US embassy cable - 05YEREVAN1342

UNCLAS SECTION 01 OF 02 YEREVAN 001342 
 
SIPDIS 
 
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E.O. 12958: N/A 
TAGS: KTDB, BBSR, BEXP, BTIO, AM 
SUBJECT: (IMI) ARMENIA, COMMERCIAL NEWS SUMMARY: 
JULY, 2005 
 
 
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SUMMARY 
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1.  This cable summarizes press reporting on commercial 
developments in Armenia for July 2005.  Major headlines 
include: 
 
-- World Bank to provide USD 20 million agricultural 
loan to the Armenian government; 
 
-- World Bank supports an Urban Heating Project for 
Armenia; 
 
-- The Lincy Foundation to spend USD 60 million to 
improve schools and roads; 
 
-- Second mobile communication company starts 
operating; 
 
-- New law on currency regulation is in force; and 
 
-- July 2005 economic data. 
 
END SUMMARY. 
 
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WORLD BANK TO PROVIDE USD 20 MILLION AGRICULTURAL LOAN 
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2.  The World Bank's (WB) Board of Directors approved a 
USD 20 million agricultural loan to Armenia.  The 
Armenian government will use the loan to implement the 
Rural Enterprise and Small-Scale Commercial Agriculture 
Development Program.  The four-year program will assist 
the development of small and medium sized enterprises 
engaged in farming and agribusiness.  The WB program 
will also give assistance in marketing agricultural 
products.  The Japanese government will provide USD 1.8 
million to co-finance the project. 
 
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WORLD BANK SUPPORTS AN URBAN HEATING PROJECT 
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3.  The World Bank announced a USD 15 million Urban 
Heating Project for Armenia.  The project combines 
investment, credit and technical assistance financing 
to support the implementation of the Armenian 
Government's Urban Heating Strategy for multi-unit 
apartment buildings and also improve heating in urban 
schools.  The UNDP/GEF project "Improving the Energy 
Efficiency of Urban Heating and Hot Water Supply in 
Armenia," will co-finance the project with a USD 2.9 
million grant. 
 
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LINCY FOUNDATION GIVES USD 60 MILLION 
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4.  The U.S.-based humanitarian Lincy Foundation 
announced a new USD 60 million project to improve 
Armenia's roads and schools.  The Lincy Foundation 
project will renovate schools throughout Armenia, 
upgrade the streets of Yerevan, and improve various 
secondary roads throughout Armenia.  These new projects 
follow Lincy's successful completion of USD 150 million 
of infrastructure renovation in Armenia during 2002- 
2003.  In addition, the Lincy Foundation provided USD 
20 million of loans to small and medium-sized 
businesses in Armenia.  The Armenian Government will 
implement these projects with the assistance of the 
Lincy Foundation. 
 
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SECOND MOBILE COMMUNICATION COMPANY STARTS OPERATING 
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5.  A Lebanese-owned company, K-Telecom, launched 
Armenia's second mobile phone service on July 1. 
Working under the VivaCell trademark, the company will 
serve as an alternative to Armentel, the Greek-owned 
telecommunications firm that has operated in Armenia 
since 1998.  VivaCell will initially provide coverage 
only in Yerevan and surrounding regions in southern and 
central Armenia.  According to K-Telecom, the company 
has already invested USD 75 million in infrastructure 
in Armenia. 
 
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NEW LAW ON CURRENCY REGULATION CAME INTO FORCE 
--------------------------------------------- - 
 
6.  Under a new law on currency regulation all 
transactions in Armenia between Armenian businesses or 
private citizens must be in Armenian national currency 
only.  Also, all prices for products and services in 
Armenia must be denominated in the Armenian dram 
without reference to a foreign currency.  Armenia's 
Ministry of Finance and Economy as well as Armenia's 
Tax Service will implement the new law. 
 
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JULY 2005 ECONOMIC DATA 
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7.  According to the preliminary data from the Armenian 
National Statistical Service, the country's real GDP 
grew in January-June 2005 by 10.2 percent year-on-year 
to USD 1.5 billion.  Industrial production increased by 
5.3 percent during January-April 2005.  Agricultural 
output grew 10.2 percent, and construction volume 
increased by 43 percent.  Armenia's foreign trade in 
January-June 2005 increased by 26.9 percent to USD 1.3 
billion.  In January-June 2005, exports amounted to USD 
429.1 million, and imports USD 788 million, with a 
foreign trade deficit of USD 358.9 million.  Consumer 
price inflation was 2.3 percent during January-June 
2005 compared to the same period last year. 
 
GODFREY