EMBASSY OF THE UNITED STATES OF AMERICA
YEREVAN
Country Commercial Guide
ARMENIA
FY 2004
International copyright, U.S. & Foreign Commercial Service
and U.S. Department of State, 2003.
All rights reserved outside of the United States.
December 2003
Country Commercial Guide: Armenia
Drafted by: Mher Avetyan, USDOC/USFCS Commercial Specialist
Cleared by: Traver Gudie, Economic/Commercial Officer; Cynthia Doell, Political/Economic Chief; Keith Simmons, Director, USAID Armenia; Vivian Walker, Deputy Chief of Mission
Approved by: John Ordway, Ambassador
American Embassy
18 Marshal Baghramyan Avenue
Yerevan 375019 Armenia
TABLE OF CONTENTS
Chapter 1 Executive Summary
Chapter 2 Economic trends and outlook
2.1 Major trends and outlook
2.2 Principal growth sectors
2.3 Government role in the economy
2.4 Balance of payment situation
2.5 Infrastructure situation
Chapter 3 Political environment
3.1 Nature of political relationship with the United States
3.2 Major political issues affecting business
3.3 Brief synopsis of the political system
Chapter 4 Marketing U.S. products and services
4.1 Distribution and sales channels
4.2 Use of agents and distributors, finding a partner
4.3 Franchising
4.4 Direct marketing
4.5 Joint ventures/licensing
4.6 Steps to establish an office
4.7 Selling factors/techniques
4.8 Advertising and trade promotion
4.9 Pricing products
4.10 Sales, service, customer support
4.11 Selling to the government
4.12 Protecting your product from IPR infringement
4.13 Need for a local attorney
Chapter 5 Leading sectors for U.S. exports and investment
5.1 Best prospects for non-agricultural goods and services
5.2 Best prospect for agricultural goods
5.3 Investment opportunities
Chapter 6 Trade regulations and standards
6.1 Trade barriers, including tariffs and import taxes
6.2 Customs valuation
6.3 Import licenses
6.4 Export controls
6.5 Import documentation
6.6 Temporary entry
6.7 Labeling, marking requirements and standards
6.8 Prohibited imports
Chapter 7 Investment climate
7.1 Openness To Foreign Investment
7.2 Conversion And Transfer Policies
7.3 Expropriations And Compensation
7.4 Dispute Settlement
7.5 Performance Requirements/Incentives
7.6 Right To Private Ownership And Establishment
7.7 Protection Of Property Rights
7.8 Transparency Of The Regulatory System
7.9 Efficient Capital Markets And Portfolio Investment
7.10 Political Violence
7.11 Corruption
7.12 Bilateral Investment Agreements
7.13 OPIC And Other Investment Insurance
7.14 Labor
7.15 Foreign Trade Zones/Free Ports
7.16 Foreign Direct Investment Statistics
Chapter 8 Trade and project financing
8.1 Brief description of the banking system
8.2 Foreign exchange controls affecting trade
8.3 General financing availability and terms of payment
8.4 How to finance exports/methods of payment
8.5 Types of export financing and insurance
8.6 Project financing available
8.7 List of banks with correspondent U.S. banking arrangements
Chapter 9 Business travel
9.1 Business customs
9.2 Travel advisory and visas
9.3 Holidays
9.4 Business infrastructure
Chapter 10 Appendices
Appendix A. Country data
Appendix B. Domestic economy
Appendix C. Trade
Appendix D. Investment Statistics
Chapter 11
Appendix E. U.S. and country contacts
CHAPTER 1
EXECUTIVE SUMMARY
Modern Armenia is a small, strategically located country (land area of 29,800 square kilometers, slightly larger than Maryland) with a population of about 3 million. Located in the heart of the Caucasus, Armenia borders Turkey to the west, Georgia to the north, Iran to the south, and Azerbaijan to the east and southwest. The Armenians have a strong tradition of education and entrepreneurship, which, combined with their close ties to the U.S. through the Armenian-American Diaspora, provides attractive prospects for joint venture partners and other business linkages with U.S. companies.
Over the past few years, Armenia has implemented a comprehensive stabilization and structural reform program. Key successes include price liberalization; privatization of small-scale and medium/large enterprises; and WTO accession. In addition, Armenia has strengthened its banking sector by putting in place modern regulatory and supervisory frameworks, although much work remains to be done.
Economic progress will depend on the continuation of the reform program as well as positive political developments. The trade embargo imposed by two of Armenia's four neighbors – Turkey and Azerbaijan -- poses a major impediment to development. The embargo remains in force because there is no peace agreement with Azerbaijan to resolve the status of the Nagorno-Karabakh enclave.
Steady economic progress has earned Armenia increasing support from international institutions. The IMF, World Bank, EBRD, as well as other financial institutions and foreign countries, extend considerable grants and loans. Total loans extended to Armenia since 1993 have exceeded $1,000 million (1,025 million USD or 43.3 percent of GDP as of December 31, 2002). These loans have targeted budget deficit reduction; local currency stabilization; private business development; energy sector development; agriculture, food processing, transportation, and health and education sectors; as well as ongoing rehabilitation work in the region damaged by the 1988 earthquake.
Armenia’s output is expected to grow as reform programs continue to transform the economy. Improvements in both reform programs and regional tensions would remove constraints on external trade, sharply decreasing transport costs, and enhancing access to external financing. Such developments would also significantly improve Armenia's investment climate, leading to an increase in the volume of much needed foreign direct investment. Over the next few years, GDP growth is expected to result primarily from rapid private sector development and a rise in capacity utilization.
Armenia is politically stable and committed to market reforms. The country has potential in information technology, light industries, high-value agricultural products, and tourism. These opportunities, coupled with a large pool of underemployed but educated labor force, low labor costs, and entrepreneurial spirit, offer some of the most promising advantages in the CIS region for U.S. companies. Some of the most attractive sectors for foreign investment are agribusiness/food processing, information technology, and tourism/hotel development.
The CCG for Armenia was written by the Economic Section, American Embassy Yerevan, 18 Marshal Baghramian Avenue, Yerevan 375019; tel: (374-1) 542-133, 542-134; fax: (374-1) 520-800. Sources used in writing the CCG included: Ministry of Finance and Economy of Armenia, Armenian State Statistics Service, Ministry of Trade and Economic Development, Central Bank of Armenia, IMF and World Bank publications, and political and economic divisions of the American Embassy Yerevan.
Country Commercial Guides are available for U.S. exporters from the National Trade Data Bank’s CD-ROM or via the INTERNET. Please Contact STAT-USA at 1-800-STAT-USA for more information. Country Commercial Guides can be accessed via the World Wide Web at http://www.stat-usa.gov, http://www.state.gov or http://www.mac.doc.gov. They can also be ordered in hard copy or on diskette from the National Technical Information Service (NTIS) at 1-800-553-NTIS. U.S. exporters seeking general export information and assistance or country-specific commercial information should consult with their nearest Export Assistance Center or the U.S. Department of Commerce's Trade Information Center at 1-800-USA-TRADE, or go to one of the following web sites: www.usatrade.gov or www.tradeinfo.gov.
