BY LATE 2007 ARMENIA’S STATE DEBT TO MAKE ABOUT 1.56 BILLION DOLLARS OR 19.1% OF GDP
Noyan Tapan
Nov 01 2006
YEREVAN, NOVEMBER 1, NOYAN TAPAN. The RA government presented the 2007
draft state budget at the joint sitting of the RA National Assembly
standing committees on November 1. The revenues of the state budget
make 489.5 bln drams, expenditures – 557.8 bln drams, deficit –
68.3 bln drams (about 179.7 mln USD).
Speaking about the main orientation and ideology of the budget, RA
Minister of Finance and Economy Vardan Khachatrian noted that the
levels of the draft budget’s revenues, expenditures, deficit and debt
have been formed in the context of the government’s common long-term
and medium-term tax and budgetary goals. The minister presented the
macroeconomic indices that formed the basis for calculation of the
indices of the draft budget. Thus, real GDP growth is programmed at 9%,
GDP deflator – 4%, average annual inflation – 4% plus-minus 1.5%, the
settlements rate of 1 US dollar – 357 drams. The growth of commodity
import is programmed at 13.5%, export growth – at 16%. As a result,
the import and export of goods make 2.151 billion USD and 1.248 billion
USD respectively. The ratios of imports/GDP and exports/GDP make 31.7%
and 20.1% respectively. The ratio of overall state budget revenues/GDP
is programmed at 16.8%, the ratio of tax revenues and duties of state
budget/GDP – 15.7%, the ratio of state budget expenditures/GDP –
19.1%, and the ratio of state budget deficit/GDP – 2.3%. Accoording to
V. Khachatrian, external sources will prevail among finance sources of
the 2007 state budget’s deficit: they will account for nearly 60.5%
of the total. Domestic sources of financing the budget deficit will
include revenues of 8.5 bln drams from the sale of state securities,
as well as privatization and currency resources of a total of 19.1
bln drams. By late 2007, state debt is forecast to make about 1.56
bln USD or 19.1% of GDP. Foreign debt accounts for most of the state
debt – 87.7% or 1.36 bln USD.
“The programmed growth in foreign debt will not have a significant
impact on the country’s solvency, because a number of qualitative
indices either will not change or will change positively,” the minister
said. In his words, by several indices Armenia is among the states
with a small debt burden, while by the ratio of foreign debt/exports,
it is among the countries with a middle-size debt burden.
From: Baghdasarian

TIGRAN SARGSIAN: BY TAX COLLECTION LEVEL ARMENIA IS IN ONE OF LAST PLACES AMONG TRANSITIONAL ECONOMIES
Noyan Tapan
Nov 01 2006
YEREVAN, NOVEMBER 1, NOYAN TAPAN. Depsite the high growth rate of
its economy, Armenia is in one of the last places among transitional
economes by its t axes/GDP ratio. Chairman of the Central Bank of
Armenia (CBA) Tigran Sargsian said this during the 2007 draft state
budget’s discussion in the RA National Assembly standing committees
on November 1. According to him, in 2007 the government plans to
increase the tax collection to 15.6% of GDP, which is by 1.1% more
than in 2006. Taking into account that a 0.4% annual growth in the
ratio of taxes/GDP has been programmed in recent years, a 1.1% growth
planned for 2007, according to the CBA Chairman, creates serious
problems for the government. He said that in order to achieve this
index, the government will submit to the NA a legislative package,
whose purpose is to reduce considerably the share of shadow economy
and improve tax administration. Particularly, the package includes
measures aimed at reducing the dollarization and the amount of cash
in circulation. Some laws proposing new instruments to fight against
the shadow economy and improve the competition atmosphere will also
be submitted to the parliament. T. Sargsian said that the government
had considered it expedient to plan an inflation of 5% plus-minus
1.5% for 2006. An inflation of 4% plus-minus 1.5% is programmed
for 2007, while in 2008, it will return to 3%. In his words, the
cause of more than 3% inflation is the increase in the prices of
some goods, particularly fuel and bread products, on international
market in 2006. The CBA Chairman noted that the settlement rate of 1
US dollar of 357 drams in next year’s state budget has no relation to
calculations of the market exchange rate. “This is not the exchange
rate that is formed in the market, but the one allowing to express
the budget’s foreign currency revenues and expenditures in drams,”
he explained. He attached importance to this idea in terms of not
sending wrong signals to the public and economic entities. He added
that the government has calculated this index based on the programmed
financial flows and the macroeconomic indices.

