Month: August 2008

ARMENIAN GDP CONTINUES ROBUST GROWTH DURING H1
by Diego Iscaro

World Markets Research Centre
Global Insight
August 1, 2008

Armenian GDP grew by 10.3% year-on-year (y/y) during the first half of
2008, according to data released by the Armenian National Statistical
Service reported by theBlack Sea Press. This was up from an increase
of 9.8% y/y recorded during the first five months of the year, and
a rise of 9.3% y/y in the period January-April. Monthly figures show
that GDP grew by a 19.1% in June. Output growth during the first six
months of 2008 continued to be driven by construction (up 14.0% y/y),
while there were also a marked increase in activity in the service
sector (excluding trade), which rose by 16.2% y/y. Furthermore, data
also show that retail trade went up by 5.0% y/y, while agricultural
production rose by 8.1% y/y. Finally, industrial production continued
to struggle and waned by 0.3% y/y in the period January-June.

Significance:The Armenian economy continues to grow at a very
strong pace, hinting that the government’s growth target of 10%
output growth for 2008 as a whole may be within reach. Nevertheless,
there are still concerns about the overheating of the economy, as
rapid output growth makes it more difficult to control spiraling
inflation. Furthermore, the robust performance of domestic demand,
reflected in a new acceleration on retail trade growth, is contributing
significantly to the sharp widening of the Armenian trade deficit.

ARMENIAN TRADE DEFICIT CONTINUES GROWTH DURING H1
by Diego Iscaro

World Markets Research Centre
Global Insight
August 1, 2008

Latest data show that Armenian external imbalances continued to
deteriorate during the fist six months of 2008. Indeed, according
to data from the country’s National Statistical Service reported by
ARMNIFO, the trade deficit stood at $1US.387 billion during the fist
half of 2008, as exports fell by 0.8% year-on-year (y/y) to $520US
million and the total value of imports increased by 40.3% y/y to
$1US.908 billion. Geographical trade data show that Armenia’s trade
deficit with countries from the European Union (EU) was widened by
57.0% y/y to $331US.0 million, while the deficit with other countries
of the Commonwealth of Independent States (CIS) rose by 52.5% y/y to
$433US.0 million. Furthermore, detailed data revealed that exports of
precious and semiprecious stones waned by 23.3% y/y to $82US.0 million,
while exports of rough ore rose by 25.9% y/y to $85US.0 million.

Significance:Strong domestic demand is fuelling import growth, while
export potential remains mainly dependent on the diamond trade. Global
Insight believes that these factors are likely to remain in place
during the rest of 2008. Indeed, the value of imports is set to be
boosted by a combination of robust demand for investment goods and high
international oil prices. Nevertheless, strong output growth should
result in a waning of the deficit-to-GDP ratio in 2008 as a whole.

ARMENIA READIES THIRD MOBILE LICENCE TENDER

Business Monitor International
Emerging Europe Telecommunications Insights
August 1, 2008

The Public Services Regulatory Commission (PSRC) of Armenia is reported
to have approved the mechanism for tendering the country’s third mobile
network operator licence. It is expected that the selection process
will take more than four months to complete, according to a report
posted on the news portal Armenialiberty. Candidates will be expected
to offer a minimum of EUR10mn for the nationwide GSM 900/1800 licence
and invest at least EUR200mn in the initial stages of network rollout.

The aim is to increase competition in the sector as well as raise
mobile penetration in a country that is poorly served by fixed-line
infrastructure and has only limited mobile phone availability at
present. The government also hopes that the country’s two existing
operators will reduce their tariffs and raise the quality and range
of the services they offer in the new competitive environment.

Previously, it had been reported by the newspaper Panorama that
the Armenian authorities were keen to award the licence to Russian
operator, MegaFon; the suggestion that the results of the auction
had already been decided in advance caused us some concern. While
BMI welcomes the prospect of a new operator in Armenia, potential
investors in the mobile and other sectors (such as broadband) may have
been deterred from entering the country if they felt that government
influence over the telecoms market remained a significant potential
constraint to growth.

Third Licence Could Tempt MegaFon Armenia: Cellular Market Shares By
Operator, Q108 Telecoms2_20080718 Source: BMI Research

The Armenian mobile market is shared by just two operators. The
largest of these is VivaCell, a company that is majority-owned by
Mobile TeleSystems (MTS), Russia’s largest mobile operator. It had
1.42mn subscribers at the end of March 2008, which would give it an
approximate 73.2% market share. Incumbent fixed-line operator ArmenTel
accounted for a further 520,000 active subscribers at that time;
this would give it a market share of 26.8%. ArmenTel is controlled
by Russia’s second largest mobile operator, Vimpel Communications.

In 2007, VivaCell and ArmenTel were awarded 3G UMTS licences, which
they seem likely to exploit as quickly as possible to improve their
customer retention schemes. 3G is also seen as useful in selling a
broader range of value-added services and premium rate content. As
yet, it is not known whether the third licensee will also be offered
access to 3G spectrum.