CHAPTER 2
ECONOMIC TRENDS AND OUTLOOK
2.1 MAJOR TRENDS AND OUTLOOK
The current Armenian government has demonstrated a firm commitment to moving Armenia from a centralized state with a planned economy to a democratic society with a free market economic system. The Government of Armenia has recently privatized much of the energy sector. The Armenian electricity grid is connected to the Iranian and Georgian grids, and Armenia is likely to become an energy exporter. Through privatization the country is modernizing its entire telecommunications system. Modern switching equipment has been installed in Yerevan. With USAID and World Bank assistance, considerable resources and training have been devoted to developing a modern public and private banking sector, although much work remains to be done. Parliament has been implementing an ambitious program of reforms aimed at restructuring the banking and financial services sector, liberalizing trade, attracting foreign investment through improved tax and customs regimes, establishing a western accounting system, and implementing a private property regime. Armenia has improved land transportation routes to its neighboring trade partners, Georgia and Iran, although borders with Turkey and Azerbaijan remain closed due to the Nagorno-Karabakh dispute. As of 2002, Russia, U.S., UK, Iran, Israel and Belgium are Armenia’s main trading partners.
The privatization of industries began in 1994, following sweeping land privatization in 1991. Progress in privatization, advances in private property legislation, and banking reform should give further impetus to economic development. Armenia was the first NIS state to register a positive GDP growth rate (in 1994). The economy has grown on average 6 percent a year since then, with strong growth of 9.6 percent in 2001 and 12.9 percent in 2002. Early estimates for 2003 predict a remarkable 15 percent growth in GDP. This progress and fiscal stability has earned Armenia support from international institutions. The IMF, the World Bank, the EBRD, as well as other financial institutions and foreign countries have extended considerable grants and loans to Armenia, with total loans to Armenia from 1993-2002 $1,025 million. These loans are targeted at reducing the budget deficit, stabilizing the local currency, stimulating private businesses, developing the energy, agricultural, food processing, land and air transportation, and social sectors, as well as continuing reconstruction in the area damaged by the 1988 earthquake. Although Armenia’s foreign debt is still manageable at 43.3 percent of GDP (120 percent of annual exports), its annual government revenues, at about 17 percent of GDP, are quite low. Armenia remains heavily dependent on foreign assistance. The U.S., the EU, and the United Nations are the main providers of technical assistance to Armenia. In FY 2002, the United States extended $90 million in assistance to Armenia.
The long-term resolution of the country's economic problems will depend on resolving the Nagorno-Karabakh conflict and establishing diplomatic and trade relations with Turkey and Azerbaijan. A settlement would increase the country's industrial output and allow Armenia to utilize fully its highly educated human resources by expanding regional trade links with Azerbaijan, Turkey and the Middle East. Armenia's economic integration with its neighbors is essential to achieve long-term growth.
2.2 PRINCIPAL GROWTH SECTORS
According to official Armenian statistics, the total output in real terms grew by 12.9 percent in 2002, including 14.2 percent growth in overall production, 44.6 percent growth in construction, 4.4 percent in agriculture, 6 percent in transportation and communication and 15.6 percent growth in trade. The total physical output of manufacturing industries (including machinery, energy, chemical, agricultural, and construction sectors) increased. Physical output in some industries increased by as much as 80 percent in 2002.
2.3 GOVERNMENT ROLE IN THE ECONOMY
Government control over industry progressively diminishes as more and more organizations are privatized. A few factories that the government considers “strategic” will not be privatized in the near term. Privatization should result in a reduction in size or mergers of ministries and in a transition of their functions from direct management and control to policy making and special support. Through the Central Bank, the government supervises the banking system and currency market. The National Assembly (Parliament) is steadily developing and passing laws that create a framework for a free, market-oriented economy. However, concurrently with these reform measures, a greater number of government officials are engaging in private business and frequently use their influence to expand and protect their organizations, often illegally.
2.4 BALANCE OF PAYMENT SITUATION
Both the balance of payment situation and trade deficit improved sharply in 2002 compared with previous years. The current account deficit was USD 148 million, which was 28 percent less than in 2001. The balance of goods deficit was USD 368.7 million, which is a 12.3 percent improvement compared with 2001, while the balance of services deficit deteriorated by USD 22.9 million, or 2.3 times.
In 2002, Armenia’s total foreign trade was USD 1,498 million, including USD 507.2 million in exports and USD 991 million in imports. The trade balance is USD - 484 million, or USD - 472 million excluding humanitarian assistance. Compared to 2001, the total foreign trade increased by 22.9 percent, including a 48.4 percent increase in exports, and 12.9 percent increase in imports. In 2002, about 27 percent of the foreign trade of Armenia was with the NIS countries, and 30.3 percent with the EU countries.
Almost 19.4 percent of all exports in 2002 were to NIS countries, including Russia – 12.8 percent, Georgia – 3.4 percent, and other NIS countries – 3.2 percent. About 39 percent of all Armenian exports went to EU countries, notably Belgium – 18.2 percent, Germany – 5.5 percent, and UK – 10 percent. More than 9 percent of Armenian exports went to the US, 17.4 percent to Israel, and 6.2 percent to Iran.
More than 30 percent of imports to Armenia came from NIS countries in 2002, largely from Russia – 19.8 percent. Almost 26 percent of all imports to Armenia came from EU countries: Belgium – 9.2 percent, Germany – 4.3 percent, Italy - 3.7 percent, and UK – 2.85 percent. As a percentage of Armenia’s imports, products from the U.S. made up 5.4 percent, from Iran – 6.3 percent, from Israel - 8.3, and Turkey – 3.8 percent.
Precious stones, imported from abroad and cut in Armenia, dominate Armenia's trade structure, leading both imports and exports. Exports of precious stones and metal more than doubled in 2002 and early 2003, and account for more than 50 percent of total export revenue. The next largest sector in exports is processed food, at 9% of total exports. As a percentage of imports, precious and semi-precious stones are again dominant at 21.5 percent followed by: mineral products (fuel)—17.6 percent; machinery—10.45 percent; and processed food—8 percent.
2.5 INFRASTRUCTURE
Geography and Environment
Location: the Caucasus, between Turkey, Georgia, Azerbaijan, and Iran
Total area: 11,496 sq. miles
Land area: 10,956 sq. miles
Comparative area: slightly larger than Maryland
Land boundaries: total 779 miles, Azerbaijan (east) 345 miles, Azerbaijan (south) 137 miles, Georgia 102 mi., Iran 22 mi., Turkey 166 mi.