6.6% GROWTH IN CBA EXPENDITURES ENVISAGED IN 2007
Noyan Tapan
Nov 01 2006
YEREVAN, NOVEMBER 1, NOYAN TAPAN. By the 2007 draft state budget,
the overall administrative expenditures of the Central Bank of Armenia
(CBA) make 3.56 billion drams, which exceeds by 6.6% this year’s budget
of the CBA. During the discussion of the 2007 draft state budget in the
RA National Assembly standing committees on November 1, CBA Chairman
Tigran Sargsian said that this growth in expenditures is conditioned
by setting up several new structures within the CBA. Particularly,
a unit on fight against money laundering and terrorism and a new
supervisory body have been created. Besides, the Armenian-German
Fund that operates as part of the CBA and aims to provide credits to
small and medium business will implement a new program on crediting
the small energy from 2007. According to T. Sargsian, in 2007, the
CBA staff maintenance expenditures will increase by 6.5% , expenses
on information and professional literature – by 10%, expenses on
communication means – by 15%, etc. The expenditures on capital
investments and purchase of fixed assets will increase by 31.5% in
2007 on 2006. This is due to construction of a new building in the
area adjacent to the building of the CBA: the construction started
in 2006 and will finish in 3 years. This will allow to unify all the
administrative bodies of the financial system, while the area currently
occupied by the CBA will be transferred to the government. In 2007,
the CBA will start the construction of its branch in Shushi to ensure
the security of dram circulation in Nagorno Karabakh. According to
T. Sargsian, given the fact that the Armenian dram is the official
means of payment of Nagorno Karabakh, it is expedient to have a
structure there for accumulation of some part of the dram reserves.

