenia, a farm in the

village of Arevadasht. The farm has 2,300 hectares of arable land, of which 200 hectares are planted in wine grapes, both local and French varieties. The vineyard employs drip irrigation, a new technology for Armenia.

through organising educational seminars and field demonstrations, encouraging farmers to adopt conservation farming technology, and helping them lower their operating costs. ATG has provided more than €36 million in goods and services.

Huge potential for organic agriculture

Meeting the challenges

One high potential growth area is organic agriculture. Armenia has the natural advantages to support organic agricultural production, including the fact that a lack of resources has prevented the use of chemical fertilisers and pesticides in the past. The Armenian Organic Agriculture Foundation (AOAF), founded in 2003, serves as an umbrella organisation. International funding agencies and private organisations are supporting the agriculture sector’s growth. One foreign supporter is the Armenian Technology Group (ATG), a non-profit California based group founded in 1989. ATG focuses on promoting the transfer of knowledge and technology to Armenia’s farmers

Challenges for the agriculture sector include upgrading technologies, machinery and know how; entering new markets; and attracting more investments. The Minister of Agriculture says, “The challenges facing Armenian agriculture are mainly external, including the global economic crisis, global warming and climate changes, and impediments to exporting to our neighbours in the region. The agriculture sector offers huge development potential once regional markets are opened up and we boost our agro-industrial production.” He notes that Armenia’s customs and tax regimes have been made more favourable for investors and that the possible opening of the border with Turkey will create significant new opportunities for Armenian agriculture.

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Yerevan Brandy Company

The Horizons of ArArAt Right time to invest in Armenia

Armenia has been known for its brandies since 1887, when Nerses Tairyants invested his money, ideas and passion in an audacious project to launch industrial production of brandy in Armenia. Centuries later, Yerevan Brandy Company (YBC) – the exclusive producer of renowned ArArAt brandy -- continues to preserve the traditions of the most famous Armenian beverage. Ara Grigoryan, Managing Director

YBC, owned by French group Pernod Richard since 1999, exports its products to 25 countries, including Russia, Ukraine, the Czech Republic, Hungary, Bulgaria and others. Managing Director Ara Grigoryan explains, “Of course, the great historical heritage of the brand makes us more watchful in every single step we take, but at the same time today ArArAt is the brand which perfectly combines traditions and audacity, Armenian spirit and French chic. In today’s really rich spirits market, every consumer buying a bottle of ArArAt makes the choice for our brandy.”

Uncompromising quality Ara Grigoryan says that YBC would like to diversify its markets; it is currently aggressively marketing its products in Germany and will soon begin distributing in the UK.

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He says, “It is important that in our export markets ArArAt is perceived as a brand with a strong philosophical platform, the biggest competitive advantage of which is uncompromising quality. Just as classical music and good literature enhance a person, our high-quality product can form a consumer’s tastes.” YBC is one of the key players in the Armenian economy. It cooperates with 5,500 farmers, buys around 32 million kilos of locally grown grapes per year, and invests around €10 million per year in upgrading its production process as well as in corporate social responsibility projects. YBC is working to help the farmers who supply grapes for its brandies to implement EU standards through providing them with European fertilisers, pesticides and know-how to ensure that only the highest quality grapes go into ArArAt brandy.

Ara Grigoryan finds that it is quite easy to do business in Armenia. He says, “Armenia is a country with a relatively young democracy but in spite of its young age its positive influence on the economic and business landscape is obvious. Day by day, things are getting better. There are problems here as there are everywhere, but the business climate is very promising. Also, our government is accessible and really cares about supporting the private sector. Armenia needs more investors, and now is the right time to invest here.” Pernod Ricard’s successful pioneering investment in YBC demonstrates Armenia’s potential. A number of symbols represent Armenia, and in this rich kaleidoscope of symbols, ArArAt has a unique place.

