(IMI) ARMENIA: REPORT ON KOTAYK PROVINCE

UNCLAS SECTION 01 OF 04 YEREVAN 002992

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SUBJECT: (IMI) ARMENIA: REPORT ON KOTAYK PROVINCE

INTERNATIONAL COPYRIGHT, U.S. AND FOREIGN COMMERCIAL
SERVICE AND U.S. DEPARTMENT OF STATE, 2003. ALL RIGHTS
RESERVED OUTSIDE OF THE UNITED STATES.

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SUMMARY
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1. On October 6-9, 2003, Embassy's BISNIS
representative visited the Armenian province of Kotayk
to explore investment and trade opportunities for U.S.
companies and to expand U.S.-Armenian commercial ties.
He met with the province's business leaders and
government officials. This is another in a series of
regional trips to reach out to companies throughout the
country to promote the BISNIS "Search for Partners" and
"Trade and Tenders" programs and collect information on
investment and commercial opportunities for U.S.
companies. End summary.

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Kotayk: General Background
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2. Kotayk province is located in the central part of
Armenia. The province was formed in 1996 and includes
three former administrative regions: Hrazdan, Abovian
and Nairi, with a total area of 797 sq. miles. Based
on the figures provided by Kotayk Mayor's office,
Kotayk has 281,000 inhabitants, divided between 153,600
urban residents and 127,400 rural residents. The
climate is mild continental. Kotayk's mineral
resources include a wide range of building materials,
e.g., basalt, tufa, perlite and marble. The province
also has a large number of mineral water springs
located near Arzni, Hankavan, and Bjni.


3. Due to its proximity to Yerevan, Kotayk is one of
the most developed provinces of Armenia. Its
industrial sector includes 170 large, medium and small
enterprises with total output reaching approximately
USD 80 million in 2003. Most companies in Kotayk are
located in the province's three major cities: Hrazdan
(capital of Kotayk),Abovian and Charentsavan.

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Key Sectors
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4. Key sectors represented in Kotayk include:

--Energy
The Hrazdan Thermal Power Plant (HTPP) and the Sevan-
Hrazdan Hydropower Plant (SHHP) cascade have a combined
installed capacity of 1,660 MW. The assets of the HTTP
were transferred to the Government of the Russian
Federation against Armenia's debt to Russia. The Sevan-
Hrazdan Cascade valued at USD 25 million was
transferred to Russia's RAO Unified Energy Systems as
well for debts Armenia owed to Russia for fuel for
Armenia's nuclear power station.

--Diamond-cutting
A number of successful diamond-cutting enterprises are
located in the villages of Nor Hajn and Nor Geghi.
Among them Shoghakn, Lori and Arevakn plants belong to
foreign investors. Aghavni and Andranik plants are
operated and owned by local entrepreneurs. Lori, owned
by Haik Arslanian, a businessman of Armenian origin
from Antwerp, Belgium, employs 400 highly qualified
diamond cutters. Equipped with modern western
processing lines and using the latest technologies, the
plant can fulfill even the most complicated orders.
The company has an agreement with Arslanian Cutting
Works in Belgium, by which the Belgian company supplies
the uncut diamonds and the Armenian plant returns the
processed diamonds for distribution in European and
international markets. Smaller amounts of Lori's
products are distributed in the United States via the
New York-based Cora Diamond Company, which also
supplies Lori with uncut diamonds.

Shoghakn diamond-cutting plant was established in the
village of Nor Hajn in 1971 as a state-owned
enterprise. In July 2000 the plant was privatized by
Lev Levayev, a prominent Russian businessman, who owns
a worldwide network of diamond processing companies.
Currently Shoghakn JSC employs 1200 specialist diamond
cutters. It exports processed diamonds primarily to
Israel.

Arevakn LLC, owned by the Belgian company Tashe,
operates a newly-established diamond-cutting plant
based in Nor Hajn.

--Textiles
The Charentsavan sewing factory, which works with
Italian companies, exports its high-quality women's
undergarments to Italy and to other EU countries.

--Building materials
"Mika-Cement" joint-stock company owns and operates
Hrazdan Cement Plant, one of the largest producers of
cement in Caucasus region. "Mika-Cement" is affiliated
with Mika Limited, a large importer of oil products as
well as the owner of a network of gasoline stations in
Armenia. "Mika-Cement" plans to upgrade its production
lines and is looking for U.S. partners to purchase
modern cement packaging lines under flexible payment
terms.

--Food processing
Food processing has become a growth sector in Kotayk.
Tamara produces a wide range of ice creams using a
modern Italian production and packaging line. Tamara
is the most popular brand of ice cream in the local
market. The company also produces natural juices and
packaged frozen fruit and vegetables. Tamara exports
its products to the United States and Russia.

Geghard recently installed a new German line to produce
high quality meat products. (Both Geghard and Tamara
anticipate using their own financial resources as well
as credit lines provided by the Armenian branch of the
London-based HSBC bank to expand.)

Artashes Cannery is one of the oldest private food
processing enterprises in Armenia. The company
produces juices, jams, and preserves for distribution
in Armenia, Russia, and in the U.S. (mainly in the Los
Angeles metropolitan area). Artashes has increased its
exports to the U.S. to meet a growing demand for its
product.