THE ARMENIAN SOCIETY AND RUSSIA NEED A NEW MEDIATOR
Hakob Badalyan
Lragir, Armenia
Nov 1 2006
All this fuss about the Iran-Armenia pipeline has two underlying
components, and both have a core strategic importance for Armenia.
And perhaps we can say the second remains outside the attention
focused on the first, whereas it is more important than the first.
Certainly, by entitling Russia to the gas pipeline, which is already
a fact, the Armenian government makes a major strategic mistake.
There has been a lot of consideration on this, although this
consideration cannot be too much when the security and development
of a country is concerned. However, I think, there is another thing
in all this story, which refers to and threatens the security and
development of the state but does not get sufficient attention.
Armenian President Robert Kocharyan stated during his meeting with
Putin on October 30 in Moscow that “the serious arrangements with
Gazprom are already brought into being.” In fact, Armenia confesses
on a presidential level that no negotations were conducted with
Gazprom, though the prime minister and the defense minister assured
the contrary, for months on, but there were “serious arrangements”.
Consequently, it is already clear that the Armenian government has
cheated its citizens for several months on. And when the government
cheats its citizens, this is a more serious and bigger threat than
giving or not giving something to another country. After all this
giving or not giving is also a consequence of the lie in the relations
of the government and the public. Consequently, the government is
first accountable for denying information to the public than for
giving the gas pipeline to the Russians.
And if the society ever makes up its mind to restore the national
property, which already belongs to another country, even though a
friendly country and a strategic partner, it first needs to solve the
problem of honesty of the government. Otherwise, we are sure to lose
whatever we get back.
It is also interesting why the government hides the truth if sooner
or later it will inevitably float, especially that the talks are
conducted with a friendly country the Armenian society definitely
sympathizes with, still even more than with France. Why does the
Armenian government hide these negotiations and the arrangements
made in these negotiations until these are brought into being? The
reason is perhaps to be sought in the same policy of lie. Official
Yerevan perhaps also cheats official Moscow. It is clear that if the
negotiations with Russians were conducted openly, they would get a
strong backlash from the society. At least, if the Armenian society
does not consist of “hopelessly grateful people” mainly, who are
ready to spend the rest of their conscious life ragging their knees
or the ground in front of one embassy or another, giving away objects,
which are connected with the national security, to even the strategic
partner should arouse dissatisfaction among this society.
And if the partner is truly strategic, and its Caucasian policy is
based on serious calculations and analyses rather than “serious
arrangements with Armenia”, it is simply obliged to take into
consideration the public moods and opinion, especially regarding
the issues it is directly concerned with. After all, the meaning of
taking something should be the belief of the majority that it is the
best solution for the fate of that object. Otherwise, the obtained
object may serve as a truncheon which can demolish but never create,
perhaps only demolish creatively. And a policy, which is based on
the principle of demolition does not have a chance to succeed. Does
Russia realize this? It appears to be highly simple, and it would
be surprising if it did not. And the fact that the Kremlin regularly
tossed pieces of information on the acquisition of the gas pipeline,
whereas the Armenian government tenaciously denied, means that the
Russians, nevertheless, realized the nuances of the situation and
gave direct messages to the Armenian society.
In fact, these messages did not get a response, or it was not
sufficient. Or the government managed to shift the problem of lie
into the problem of giving or not giving, and would announce easily
that we won’t give away anything, and everything would be forgotten.
The Russians would raise the issue again, and the Armenians would
settle the problem again. The two main victims of this deal in
perspective should draw conclusions: the Armenian society, which is
losing almost the sole guarantee of its energy security, and Russia,
whose reputation is diminishing like a geometric progression in already
the third country of the Caucasus. Consequently, the “victims” should
seriously consider finding a new mediator for their relations because
it is evident that the existing mediator, the Armenian government
cheats both parties. Of course, this does not mean that Russia should
consider changing the government of Armenia.
This is the problem of the Armenian society. Russia had better not
disturb. Especially that it has a lot of other work to do in Armenia.
The Kremlin had better attend to its “emissaries” supplying information
from Armenia in order to have them be closer to the public than one
government official or another.
It is possible that Russia is not interested in all this. It is
possible that this is so, but this is politics, and if you do not
attend to this, it will attend to you. Of course, it is also possible
that the Armenian society and Russia do not need a new mediator but
a new Armenian society and a new Russia.

NO ISSUE RELATING TO WITHDRAWING TROOPS DISCUSSED AT MEETING BETWEEN ARMENIAN AND AZERBAIJANI DEFENCE MINISTERS
Noyan Tapan
Nov 01 2006
YEREVAN, NOVEMBER 1, NOYAN TAPAN. Azerbaijani Defence Minister Safar
Abiyev’s statement, according to which allegedly at the October 20
meeting between Armenian and Azerbaijani Defence Ministers the first
issue raised by him and discussed related to “withdrawing Armenian
troops from occupied Azerbaijani territories” does not correspond
to reality. According to the report provided to Noyan Tapan from RA
Defence Ministry Press Service, no issue of the kind was discussed at
the meeting held in the Ijevan-Ghazakh part of Armenian-Azerbaijani
border, at the suggestion of Andrzej Kasprczik, Personal Representative
to OSCE Chairman-in-Office, within the framework of measures aimed
at increasing mutual confidence between the sides. They only spoke
about border control and cease-fire preservation.

