(IMI) REPORT ON VAYOTS DZOR PROVINCE

UNCLAS SECTION 01 OF 03 YEREVAN 000859

SIPDIS

COMMERCE FOR 3150/PBRADLEY/BSMITH
COMMERCE FOR 4201/ITA/IEP/OEERIS/BISNIS/EHOUSE
EMBASSIES PLEASE PASS FCS
DEPT FOR EUR/CACEN, EB/CBA
ANKARA ALSO FOR CFC/ SNYDER/BALLINGER
PASS TDA-STEIN, OPIC, EXIM-TUMMINIA/PANARO

E.O. 12958: N/A
TAGS: KTDB BBSR BEXP BTIO AM
SUBJECT: (IMI) REPORT ON VAYOTS DZOR PROVINCE

--------------
SUMMARY
--------------


1. On April 14-15, 2005, Embassy's BISNIS
representative visited the Vayots Dzor region of
Armenia 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 the latest
in a series of regional trips to reach out to local
companies throughout Armenia to promote the BISNIS
"Search for Partners" and "Trades and Tenders"
programs and collect information on investment and
commercial opportunities for U.S. companies. End
Summary.

--------------
VAYOTS DZOR: GENERAL BACKGROUND
--------------


2. Vayots Dzor is located in the Southern part of
Armenia. According to the Vayots Dzor governor's
office, the province has 62,000 inhabitants: 20,000
urban residents and 42,000 rural residents. The
province borders Azerbaijan to the East and
Nakhchivan, an Azerbaijani enclave territory, to the
West. With an altitude ranging from 3,000 feet to
6,500 feet, Vayots Dzor is located on the upper and
middle reaches of the Arpa River, the largest arm of
Arax River, which ultimately runs along the Armenia-
Turkey and Armenia-Iran borders. There are many
historical landmarks in the province, as well as
gorges and deep canyons, karsts and caves, forests,
and rich agricultural lands.


3. Vayots Dzor's mineral resources include basalt,
felsite, perlite, and quartzite. The province also
has mineral water springs located near the resort town
of Jermuk. Vayots Dzor has significant water
resources for hydro power generation.


4. More than 40 percent of Vayots Dzor's population
inhabits the three major towns - Yeghegnadzor, the
region's capital (8,200 inhabitants),Vaik (5,400
inhabitants),and Jermuk (5,800 inhabitants).


5. The province's industrial sector comprises 70
small and medium-sized private enterprises engaged in
food processing (wine production, cheese making,
bottling of mineral water),stone mining, jewelry
production, and electronic industry. In 2004 the
region's aggregate industrial output totaled USD 9.5
million. The wineries located near Yeghegnadzor and
mineral water bottling companies in Jermuk generate
the greatest share of the province's industrial volume
and sales.

--------------
SECTORS
--------------


6. There are 10 major mineral water bottlers that
produce about 30 million bottles annually and account
for 80 percent of the mineral water bottling in
Armenia. Among the largest bottlers are the
(unrelated) Jermuk Group and Jermuk Joint-Stock
Company. The Jermuk Joint-Stock Company privatized
their plant in 1995 and installed plastic production
lines the same year. Both companies dominate
Armenia's market and also export to CIS countries, the
Middle East, Europe, and the United States.


7. Vayots Dzor is Armenia's largest grape growing and
winemaking region. It is famous for its Black Areni
varietal, which is good for red table wine and semi-
dry wines. As winemaking becomes a profitable
business in Armenia, local farmers are steadily
increasing grapes production in the province. There
are now several private wineries in Vayots Dzor that
export their product to the CIS, EU countries, and the
United States. Currently a Vayots Dzor winery seeks
suppliers of used oak barrels for aging (see below).


8. In 2000, the USDA Marketing Assistance Project
initiated a dairy goat breeding project in Vayots Dzor
to increase the production and consumption of goat
milk and cheese. A number of private goat breeding
enterprises, including Golden Goat Plus, Selim, Spitak
Aghpyur, Vayots Dzor, Vernashen Kat, and Jermuk Blue
are now successfully operating in the province. Some
of them produce a high-quality packaged cheese that is
exported to the United States and European countries.


