ARMENIA COMMERCIAL NEWS SUMMARY:

UNCLAS SECTION 01 OF 02 YEREVAN 002095

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E.O. 12958: N/A
TAGS: ECON ETRD KTDB BBSR BEXP BTIO AM
SUBJECT: ARMENIA COMMERCIAL NEWS SUMMARY:
NOVEMBER 2005

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

-- Alcatel agrees to support the Armenian Enterprise
Incubator Foundation;

-- EBRD to expand financing program for Armenian banks;

-- IMF approves USD 4.7 mln disbursement for Armenia;

-- New E-Commerce systems facilitate bank transfers and
investment;

-- Armenia's tastiest trade fair: ARMPRODEXPO 2005;

-- October 2005 Economic Data.

END SUMMARY.

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ALCATEL TO SUPPORT THE ENTERPRISE INCUBATOR FOUNDATION
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2. French Telecom Company Alcatel Manager Serge
Tchuruk and Deputy Minister of Trade and Economic
Development Tigran Davtyan signed a cooperation
agreement on November 16 at the UN-sponsored World
Summit on Information Technology in Tunis. Under the
agreement, Alcatel will provide equipment, training
materials and other forms of support to assist the
Armenian Enterprise Incubator Foundation (EIF) in
establishing an information technology research and
development training center. EIF was founded in 2002
thanks to a grant of USD 5 million from the World Bank
and provides managerial services, shared workspace,
training and other support to information technology
companies in Armenia. In August, Alcatel contracted
with the Armenian telephone company VivaCell to deploy
a new country-wide mobile network. Alcatel also
supplies significant equipment to VivaCell's only
competitor, Armentel.

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EBRD TO EXPAND FINANCING PROGRAM FOR ARMENIAN BANKS
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3. On November 14, the European Bank for
Reconstruction and Development (EBRD) announced its
plan to establish a Euro 40 mln (USD 46.8 mln)
framework to provide financing to Armenian banks so
that they can make loans to support small and medium-
sized businesses, micro-finance projects, mortgages and
other investments. The EBRD will assume the full
commercial risk for the banks' investments under this
program. This initiative builds on the EBRD's Armenia-
Micro-Lending Program through which the ERBD has
provided Euro 10 mln (USD 11.7 mln) to local banks to
finance similar loans over the past three years. USAID
has agreed to provide USD 1.5 mln in technical
assistance to local banks working with EBRD under the
existing and future framework agreements. To date, the
EBRD has selected four local banks, Armeconom, Anelik,
ACBA and Ineco, to participate in the project.
According to EBRD Resident Representative Michael
Weinstein, the new framework agreement should be
completed by January 2006.

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IMF APPROVES USD 4.7 MILLION DISBURSEMENT FOR ARMENIA
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4. On November 14 the Executive Board of the
International Monetary Fund (IMF) completed its first
review of Armenia's economic performance under a three-
year Poverty-Reduction and Growth Facility (PRGF)
program. As a result of its positive assessment, the
IMF agreed to disburse approximately an additional USD
4.7 mln to the GOAM, bringing total disbursements under
the program to approximately USD 9.4 mln. The total
amount allotted under the PRGF program, which the IMF
approved on May 25, 2005, is roughly USD 32.8 mln.
According to IMF Deputy Board Director and Acting Chair
Agustin Carstens, "Armenia's economy continues to
perform strongly. Prudent fiscal and monetary
policies, strong external inflows, and ongoing
structural reforms have contributed to double-digit
growth, low inflation, and declining poverty in 2005.
The outlook is for continued robust growth in 2006."
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E-COMMERCE SYSTEMS FACILITATE TRANSFERS, INVESTMENT
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5. On November 4, the Central Bank of Armenia (CBA),
the Ministry of Finance and Economy, the United Nations
Development Program (UNDP) and the Armenian Card
Company (ArCa) introduced two new electronic commerce
systems, Card-to-Card Transfers and Online Treasury
Direct. The Card-to-Card Transfer system allows ArCa
debit/credit card holders to make instant on-line bank
transfers to other ArCa accounts. Under the system,
both sender and beneficiary will receive e-mail
notification of such transactions. Treasury Direct
will become operational in December 2005 and will allow
investors with ArCa cards to purchase treasury bills on-
line. There are 16 Armenia banks that are members of
the ArCa e-payment system and approximately 90,000 ArCa
card holders who will be eligible to use these new
services. ArCa was established by the Central Bank in
collaboration with 10 trade banks in March 2000 to
develop electronic banking and payment system in
Armenia. In 2003 ArCa introduced an e-payment system
which allows members to pay for public utilities,
mobile phone cards and Internet cards online.

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ARMENIA'S TASTIEST TRADE FAIR, ARMPRODEXPO 2005
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6. Sixty-four food processing companies displayed
their products at the Fifth International ArmProdExpo
held on November 2-5 in Yerevan. The Armenian
Ministries of Agriculture and Foreign Affairs, Chamber
of Trade and Industry and the Center for Agricultural
and Rural Development (CARD) organized the event. CARD
is an Armenian non-profit organization funded by USDA.
ArmProdExpo's goal was to promote Armenian agricultural
products to domestic and international consumers and
provide a forum for Armenian producers to establish new
business contacts. The majority of the vendors
represented local enterprises, though seven joint-
ventures participated (mainly Armenian-Russian,
Armenian-Iranian and Armenian-French). No American
companies were represented but 13 of the vendors had
received support from USDA through the CARD project.
Products available at the expo included alcoholic
beverages (primarily cognac, wine and vodka),cheeses,
dried and canned fruits and vegetables and some meat
products. There were also stands dedicated to
packaging, containers and labeling materials, the lack
of which has been a significant obstacle to producers
seeking to market goods abroad.

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OCTOBER 2005 ECONOMIC DATA
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7. According to press reports based on preliminary
data from the National Statistical Service, Armenia's
real GDP from January to October 2005 grew by 12.2
percent year-on-year to USD 3.7 billion. Industrial
production totaled USD 1,153 million an increase of 6.1
percent compared to the same period last year. Gross
agricultural output for the first ten months of 2005
grew by 10.4 percent compared to 2004, and reached USD
835.4 million. Construction increased by 32.6 percent
to USD 676.5 million. From January to October 2005,
exports were worth USD 766.4 million, and imports USD
1.39 billion, with a foreign trade deficit of USD 626.8
million.
EVANS