Coastline: 0 miles (landlocked)
Maritime claims: none
Climate: highland continental; hot dry summers; cold winters
Terrain: high Armenian Plateau with mountains; little forest land; fast flowing rivers; good soil in Arax River valley
Natural resources: deposits of gold, copper, molybdenum, zinc, aluminum and coal.
Land use: arable land - 17percent; permanent crops – 3 percent; meadows and pastures – 24 percent; forest and woodland – 15 percent, other - 41 percent
Irrigated land: 1,177 sq. miles (1990)
Current
Environmental
Issues: soil pollution from toxic chemicals such as DDT; pollution of Hrazdan and Arax Rivers; the falling water level of Lake Sevan, a result of its use as a source for hydropower.
Natural hazards: possibility of earthquakes; subject to occasional drought.
Industries
Traditionally diverse, including metal cutting machine tools, forging-pressing machines, electric motors, tires, knitwear, hosiery, shoes, silk fabric, washing machines, chemicals, trucks, watches, industrial tools, mainframe computers and microelectronics (mostly defense oriented), and software. Currently, much of industry is either idle or operating at a fraction of its capacity. The defense industry is being partially converted to civilian purposes. Armenia’s international production code is 485.
Agriculture
Only 17 percent of Armenia's land area is arable. Armenian fruits are superior in quality. Both the U.S. Department of Agriculture and USAID are implementing marketing assistance project with many small agribusinesses. There is a minor livestock sector. Armenian vineyards are well known for producing brandy, wines, and other liqueurs.
Transportation
Railroads: 522 miles exist (does not include industrial lines); of four international rail connections (with/via Georgia, Azerbaijan, Turkey) only the connection with Georgia (to Black Sea ports) is presently operable.
Highways: total 7,019 miles, paved 6,522 miles, unpaved/dirt 497 miles (1990); road connections exist with all neighboring states (only roads with Georgia and Iran are open for border crossing).
Pipelines: natural gas 559 miles (1991)
Ports: none; landlocked
Airports: 12 total, 10 usable; 6 with permanent-surface runways; 1 with runways over 3,659 m; 3 with runways 2,440-3,659 m; 2 with runways 1,060-2,439 m (note: a C-130 can land on a 1,060-m airstrip). Of the six civil airports with artificial field surfacing, only the largest ones - Zvartnots (in Yerevan), Erebuni (in Yerevan), Stepanakert, and Shirak (in Gyumri) operate at present. Zvartnots is an international airport that can accommodate all types of planes, including the largest cargo aircraft. Shirak can accommodate heavy cargo planes, but as part of Zvartnots' deal with the Armenian government, can only be used as an alternate to Zvartnots airport, while Erebuni can accommodate only small commuter aircraft and helicopters. Besides regular flights to many NIS cities, including Moscow and St. Petersburg, regular weekly flights connect Armenia with Amsterdam, Athens, Beirut, Dubai (UAE), Frankfurt, London, Paris, Prague, Sofia, Tehran, and Vienna.
Telecommunications
Armenia has about 520,000 telephones. The average telephone density is 53 per 100 families. International connections to other NIS countries are by landline or microwave, and to other countries by satellite and by leased connection through the Moscow International Gateway Switch. The Greek state-owned OTE organization owns 90 percent of the shares of Armentel, with the remaining 10% owned by the Armenian government. Armentel has a 15-year monopoly running through 2013 on all telecommunications in the country, as well as on communications lines that allow access to the international market.
According to the privatization agreement signed between Armentel and the government, Armentel has committed to invest USD 300 million by 2008. Armentel states that it has already invested approximately USD 130 million' while the government argues that actual investments to date have been far less and have not met the company's investment commitment. The majority of the phone lines are digitalized, and Armentel has committed to provide cell phone service on the whole territory of Armenia by the end of 2004.
Many international donors and foreign governments have suggested that Armenia may wish to purchase back the telecommunication’s monopoly rights from Armentel, or cite Armentel’s lack of compliance with investment requirements to cancel the monopoly contract, opening up the sector to competition. Armentel has been accused of charging unreasonably high prices to other telecommunications service providers such as the domestic cable company and internet service providers (ISPS).
Internet service provision is not well developed, largely due to Armentel's monopoly access to international gateways and the internet backbone. The Armentel monopoly and resulting lack of competition in the provision of Internet access significantly raise costs for broadband access. The Armenian Government has stated its intent to renegotiate Armentel's monopoly, which was to continue until 2014. The Government also tacitly supports private companies and groups that find loopholes in the Armentel license, thereby increasing competition among ISPs. High-speed, high-quality satellite access is available for industrial users.
Broadcast stations: almost 100 percent of the population receives Armenian and Russian TV programs (some areas also receive Turkish, Iranian, Georgian, and Azerbaijani TV broadcasts). Private TV broadcasting stations, cable networks, and Internet providers are increasing in number.
CHAPTER 3
POLITICAL ENVIRONMENT
3.1 NATURE OF POLITICAL RELATIONSHIP WITH THE UNITED STATES
American-Armenian relations are excellent. Armenia, per capita, is the second largest recipient of U.S. aid. The United States Embassy was the first embassy to open in Yerevan in February 1992. The Armenian Embassy opened in Washington in the same year. U.S. humanitarian and technical aid to Armenia emphasizes humanitarian assistance (food and fuel); building democracy and good governance; modernizing the banking system; fiscal reform; restructuring the energy sector; agricultural marketing; and creating a regulatory and a financial framework for private sector development. The U.S. is active in efforts to negotiate an end to the Karabakh conflict. Armenian and American government officials maintain very close working relations. During the winters of 1993-1995, the U.S. undertook unprecedented large-scale humanitarian assistance to Armenia, providing wheat, kerosene, and kerosene heaters to protect Armenians from the worst effects of the winter. While continuing large-scale fuel and food assistance, the U.S. has changed the emphasis of aid to political and economic development, and assistance for expansion of the private sector. USAID has a separate Mission in Yerevan, which cooperates closely with the Georgia/Azerbaijan Mission. The U.S. Peace Corps has been operating in Armenia since 1992. More than 140 U.S. volunteers work in Armenian cities and the countryside providing business consulting and English language training. US Treasury provides long and short-term advisors to the government in a range of financial areas. USDA has active educational, marketing, loan and grant programs.
In 1992, Armenia signed three agreements with the United States affecting trade between the two countries. The agreements were ratified by the Armenian parliament in September 1995 and went into force in the beginning of 1996. These are:
- Agreement on Trade Relations Between the Republic of Armenia and the United States of America ("Trade Agreement").
- Investment Incentive Agreement between the Government of the Republic of Armenia and the Government of the United States of America ("OPIC Agreement").
- Treaty Between the Republic of Armenia and the United States of America Concerning the Reciprocal Encouragement and Protection of Investment ("Bilateral Investment Treaty - BIT").
