**ARMENIA:INVESTMENT CLIMATE STATEMENT**

** **

6 SEPTEMBER1999

SOURCE: US EMBASSYYEREVAN

1. SUMMARY. THIS ISCABLE CONTAINS POST'S ANNUAL UPDATE OF OUR INVESTMENT CLIMATE STATEMENT. THESTATEMENT INCLUDES THE FOLLOWING SECTIONS:

 

A.1. OPENNESS TOFOREIGN INVESTMENT

A.2. CONVERSION ANDTRANSFER POLICIES

A.3. EXPROPRIATIONAND COMPENSATION

A.4. DISPUTESETTLEMENT

A.5. PERFORMANCEREQUIREMENTS / INCENTIVES

A.6. RIGHT TOPRIVATE OWNERSHIP AND ESTABLISHMENT

A.7. PROTECTION OFPROPERTY RIGHTS

A.8. TRANSPARENCY OFTHE REGULATORY SYSTEM

A.9. EFFICIENTCAPITAL MARKETS AND PORTFOLIO

     INVESTMENT

A.10.POLITICALVIOLENCE

A.11.CORRUPTION

 

B. BILATERALINVESTMENT AGREEMENTS

C. OPIC AND OTHERINVESTMENT INSURANCE

D. LABOR

E. FOREIGN TRADEZONES/FREE PORTS

F. FOREIGN DIRECTINVESTMENT STATISTICS

 

END SUMMARY.

 

A.1. OPENNESS TOFOREIGN INVESTMENT

 

2.  ARMENIAN'S INVESTMENT AND TRADE POLICYIS AMONG THE MOST OPEN IN THE CIS. WITH AN ECONOMY THAT LARGELY DEPENDS ON FOREIGN TRADE, THE ARMENIANGOVERNMENT MAKES SIGNIFICANT EFFORTS TO ATTRACT FOREIGN INVESTMENT.  FOREIGN COMPANIES ARE ENCOURAGED TOINVEST AND ARE ENTITLED BY LAW TO THE SAME TREATMENT AS LOCAL COMPANIES(NATIONAL TREATMENT).

 

3.  BASIC PROVISIONS REGULATING THEINVESTMENT CLIMATE ARE SET BY THE BILATERAL INVESTMENT TREATY (BIT), SIGNED BYTHE UNITED STATES AND ARMENIA ON SEPTEMBER 23, 1992, AND BY THE LAW ON FOREIGNINVESTMENT ADOPTED BY ARMENIA ON JULY 31, 1994.  UNDER THE TERM "FOREIGN INVESTOR," THE LAWRECOGNIZES ANY FOREIGN COMPANY OR CITIZEN, A PERSON WITHOUT CITIZENSHIP, ANARMENIAN CITIZEN PERMANENTLY RESIDING OUTSIDE OF ARMENIA, OR AN INTERNATIONALORGANIZATION THAT INVESTS IN ARMENIA.

 

"FOREIGNINVESTMENT" IS ANY FORM OF PROPERTY, INCLUDING FINANCIAL MEANS ANDINTELLECTUAL PROPERTY, THAT IS INVESTED BY A FOREIGN INVESTOR DIRECTLY IN THETERRITORY OF ARMENIA IN ANY ECONOMIC OR OTHER VENTURE.

 

A "FOREIGNINVESTMENT COMPANY" IS A COMPANY OF ANY LEGAL FORM RECOGNIZED UNDERARMENIAN LAW THAT IS FOUNDED BY A FOREIGN INVESTOR OR IN WHICH HE IS APARTICIPANT.

 

4.  FOREIGN INVESTORS ARE ALLOWED TO MAKETHE FOLLOWING TYPES OF INVESTMENTS IN ARMENA:

- WORLD CURRENCIES(INCLUDING THE ARMENIAN DRAM)

- REAL ESTATE, OTHERPROPERTY AND RELATED PROPERTY RIGHTS (EXCEPT FOR THE RIGHT TO OWN LAND)SECURITIES

- MONEY ORDERS OROTHER ORDERS FOR THE IMPLEMENTATION OF OBLIGATIONS/AGREEMENTS THAT HAVE ADEFINED VALUE

- ANY FORM OFINTELLECTUAL PROPERTY RIGHTS

- THE RIGHT TOCONDUCT ANY ECONOMIC ACTIVITY SPECIFIED

BY LEGISLATION OR BYAN AGREEMENT WITH THE REPUBLIC OF

ARMENIA

- PAID SERVICES

- OTHER TYPES OFINVESTMENT ALLOWED BY ARMENIAN LEGISLATION.

