US embassy cable - 05YEREVAN520

UNCLAS SECTION 01 OF 02 YEREVAN 000520 
 
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) ARMENIA, COMMERCIAL NEWS SUMMARY: 
MARCH, 2005 
 
------- 
SUMMARY 
------- 
 
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. 
 
--------------------------------------------- --------- 
GERMANY'S COMMERZBANK TO SUPPORT SME LENDING IN ARMENIA 
--------------------------------------------- --------- 
 
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. 
 
--------------------------------------------- -- 
ARMENTEL REPORTS EARNINGS UP 70 PERCENT IN 2004 
--------------------------------------------- -- 
 
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. 
 
--------------------------------------------- --------- 
GERMAN BANK KFW CONTINUES FINANCING THE SEVAN-HRAZDAN 
HYDRO POWER PLANTS' RECONSTRUCTION 
--------------------------------------------- --------- 
 
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. 
 
--------------------------------------------- - 
USDA MARKETING ASSISTANCE PROJECT RESTRUCTURED 
--------------------------------------------- - 
 
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. 
 
-------------------------------------- 
ARMENIAN TAX LAWS TO FORM NEW TAX CODE 
-------------------------------------- 
 
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. 
 
------------------------------------- 
ARMENIA FEBRUARY ECONOMIC HIGHLIGHTS 
------------------------------------- 
 
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