3.2 MAJOR POLITICAL ISSUES AFFECTING BUSINESS CLIMATE
The conflict surrounding Nagorno-Karabakh, an Armenian-populated autonomous enclave in neighboring Azerbaijan, has lowered the attractiveness of investment in the region. Both sides have observed a cease-fire for more than nine years.
Turkey, siding with Azerbaijan in this conflict, has established a blockade of Armenia, paralleling that of Azerbaijan. The embargoes partially lost their economic influence because many Turkish goods and Azeri oil products find their way to Armenia, mainly via Georgia. Also, since 1995, Turkey has allowed a limited number of passenger charter flights between the two countries as well as Armenian transit flights over Turkish territory. Armavia has a regular flight from Yerevan to Istanbul twice per week. The embargo remains one of the key factors hindering economic development of Armenia. The embargo also ties the hands of many U.S. businesses whose regional headquarters (which usually cover the Caucasus) are located in Turkey.
International monitoring groups recording notable shortcomings in both the 2003 presidential and parliamentary elections. President Robert Kocharian was re-elected, despite numerous instances of witnessed ballot box stuffing and voter intimidation. Similar concerns were raised about the May parliamentary vote, in which the pro- Kocharian party secured a majority of the seats.
3.3 BRIEF SYNOPSIS OF THE POLITICAL SYSTEM
Name of the state in English: Republic of Armenia (Armenia)
Local name of the state: Hayastani Hanrapetutyun (Hayastan)
Type: Republic
Capital: Yerevan
Flag: Three equal horizontal bands of red (top), blue, and orange
Independence: 28 May 1918 (First Armenian Republic); 23 September 1991 (from Soviet Union)
Constitution: A new, post-Soviet constitution was adopted by referendum on July 5, 1995.
Legal system: The constitution is based largely on the French strong presidential model. The U.S. and EU are providing extensive advice to the legislative and regulatory reform processes, including a election law, which reflect western legal norms. A special presidential commission is prepared constitutional amendments providing for, inter alia, a stronger parliament and dual citizenship, but the referendum failed in May 2003.
Suffrage: 18 years of age; universal
Executive Branch:
The President of Armenia is elected every five years by popular vote. The President appoints the Prime Minister and Ministers, who do not need to be confirmed by the parliament. The Prime Minister, however, should present an Economic Program for the Parliament's approval. Armenia's current President is Robert KOCHARIAN (first elected 1998, second term began April 9, 2003). Armenia's Prime Minister is Andranik MARKARIAN (since May 2, 2000).
The regional (district) governmental structure of Armenia closely mirrors the national structure. The 10 provinces (Marzes) are led by appointed Governors, while the city of Yerevan has the status of Marz and is led by an appointed mayor. Their executive bodies wield certain control over the local budget, population, and businesses in the region. The local governments, however, do not have legislative power. A new law on self-government, passed in 2002, calls for further decentralization and fiscal independence for local governments.
Legislative Branch:
The Armenian parliament, the National Assembly, has 131 members; 75 of them are elected under proportional (party list), 56 under majoritarian (single mandate). The National Assembly can vote no confidence in the Cabinet but may not dismiss individual Ministers or a Prime Minister. There are 6 standing committees, which, along with the government, are actively involved in the legislative reform process. Deputies to the National Assembly are elected by general election every four years, A new draft of the electoral code has been under discussion at the parliament. The present Chairman of the National assembly is Arthur Baghdasarian.
Judicial Branch:
The Constitution provides for a nominally independent judiciary with a three-layer court system: Courts of First Instance, Courts of Appeals, and Court of Cassation. The Court of Cassation was formed in July 1998. The Constitutional Court is charged with ruling on compatibility of legislation and international treaties with the Constitution and resolving electoral disputes.
The Chairman of the Court of Cassation is Henrik DANIELIAN. The Chairman of the Constitutional Court is Gagik HARUTYUNIAN.
Major Political Parties
- Republican Party (RP), Andranik Markarian, Acting Chairman
-Country of Law Party, Arthur Bagdasarian, Chairman
- Peoples' Party (PP), Stephan Demirchian, Chairman
-Armenian Revolutionary Federation (ARF - Dashnak Party), Vahan Hovhanisian-National Accord Party- Artashes Geghamian
- National Democratic Union (NDU), Vazgen Manukian, Chairman
-United Labor Party, Gurgen Arsenian, Chairman
Other parties and movements include:
Constitutional Rights Union, Hrant Khachatrian, Chairman
- Democratic Party of Armenia (DPA), Aram SARKISIAN, Chairman;
- Communist Party, Ruben Tovmasian, Chairman
- Liberal Democratic (Ramkavars), Harutyun Arakelian, Co-chair
- Liberal Democratic Party of Armenia, Vigen KHACHATRIAN, Chairman
- Self-Determination Union (SDU), Paruir Hayrikian, Chairman
- Armenian National Movement (ANM), Ararat Zurabian, Chairman
CHAPTER 4
MARKETING U.S. PRODUCTS AND SERVICES
4.1 DISTRIBUTION AND SALES CHANNELS
The emerging Armenian private sector currently enjoys a legal environment that allows for almost all distribution and sales mechanisms available in the West. Marketing principles and techniques are slowly developing, although some market participants do not fully comprehend the principles of a modern economy. Some of the remaining state organizations continue to use remnants of the industry-by-industry centralized purchase and distribution systems run by the ministries.
4.2 USE OF AGENTS AND DISTRIBUTORS, FINDING A PARTNER
A number of private Armenian companies have become agents/distributors or authorized dealers for such firms as Procter & Gamble, M&M-Mars, Johnson&Johnson, Kodak, Philip Morris, DHL, FedEx, Dell Computers, IBM, Reebok, Adidas, LG (Goldstar), Tefal, Sony and JVC.
To find a local partner, interested American firms may contact the following organizations:
a) American Embassy, Yerevan – Economic/Commercial Officer, Traver Gudie, 18 Marshal Baghramyan Avenue, Yerevan 375019 Armenia, or Department of State, Washington DC 20521-7020, or; Tel: (374-1) 52 46 61. E-mail address: <gudiet@state.gov>.
b) Business Information Service for the Newly Independent States (BISNIS). BISNIS is a unique government organization that explores business opportunities, accumulates and regularly publishes partnership and agent/distributor leads collected by its representative in Armenia. Write or call: George Isayan, BISNIS Representative in Armenia, or BISNIS Information Center, USA Trade Center, 1401 Constitution Ave, NW, Washington, DC 20230
Tel: (202) 482-4655, Fax: 202/482-2293, E-mail: bisnis@ita.doc.gov, Website: www.bisnis.doc.gov.
c) American Chamber of Commerce in Armenia (AmCham). Nanik Melkomian, Executive Director; Hotel Armenia, 1 Amirian Street, Yerevan 375001; tel: (374-1) 599-187, e-mail: amcham@arminco.com.