 

5.  TYPES OF COMPANIES THAT CAN EESTABLISHED IN ARMENIA ARE DESCRIBED IN THE 192 LAW ON ENTERPRISES ANDENTREPRENEURIAL ACTIVITY AND THE 1996 JOINT STOCK COMPANY LAW.  THE FOLLOWING LEGAL FORMS MAY BE USEDBY FOREIGN INVESTOR TO MAKE INVESTMENTS IN ARMENIA:

 

(A) ESTABLISHMENT OFFULLY FOREIGN-OWNED COMPANIES (INCLUDING REPRESENTATIONS, AFFILIATES, ANDBRANCHES), OR THE PURCHASE OF EXISTING COMPANIES

(B) ESTABLISHMENT OFNEW JOINT-VENTURE COMPANIES WITH THE PARTICIPATION OF ARMENIAN COMPANIES ORCITIZENS, OR THE PURCHASE OF A PORTION OF SHARES IN AN EXISTING COMPANY

(C) PURCHASE OFDIFFERENT TYPES OF SECURITIES OFFICIALLY RECOGNIZED BY ARMENIAN LEGISLATION

(D) PROCUREMENT OFPERMISSION TO USE LAND, OR A CONCESSION AGREEMENT FOR THE USE OF ARMENIANNATURAL RESOURCES WITH THE PARTICIPATION OF AN ARMENIAN COMPANY OR ARMENIANCITIZENS

(E) PROCUREMENT OFOTHER PROPERTY RIGHTS

(F) OTHER ALLOWEDFORMS INCLUDING THOSE BASED ON AGREEMENTS WITH ARMENIAN COMPANIES OR CITIZENS.

 

6.  FOREIGN INVESTORS ARE RESPONSIBLE FORANY VIOLATION OF ARMENIAN LAWS AND REGULATIONS BY THEIR COMPANIES.  FOREIGN INVESTORS CAN USE THEIRPROPERTY TO SATISFY THEIR OBLIGATIONS IN ACCORDANCE WITH THESE

RESPONSIBILITIES.

 

7. ARMENIA IS AMEMBER OF THE FOLLOWING INTERNATIONAL ORGANIZATIONS:

IMF, WORLD BANK/IDA,IFC, OSCE, WTO (OBSERVER), UN/UNCTAD/UNESCO, MIGA, ILO, WHO, WIPO, INTERPOL,EBRD, IAEA, WORLD TOURISM ORGANIZATION, WORLD CUSTOMS ORGANIZATION, AND THEBLACK SEA ECONOMIC COOPERATION.

 

NEGOTIATIONS AREUNDERWAY TO BECOME A FULL MEMBER OF THE WTO (WORLD TRADE ORGANIZATION).

 

A.2. CONVERSION ANDTRANSFER POLICIES

 

8.  IN 1994-1995, ARMENIA LIFTEDPRACTICALLY ALL LIMITATIONS ON THE CONVERSION AND TRANSFER OF FUNDS. THIS CANNOW BE ACCOMPLISHED THROUGH HSBC (FORMERLY MIDLAND ARMENIA) AS WELL AS THROUGHDOMESTIC FINANCIAL INSTITUTIONS. THE GOVERNMENT OF ARMENIA MAINTAINS A FREELY CONVERTIBLE CURRENCY, THEARMENIAN DRAM, UNDER A MANAGED FLOAT. THERE ARE NO RESTRICTIONS ON THE CONVERSION OR REPATRIATION OF CAPITALAND EARNINGS, INCLUDING BRANCH PROFITS, DIVIDENDS, INTEREST, ROYALTIES, ORMANAGEMENT OR TECHNICAL SERVICE FEES.

 

MOST BANKS CANTRANSFER FUNDS INTERNATIONALLY WITHIN 2-4 DAYS.  NEAR INSTANTANEOUS TRANSFERS ARE AVAILABLE THROUGH WESTERNUNION, WHICH HAS BEEN OPERATING IN ARMENIA SINCE 1996.

 

9.  COMPANIES IN ARMENIA MAY CONVERTCURRENCY THROUGH LOCAL BANKS WITH NO RESTRICTIONS.  THEY CAN OPEN HARD CURRENCY ACCOUNTS IN ARMENIAN OR FOREIGNBANKS.  THERE ARE NO LIMITATIONS ONWIRE TRANSFERS.  CASH EXPORTS ARELIMITED TO USD 10,000 OR ITS EQUIVALENT. FOREIGN INVESTORS CAN FREELY REPATRIATE THEIR PROPERTY, PROFITS, OROTHER ASSETS THAT RESULT FROM THEIR INVESTMENT AFTER ALL DUE TAXES (E.G.,PROFIT TAX, VAT, EXCISE TAX) ARE PAID.