The French group Castel invested USD 18 million in
Kotayk Brewery in 1997. Castel owns 71 percent of the
shares of the Kotayk Brewery and Mr. Gagik Tsaroukian,
an Armenian businessman, 29 percent. Mr. Tsaroukian is
also the owner of Multi Group, that includes a number
of companies mainly based in Kotayk province,
specializing in dairy production, stone processing,
wholesale and retail trading and wine making.

"Zohrabyani Tigran Mets" company, based in the town of
Yeghvard, produces high quality dairy products with
technical and marketing assistance of the USDA
Marketing assistance project in Armenia.

Kotayk is home to several mineral water bottling
plants. One of these, Bjni, is a member of the SIL
Group, a large holding company in Armenia. "BML-Arzni"
LLC, owned by several local and foreign investors,
produces Arzni mineral water, a popular brand in the
former Soviet Union markets. The company's products
are marketed in the Middle East and Europe.

--Tourism
Tourism is one of the province's most promising sectors
for foreign investors. The winter resort town of
Tsakhkadzor is a popular tourist destination. Located

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2,000 meters above sea level, its climate ranges from
plus 30 degrees Celsius in summer to minus 30 degrees
Celsius in winter with 260 days of sunshine per year on
average. The mountains near Tsakhkadzor host a ski
resort. During the Soviet era, the town attracted
tourists and professional sportsmen from the Soviet
Union and abroad. The Tsakhkadzor Sports Complex was
the main training center for the Soviet National
Olympic team. A number of spas and hotels in
Tsakhkadzor are interested in cooperating with U.S.

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companies to help refurbish their facilities to meet
international standards.


5. Many companies in Kotayk have growth potential.
Most wish to cooperate or establish a partnership with
foreign investors, and some of these offer interesting
investment opportunities. The Embassy encourages
interested U.S. firms to contact the Economic-
Commercial Section of the Embassy or the BISNIS Trade
Specialist for Armenia Joan Morgan by phone at: (202)
482-2709 or e-mail at .

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INVESTMENT OPPORTUNITIES
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Construction Materials
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6. Company: Armavto. Established in the city of
Charentsavan in 1980, this formerly state-owned
forklift plant was converted into a private company in

1994. It produces small tonnage forklifts and electric
loaders with 1 ton lift capacity. During the Soviet
era, Armavto was the monopoly supplier to the Soviet
market. The company now employs 250 people. It also
produces steel balls for mills. The company's sales in
2001 totaled USD 1.4 million. Armavto owns 37,900 sq.
meters of production space and 6,100 sq. meters of
storage facilities.


7. To expand its activities, Armavto seeks a U.S.
partner to establish the production of basalt fiber
used in manufacturing of pipes, fittings, roofing
insulation materials etc. A U.S. partner would be
expected to provide technology and equipment.
Armavto's contribution would include the labor,
production space, established distribution network in
Armenia, and financial investment of up to 30 percent
of the total investment amount. The total investment
for this project would be USD 1.5 million.

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DAIRY PRODUCTION
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8. Company: Zohrabyani Tigran Mets JSC. Zohrabyani
Tigran Mets (ZTM) Joint-Stock Company was established
in 1997. It is involved in the production of dairy
products, including sour cream, curds, and butter. The
USDA Marketing Assistance Project in Armenia is
providing technical and marketing assistance to ZTM.
ZTM plans to expand its capacities. The company
proposes a partnership opportunity for a U.S. company
in the production of dairy products. ZTM seeks a
partner who can purchase and install a modern milk
processing and packaging line. The proposed investment
is USD 100,000 with a payback period of 3 years.

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Trade opportunities
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Construction materials
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9. COMPANY: Mika-Cement JSC. Mika-Cement Joint-Stock
Company owns and operates the Hrazdan Cement Plant,
which was established in 1970. The plant was
privatized in 2001. The company wishes to purchase a
new/used cement packaging line with the capacity of 50-
100 tons/hour. The total amount of this deal would be
up to USD 500,000.

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Telecommunication services
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10. Company: Telnet LLC. Telnet is a private Internet
services company established in 1999. Telnet plans to
upgrade its equipment and seeks a U.S. supplier of the
multiport device for a dial-up connection. Shipping
terms: CIP Yerevan. Payment terms: negotiable. U.S.
dollar value: 3,000.

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USEFUL CONTACTS
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11. For more information on business opportunities in
the province of Kotayk, please contact:

George Isayan, BISNIS (Business Information Service for
the Newly Independent States, U.S. Department of
Commerce) representative for Armenia, U.S. Embassy
Yerevan, 18 Marshal Baghramyan Ave., Yerevan-19,
Armenia, Tel: (374-1) 521-611, Fax: (374-1) 520-800,
E-mail:
website: .

Vladik Nahapetyan, Head of the financial and economic
development department, Kotayk Governor's Office
Tel: (374-23) 25-301

Arsen Khachatryan, Head of the social-economic
development department, Kotayk Governor's Office
Tel:(374-23) 25-301, e-mail: ars5620@yahoo.com
ORDWAY