COMSTAR COMPLETES ARMENIAN WIMAX NETWORK BUILDOUT

Business Monitor International
Emerging Europe Telecommunications Insights
August 1, 2008

Comstar United TeleSystems (Comstar UTS) of Russia has completed
the buildout of a wireless network based on the 802.16e standard in
Armenia. The network has been built for the Armenian ISP Cornet,
a subsidiary of transit operator Callnet in which Comstar UTS has
owned a 75% stake since October 2006. Cornet has a licence to use
the 3.6-3.8GHz frequency band across the whole of Armenia.

The network consists of 24 base stations, which are connected to each
other via radio relay lines and leased telecommunications channels from
incumbent ArmenTel (a VimpelCom subsidiary). Airspan Networks of the
US was contracted in Q407 to supply and install the network. Comstar
UTS has also installed two data transmission nodes based on equipment
supplied by Cisco Systems.

The WiMAX network will be used to provide high-speed internet access,
deliver multimedia content, offer VoIP services and data transmission
and create VPNs for residential and corporate customers. As the
network is based on the 802.16e standard, Cornet will be able to
offer a broad range of fixed-mobile convergence services as well as
stand-alone mobility products. Comstar UTS reports that, earlier this
year, Cornet applied to the Public Service Regulation Committee for
the right to own 60,000 telephone numbers; the company is now working
to launch voice services using this numbering resource.

Wireless Broadband To Raise Penetration Growth Of Fixed-line Telephony
Market, 2002-07 Telecoms6_20080715 Source: ITU; BMI Research; e =
estimate

Armenia is poorly served by basic telephony and internet access
services, despite considerable efforts by ArmenTel in recent years to
modernise and upgrade its network. The International Telecommunication
Union (ITU) believes that there were less than 100,000 internet users
in Armenia at the end of 2007, with broadband subscribers numbering
less than 5,000. Basic fixed-line availability is also poor; the number
of fixed-lines grew from 542,800 at the end of 2002 (17.8% penetration)
to 594,400 at the end of 2005 (19.7% penetration), according to the
ITU. BMI estimates that this figure had risen to 609,000 by the end
of 2006 and to almost 620,000 by the end of 2007 (20.7% penetration),
based on the reported number of customers served by ArmenTel.

Callnet is one of four licensed long-distance operators in Armenia
and serves approximately 75% of the country’s banking and financial
institutions market. Consequently, the new mobile WiMAX network is
expected to meet with considerable interest from the corporate sector,
as well as the transportation and logistics sectors.

ARMENIAN OPPOSITION STATEMENT BLAMES AUTHORITIES FOR ILLEGAL ACTS

A1+
Aug 1 2008
Yerevan

A statement by the Centre for Pan-National Movement.

"Since yesterday [31 July] the Centre for Pan-National Movement
has been receiving many signals from the districts of the country
that movement of transport means to Yerevan has been limited under
a certain instruction. In some places, bus stations have been simply
closed down. Taxi services have received the same order.

Public transport in Yerevan will stop operating from 1500 [1000
gmt]. In fact, every time when the Pan-National Movement stages a
rally, the authorities resort to the same illegal actions.

This is a violation of the Constitution and human rights, in
particular, the right to free movement, the right to information and
dissemination, freedom of assembly. Initiators and authors of this
[violation] commit crime. Such criminal acts indicate that authorities
realize that people do not support them. They [authorities] are
so feared of the national protests that they resort to any illegal
actions in order to reduce the number of persons in the rallies".

POLICE IN ARMENIA CORDON OFF KEY AREAS

A1+
Aug 1 2008
Yerevan

Currently units of special purpose police equipped with special
hardware are moving along the Echmiadzin-Yerevan road.

The government building of the Republic of Armenia, adjacent territory
to the office of the [ruling] Republican Party of Armenia have been
cordoned off by the police.

By tradition, the police have also surrounded the empty Freedom Square
and has "occupied" all the central cafes.

ARMENIAN OPPOSITION TO SET UP NATIONAL CONGRESS

A1+
Aug 1 2008
Yerevan

Yerevan, 31 July: Tomorrow [1 August] at 1900 [1400 gmt] main political
forces of the Pan-National Movement will sign a declaration on the
platform near Metandaran [museum – institution of ancient manuscripts]
on establishment of an Armenian National Congress.

"We call on our people to demonstrate will on this day and take
an active part in establishment of the Armenian National Congress,
as well as demonstrate high civil consciousness and determination,"
representative of the Pan-National Movement centre, Levon Zurabyan,
told journalists today.

During the rally staged on 4 July, Levon Ter-Petrosyan had made
several demands to authorities allowing them a period to fulfil those
demands. In particular, he demanded that the political prisoners be
released, political persecution and police terror be stopped, freedom
of assembly is maintained as well as bring the main culprit of the1
March events, Robert Kocharyan and his mates, to responsibility.

Since the demands have not been fulfilled, the motto of the 1 August
rally of the Pan-National Movement, as promised by Ter-Petrosyan,
will be the resignation of [Armenian President] Serzh Sargsyan.