 

A.3. EXPROPRIATIONAND COMPENSATION

 

10.  THE CONSTITUTION OF ARMENIA PROTECTSALL FORMS OF PROPERTY (INCLUDING PRIVATE PROPERTY) AND THE RIGHT OF CITIZENS TOOWN AND USE PROPERTY.  ACCORDING TOTHE FOREIGN INVESTMENT LAW, IN THE EVENT OF A CHANGE IN LEGISLATION, FOREIGNINVESTMENTS, IN ACCORDANCE WITH

THE INVESTOR'SPREFERENCE, MAY BE SUBJECT TO THE LAWS EXISTING AT THE TIME WHEN THEINVESTMENTS WERE MADE, FOR A PERIOD OF UP TO 5 YEARS.  FOREIGN INVESTMENTS CANNOT BE NATIONALIZED; THEY ALSO CANNOTBE CONFISCATED OR EXPROPRIATED EXCEPT IN EXTREME CASES OF A NATURAL OR STATEEMERGENCY, UPON A DECISION BY THE COURTS AND WITH FULL MANDATORY COMPENSATION.

 

A.4. DISPUTESETTLEMENT

 

11.  ACCORDING TO THE FOREIGN INVESTMENT LAWOF 1994, ALL DISPUTES THAT ARISE BETWEEN A FOREIGN INVESTOR AND THE REPUBLIC OFARMENIA MUST BE SETTLED IN ARMENIAN COURTS.  ALL OTHER DISPUTES TO WHICH THE ARMENIAN GOVERNMENT IS NOT APARTY CAN BE CONSIDERED BY THE ARMENIAN COURTS OR OTHER BODIES ENTITLED TOSETTLE ECONOMIC DISPUTES, OR BY INTERMEDIARY COURTS, UNLESS OTHERWISE PROVIDEDFOR BY INTERNATIONAL LAW OR BY PRELIMINARY AGREEMENTS OF THE PARTIESINVOLVED.  THE BILATERAL INVESTMENTTREATY (BIT), HOWEVER, PROVIDES THAT IN THE CASE OF A DISPUTE THAT ARISESBETWEEN AN AMERICAN INVESTOR AND THE REPUBLIC OF ARMENIA, THE INVESTOR MAYCHOOSE TO SUBMIT THE DISPUTE FOR SETTLEMENT BY BINDING INTERNATIONALARBITRATION.

 

12.  LEGISLATION: THE PROVISIONS GOVERNINGTHE RESOLUTION OF COMMERCIAL AND OTHER DISPUTES ARE CONTAINED IN THE CIVILCODE, THE CIVIL PROCEDURES CODE, THE LAW ON ARBITRATION COURT AND ARBITRATION

PROCEDURES, AND THELAW ON ENFORCEMENT OF COURT VERDICTS AND DECISIONS.

 

13.  MECHANISMS: EFFECTIVE JANUARY 1999,COMMERCIAL DISPUTES CAN BE RESOLVED EITHER IN STATE COURTS OR THROUGH ALTERNATIVEDISPUTE RESOLUTION MECHANISMS.  ANYCOURT OF FIRST INSTANCE CAN RULE ON CASES INVOLVING COMMERCIAL OR ECONOMICDISPUTES.  THE VERDICT OF A COURTOF FIRST INSTANCE CAN BE APPEALED TO THE COURT OF APPEALS.  THE COURT OF APPEALS VERDICT CAN BEAPPEALED TO THE COURT OF CASSATION, WHICH IS THE SUPREME COURT OF ARMENIA.  AN ARBITRATION SERVICE HAS BEEN FORMEDFOR INDEPENDENT DISPUTE RESOLUTION.

 