CONCERT DEDICATED TO COMPOSER STEPAN ROSTOMIAN’S 50TH ANNIVERSARY TO TAKE PLACE IN YEREVAN
Noyan Tapan
Nov 01 2006
YEREVAN, NOVEMBER 1, NOYAN TAPAN. A concert dedicated to the 50th
anniversary of composer Stepan Rostomian, professor of Yerevan State
Conservatory after Komitas will be held on November 5 at the Aram
Khachatrian concert hall on the initiative of RA Ministry of Culture
and Youth Affairs and Armenian State Philharmonic Orchestra. At the
Philharmonic Orchestra’s invitation, the concert will be conducted
by English conductor David Davis. On the latter’s initiative concerts
dedicated to the composer’s jubilee have been organized in England this
year. D.Davis also conducted the jubilee concert organized by Moscow
Union of Composers. “I consider S.Rostomian one of the best Armenian
composers of 20th century. I love his fantastic music, in which the
spirit of Armenia is felt,” D.Davis said this at the November 1 press
conference. In his words, he started to cooperate with the Armenian
composer in the 1980-s when they performed S.Rostomian’s symphony N
3 with the Paragon orchestra founded by him in Great Britain. “After
this we often ask Rostomian to compose music and it can be said
that the majority of his works is first performed in England and
then in another countries,” the conductor said. In S.Rostomian’s
words, his works were first performed in England and it was not by
chance that the events dedicated to his 50th anniversary started in
the very country. Asked why his works are not performed in Armenia,
the composer said that it already does him a credit that he is well
known abroad. “There are names famous in the whole world, but not in
the homeland. We should not complain of this, as we are well-known
in the world and this already does credit to Armenia,” S.Rostomian
declared. In 2003 S.Rostomian received the title of Academician of
International Academy on Natural and Public Sciences. In 2005 the
composer was awarded Albert Schweitzer order and was given Peter I
order at the jubilee evening organized by Moscow Union of Composers
this year.

WILL THE MONEY BE ENOUGH FOR SUBSIDIZING?
Lragir, Armenia
Nov 1 2006
ARG is likely to bid for increasing the tariff of natural gas. The
chief executive officer of the company Karen Karapetyan stated October
31 that he is not satisfied with the present tariff. But Karapetyan
reassured that the tariff for industries will increase.
Karen Karapetyan declined to say how much they are likely to increase
the tariff saying that they will tell when they offer the bid to the
Public Services Regulatory Commission.
The news reporters asked why, in that case, the Armenian government
assured that the tariff of gas would not grow for at least three
years. Karen Karapetyan said these statements were on the price of
gas on the border, in other words, the 110 dollars. It means that the
industries of Armenia will have to pay more. It is possible that the
government will lend a hand, which relieved the consequences of the
increase in the price of gas by using the money from the sale of the
fifth generating unit to subsidize gas. But it is foreseen for three
years, whereas when ARG increases the price of gas in the country,
it is natural that the estimations for subsidy are disrupted, and the
money may not be enough. Therefore, first the government had better
inform the enterprises whether it has more property to sell or they
have to think for themselves.
From: Emil Lazarian | Ararat NewsPress

GEORGIA STOLE GAS FROM ARMENIA
Lragir, Armenia
Nov 1 2006
For a long time there was difference between the gas meter on the
Georgian border and the gas meter on the Armenian border. Karen
Karapetyan, chief executive officer of ARG said October 31 that the gas
supply from Russia was halted for two days to eliminate this problem,
which overlapped with the Russian-Georgian tensions and was believed
to be a consequence of these tensions.
Karen Karapetyan says it was not related with the Russian-Georgian
relation, and the gas meter was the only problem. The gas meter in the
territory of Georgia showed that more gas is transported to Armenia
than the gas meter of Armenia shows. It means that the Georgians
stole gas. In addition, Karen Karapetyan says ARG paid for this gas
not to stop the supply of gas to Armenia because the supplier is not
interested where this gas went to. Karen Karapetyan says it was another
question if the supplier said that the Georgian side is responsible
for the difference. The chief executive officer of ARG says at present
the company is making efforts connected with compensation.