d) ADA - Armenian Development Agency (Director - Mr. Vahagn Movsessian), 17 Charents Street, Yerevan, Armenia; tel: (374-1) 57 01 70, 54 22 57, fax: (374-1)52 22 72; e-mail: ada@ada.am; web site: http://www.ossada.am. ADA is an Armenian Government affiliated agency to promote Armenian exports and foreign investment to Armenia. Directed by the Prime Minister's Office, ADA is aimed to serve as a "one stop shop" for foreign investors.
e) Trade Point Armenia (Director - Mr. Vahram Hakobyan, Mr. Vahagn Ovsepyan, Marketing and Trade Promotion), Government House 1, Republic Sq. Suite 30, 375010, Yerevan, Armenia. Tel: (374-1) 58 28 56; Fax: (374-39) 90 68 40, E-mail: vjh@vjh.tpa.amilink.net. Website: http://sunsite.icm.edu.pl/untpdc/incubator/arm/tpevn/welcome.html
f) Union of Manufacturers and Businessmen of Armenia (Chairman - Arsen Khazarian), 41 Arshakunyats Ave., Yerevan 375026; tel/fax: (374-1) 560 188, or 14 Abovyan St., 2nd floor, room 102, tel: (374-1) 520 227, 526 953, 562 152. Website: www.umba.am. Members of the Union include many of the largest company leaders and businessmen in Armenia.
g) Arax Consulting Group (Mr. Ashot Poghosyan, President), 2a Tamanyan St., Suite 2, Yerevan
Tel: (374-1) 589-856, 529-418, 564-013, Fax: (374-1) 529-418, 545-698, E-mail: arax@arminco.com.
i) Arlex International Ltd, Legal And Business Consulting, (Mr. Thomas Samuelian, Managing Attorney), 9 Tpagrichneri St., Suite 54, Yerevan 375010, Tel: (374-1) 580-213, Fax: (374-1) 580-213, E-mail: tsamuelian@arlex.am, website: www.arlex.am.
j) BSC - Business Support Center, 24 Moskovyan Street, Yerevan 375002 Armenia, Tel/Fax: (374-1) 528-279, 561-064; e-mail: bsc@bsc.am. Website: www.bsc.am. An EU TACIS initiated project that provides consulting to local and foreign private companies.
k) Business Consult (Ms. Parandzem Gevorkyan, Managing Director), 8 Zakyan Street, 2 Floor,
Suite 30b, Tel: (374-1) 567-767, Fax: (374-1) 562-404, E-Mail: businessconsult@bc.am, website: www.bc.am.
l) International Legal Consulting (ILC) LLC (Ms. Edith Khachatourian, Managing Partner), 19 Sayat-Nova Ave., Suite 200, Yerevan 375001, Tel: (374-1) 56 96 98, Fax: (374-1) 566-735, E-mail: ekhach@arminco.com.
m.) KPMG Armenia (Executive Director - Alan Kuchukian), 8 Hanrapetsusian, Yerevan 375010, Armenia, tel: (374-1) 566 762, 584 754, 586 379. Website: www.kpmg.am. An affiliate of KPMG's office in London.
n) SED-MARSED consulting cjsc. (CEO- Tigran Jrbashyan) 25/27 Nalbandyan, Suite 2, Yerevan-01; tel: (374-1) 565 625, 522 734; fax: (374-1) 565 625. A consulting company, which specializes in financial advice and auditing.
o) Hai-Consult (Executive Director - Gagik Makaryan), 4 Tigran Mets, room 2, 2nd floor, Yerevan-10, Armenia; tel: (374-1) 589-337, 562-318; fax: (374-1) 151-822; e-mail: veneto@arminco.com. A consulting and auditing company.
p.) Grant Thornton Amyo (Executive Director - Armand Pinarbasi), 18 Vardanats, Yerevan 375010, Armenia; tel: (374-1) 522 401, 586 373; fax: (374-1) 584 419, 584 459; e-mail: gta@gta.am. Website: www.gta.am. An affiliate of Grand Thoronton consulting company.
4.3 FRANCHISING
Though a few franchises have recently opened, this is virtually an unknown concept in Armenia. It is believed that franchising may become popular as soon as Armenian businessmen see the first success stories and are able to cope with financing requirements. Despite the generally very low incomes of the population, some entrepreneurs have accumulated enough capital to provide start-up funds for franchising.
4.4 DIRECT MARKETING
Direct marketing is used primarily by industrial equipment manufacturers.
4.5 JOINT VENTURE/LICENSING
Joint business ventures represent the most popular forms of trade/investment arrangements between local and U.S. companies. Joint ventures are registered either as limited liability companies or joint stock companies.
4.6 STEPS TO ESTABLISH AN OFFICE
Legal Forms of Businesses
According to the Civil Code of Armenia, there are several types of commercial entities that can be established. These can be broken out into two main categories: business partnerships (including full business partnerships and limited business partnerships) and business companies (including limited liability companies, companies with supplementary liability, and joint stock companies).
Business partnerships may be created in one of the following two forms: full business partnerships and limited business partnerships.
Full business partnerships: the general partners of a full partnership conduct entrepreneurial activity in the name of the partnership and bear liability for its obligations with their personal property. A person may be a participant in only one full partnership.
A limited business partnership consists of both general and limited partners. General partners of a limited partnership, similar to a full partnership, are liable for the liabilities of the partnership with their personal property, and they conduct entrepreneurial activity in the name of the partnership. Limited partners enjoy limited liability, which means their liability extends only to the amount of their contribution, and they do not take part in the entrepreneurial activities of the partnership. A person may be a general partner only in one limited partnership. A participant in a full partnership may not be a general partner in a limited partnership, or vice versa.
Only individual entrepreneurs and/or commercial entities may be general partners in business partnerships, while citizens and legal persons may be limited partners in business partnerships.
Business companies
Citizens and legal persons may be participants in business companies, which may be established in the following form: limited liability companies, companies with supplementary liability, and joint stock companies.
A limited liability company is a company founded by one or more persons, the charter capital of which is divided into ownership shares of amounts determined by the charter. The liability of participants/owners in a limited liability company is limited to the nominal value of their equity.
A company with supplementary liability is a company founded by one or more persons, the charter capital of which is divided into ownership shares of amounts determined by the charter. The participants in such a company jointly and severally bear subsidiary liability for its obligations with their property proportional to the value of their contributions. The proportion is identical for all participants and is determined by the charter of the company. Upon bankruptcy of one of the participants, his liability for the obligations of the company shall be distributed among the remaining participants, in proportion to their contributions, unless otherwise provided in the charter.