14.  THE LAW ON ARBITRATION COURTS ANDARBITRATION PROCEDURES ALLOWS ANY LEGAL ENTITY FUNCTIONING IN ARMENIA TO SETTLEA COMMERCIAL OR PROPERTY-RELATED DISPUTE OUTSIDE THE COURT SYSTEM THROUGHINSTITUTIONAL OR AD-HOC PANELS. THE LAW RECOGNIZES THAT SUCH BUSINESS AND COMMERCIAL ORGANIZATIONS ASCHAMBERS OF COMMERCE AND BANK ASSOCIATIONS CAN CREATE PANELS OF EXPERTS(INSTITUTIONAL PANELS) AUTHORIZED TO SETTLE DISPUTES BETWEEN LEGAL ENTITIES(USUALLY MEMBERS OF THEIR ORGANIZATION), SHOULD THE ENTITIES AGREE TO SETTLETHE DISPUTE IN THIS MANNER. ALTERNATIVELY, THE TWO ENTITIES MAY SPECIFICALLY WRITE INTO THEIR CONTRACTTHAT ANY DISPUTE BETWEEN THEM SHOULD BE SETTLED BY AN AD-HOC ARBITRATIONPANEL.  IN THE EVENT OF A DISPUTE,EACH PARTY NOMINATES A MEMBER OF THE ARBITRATION PANEL.  THE TWO PANELISTS, IN TURN, SELECT ATHIRD PANELIST.  THE DECISION OFTHE ARBITRATION PANEL IS FINAL AND MAY BE REVOKED BY A COURT OF FIRST INSTANCEONLY IF THE COURT FINDS THAT LEGAL PROCEDURES WERE NOT PROPERLY OBSERVED.

 

15.  IF ONE SIDE FAILS TO IMPLEMENT THEVERDICT OF THE ARBITRATION PANEL, THE OTHER MAY APPEAL TO A STATE COURT WITH AREQUEST TO ENFORCE THE DECISION. AFTER THE COURT OF FIRST INSTANCE REVIEWS THE CASE TO ENSURE THAT PANELPROCEDURES WERE PROPERLY FOLLOWED, IT MAY ISSUE A COURT ORDER TO A MARSHALMANDATING ENFORCEMENT OF THE DECISION. MARSHALS ARE EMPLOYED BY THE MINISTRY OF JUSTICE.

 

16.  ALTHOUGH ARMENIAN COURTS ARE STILLSUBJECT TO POLITICAL PRESSURE FROM BOTH THE EXECUTIVE AND LEGISLATIVE BRANCHES,THEY ARE BECOMING INCREASINGLY INDEPENDENT.  THE MINISTRY OF JUSTICE WILL GRADUALLY LIMIT ITS INVOLVEMENTIN CIVIL CASES BY 2001.  ARMENIAWILL SOON SIGN THE INTERNATIONAL CONVENTION ON INVESTMENT DISPUTES AND BECOME AMEMBER OF THE INTERNATIONAL CENTER FOR THE SETTLEMENT OF INVESTMENT DISPUTES(ICSID).

 

17.  OTHER ASSISTANCE: FOR MORE INFORMATIONCONTACT:  

MINISTRY OF JUSTICE(MINISTER - MR. DAVID HARUTYUNIAN)

8 KHORHRDARANISTREET, YEREVAN 375010

TEL: (374-2) 582-157;FAX: (374-2) 582-449

ECONOMIC COURT, 18PARONYAN STREET, YEREVAN 375015;

TEL: (374-2) 532-411;FAX: (374-2) 582-449

 

MINISTRY OF INDUSTRYAND TRADE.  INFORMATION CENTER

5 HANRAPETUTYAN ST.,YEREVAN-10: TEL: (3742) 538-082, FAX: (3742) 588-321, 151-081.

 

A.5. PERFORMANCEREQUIREMENTS / INCENTIVES

 

18.  FOREIGN INVESTMENT COMPANIES PAY TAXESAND ARE SUBJECT TO SIMILAR TAX PRIVILEGES AS ARMENIAN COMPANIES.  SPECIFIC PRIVILEGES APPLY TO CORPORATETAXATION IF FOREIGN INVESTMENT IN A COMPANY EXCEEDS ONE MILLION DOLLARS.  NO LIMITATION ON FOREIGN OWNERSHIP, THENUMBER OF FOREIGN EMPLOYEES, ACCESS TO FINANCIAL SOURCES, OR OTHERDISCRIMINATION IS IMPOSED.

 

19.  ARMENIA CURRENTLY HAS NO GENERALIZEDINVESTMENT INCENTIVE PROGRAMS OTHER THAN INCENTIVES AVAILABLE TO EXPORTERS (NOEXPORT DUTY; VAT REFUND ON GOODS AND SERVICES EXPORTED), INCOME TAX HOLIDAYS,AND THE ABILITY TO INDEFINITELY CARRY FORWARD LOSSES. HOWEVER, IN ACCORDANCEWITH THE LAW ON FOREIGN INVESTMENT, SEVERAL AD HOC INCENTIVES MAY BE NEGOTIATEDON A CASE-BY-CASE BASIS FOR INVESTMENTS TARGETED AT CERTAIN SECTORS OF THEECONOMY AND/OR OF STRATEGIC IMPORTANCE TO THE ECONOMY.