ARMENIA IS UNIQUE BY ACCIDENT
Lragir, Armenia
Nov 1 2006
No small country had ever been reported to build a gas pipeline for its
market, stated Karen Karapetyan, CEO of ARG (Armrusgasard) October 31,
who told news reporters what will the fate of the Iran-Armenia gas
pipeline be. “The Republic of Armenia, its market, its volumes are,
unfortunately, so small that there is not a precedent when a small
country builds its own gas pipeline. The Republic of Armenia is unique
in this sense because it has assumed the whole burden, return of the
investments, and so on and so forth,” stated Karen Karapetyan.
But his following words make it clear that the Republic of Armenia is
unique by accident. Karen Karapetyan says a transit gas pipeline would
be possible to consider in case there was a buyer. Karen Karapetyan
does not deny, of course, that Armenia can become a country of transit
of gas, but he does not know when it will happen.
“When the gas seller and the gas buyer arrange that the first sells
and the second buys, and in deciding the transit route via Armenia is
beneficial. It is not clear when this will happen. A transit pipeline
is three times more expensive. When the market, the buyer and the
seller, does not work, one has to compensate fot this money. In this
case, only our consumer compensates. If we built a transit pipeline,
and the tariffs were set to compensate, each of you would ask why do
you build the pipeline on my expense, if there is not a market for
it?” says the chief executive officer of ARG.
In this case, of course, Armenia remains unique because when the
possibility of transit occurs, we will have to build a new pipeline
because the one under construction, which will be operated in December
cannot supply the volume required for transit. Meanwhile, this shows
that the government does not have wish rather than market for transit,
or more exactly, courage. The point is that the Georgian prime minister
had proposed to Armenia to turn the Iran-Armenia gas pipeline into a
transit pipeline, but the Armenian government did not respond. And
now the Georgians are considering the possibility of transporting
gas via the territory of Azerbaijan.
On the other hand, it may be good that it is not a transit pipeline,
because Armenia is even unable to deal with the existing small one
independently. No Armenian official has stated so far what they are
negotiating with the Russians in connection with the Iran-Armenia gas
pipeline. Karen Karapetyan is not an exception. It only became clear
from his words that Gazprom is likely to buy it but Karapetyan does
not know whether the government will agree to sell it or not. The
chief executive officer of ARG only knows that the right thing to do
is to have ARG take up the management of the pipeline. “There are two
ways of giving the pipeline to ARG: combining the share capital, and
management. It depends on the decision of the Armenian government,”
says Karen Karapetyan.
He says even if a separate company is set up to manage the
Iran-Armenia gas pipeline, the engagement of ARG is inevitable in
supplying the demand in Armenia. The point is that the 40 km section
under construction can transport an annual 400 million cu m of gas,
whereas Armenia is likely to get about 2 billion cu m gas from Iran
annually. Therefore it is necessary that ARG expands its network and
boosts the capacity of the Iran-Armenia gas pipeline. “Independent
from who the investor is, it needs to reach agreement with ARG to
make investments in our gas transportation system,” states Karen
Karapetyan. According to Karapetyan, it is preferable that the owner
of the company attends to this expansion rather than the new investor
because it will cost the consumer cheaper. The CEO of ARG states that
there is already agreement with Gazprom, the owner of ARG.
From: Emil Lazarian | Ararat NewsPress

FOREIGN MINISTER MEETS WITH PACE MONITORING COMMITTEE’S REPORTERS FOR AZERBAIJAN
AzerTag, Azerbaijan
Nov 1 2006
Foreign Minister Elmar Mammadyarov met with visiting reporters of the
Monitoring Committee of the Parliamentary Assembly of the Council of
Europe for Azerbaijan Tony Lloyd and Andres Herkel, press service of
the Ministry said.
Mr. Mammadyarov spoke of the Armenia-Azerbaijan conflict over
Nagorno-Karabakh, describing it as Azerbaijan’s major problem, and
saying the dispute poses a serious threat to the entire region.
He said Armenia, which is a member of the Council of Europe, occupied
twenty percent of Azerbaijan’s territory forcing about million of
Azerbaijanis to flee their homelands.
“The international community should warn Armenia that a country,
which tries to become a part of Europe, should refrain from such acts
and withdraw its forces from Azerbaijan”, the Azeri Minister noted.
Elmar Mammadyarov also spoke of Azerbaijan’s integration into European
and Euroatlantic structures.
The guests stressed the need to find a quick solution to the
Nagorno-Karabakh Conflict, stressing it is important to both sides.