ARMENIA COMMERCIAL NEWS SUMMARY: MARCH

UNCLAS YEREVAN 000421

SIPDIS

SIPDIS

DEPT FOR EUR/CARC, EUR/ACE

E.O. 12958: N/A
TAGS: ECON ETRD KTDB CCSR BEXP BTIO AM
SUBJECT: ARMENIA COMMERCIAL NEWS SUMMARY: MARCH
2006


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SUMMARY
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1. This cable summarizes press reporting on
commercial developments in Armenia for March 2006.
Major headlines include:

-- Microsoft opens a subsidiary in Armenia;

-- GOAM approves new technopark in Gyumri;

-- Germany issues Armenia a USD 9.7 million loan;

-- Public Services Regulatory Commission (PSRC)
approves new gas tariffs for local consumers;

-- February 2006 economic data.

END SUMMARY.

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MICROSOFT OPENS A SUBSIDIARY IN ARMENIA
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2. On March 3, Microsoft Corp. opened a subsidiary
in Armenia headed by a full-time, locally-based
representative. The company plans to release
Armenian-language versions of MS Windows and MS
Office, to develop Microsoft based solutions for
local business, to promote the use of licensed
software in government offices and educational
institutions and to provide training courses. The
subsidiary also hopes to expand Microsoft's
distribution network in Armenia. Currently, a local
electronics company, Bi-Line, is the only licensed
distributor of Microsoft products in the country.
Microsoft has approximately 80 subsidiaries world-
wide. Its offices in Azerbaijan and Armenia are
managed by the Central and Eastern European Division
of Microsoft headquartered in Munich, Germany.

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GOAM APPROVES TECHNOPARK IN GYUMRI
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3. In early March, the Armenian National Assembly
approved a project to establish a technopark in
Gyumri, Armenia's second largest city. According to
Deputy Minister of Trade and Economic Development
Armen Gevorgyan, the technopark is designed to
encourage information technology (IT) companies to
open offices in Gyumri by promoting collaboration
between companies and by providing high-quality
office space, utilities and infrastructure support.
Over the longer term, the government hopes that this
project will contribute to sustainable regional
development of high-growth industry outside of the
capital city. Currently, most of Armenia's IT
companies are based in Yerevan.

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GERMANY ISSUES USD 9.7 MLN LOAN TO GOAM
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4. On March 9, the Minister of Finance and Economy
Vardan Khachatryan and the German Ambassador to
Armenia signed an agreement on financial cooperation
under which Germany will provide Armenia with a USD
9.7 million (Euro 8 million) loan through the German
KfW bank. The majority of the loan, USD 7.2 million
(Euro 6 million) aims at further developing the
local mortgage market by extending mortgage terms to
ten years and reducing interest rates. The
remainder (USD 2.4 million) will be used to
rehabilitate water and sewage treatment plants in
the cities of Gyumri and Vanadzor. According to
Minister Khachatryan, the interest rate for the KfW
loan is 0.75 percent and the term is for 40 years
with an automatic 10-year grace period.

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PSRC APPROVES NEW GAS TARIFFS

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5. On March 10, Armenia's Public Services
Regulatory Commission (PSRC) approved new consumer
tariffs for natural gas imported from Russia. The
new tariffs will be enforced as of April 10, 2006,
and raise the residential rate for a cubic meter of
gas from USD 0.13 to USD 0.20 in Armenian dram
equivalents. The industrial rate is scheduled to
increase from USD 0.08 to USD 0.1465 per cubic
meter. The new rates significantly increase the
cost of natural gas for Armenian consumers (up by 52
percent for residential consumers and by 85 percent
for industrial consumers). According to press
reports, the government is still negotiating with
Russian Gazprom to find ways to reduce the impact of
the price increase on the local market.

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ECONOMIC DATA FOR FEBRUARY 2006
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6. According to preliminary data from the National
Statistical Service, Armenia's real GDP for January-
February 2006 grew by 7 percent year-on-year to USD
364.6 million. Industrial production totaled USD
198.7 million, down by 0.6 percent compared to
January-February 2005. Gross agricultural output
for the January-February 2006 grew by 2.7 percent
compared to January-February 2005, and amounted to
USD 54.4 million. Construction reached USD 28.14
million, a 14.5 percent increase. Foreign trade
turnover was valued at USD 364.6 million, with
imports constituting USD 251.1 million and exports,
USD 113.4 million. The average USD/AMD exchange
rate was 450.93. There was 3.8 percent inflation
compared to December 2005, and deflation of 1.5
percent in January-February over the same period of
in 2005.

GODFREY