 

20.  FOREIGN INVESTMENT INCENTIVES:

 

OWNERSHIP:                      100PERCENT OWNERSHIP PERMITTED

 

ADMISSION:                      NOSCREENING AND NO SPECIFIC

                                   APPROVAL/AUTHORIZATIONFOR

                                   INVESTMENTENTRY

 

LAND ACCESS:            LONG-TERMLEASES ARE FREELY PERMITTED

 

TAX HOLIDAYS:            AVAILABLEFOR FOREIGN INVESTMENTS OVER USD 1 MILLION

 

IMPORT DUTY:            NODUTIES ON STATUTORY CAPITAL AND RAW MATERIALS

 

EXPORT DUTY:            NONE

 

VAT ON EXPORT:            REFUNDIS PROVIDED

 

INCOME TAX:            NOSPECIAL INCENTIVES OR EXEMPTIONS

 

CORPORATE TAX:            HOLIDAYSFOR INVESTMENT OVER USD 1 MILLION

 

LOSSES:                     LOSSESMAY BE CARRIED FORWARD INDEFINITELY

 

EXCHANGE CONTROL:            FREEOPERATION OF FOREIGN CURRENCY ACCOUNTS

 

REMITTANCE:            NORESTRICTIONS ON REMITTANCES

 

STAFF RECRUITMENT:            NORESTRICTIONS

 

LOCATION:               NOSECTORAL OR GEOGRAPHICAL RESTRICTIONS ON INVESTMENT. SOME INCENTIVES FOR THEEARTHQUAKE

ZONE, MOUNTAINOUS RURAL AREAS, AND CERTAIN RURAL AREAS LOCATED ALONGTHE BORDER.

 

SECTORAL:               NEGOTIABLE

 

INVESTMENT

GUARANTEES:            5YEAR PROTECTION CLAUSE, 17 BILATERAL TREATIES, AND MEMBERSHIP IN MIGA

 

DISPUTE RESOLUTION:             ICSIDSIGNATORY (RATIFICATION BY THE ARMENIAN PARLIAMENT IS ANTICIPATED).

 

A.6. RIGHT TOPRIVATE OWNERSHIP AND ESTABLISHMENT

 

21.  FOREIGN INVESTORS HAVE THE RIGHT TOPRIVATE OWNERSHIP AND THE ESTABLISHMENT OF BUSINESS ENTERPRISES INARMENIA.  ALTHOUGH FOREIGNERS HAVENO RIGHT TO OWN LAND (THEY CAN ONLY LEASE IT), A COMPANY REGISTERED BY AFOREIGNER IN ARMENIA AS AN ARMENIAN BUSINESS ENTITY HAS THE RIGHT TO BUY LAND.  FOREIGNERS HAVE THE RIGHT TO OWN ALLOTHER TYPES OF PROPERTY AND HAVE RIGHTS EQUAL TO ARMENIAN CITIZENS TO ESTABLISHDIFFERENT TYPES OF COMPANIES. EXPLOITATION OF NATURAL RESOURCES IS TO BE MADEONLY WITH A CONCESSION AGREEMENT SIGNED BY THE GOVERNMENT OF ARMENIA.

 

A.7. PROTECTION OFPROPERTY RIGHTS

 

22.  THE RIGHT OF CITIZENS TO OWN PROPERTYIS PROTECTED BY THE CONSTITUTION. THE NEW CIVIL CODE EXPLICITLY DEFINES OWNERSHIP ANO OTHER PROPERTYRIGHTS.  THE LAW ON PROPERTY REGISTRATION,WHICH WAS

AOOPTED IN APRIL1999, REGULATES ISSUES RELATED TO THE REGISTRATION OF PROPERTY RIGHTS ACCORDINGTO THE NEW CIVIL CODE.  PROPERTYRIGHTS OF U.S. BUSINESSES IN ARMENIA ARE PROTECTED BY THE LAW ON PROPERTY, THE1992 TRADE AGREEMENT BETWEEN THE U.S. AND ARMENIA (DESCRIBED BELOW), THEBILATERAL INVESTMENT TREATY, AND THE FOREIGN INVESTMENT LAW.  ACCORDING TO THE FOREIGN INVESTMENTLAW, FOREIGN INVESTMENTS CANNOT BE NATIONALIZED OR CONFISCATED.  INVESTORS MUST BE FULLY COMPENSATED FORANY CONFISCATION RESULTING FROM A STATE OF EMERGENCY.