"We do not see any difference between Serzh Sargsyan and Robert
Kocharyan. At one time, Serzh Sargsyan promised to carry out reforms
and fulfill the demands of the resolutions of the Parliamentary
Assembly of the Council of Europe. However, it became obvious that
it was simply a game and that Serzh Sargsyan did not and has not a
desire to free himself from Kocharyan’s legacy. The trend of events
indicate that it’s the same regime," Zurabyan has said.

He thinks that Serzh Sargsyan has lost his chances to assert himself
using another method.

The leaders of the Pan-National Movement promise to inform people
of their future activities tomorrow at the rally. Today Zurabyan has
only said that the sit-in protest will continue on the Northern avenue.

KESKIN: TURKEY NOT YET RIPE FOR EU MEMBERSHIP

German news agency DDP
Aug 1 2008

Osnabrueck – In the view of Turkish human rights activist and
Aachen Peace Award Winner Eren Keskin, Turkey is "not nearly ripe for
accession to the European Union," even though the ban of the governing
Justice and Development Party (AKP) had not materialized. "There is no
freedom of opinion and no culture to express ideas freely. There are
still incidents of torture," she told [the daily] Neue Osnabruecker
Zeitung in its Wednesday [30 July] edition. Those daring to address
sensitive political issues such as the problem of Cyprus "run the
risk of ending up in jail." The same applied to how the massacres
perpetrated against the Armenians are dealt with.

The lawyer, who is of Kurdish descent, regarded "the power of the
military" as a crucial obstacle in the way of her country’s speedy EU
membership. "We are still ruled by a constitution that was drafted
by the military." The armed forces are largely in control of the
economy, the judiciary, and the media, she said. The influence of
the military is so huge "that even ordinary people in our country
have an unbelievable confidence in the military." According to her,
that even applies to the leftwing opposition Kemalists. "Even they
are under the mistaken belief that the military guaranteed the future
of Turkey," she pointed out.

ARMENIAN MINISTER DISCUSSES TRANSPARENCY IN DEFENCE REFORMS

ArmInfo News Agency (in Russian)
July 31 2008
Armenia

Yerevan, 31 July: Armenian Defence Minister Seyran Ohanyan received
experts from Great Britain, the USA and Bulgaria today [31 July
08]. Experts of the Centre for Civil-Military Relations (the USA),
and experts of the defence ministries of Great Britain and Bulgaria,
headed by the centre’s expert [?Anonius Bernards], were included in the
group, which has been on a working visit to Yerevan since 28 July. The
military attaches of the US and German embassies, (?Robert Webster)
and (?Peer Schwaan), were also in the expert group.

During the meeting, the minister thanked his foreign colleagues for
their valuable observations, adding that those will be efficiently
used in the strategic revision of defence, especially while assessing
the security environment, the press secretary of the Armenian defence
ministry, Col Seyran Shahsuvaryan, told the Arminfo news agency.

The minister said that the implementation of this process is dictated
by the change in the regional security environment, and it is
necessary to carry out defence reforms in this light in order to have
armed forces capable of defence. At the end of the meeting, the sides
stressed the necessity for concurrent revision of the defence strategy
taking into account transparency of the planned actions, including
[those] for the international community. This will allow determining
potential risks and threats and will establish an atmosphere of trust
to smooth over contradictions, settle conflicts and strengthen the
atmosphere of regional security.

ARMENIA KEEN ON BUILDING RAILWAY LINK TO IRAN – MINISTER

ArmInfo News Agency (in Russian)
Aug 1 2008
Armenia

Yerevan, 1 August: The Iran-Armenia railway will be constructed
irrespective of whether the Abkhaz section of the Georgian railway
is open or not, Armenian Minister of Transport and Communications
Gurgen Sargsyan said at a news conference today.

"We will not wait for anyone and will start the construction,"
the minister said. He said that currently three projects on the
construction of the railway with Iran are being considered and that
"there are no problems except for funding".

The cost of the construction depends on the length of the
route. According to preliminary estimates, the most preferred and
the shortest route of 397 kilometres is from the Gagarin station
[in Armenia Gegharkunik Region] to the Gavar-Martuni-Jermuk station
[towns in Armenia’s Gegharkunik and Vayots Dzor Regions].

"This is the shortest route, and that’s why it is the most profitable
one from the economic point of view," the minister said. He added
that this route would connect [Armenia] with the north of Georgia
through Vanadzor [a town in the north of Armenia] and with Meghri
[a town close to the Iranian border] via the station in Kapan [a town
in the south of Armenia].

Another 80-kilometre section will run through Iranian territory to the
Iranian station of Marand [a town in Iran’s East Azarbayjan Province],
he said.

The other two routes are 443 and 449-km long. They start from the
stations of Eraskh [a village close to the Armenian-Azerbaijani border]
and Vardenis [a town in Armenia’s Gegharkunik Region], the minister
said. He said that in any case it is planned to construct a totally
new railway line.

Previously Gurgen Sargsyan said that the preliminary cost of the
construction of the Iran-Armenia railway would range from 1.5bn to
2bn dollars. Armenia, Iran and Russia have expressed interest in
this project.