US embassy cable - 05YEREVAN2095

UNCLAS SECTION 01 OF 02 YEREVAN 002095 
 
SIPDIS 
 
EMBASSIES - PLEASE PASS FCS 
DEPT FOR EUR/CACEN, EB/CBA 
PASS TDA, OPIC, EXIM 
 
E.O. 12958: N/A 
TAGS: ECON, ETRD, KTDB, BBSR, BEXP, BTIO, AM 
SUBJECT:  ARMENIA COMMERCIAL NEWS SUMMARY: 
NOVEMBER 2005 
 
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SUMMARY 
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1.  This cable summarizes press reporting on commercial 
developments in Armenia for November 2005.  Major 
headlines include: 
 
-- Alcatel agrees to support the Armenian Enterprise 
Incubator Foundation; 
 
-- EBRD to expand financing program for Armenian banks; 
 
-- IMF approves USD 4.7 mln disbursement for Armenia; 
 
-- New E-Commerce systems facilitate bank transfers and 
investment; 
 
-- Armenia's tastiest trade fair:  ARMPRODEXPO 2005; 
 
-- October 2005 Economic Data. 
 
END SUMMARY. 
 
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ALCATEL TO SUPPORT THE ENTERPRISE INCUBATOR FOUNDATION 
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2.  French Telecom Company Alcatel Manager Serge 
Tchuruk and Deputy Minister of Trade and Economic 
Development Tigran Davtyan signed a cooperation 
agreement on November 16 at the UN-sponsored World 
Summit on Information Technology in Tunis.  Under the 
agreement, Alcatel will provide equipment, training 
materials and other forms of support to assist the 
Armenian Enterprise Incubator Foundation (EIF) in 
establishing an information technology research and 
development training center.  EIF was founded in 2002 
thanks to a grant of USD 5 million from the World Bank 
and provides managerial services, shared workspace, 
training and other support to information technology 
companies in Armenia.  In August, Alcatel contracted 
with the Armenian telephone company VivaCell to deploy 
a new country-wide mobile network.  Alcatel also 
supplies significant equipment to VivaCell's only 
competitor, Armentel. 
 
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EBRD TO EXPAND FINANCING PROGRAM FOR ARMENIAN BANKS 
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3.  On November 14, the European Bank for 
Reconstruction and Development (EBRD) announced its 
plan to establish a Euro 40 mln (USD 46.8 mln) 
framework to provide financing to Armenian banks so 
that they can make loans to support small and medium- 
sized businesses, micro-finance projects, mortgages and 
other investments.  The EBRD will assume the full 
commercial risk for the banks' investments under this 
program.  This initiative builds on the EBRD's Armenia- 
Micro-Lending Program through which the ERBD has 
provided Euro 10 mln (USD 11.7 mln) to local banks to 
finance similar loans over the past three years.  USAID 
has agreed to provide USD 1.5 mln in technical 
assistance to local banks working with EBRD under the 
existing and future framework agreements.  To date, the 
EBRD has selected four local banks, Armeconom, Anelik, 
ACBA and Ineco, to participate in the project. 
According to EBRD Resident Representative Michael 
Weinstein, the new framework agreement should be 
completed by January 2006. 
 
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IMF APPROVES USD 4.7 MILLION DISBURSEMENT FOR ARMENIA 
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4.  On November 14 the Executive Board of the 
International Monetary Fund (IMF) completed its first 
review of Armenia's economic performance under a three- 
year Poverty-Reduction and Growth Facility (PRGF) 
program.  As a result of its positive assessment, the 
IMF agreed to disburse approximately an additional USD 
4.7 mln to the GOAM, bringing total disbursements under 
the program to approximately USD 9.4 mln.  The total 
amount allotted under the PRGF program, which the IMF 
approved on May 25, 2005, is roughly USD 32.8 mln. 
According to IMF Deputy Board Director and Acting Chair 
Agustin Carstens, "Armenia's economy continues to 
perform strongly.  Prudent fiscal and monetary 
policies, strong external inflows, and ongoing 
structural reforms have contributed to double-digit 
growth, low inflation, and declining poverty in 2005. 
The outlook is for continued robust growth in 2006." 
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E-COMMERCE SYSTEMS FACILITATE TRANSFERS, INVESTMENT 
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5.  On November 4, the Central Bank of Armenia (CBA), 
the Ministry of Finance and Economy, the United Nations 
Development Program (UNDP) and the Armenian Card 
Company (ArCa) introduced two new electronic commerce 
systems, Card-to-Card Transfers and Online Treasury 
Direct.  The Card-to-Card Transfer system allows ArCa 
debit/credit card holders to make instant on-line bank 
transfers to other ArCa accounts.  Under the system, 
both sender and beneficiary will receive e-mail 
notification of such transactions.  Treasury Direct 
will become operational in December 2005 and will allow 
investors with ArCa cards to purchase treasury bills on- 
line.  There are 16 Armenia banks that are members of 
the ArCa e-payment system and approximately 90,000 ArCa 
card holders who will be eligible to use these new 
services.  ArCa was established by the Central Bank in 
collaboration with 10 trade banks in March 2000 to 
develop electronic banking and payment system in 
Armenia.  In 2003 ArCa introduced an e-payment system 
which allows members to pay for public utilities, 
mobile phone cards and Internet cards online. 
 
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ARMENIA'S TASTIEST TRADE FAIR, ARMPRODEXPO 2005 
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6.  Sixty-four food processing companies displayed 
their products at the Fifth International ArmProdExpo 
held on November 2-5 in Yerevan.  The Armenian 
Ministries of Agriculture and Foreign Affairs, Chamber 
of Trade and Industry and the Center for Agricultural 
and Rural Development (CARD) organized the event.  CARD 
is an Armenian non-profit organization funded by USDA. 
ArmProdExpo's goal was to promote Armenian agricultural 
products to domestic and international consumers and 
provide a forum for Armenian producers to establish new 
business contacts.  The majority of the vendors 
represented local enterprises, though seven joint- 
ventures participated (mainly Armenian-Russian, 
Armenian-Iranian and Armenian-French).  No American 
companies were represented but 13 of the vendors had 
received support from USDA through the CARD project. 
Products available at the expo included alcoholic 
beverages (primarily cognac, wine and vodka), cheeses, 
dried and canned fruits and vegetables and some meat 
products.  There were also stands dedicated to 
packaging, containers and labeling materials, the lack 
of which has been a significant obstacle to producers 
seeking to market goods abroad. 
 
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OCTOBER 2005 ECONOMIC DATA 
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7.  According to press reports based on preliminary 
data from the National Statistical Service, Armenia's 
real GDP from January to October 2005 grew by 12.2 
percent year-on-year to USD 3.7 billion.  Industrial 
production totaled USD 1,153 million an increase of 6.1 
percent compared to the same period last year.  Gross 
agricultural output for the first ten months of 2005 
grew by 10.4 percent compared to 2004, and reached USD 
835.4 million.  Construction increased by 32.6 percent 
to USD 676.5 million.  From January to October 2005, 
exports were worth USD 766.4 million, and imports USD 
1.39 billion, with a foreign trade deficit of USD 626.8 
million. 
EVANS