 

23.  AN AGREEMENT ON TRAOE RELATIONS BETWEENARMENIA AND THE UNITED STATES SIGNED IN 1992 STATES THAT BOTH PARTIES SHALLENSURE THAT DOMESTIC LEGISLATION PROVIDES FOR THE PROTECTION OF INTELLECTUALPROPERTY RIGHTS ON LITERARY, SCIENTIFIC AND ARTISTIC WORKS (INCLUDING COMPUTERPROGRAMS AND DATA BASES), PATENTS AND OTHER RIGHTS ON INVENTIONS, INDUSTRIALDESIGN, KNOW-HOW, TRADE SECRETS, TRAOEMARKS, AND SERVICE-MARKS.  THE AGREEMENT ALSO INCLUDES PROTECTIONAGAINST UNFAIR COMPETITION.  THOUGHINTELLECTUAL PROPERTY RIGHTS LEGISLATION HAS BEEN ADOPTED, ENFORCEMENTMECHANISMS ARE STILL WEAK.  PIRACYOF LITERARY, VIDEO, AUDIO, AND SOFTWARE MATERIALS IS WIDESPREAD AND POORLYCONTROLLED.  ENFORCEMENT MECHANISMSWILL LIKELY BE STRENGTHENED AS ARMENIA PROGRESSES TOWARD WTO ACCESSION.

 

A.8. TRANSPARENCY OFTHE REGULATORY SYSTEM

 

24.  THE ARMENIAN REGULATORY SYSTEMPERTAINING TO BUSINESS ACTIVITIES, THOUGH ONE OF MOST DEVELOPED IN NIS, STILLLACKS TRANSPARENCY.  INCOMPLETELAWS AND STATE CONTROLLED ACTIVITIES HAVE LEAD TO A SITUATION WHERE CERTAINSECTORS, THOUGH OFFICIALLY OPEN, MAINTAIN NEAR MONOPOLIES THAT ARE DIFFICULT TOBREAK (E.G., THE AVIATION AND TELECOMMUNICATIONS SECTORS).  THE LACK OF A LEGAL INFRASTRUCTURE TOFIGHT THE SHADOW ECONOMY, ESPECIALLY IN THE AREA OF TRADE, OFTEN UNDERMINESFAIR COMPETITION.  CHANGES INLEGISLATION ARE ONLY RARELY ANNOUNCED OR PUBLICLY DISCLOSED BEFOREIMPLEMENTATION.  ARMENIA RECENTLYCREATED AN INDEPENDENT ENERGY REGULATORY COMMISSION AND PLANS TO CREATE ANINDEPENDENT SECURITIES AND EXCHANGE COMMISSION IN THE COMING YEAR.

 

25.  LABOR, SAFETY AND HEALTH REQUIREMENTS,MOSTLY REMAINING FROM THE SOVIET PERIOD, GENERALLY DO NOT IMPEDE INVESTMENTACTIVITIES.  ALTHOUGH THE COUNTRY'STAX AND ACCOUNTING SYSTEMS ARE BASED ON SOVIET-STYLE MODELS, ARMENIA IS SLOWLYIMPLEMENTING INTERNATIONAL ACCOUNTING STANDARDS.  THE LAW PROVIDES TAX INCENTIVES AND FACILITATES TAXREPORTING FOR FOREIGN-OWNED FIRMS AND JOINT VENTURES.  BUREAUCRATIC PROCEOURES CAN BE BURDENSOME AND TIME CONSUMINGWHEN AN INVESTOR NEGOTIATES A CONTRACT WITH THE ARMENIAN GOVERNMENT, AS THECONTRACT MAY REQUIRE APPROVAL BY SEVERAL MINISTRIES.

 

26.  KEY BUSINESS LAWS AND REGULATIONSAFFECTING THE BUSINESS ENVIRONMENT:

 

01/22/90             LAWON FARMS AND COLLECTIVE FARMS (AMENDED 3/30/92)

