(IMI) ARMENIA, COMMERCIAL NEWS SUMMARY:

UNCLAS SECTION 01 OF 02 YEREVAN 000520

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TAGS: KTDB BBSR BEXP BTIO AM
SUBJECT: (IMI) ARMENIA, COMMERCIAL NEWS SUMMARY:
MARCH, 2005

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

-- Germany's Commerzbank to support SME lending program
in Armenia;

-- Armentel reports earnings up 70 percent in 2004;

-- German development bank KFW continues financing the
Sevan-Hrazdan hydro power plants' reconstruction;

-- USDA Marketing Assistance Project in Armenia
restructured into a locally-registered foundation;

-- Armenian tax laws to form new tax code; and

-- Armenia's February economic highlights

END SUMMARY.

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GERMANY'S COMMERZBANK TO SUPPORT SME LENDING IN ARMENIA
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2. Germany's Commerzbank is negotiating with several
Armenian commercial banks to establish a fund of credit
guarantees. The fund would attract financial resources
to be used for lending to SMEs in Armenia. According
to the German KFW Bank representative in Armenia, KFW
will be a guarantor of the attracted financial
resources, securing 90 percent of the loan amount. The
total program cost is 7.8 million euros.

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ARMENTEL REPORTS EARNINGS UP 70 PERCENT IN 2004
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3. Armenia's national telecommunications provider,
Armentel, reported net profit up 70 percent to 20,499
million euros in 2004. Revenue grew 22.2 percent to
85.2 million euros, including a 46 percent growth, to
27,483 million euros, from mobile services as the
number of mobile subscribers rose to 203,309 from
111,188 at the beginning of 2004. Revenue from fixed
telephone services rose 25.3 percent to 28,176 million
euros, and revenue from international services grew 4.7
percent to 26,265 million euros. Armentel lost its
monopoly on mobile services in November 2004, and a
second mobile operator, K-Telecom is set to begin
offering services in May this year. Greece's OTE owns
90 percent of Armentel, and the Armenian government
owns 10 percent.

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GERMAN BANK KFW CONTINUES FINANCING THE SEVAN-HRAZDAN
HYDRO POWER PLANTS' RECONSTRUCTION
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4. Germany's KFW plans to provide another loan to
upgrade generating facilities at one of the six hydro
power plants of the Sevan-Hrazdan Cascade, the third to
be upgraded by KFW funding. In 2000, KFW financed the
restoration of the Kanaker HPP. In 2004, KFW signed a
15 million euro credit agreement on financing the
refurbishment of the Yerevan HPP. The government of
Armenia sold the plants to Russia's RAO-UES in 2003 in
exchange for the latter's assumption of USD 43 million
in energy arrears.

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USDA MARKETING ASSISTANCE PROJECT RESTRUCTURED
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5. The U.S. Department of Agriculture's Marketing
Assistance Project (USDA MAP) in Armenia is converting
into the Center for Agribusiness and Rural Development
(CARD),a locally-registered foundation. It will focus
primarily on providing technical, financial, and
marketing assistance to farmers and private
agribusiness companies throughout the regions in
Armenia. CARD will be managed by a Board of Trustees
and an executive director. USDA Foreign Agricultural
Service will be the main financial source for the newly-
established foundation.

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ARMENIAN TAX LAWS TO FORM NEW TAX CODE
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6. The Armenian government is working to harmonize and
consolidate all the various tax laws into a single tax
code. According to the Armenian Deputy Minister of
Finance and Economy, the new code will streamline tax
administration and eliminate the current discords in
tax legislation.

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ARMENIA FEBRUARY ECONOMIC HIGHLIGHTS
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7. Armenia's National Statistical Service reported
that the country's real GDP in January-February 2005
grew by 7 percent to USD 321.9 million. Armenia's
foreign trade in January-February 2005 increased by
45.3 percent to USD 346.6 million. The inflation rate
in February 2005 was 4.8 percent.
EVANS