(IMI) ARMENIA, COMMERCIAL NEWS SUMMARY:

UNCLAS SECTION 01 OF 02 YEREVAN 001342

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SUBJECT: (IMI) ARMENIA, COMMERCIAL NEWS SUMMARY:
JULY, 2005


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SUMMARY
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1. This cable summarizes press reporting on commercial
developments in Armenia for July 2005. Major headlines
include:

-- World Bank to provide USD 20 million agricultural
loan to the Armenian government;

-- World Bank supports an Urban Heating Project for
Armenia;

-- The Lincy Foundation to spend USD 60 million to
improve schools and roads;

-- Second mobile communication company starts
operating;

-- New law on currency regulation is in force; and

-- July 2005 economic data.

END SUMMARY.

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WORLD BANK TO PROVIDE USD 20 MILLION AGRICULTURAL LOAN
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2. The World Bank's (WB) Board of Directors approved a
USD 20 million agricultural loan to Armenia. The
Armenian government will use the loan to implement the
Rural Enterprise and Small-Scale Commercial Agriculture
Development Program. The four-year program will assist
the development of small and medium sized enterprises
engaged in farming and agribusiness. The WB program
will also give assistance in marketing agricultural
products. The Japanese government will provide USD 1.8
million to co-finance the project.

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WORLD BANK SUPPORTS AN URBAN HEATING PROJECT
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3. The World Bank announced a USD 15 million Urban
Heating Project for Armenia. The project combines
investment, credit and technical assistance financing
to support the implementation of the Armenian
Government's Urban Heating Strategy for multi-unit
apartment buildings and also improve heating in urban
schools. The UNDP/GEF project "Improving the Energy
Efficiency of Urban Heating and Hot Water Supply in
Armenia," will co-finance the project with a USD 2.9
million grant.

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LINCY FOUNDATION GIVES USD 60 MILLION
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4. The U.S.-based humanitarian Lincy Foundation
announced a new USD 60 million project to improve
Armenia's roads and schools. The Lincy Foundation
project will renovate schools throughout Armenia,
upgrade the streets of Yerevan, and improve various
secondary roads throughout Armenia. These new projects
follow Lincy's successful completion of USD 150 million
of infrastructure renovation in Armenia during 2002-

2003. In addition, the Lincy Foundation provided USD
20 million of loans to small and medium-sized
businesses in Armenia. The Armenian Government will
implement these projects with the assistance of the
Lincy Foundation.

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SECOND MOBILE COMMUNICATION COMPANY STARTS OPERATING
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5. A Lebanese-owned company, K-Telecom, launched
Armenia's second mobile phone service on July 1.
Working under the VivaCell trademark, the company will
serve as an alternative to Armentel, the Greek-owned
telecommunications firm that has operated in Armenia
since 1998. VivaCell will initially provide coverage
only in Yerevan and surrounding regions in southern and
central Armenia. According to K-Telecom, the company
has already invested USD 75 million in infrastructure
in Armenia.

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NEW LAW ON CURRENCY REGULATION CAME INTO FORCE
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6. Under a new law on currency regulation all
transactions in Armenia between Armenian businesses or
private citizens must be in Armenian national currency
only. Also, all prices for products and services in
Armenia must be denominated in the Armenian dram
without reference to a foreign currency. Armenia's
Ministry of Finance and Economy as well as Armenia's
Tax Service will implement the new law.

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JULY 2005 ECONOMIC DATA
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7. According to the preliminary data from the Armenian
National Statistical Service, the country's real GDP
grew in January-June 2005 by 10.2 percent year-on-year
to USD 1.5 billion. Industrial production increased by
5.3 percent during January-April 2005. Agricultural
output grew 10.2 percent, and construction volume
increased by 43 percent. Armenia's foreign trade in
January-June 2005 increased by 26.9 percent to USD 1.3
billion. In January-June 2005, exports amounted to USD
429.1 million, and imports USD 788 million, with a
foreign trade deficit of USD 358.9 million. Consumer
price inflation was 2.3 percent during January-June
2005 compared to the same period last year.

GODFREY