10/31/90             LAWON OWNERSHIP IN THE REPUBLIC OF ARMENIA

01/29/91             LANDCODE

03/14/92             LAWON ENTERPRISES AND ENTREPRENEURIAL ACTIVITY

03/19/92             LITHOSPHERECODE

03/02/93             WATERCODE

06/29/93             LAWON THE PRIVATIZATION OF STATE AND PUBLIC HOUSING STOCK

O8/21/93             LAWON PATENTS

O8/27/93             CUSTOMSCODE

08/31/93             LAWON COMMODITIES EXCHANGE

09/02/93             LAWON THE STATE REGISTER OF ENTERPRISES

O9/08/93             LAWON THE CIRCULATION OF SECURITIES

12/27/93             INDIVIDUALBUSINESSMEN LAW

04/27/94             LAWON LAND TAX

06/17/94             LAWON THE STATUS OF FOREIGN CITIZENS

07/31/94             FOREIGNINVESTMENT LAW

O5/19/95             BASICPRINCIPLES FOR RETAIL TRADE

06/15/95             BANKRUPTCYLAW

11/15/95             MORTGAGELAW

04/3O/96             ADVERTISEMENTLAW

04/30/96             JOINTSTOCK COMPANY LAW

05/13/96             COPYRIGHTLAW

06/11/96             LAWON STATE DUTIES

06/29/96             BANKBANKRUPTCY LAW

06/30/96             LAWON THE CENTRAL BANK

06/3O/96             LAWON BANKS AND BANKING ACTIVITIES

11/19/96             INSURANCELAW

O5/12/97             LAWON CUSTOMS DUTIES

05/12/97             LAWON TAXES

05/27/97             STANDARDIZATIONAND CERTIFICATION LAW

06/10/97             LAWON TRADEMARKS

06/10/97             LAWON BRAND NAMES

06/15/97             LAWON VALUE ADDED TAX

06/24/97             LAWON EXCISE TAX

07/19/97             LAWON DUTIES

11/27/97             LAWON PROFIT TAX

12/10/97             LAWON THE PRIVATIZATION AND DENATIONALIZATION OF STATE OWNED ENTERPRISES ANDUNFINISHED CONSTRUCTION PROJECTS

                        (PERIODICALLYAMENDED)

12/27/97             LAWON INCOME TAX

12/27/97             LAWON STATE DUTIES

12/27/97             LAWON PROPERTY TAX

02/03/98             LAWON TAX PRIVILEGES FOR ENERGY SECTOR ENTERPRISES

02/03/98             LAWON INTELLECTUAL PROPERTY PROTECTION FOR MICROCHIP TECHNOLOGIES

02/03/98             LAWON TRANSPORTATION

02/I7/98             LAWON TELECOMMUNICATIONS

03/18/98             LAWON TAX PRIVILEGES FOR STATE PROCUREMENT, CLEARING SHIPMENTS, AND GOODS ANDSERVICES PROVIDED UNDER INTER-GOVERNMENTAL AGREEMENTS

05/05/98             LAWON ARBITRATION AND ARBITRATION COURTS

05/19/98             LAWON ACCOUNTING RECORDS

06/17/98             LAWON ADOPTING A NEW CIVIL COOE

12/15/98             LAWON CUSTOMS DUTIES

12/28/98             LAWON ENVIRONMENTAL PROTECTION AND PAYMENTS FOR ENVIRONMENTAL DAMAGE

12/28/98             LAWON CUSTOMS FEES

04/14/99             LAWON PROPERTY REGISTRATION

 

A.9. EFFICIENTCAPITAL MARKETS AND PORTFOLIO

     INVESTMENT

 

27.  CURRENT POLICIES DO NOT RESTRICT THEFLOW OF CAPITAL RESOURCES IN PRODUCT ANO FACTOR MARKETS.  CREDIT IS ALLOCATED ON MARKET TERMSWITH ANNUAL INTEREST RATES AT ABOUT 50 PERCENT AS OF AUGUST 1999. CREDIT ISMOSTLY LIMITEO TO HIGH-INTEREST, SHORT-TERM COMMERCIAL LENDING FROM LOCAL BANKSAND OTHER SUBSIDIZED PROGRAMS ESTABLISHED BY INTERNATIONAL FINANCIALINSTITUTIONS AND FOREIGN GOVERNMENTS (INCLUDING THE UNITED STATES).  THE YEREVAN STOCK MARKET IS EMBRYONIC,WITH ONLY A HANDFUL OF COMPANIES TRADING LOCALLY.  PHYSICAL OWNERSHIP OF STOCK SHARES OR BONDS IS RARE AS THESEINSTRUMENTS ARE JUST STARTING TO ENTER INTO CIRCULATION.  PREVIOUSLY, SHARE REGISTRIES WERE KEPTTHE BY ISSUING CORPORATIONS THEMSELVES. ON APRIL 1997, THE GOVERNMENT PASSED A RESOLUTION REQUIRING ALLCORPORATIONS WITH MORE THAN 50 SHAREHOLDERS TO KEEP THEIR REGISTRIES WITH THENATIONAL SHARE REGISTRY.  NORESTRICTIONS EXIST FOR FOREIGN INVESTORS TO INVEST IN EXISTING COMPANIES AND

CORPORATIONS.  NO REGULATIONS EXIST THAT WOULD LIMITOR PROHIBIT FOREIGN INVESTMENT, PARTICIPATION, OR CONTROL AT THE TIME OFINCORPORATION.  A NEW COMPREHENSIVEREFORM EFFORT IS UNDERWAY TO CREATE CAPITAL MARKET MECHANISMS OVER THE NEXT TWOYEARS.