Yerevan Brandy Company 2, Isakov Avenue 0082 Yerevan Republic of Armenia Phone: +374 10 510 100 info@yerevan-brandy-company.com www.ybc.am


• Ministry of Health Spearheading Healthcare Reforms • Impressive Progress in Healthcare and Pharmaceuticals

Health

“The key direction of the Republic of Armenia’s healthcare policy has been and is to ensure healthcare accessibility for all citizens, especially socially vulnerable groups, and to foster social equity and equality.” Dr. Harutyun Kushkyan, Minister of Health


ARMENIA

Ministry of Health Spearheading Healthcare Reforms Armenia’s Ministry of Health is overseeing ambitious reforms of the country’s healthcare sector. The ministry works in partnership with a number of international organisations in its efforts to upgrade Armenia’s healthcare facilities and services, including the World Health Organisation, the World Bank, Oxfam, and the United States Agency for International Development (USAID). Armenia’s Minister of Health, Dr. Harutyun Kushkyan, explains, “The key direction of the Republic of Armenia’s healthcare policy has been and is to ensure healthcare accessibility for all citizens, especially socially vulnerable groups, and to foster social equity and equality.”

Upgrading primary healthcare The Ministry of Health and the USAID are partnering in the Primary Healthcare Reform Project (PHRP), a five year project launched in February 2009 which is designed to improve primary healthcare throughout Armenia. In November 2009, the second stage of the PHRP’s Quality Assurance in Primary Healthcare Programme was implemented when 48 “Quality Coordinators” and representatives of Yerevan State Medical University, the National Institute of Health, and the Ministry of Health received training in healthcare quality assurance. Following the training session, Dr. Harutyun Kushkyan highlighted PHRP’s successful collaboration with the Ministry of Health, which has resulted in the development and introduction of a number of new regulations, standards, and effective funding mechanisms for the country’s health system. Dr. Harutyun Kushkyan, MD, PhD, is a medical educator, a highly respected researcher, and a surgical endocrinologist. He recently addressed the Tenth Armenian Medical World Congress, held in the US in July 2009, concerning recent developments and challenges in Armenia’s healthcare sector.

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Dr. Harutyun Kushkyan, Minister of Health

The minister has been instrumental in helping to improve the quality of training for healthcare professionals in Armenia and led the establishment of the schools of medicine, dentistry and nursing at Yerevan’s Erebouni Medical Centre. Through these training programmes, more than 60 Armenian physicians and nurses have received additional medical training abroad, and more than 80 physicians and nurses from the US, France, and Germany have held and continue to hold medical education sessions and conferences at Erebouni Medical Centre. Dr. Harutyan Kushkyan has received awards for his accomplishments from the University of Southern California School of Medicine, Harvard Medical School, Boston’s Beth Israel Hospital, the University of California of Los Angeles, the American International Health Association, and various organisations in Armenia. He represents the dedicated leadership which is helping to bring about positive change in Armenia’s healthcare sector.


Health

Impressive Progress in Healthcare and Pharmaceuticals Armenia has been steadily liberalising and upgrading its healthcare facilities and services while also developing a thriving pharmaceuticals sector which offers significant investment potential. At independence, Armenia inherited a highly centralised health system organised according to the Soviet Semashko model which focused on secondary rather than primary care and often failed to take the needs of the population (particularly rural residents) into account.

Decentralisation, focus on primary care

isation and the United States Agency for International Development (USAID), around two-thirds of Armenia’s rural health facilities have been upgraded and a Basic Benefits Package, which includes free primary care and maternity services, is now available to all Armenian citizens.

In addition, an Open Enrolment (OE) system has been instituted whereby every resident of Armenia has a right to choose his/her own health care provider, and over 2.5 million people are now enrolled in the OE computerised database.

New financing mechanisms To cope with rising healthcare costs and “informal” payments, new systems of healthcare financing and monitoring have been implemented, and a compulsory national health insurance programme is under consideration. Government spending on primary healthcare has increased from 15% of total healthcare expenditures to 35% over the last 10 years.