A joint-stock company is a company with its charter capital divided into a defined number of shares of stock. Only joint-stock companies have the right to issue shares of stock. Joint-stock companies may be organized in the following forms:
A) Open joint-stock company: a joint-stock company whose participants may freely transfer their shares without the consent of the other stockholders is an open joint-stock company. An open joint-stock company may conduct open subscriptions of its issued shares and freely transfer them pursuant to the terms established by statutes and other legal acts.
B) Closed joint-stock company: a joint-stock company whose shares of stock are distributed only among its founders or another previously determined group of persons is a closed joint-stock company. Such a company does not have the right to conduct open subscription to its issued shares nor otherwise offer them to an unlimited group of persons. Issued shares of a closed joint stock company can be transferred only by observing the pre-emptive rights of other shareholders of the company. The maximum number of shareholders allowed in a closed joint-stock company is 50.
Business companies may be established and maintained by one person. However, another business entity may not be the sole shareholder of a business company [in case of a limited liability company]. The founders of business companies are obligated to pay the charter capital in full, prior to registration of the company. In order to make the charter capital payment, the applicant(s) must first open a current bank account, where the contribution of the founder(s) may be deposited. A contribution to the charter capital of a business partnership or company may be made in the form of cash, securities, real property, or other property having a monetary value. The monetary evaluation of the contribution made by a participant in a business company is determined by an agreement executed among the founders (participants or shareholders) of the company and shall be audited.
Business partnerships and companies may be founders, participants, or shareholders of other business partnerships and companies.
A cooperative is a voluntary amalgamation of citizens and legal persons on the basis of membership, with the purpose of meeting the financial and other interests of the participants. Cooperatives are founded from the members’ combined property. Cooperatives, as legal persons, may be organized as either commercial or non-commercial entities, depending on the type of activities implemented.
Representative offices and branches do not have the status of independently incorporated companies [legal persons] and act only on the basis of bylaws approved by the parent company [founder]. A representative office represents and defends the interests of the parent company, while a branch carries out all or part of the functions of the parent company, including representation.
Every organization, regardless of its organizational-legal type can establish a subsidiary in Armenia. A business company is a subsidiary if another (or principal) business company or partnership has the possibility of determining decisions taken by such a company. This can exist by virtue of the principal's dominant participation in charter capital or in accordance with a contract concluded between the two companies. A subsidiary has the status of a legal entity and its liability is not transferable to the parent organization.
Step 1: Company name registration at the Intellectual Property Agency under the Ministry of Trade and Economic Development; application should be submitted to the regional branch of the State Registry. Step 2: Registration at the regional branch of the State Registry. Step 3: Registration at Armenia's Tax Service - obtaining a tax identification number (TIN); Step 4: Registration at Armenia's Social Security State Fund. Step 5: Obtaining permission from Armenia's Police local departments to apply for the company seal. Step 6: Ordering of seal at "Seal" JSC.
For more information on registration contact:
State Register of Legal Persons, Ministry of Justice (Mr. Tigran Mukuchian, Deputy Minister of Justice, Mr. G. Sargsyan, Head of the State Register of Legal Persons)
15 Grigor Lusavorich St., Yerevan 375010 Armenia
Tel: (374-1) 524-516 or 524-600; fax: (374-1) 521-021.
Telephone numbers of local divisions of the State Register in Yerevan (by city districts):
Arabkir (374-1) 281639, 250821
Mashtots (374-1) 391720
Myasnikyan (374-1) 565991, 581852
Khorhurdayin (374-1) 644942
Spandaryan (374-1) 582272
Shaumyan (374-1) 772160
Shengavit (374-1) 440730
Erebuni (374-1) 575011
4.7 SELLING FACTORS/TECHNIQUES
The retail industry in Armenia is primarily driven by the private sector. Most wholesale and retail companies are concentrated in Yerevan, where the number of retail outlets, especially small-sized food providers and conventional and specialty stores, has been growing rapidly since 1995. The majority of these stores employs from 3 to 10 people and operates largely on a consignment basis with various wholesalers, although importers themselves own some outlets. Since credit cards and checks are not yet universally accepted in Armenia, most retail sales are paid in cash. Domestic or international company-to-company sales are primarily made by bank transfer (especially in the state sector), letter of credit, or on a barter basis.
Yerevan and some other Armenian cities also feature large open markets where relatively inexpensive food, clothing, housewares, and consumer electronics are sold by thousands of individual vendors. Many of them take individual “shopping-tours” to countries such as Turkey, the UAE, Iran, and China on a regular basis to buy products for resale in Armenia. Some of these open markets, especially those trading food, serve also as wholesale markets for owners of retail stores. Though prohibited by law, vendors readily accept U.S. dollars, especially for expensive items.
4.8 ADVERTISING AND TRADE PROMOTION
Advertising in Armenia is rapidly gaining popularity, with most ads promoting foreign-made products. In 1996, Armenia adopted an Advertising Law that sets advertising standards and principles, including a mandate making Armenian the official language for advertising. Armenian text may be accompanied by text in a foreign language, provided the latter appears in smaller script. This provision does not cover newspapers, special publications, trademarks, etc. that are issued or printed in foreign languages. An advertisement may be copyrighted under Armenian law.
The law prohibits advertisements promoting the stimulating or relaxing effects of alcohol and cigarettes. The Ministry of Health’s permission is necessary for advertising pharmaceuticals, medical equipment or treatment methods. No advertising for weapons (except sports and hunting weaponry) is allowed. Certain restrictions apply to advertising banks, insurance and other financial institutions. Unfair or inaccurate advertising is prohibited. Those legal entities or persons whose rights were violated as a result of unfair or false advertising have the right to appeal in court, claim damages and demand an official retraction of the offending advertisement.
Television holds the majority of the advertising industry's market share. Locally made TV ads are usually of low quality. The Armenian audience is more receptive to ads placed on three Russian channels (ORT, RTR, and NTV) available in Armenia that feature world-class advertising. More ads are being placed on private Armenian TV channels, which are growing in number. A few private FM radio stations are also aggressively entering the market. Advertising can be arranged through local advertising agencies, or directly with TV stations, radio stations, and the press. Some suggested contacts are:
Press, displays, stands, posters -
Business Style Co.Ltd,
Sayat-Novai Ave. 6-2, Yerevan-1, tel: (3741)560065, 560161
e-mail: bs@bsi.am.
Ega, 13/13 Hrachya Kochari Street, 375012, tel: (374-1) 270371, 270610, fax: (374-1) 587288, e-mail: ega_arm@inbox.net
Noyan Tapan, 28 Isahakyan St., Yerevan 375009, Armenia; tel: (374-1) 524 279, 524 318, fax: 524-279, e-mail: contact@noyan-tapan.am. Weekly English language newspaper.
Paradise Co.Ltd, Abovyan St. 18, Yerevan 375001, Tel: (374-1) 523930, 520479, fax: (374-1) 564626, e-mail: paradi@arminco.com
Spyur (Information Service) Co.Ltd, Pavstos Buzandi St. 1/3, 7th Floor, Yerevan-10, tel: (3741)590000 Information, 563505, 562635, fax: (3741)562635, e-mail: info@spyur.am.