9. Jermuk is a resort town and a popular tourist
destination during Soviet times. Local spas provide
mineral water treatments. One of the major investors
in Jermuk's infrastructure, the Jermuk Group, has
recently privatized a large resort hotel and converted
it into a high-quality facility. Local and foreign
investors are currently renovating many of the town's
other hotels and spas. They plan to import furniture
and spa equipment from Europe and the United States.
The Jermuk mayor's office recently established a
tourism information center where potential investors,
suppliers, and foreign tour operators may obtain
information on business opportunities in Jermuk.

--------------
INVESTMENT OPPORTUNITIES
--------------


10. Most enterprises operating in Vayots Dzor have
potential and need to establish long-term cooperation
or a partnership with foreign investors. Some offer
interesting commercial and investment opportunities.
The Embassy encourages interested U.S. firms to
contact the Political-Economic Section of the Embassy
or the BISNIS Trade Specialist for Armenia Ellen House
by phone at (202) 482-2284 or email at
Ellen_House@ita.doc.gov

--------------
FOOD PROCESSING
--------------


11. Company: Vayots Dzor LLC

Vayots Dzor is a private company established in 1998
in Yeghegnadzor that bottles mineral water and
produces goat cheese for export to the Unites States.
The company also owns 20 hectares of orchards and
produces high quality fruits and vegetables, including
apricots, peaches, pears, and apples. The company
seeks a U.S. partner to establish joint production of
canned fruits and vegetables. It also wishes to set
up natural juice production. Vayots Dzor LLC is able
to invest some USD 500,000 into the cannery project.
A business plan in English is available and can be
mailed upon request.

--------------
STONE CUTTING
--------------


12. Company: Vazo LLC

Vazo was established in 1985 and privatized in 1994.
It specializes in stone processing, manufacturing
slabs from tuff, basalt, and granite. The company
also owns a quarry of basalt and granite. The company
markets its products in Armenia and exports them to
CIS countries. The company wishes to upgrade its
stone cutting and polishing machinery. It seeks a
U.S. partner to provide a modern stone processing
line. Vazo would invest its inexpensive, qualified
labor, well-established distribution channels, as well
as some financial resources. A business plan is
available and can be mailed upon request.

--------------
SMALL HYDRO-ELECTRIC PLANTS
--------------


13. Vayots Dzor has significant water resources for
hydro-electric generation. The province has six
privately owned small hydro power plants (HPP) located
on the Arpa and Yeghegis rivers. Their total
installed capacity is 6 Megawatts. According to local
experts, there is potential for profitable development
of new small hydroelectric plants since the Government
of Armenia recently set higher tariffs for electricity
from small HPPs than from large HPPs.

--------------
TRADE OPPORTUNITIES
--------------


14. Company: Ginetas LLC

Ginetas was established in 1998 in Vayots Dzor
province by a professional wine engineer technologist.
Using the Vayots Dzor variety of grapes, Areni, the
company produces several new brands of wine. USDA
Marketing Assistance Project in Armenia has
financially and technically supported the firm since

1998. Ginetas intends to purchase up to USD 100,000
of used wine oak barrels for aging. It seeks a U.S.
supplier of barrels under flexible financial terms.


15. For more information on business opportunities in
Vayots Dzor, please contact:

Mr. Alexan Avagyan, Director of Vayots Dzor Regional
Business Center, Head of Regional Chamber of Commerce
Tel: (374-281) 22-113
Fax: (374-281) 20-553
E-mail: vaykcci@arminco.com
Website: www.vaykcci.am


Mr. Vanik Khudaverdyan,
Vayots Dzor Governor's office
Tel: (374-281) 22-690

Mr. Vanik Zohrabyan,
Jermuk Tourism and Business
Information Agency
Tel: (374-248) 22-488

George Isayan,
BISNIS (Business Information Service for the Newly
Independent States, U.S. Department of Commerce)
Representative in Armenia
American Embassy, Yerevan
1 American Avenue
Yerevan 375082 Armenia
Tel: (374-10) 464-700
Fax: (374-10) 464-742
E-mail: isayangx@state.gov
www.bisnis.doc.gov
EVANS