The government’s healthcare reforms have involved decentralisation, privatisation, and new financing mechanisms as well as a focus on primary care, but many challenges remain. The current system is still largely financed by out of pocket payments by patients, and many people cannot afford adequate care. Some health facilities, especially in rural areas, lack modern medical technology and equipment. Nevertheless, Armenia has made great progress in reforming the system from one that emphasises the treatment of disease towards a system emphasising prevention, family care and community participation. With the help of a number of international organisations, including the World Health Organ-

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“Quality Assurance” programmes have been introduced to improve the quality of primary care nationwide, family medicine practices have opened, and the main cause of maternal death in Armenia – post-partum haemorrhage – has been reduced by over 60% since 2005. Specific programmes are helping to upgrade the skills levels of healthcare professionals.

Flourishing pharmaceuticals sector Armenia’s pharmaceuticals industry, one of the most successful sectors in the economy, is also upgrading its standards. In fact, the need to apply internationally recognised Good Manufacturing Practice (GMP) standards was the main topic of Armenia’s first Pharmaceutical Development Conference, held in Yerevan in November 2009. The conference brought together key Armenian pharmaceutical producers, government representatives, business associations, university lecturers, healthcare professionals and donor organisations. The conference moderator, Deputy Minister of Health Tatul Hakobyan, emphasised the importance of collaboration between the private sector and the public sector in improving the quality of medicines in Armenia. “To achieve the improved quality objective, adequate contemporary regulations must be paired with investments and training,” he said. Following the conference, the government of Armenia committed itself to adopting GMP legislation and will soon require all manufacturers to meet GMP standards. Leaders in the pharmaceuticals sector are already applying such standards but the new measures will upgrade the quality of the sector overall, helping to boost pharmaceuticals exports

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as well as increase confidence in Armenian pharmaceuticals.

Leaders already applying world-class standards Leaders in Armenia’s pharmaceuticals sector – all of which meet the highest international quality criteria – include Liqvor, Pharma Tech, Arpimed, Yerevan Chemical Pharmaceutical Firm, Vitamax-E, and major distributors Natali Pharm and Alfapharm. Armenia’s pharmaceuticals exports have been growing by around 50% per year over the past five years. The Armenian pharmaceuticals sector benefits from a skilled and highly educated workforce, an open and co-operative cluster comprised of enthusiastic entrepreneurs, significant domestic and foreign direct investment, and an appreciation and willingness to adopt international standards. The industry also benefits from a modern testing and inspection laboratory which is ISO 9001-2000 certified and approved by the World Health Organisation and the International Pharmaceutical Federation.

Most Armenian pharmaceuticals firms focus on the production of generic drugs, although some enterprises are also producing branded products which are gaining in popularity in both domestic and foreign markets. According to the USAID, phytopharmaceuticals based on locally grown or collected herbs make up a strong growth segment. To date, 112 herbal medicinal products have been registered in Armenia, and herbal medicinal products make up 23% of sales of non-prescription drugs, or around €88,000 in annual sales.

Investing in pharmaceuticals Commenting on the investment potential of the pharmaceuticals sector, Nerses Yeritsyan, Minister of Economy, explains, “Although current pharmaceuticals production volumes are relatively small, opportunities exist for potential investors in penetrating the large and growing markets of the CIS through existing free trade agreements, and utilising small to moderate scale production facilities, which are ideal for low volume, high value production. We believe Armenia’s pharmaceutical industry will continue to expand and grow, and we welcome your participation in this emerging and vibrant sector.”


• Spectacular Attractions for International Visitors

Tourism


ARMENIA

Spectacular Attractions for International Visitors Armenia’s magnificent Carahunge, known as the Armenian Stonehenge, is only one of the country’s unique attractions which can form the basis of a thriving tourism industry, and the government has targeted tourism as an economic growth sector. Natural, cultural, archaeological and religious sites all offer reasons to visit Armenia as well as significant development potential. Armenia now has a number of travel agencies and car hire companies (including Hertz), while national carrier Armavia and other airlines offer flights between Armenia and destinations all over the world, and Yerevan’s international airport has been expanded.