Zebra Limited Liability Company, Tumanyan St. 40, Apt.36, Yerevan 375002, tel: (3741) 270610, 537056, 539927, fax: (3741)587288, e-mail: art-zebra@netsys.am.
PromoStars - Biayna, Tumanyan str, 26/1, Yerevan, 375001, tel/fax: 52-14-07, 52-50-15, 54-48-44; E-mail: arlego@arminco.com; bisuv@netsys.am
AZD advertisement agency, 45 Baghramyan ave, 2-nd floor, Yerevan, Armenia, tel: 26-34-93, e-mail: azd@azd.am, Web site: www.azd.am
Radio and TV
Hai FM 105.5 Radio Station. 1/3 Pavstos Byuzand St., 6th Floor, Yerevan-10; Tel: (374-1) 529-868 or 560-000; fax: (374-1) 529 868; e-mail: haifm@megacom.am, web site: http://users.freenet.am/~haifm/index.htm. A leading Armenian radio station.
AR TV (private), 5A Tumanian St., Yerevan-10; Tel: (374-1) 523-886, 564-149,
563 564; e-mail: artv@mbox.amilink.net. Private Armenian TV station.
Public TV Company of Armenia, Nork, Gevorg Hovsepyan St. 26, Yerevan-47, tel: (3741) 569574, 650015, fax: (3741) 562460, 548596, e-mail: armen@armtv.com.
Shant TV (private), Leningradyan, Gyumri, Armenia: Tel: (374-69) 34-444 or 22-388. The larger of two TV stations based outside of Yerevan.
METEO TV 54, Leo str., Yerevan, tel: (3741) 53-92-31, e-mail: meteotv@arminco.com; web site: www.meteo-tv.am
ARDZAGANK radio company; K.Demirchyan Center, Park Tsitsernakaberd, Yerevan 375028, tel: 39-55-99; 39-60-20; 39-81-25; e-mail: ardzagank@media.am
Armenia TV; tel: 58-38-90, media@armeniatv.am
Business Newspapers:
Delovoy Express, 22 Nazaryan St., Yerevan; tel: (3741) 25-26-83, fax: (3741) 25-49-95.
Hayastani Hanrapetutiun (The Republic Of Armenia) Daily, Arshakunyats Ave. 2, 13th and 14th Floors, Yerevan-23, tel: (374 1) 52 57 56, 52 69 74, 52 82 92, fax: (374 1) 54 86 11;e-mail: hh@press.aic.net.
Aravot” daily, #2 Arshakuniats ave, 15 floor, tel: 56-89-68, fax: 52-87-52; e-mail: aravot@press.arminco.com; web site: www.aravot.am.
Business News Agencies
Arminfo News Agency, Isahakyan St. 28, 2nd Floor, Yerevan-9, tel: (374 1) 52 20 34, 54 31 74, 54 31 72, 54 31 73, fax: (3741) 54 31 72, 54 31 73, e-mail: news@arminfo.am.
Arka News Agency, 1/3 P.Byuzandi, Yerevan, tel: (374 1) 524080; e-mail:arka@arminco.com; web site: www.arka.am
MediaMax News Agency, 1 Marshal Baghramian Ave., apt 32. Yerevan, Armenia Tel: (+374 1) 54-54-31; fax: (+374 1) 54-54-37; e-mail: media@arminco.com, web site: www.mediamax.am
INTERNET Advertisement
Webnet Armenian Online Catalogue: www.wbenet.am; tel./fax: (374 9) 40-19-71
4.9 PRICING PRODUCTS
Private sector: Pricing is largely determined by supply and demand. Some of the factors that continue to contribute significantly to pricing decisions are:
- low purchasing power of population
- high cost of transportation
- little competition or absence of locally manufactured products in many categories
- corruption ("fees" paid to customs officials, road and district police, tax police, government officials, "controllers", and racketeers can comprise as much as 20-30 percent of retail prices. The government is developing anti-corruption steps, but it is still early to measure results).
State sector: The pricing policy of the state sector is increasingly determined by supply and demand. The state continues to control prices for utilities and public transportation, keeping them artificially low. However, prices in those sectors are gradually readjusted to match the market, as the relevant industries prepare for partial or complete privatization. From time to time, the government conducts rationed sales of basic foods and other consumables (sugar, powdered milk, matches, soap) to the most needy groups at prices much lower than market prices.
4.10 SALES SERVICE, CUSTOMER SUPPORT
With the break-up of the USSR, the old structures that provided warranty servicing or replacement of Soviet-made goods all across its territory ceased to exist. The majority of private vendors or service providers in contemporary Armenia, as a rule, do not provide any support or additional services to their customers. Warranty services are gradually being introduced by companies representing/selling internationally recognized brands, especially in the area of consumer electronics.
4.11 SELLING TO THE GOVERNMENT
Selling to the Armenian government is strictly limited by the government's lack of funds. Most of the government’s large purchases are connected to programs funded by international financial donors. Purchases of foreign goods and services by state organizations are usually conducted upon authorization of their controlling ministries or state administrations, often via public foreign trade companies or through tenders. During the past two years the government purchased mainly fuel, energy equipment, raw materials, building materials, a very limited amount of machinery for its industries, and almost no consumer goods. Government purchases are conducted in accordance with the RA Law On Procurements.
4.12 NEED FOR A LOCAL ATTORNEY
The business regulatory environment in Armenia is not very transparent, and accurate information (especially in English) is not readily available. To avoid complications, the Embassy recommends that U.S. firms consult thoroughly with local lawyers on every aspect of their future activities in Armenia, including registration, licenses, taxes, particular tax incentives, local accounting principles, import/export procedures, certification requirements, contracts, etc. This is particularly recommended for firms entering Armenia for the first time, or for those that have no Armenian partner. Note that information provided in this guide is of a general character and cannot substitute for detailed legal advice. A list of local attorneys can be requested from the Consular Section of the American Embassy in Yerevan. Call (374-1) 524 661 or fax (374-1) 151-550.
Information on practicing lawyers may also be obtained from:
Union of Advocates of the Republic of Armenia, 3 Zakyan Street, Yerevan-10; Tel: (374-1) 583-442.
International Bar Union, 2 Mashtots Ave., #2, Yerevan-15, Tel.: 374 (1) 58 76 84
4.13 PERFORMING DUE DILIGENCE/CHECKING BONA FIDES OF BANKS/AGENTS/CUSTOMERS
The following organizations provide due diligence and check bona fides of financial organizations:
a.) KPMG Armenia (Executive Director - Alan Kuchukian), 8 Hanrapetsusian, Yerevan 375010, Armenia, tel: (374-1) 566 762, 584 754, 586 379; fax: (374-1) 151 986, 151 989.
b.) Amyot Exco (Executive Director - Armand Pinarbasi), 18 Vardanats, Yerevan 375010, Armenia; tel: (374-1) 522 401, 586 373; fax: (374-1) 584 419, 584 459; e-mail: amyot@arminco.com.
c.) Hai-Consult (Executive Director - Gagik Makaryan), 4 Tigran Mets, room 2, 2nd floor, Yerevan-10, Armenia; tel: (374-1) 589-337, 562-318; fax: (374-1) 151-822; e-mail: veneto@arminco.com
d.) SED-MARSED consulting cjsc. (CEO- Tigran Jrbashyan) 25/27 Nalbandyan, Suite 2, Yerevan-01; tel: (374-1) 565 625, 522 734; fax: (374-1) 565 625.
CHAPTER 5
LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT
The Armenian government remains eager to obtain Western development assistance, investment, technologies, and management expertise. However, transportation problems, minimal local financing sources, very low wages, and often the unwillingness of foreign lending institutions to take risks in Armenia inhibit the scope of potential business opportunities. At present, the most promising opportunities are concentrated in the following areas:
5.1 BEST PROSPECTS FOR NON-AGRICULTURAL GOODS AND SERVICES
Sector Name: TRAVEL AND TOURISM SERVICES
ITA Industry Code: TRA
Armenia offers significant opportunities for tourism infrastructure development. Despite its relatively small size and land-locked location, Armenia has a substantial man-made and natural base for developing international and domestic tourism. In recent years, Armenia has experienced significant growth in the tourism industry, attracting over 160,000 tourists in 2002, a 31.5 percent growth over the previous year. Road and railroad construction, airport development, airlines, and hotel and resort development are the most promising areas for potential development in the near future. Several tourism infrastructure development projects are underway in which U.S. investors have the opportunity to participate. A number of foreign-owned tourism facilities are already operational, including some American investments. For more information contact:
Ministry of Trade and Economic Development; 5 Hanrapetutyan St., Yerevan- 375010: Tel:(374-1) 538-082, Fax:(374-1) 588-321, 151-081.
Sector Name: ENERGY
ITA Industry Code: ELP, REQ
Reform in the Armenian power sector is further along than in most of the FSU. Disaggregation of the sector into separate generating, transmission, and distribution companies is complete. Power generation has been largely privatized by recent debt for equity swaps with Russian power companies, and the distribution network is completely private.
The Armenian power system presently has a total nominal installed capacity of almost 3,220 megawatts (MW), excluding Unit 1 of the Metsamor nuclear power plant, which is non-operational. Gross domestic peak demand at high voltage in 2002 was approximately 1250 MW. Armenia makes modest electricity exports to Georgia, has a swap arrangement with Iran, and has potential to export electricity to Eastern Turkey. However, the eventual closure of Metsamor Unit 2, and the age and obsolescence of existing plants, will force significant new investment in generating capacity. Russian energy giant RAU UES has recently acquired Armenia’s largest thermal plant, Hrazdan, five hydroelectric plants, and a five-year concession to run the Metsamor nuclear plant. UES has promised capital improvements in the thermal and hydro plants.
HydroPower:
Most of Armenia's small hydropower plants are being privatized. Currently,
29 small hydropower plants (less than 10 MW capacity) are in operation with
a total capacity of 43.4 MW and average annual electricity generation of 100
million kWh. From the 24 small HPPs, constructed before 1957, 15 HPPs were
privatized up to date, and 8 HPPs were written off. In the last 6 years, 14
new HPPs were constructed (total capacity 9.26MW), from which only one is
state owned. Now in 2003, 15 private HPPs with a total capacity of 37.71MW
are under construction.
The theoretical potential
for hydropower resources of Armenia has been estimated to 21.8 billion
kWh/year. This includes 18.6 billion kWh/year for large and medium rivers
and 3.2 billion kWh/year for small rivers. The technically available
potential is estimated to be 7-8 billion kWh/year, and the economically
feasible potential is 3.2-3.5 billion kWh/year. The present average annual
electricity generation by all hydropower stations in Armenia totals 1.6
billion kWh/year.
For more information contact: Head of Research Dept, Ministry of Energy,
Government Bldg. #2, Yerevan-10; Tel: (374-1) 528-704; Fax: (374-1) 151-687.
Thermal Power. The three thermal power plants, in Hrazdan, Yerevan, and Vanadzor, are dual fired and burn imported natural gas and mazout. (Hrazdan: 2x50MW and 2x100MW heat plus power units, 4x200MW power only; Yerevan: 5x50MW heat plus power units; 2x150MW power only). They supply steam for industrial purposes and/or district residential heating, with a total rated capacity of 1,600 Gcal/h. Due to a significant decrease in Armenia’s heavy industry, current heat consumption is only a fraction of capacity. These plants are aging and inefficient. Some units have been rehabilitated; others are kept in reserve, and will need replacement or substantial refitting to bring them up to rated capacity. Vanadzor TPP with 96MW of installed capacity has been privatized along with chemical factories located adjacent to the plant and is owned by a Russian company. For more information contact: Office of the U.S. Executive Director, One Exchange Square, London EC2A 2EH, United Kingdom, Tel: (44) 171-338-6569, Fax: (44) 171-338-6487, or Armenergo State Concern, 27 Abovyan St. Yerevan-09, Armenia; Tel: (374-1) 151-721, 21-781, or 592-321, Fax: (374-1) 151-721, or 521-781.
Power Delivery: Armenia’s bulk power transmission network consists of 164 km of 330 kV lines, 1320 km of 220 kV lines, and 3146 km of 110 kV lines. It was designed as a part of the Trans-Caucasus Power Pool, which is no longer functioning due to regional conflicts and economic disruption. Two lines (220 kV and 110 kV) to Georgia are operational and supply power to southwestern Georgia. There is a 110 kV line to the Nagorno-Karabakh enclave, and a new Iran-Armenia line. Links to Azerbaijan (330 kV, 400 MW; 110 kV, 50 MW), Nakhichevan (2 x 220 kV, 500 MW), and Turkey (220 kV 300 MW) are not in operation, but could be restored in the event that political relations are normalized.
The low voltage distribution line length is about 40,000 km, with some 9,000 transformers of an average size of 322 kVA, providing electricity to over 700,000 end-users, 300,000 of whom are in Yerevan. Armenia’s transmission system control center is located in Yerevan in the head office of ArmEnergo, a state organization, which serves as single buyer and dispatch center. Armtrans is a closed joint stock company that owns and operates the transmission network. Power line carriers (PLC) via the High Voltage (HV) transmission lines generally provide direct contact to all HV substations, which are all manned. The PLC system is to be upgraded, funded by the World Bank and the Japanese Government’s Transmission and Distribu