Carahunge, the Armenian Stonehenge

Carahunge, the Armenian Stonehenge

sky. The Armenian culture ministry’s Department for Cultural Heritage has announced that funding from the national budget will help adapt Carahunge for tourism, including building a protective transparent wall around the monument and ensuring maintenance and security.

to archaeologists. The UNESCO World Heritage Site in Zvartnots is a complex of structures (including the remains of a cathedral and a palace) erected in the middle of the 7th century near Echmiadzin, probably by Catholicos Nerses III, known as “The Builder”.

The most ancient of Armenia’s many historic monuments is sure to become a top international tourism site. Carahunge, a collection of massive “standing stones” erected between 7,500 and 5,000 years ago, is known as the Armenian Stonehenge for its parallels with the UK’s famed 5,000 year old site. Carahunge’s stones are surrounded by a circular earth mound and ditch built some 1,000 years before the stones were set in place.

Archaeologists believe that Carahunge served simultaneously as a temple to Ari, the ancient Armenian sun god, as well as a university and an observatory. According to recent findings, the massive stones with their view holes could be used to define the phases of the sun and moon as well as the day when a year began. Transparent obsidian, found in fragments at the site, might have been used in the holes for magnification.

Excavations at Armenia’s Areni Cave (Bird Cave) have uncovered huge clay pots and jugs dating back to around 3500 BC to 3900 BC. The pots contained dried crushed grapes, making Areni Cave the world’s oldest large-scale winemaking facility ever found.

The monument, located around 200 km from Yerevan, consists of over 200 shaped stones, some bearing smooth angled holes of 4cm to 5cm in diameter which direct a viewer’s vision towards different points in the

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UNESCO site and world’s oldest wine cellar Carahunge is by no means the only site in Armenia of interest

Religious travel Armenia was the first country to adopt Christianity as a national religion, giving it great appeal for the growing global religious travel market, which now totals some 300 million travellers. Kevin J. Wright, President of the World Religious Travel Association, says, “Only


Armenia can offer faith-based travellers a religious history that begins with the first book of the Bible and includes being evangelised by two of Christ’s apostles, Bartholomew and Thaddeus, and becoming the first country to adopt the Christian faith.” Armenia’s religious sites range from its many ancient churches and monasteries to the Biblical Mount Ararat, which can best be seen from Khor Virap monastery. Armenia’s UNESCO World Heritage Sites include the monasteries in Sanahin, Geghard and Haghpat; the cathedral and churches of Echimiadzin; the Upper Azat Valley near Geghard; and Zvartnots.

Eco tourism and special interest tours In addition to its historic monuments and religious sites, Armenia has a wealth of attractions for nature lovers and seekers of off the beaten track ecotourism.

The World Wildlife Fund partnered with Marriott in the “Reserves and National Parks of Armenia” campaign to spur on both protection and infrastructure development of the country’s “specially protected nature areas” (SPNAs). One of Armenia’s natural wonders is Lake Sevan, the largest lake in Armenia and one of the largest high altitude lakes in the world. Located in central Armenia at an altitude of 1,900 m, the lake covers 940 sq km and is fed by 28 rivers and streams. Along with Lake Van and Lake Urmia, Lake Sevan was one of the three great lakes known as the Seas of Armenia in the ancient Armenian kingdom; Lake Sevan is the only one within today’s Armenia. Lake Sevan is now part of one of Armenia’s two natural parks; the other is around the picturesque village of Dilijan, a centre for artists and craftspeople. Other protected natural areas include three state

Khor Virap monastery, at the Mount Ararat

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ARMENIA

number of visitors coming from Europe to Armenia has grown significantly over the past few years, and the percentage of non Diaspora visitors has been growing especially rapidly. To encourage tourism visits and investments, it is very important to develop an Armenian brand and to communicate it.” To help bring information about Armenia to a wider public, the Armenian Tourism Development Agency (ATDA) recently participated in one of the world’s leading travel shows, the Top Resa International Travel Fair, held in September 2009 in Paris. Representatives from Armenian travel enterprises Saberatour Sevan, Geographic Travel and Voyage Armenia also participated.

Lake Sevan

reserves (Khosrov Forest, Shikahogh and Erebuni), and 25 state natural preserves; all these combined cover more than 308,000 hectares, or approximately 10% of the country’s territory. The Armenian Ecotourism Association provides information about the country’s ecotourism attractions and investment opportunities. Armenia is also developing special interest tours, including wine tourism and travel along Armenia’s 550 km portion of the Silk Road. Armenia is participating in a project to develop a wine route through Black Sea countries, and the government recently installed 14 multilingual information boards at key points along Armenia’s Silk Road. The Armenian Tourism Department within the Ministry of Economy is also promoting winter tourism, health and wellness travel, and events and festivals which showcase Armenia’s unique culture and cuisine.

Growing numbers of visitors from EU Armenians from the Diaspora make up the majority of the country’s foreign visitors now, but this is certain to change as the world becomes more aware of what Armenia offers. Aristomene Varoudakis, the World Bank’s representative in Armenia, points out, “The

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The Country of Talking Stones International Tourism Fair held in Armenia annually since 2000 hosted 65 travel industry enterprises at the November 2009 event. At the fair, Yeghishe Tanashyan, Vice President of the Armenian Association of Travel Agents, commented, “Tourism was one of the industries that was hit first by the global economic crisis, but we are already seeing a recovery.” Armenia offers fine hotels for visitors. For example, the Tufenkian group of companies, which is involved in the production of fine carpets as well as significant community service projects, has hotels in Yerevan, Sevan, Dilijan and Lori. All Tufenkian hotels combine beautifully designed facilities with exceptional comfort and service and help to introduce guests to Armenia’s undiscovered tourist attractions. Tufenkian also organises tours which introduce travellers to Armenia’s many wonders.

FDI for tourism Foreign direct investment has already flowed in to Armenia’s tourism sector. Golden Tulip, Best Western, and Marriott have opened hotels in Yerevan, and the government welcomes more hotel investment throughout the country. The Competitive Armenian Private Sector (CAPS) programme supported by the United States Agency for International Development (USAID) focuses on developing sectors designated as having strong growth potential, and one of the programme’s targeted sectors is tourism. Clearly Armenia offers a wealth of attractions for both visitors and tourism investors.


Tourism

Hertz

World-Class Car Hire and Travel Services Visitors to Armenia can count on a complete range of world-class travel services from travel group Elitar Travel, which also operates the Hertz car hire franchise. “We are a one-stop-shop,” says Robert Hakobyan, Hertz Armenia’s General Manager. Hertz Armenia, the country’s first car hire firm when it was founded in 2000, now has the biggest car hire fleet in the country and serves both leisure and business travellers. “In addition to the local private sector, many international companies are represented in Armenia, and we can provide superior services for this segment,” Robert Hakobyan says. Hertz plans to offer pick up and drop-off of vehicles in Turkey when Armenia’s borders fully open; the company is already offering this service in Georgia. Hertz can provide chauffeured vehicles, navigation equipment rentals and much more. Robert Hakobyan says, “The quality of our services makes us stand out. We have new cars, highly-trained staff, and value-added services, and our office is conveniently located in the centre of Yerevan. In addition, our customers can benefit from the Hertz group’s international network. From the very beginning, our team here at Hertz Armenia has adopted a customer-oriented strategy, and this has been the key to our success.”

Innovative individual and group tours For travellers wishing to discover Armenia with the help of local experts, Elitar Travel provides inbound travel services through Armenia Holidays; the latter is one of Armenia’s biggest incentive tour operators. Elitar Travel offers innovative individual and group tours, (such as cultural, religious, adventure, special interest tours, not only in Armenia but in Caucasus and Iran as well), hotel and flight reservations, multilingual guides, “meet and greet” transfers, and other services guaranteed to make any traveller’s visit to Armenia a success. Just as Hertz dominates Armenia’s car hire sector thanks to its top quality services, Armenia Holidays stand out from their competitors through their well-

Robert Hakobyan, General Manager

planned itineraries, highly-trained multilingual guides, and commitment to customer service. “We go the extra mile for our customers,” Robert Hakobyan says. Elitar Travel is working to inform international travellers about Armenia’s exceptional attractions, which include 5 UNESCO World Heritage sites, early Christian churches and other historic landmarks, part of the famed Silk Road, and a wide-range of eco tourism options, among many other choices. Robert Hakobyan explains, “Through our travel company’s participation in international exhibitions and events, we are trying to make people all over the world more aware of everything Armenia has to offer.”

Hertz Rent a Car 7, Abovyan street 0001 Yerevan, Armenia Phone: +374 10 58 48 18 Fax: +374 10 54 33 77 info@hertz.am - www.hertz.am www.armeniaholidays.com (booking service)

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ARMENIA

Golden Tulip Yerevan and Best Western Congress Hotel

Top Hotels in Yerevan Pamper Business and Leisure Travellers Armenia welcomes discerning business and leisure travellers with two superior hotel properties, the Golden Tulip Hotel Yerevan and the Best Western Congress Hotel, both owned by Italian group Renco. General Manager Chiara Figini explains, “We wanted to offer two hotel options to reach two different markets. Our hotels’ welcoming and multilingual staff members excel at making guests feel at home during their stay with us and are committed to satisfy all their needs.” The Golden Tulip Hotel, housed in a landmark building designed in the 1920s, offers 104 elegant guestrooms furnished with Italian handicrafts and equipped with the latest amenities, including high-speed Internet connections. As Chiara Figini says, “Every inch of the Golden Tulip Hotel Yerevan delivers luxury.” The Golden Tulip’s two presidential suites feature rich colour schemes and exceptional comforts, while the newly renovated Junior Suites celebrate “Made in Italy” charm. In addition the hotel has a choice of comfortable standard rooms.

The wellness centre pampers guests with a full range of treatments Guests can enjoy the open air Zanzibar swimming pool on the roof and try Italian espresso, homemade ice cream and delicious cocktails in the convivial Dolce Vita Bar and Tearoom in the lush winter garden with its Italian fountain.

Yerevan’s best hotel restaurant The Golden Tulip’s elegant Rossini Restaurant, named the city’s best hotel restaurant in 2008 and 2009, features authentic Italian and local dishes. Chiara Figini adds, “The Golden Tulip Yerevan is only a 15 minute drive from the international airport and is located in the historic centre of the city within walking distance of Yerevan’s top attractions.”

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Tourism

Best Western Congress Hotel

Comfort for business and leisure For leisure and business travellers looking for value-added comfort the Best Western Congress Hotel guarantees superior facilities and business services as well as a wide range of extras. The hotel offers a winning combination of world-class amenities, Italian flair and Armenian hospitality. Located only 10 minutes from the international airport and a few steps to the Republic Square, the 126 room hotel is equipped with the latest services, including free high-speed Internet and a large choice of meeting facilities with cutting-edge equipment. As a business-oriented hotel, the Best Western Congress Hotel hosts around 200 conferences a year. Guests can enjoy the hotel’s cozy Italian pizzeria equipped with traditional wood oven and the popular Raffaello restaurant, which features local and Italian cuisine. The hotel’s fitness centre with free sauna helps guests unwind; the Best Western Congress Hotel features the most prestigious and biggest Caribbean open air pool which during summer becomes the location of Wedding Ceremonies and different functions. Both of Renco’s fine hotels are playing a key role in spurring on the growth of Armenia’s high-potential tourism sector.

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The abuse of alcohol and other intoxicants creates a serious threat to the health and well-being of the user.


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