 

28.  THE PRIVATE BANKING SYSTEM ISDEVELOPING INTO A STRUCTURE THAT WILL ALLOW ONLY RELATIVELY STRONG AND SOLVENTBANKS TO FUNCTION.  THEINTRODUCTION OF STRICTER REGULATIONS IN 1995 LED TO A PROCESS OF BANKCONSOLIDATION AND A REDUCTION IN THE NUMBER OF BANKS.  THE REQUIRED LEVEL OF BANK CAPITALIZATION IS GRADUALLYINCREASING, WITH A MINIMUM REQUIREMENT OF USD 1 MILLION IN 1999.  AT THE END OF 1998, TOTAL ASSETS OF ALLBANKS IN ARMENIA WERE LESS THAN USD 300 MILLION. IMF ASSISTANCE HAS HELPED TOESTABLISH REGULAR AUDITS AND COMPETENT CENTRAL BANK SUPERVISION.  AFTER CONSOLIDATION, A CORE OF 15-25SOLID BANKS IS PREDICTED.  SINCETHE ADOPTION OF THE LAW ON BANK BANKRUPTCY IN 1996, THE GOVERNMENT'S ROLE INTHE MANAGEMENT OF MAJOR BANKS AND ITS ABILITY TO BAIL OUT BANKS HAS BEENLIMITED.  THE GOVERNMENT'S ONLYOWNERSHIP IN THE COMMERCIAL BANKING SECTOR INCLUDES A 100 PERCENT STAKE IN THESAVINGS BANK AND 28 PERCENT OWNERSHIP OF ARDSHINBANK (A SOVIET-ERA BANK OFINDUSTRY AND CONSTRUCTION).

 

A.10. POLITICAL VIOLENCE

 

29.  NO INCIDENT INVOLVING POLITICALLYMOTIVATED DAMAGE TO COMMERCIAL PROPERTY HAS BEEN OBSERVED IN ARMENIA.  IT IS UNLIKELY THAT CIVIL DISTURBANCES,SHOULD THEY OCCUR, WOULD BE DIRECTED AGAINST U.S. BUSINESSES OR THE U.S.COMMUNITY.  ARMENIA HAS EXPERIENCEDAN INFLUX OF RESIDENTS FROM NEIGHBORING IRAN, MAINLY FOR TRADING PURPOSES; THATINFLUX IS CURRENTLY DECLINING.  NOINCIDENTS INVOLVING IRANIAN CITIZENS DIRECTED AGAINST U.S. OR OTHER BUSINESSESHAVE OCCURRED.

 

A.11. CORRUPTION

 

30.  ARMENIA HAS INHERITED THE CORRUPTPRACTICES THAT WERE COMMON THROUGHOUT THE USSR.  FACTORS SUCH AS THE KARABAKH WAR OF 1989-1993, THECORRESPONDING SHARP DECREASE IN ECONOMIC ACTIVITY ANO REAL INCOME OF THEPOPULATION, A FAST GROWING GAP BETWEEN RICH AND POOR, THE PREDOMINANT USE OFCASH IN THE ECONOMY, FLAWS IN NEWLY ADOPTED LAWS, AND THE ABSENCE OF EFFECTIVELAW ENFORCEMENT MECHANISMS HAVE AGGRAVATED THE SITUATION.  IN LATE 1996, THE ARMENIAN GOVERNMENTOPENLY ADMITTED THAT CORRUPTION HAD GROWN BEYOND PREVIOUS LIMITS AND HAD BECOMEA MAJOR PROBLEM.  THE GOVERNMENTHAS SINCE TAKEN SOME ANTI-CORRUPTION STEPS.  A NUMBER OF SENIOR GOVERNMENT OFFICIALS HAVE BEEN ARRESTEDFOR ALLEGED CORRUPTION AND ARE CURRENTLY UNDER INVESTIGATION.  ALSO, MANY HIGH RANKING OFFICIALS INTHE CUSTOMS AND TAX INSPECTORATE OFFICES HAVE BEEN REPLACED.  THE NEWLY-APPOINTED PRIME MINISTER HASFORCEFULLY STATED HIS COMMITMENT TO FIGHTING CORRUPTION, AND THE U.S.GOVERNMENT PROVIDES TECHNICAL ASSISTANCE TO THE GOVERNMENT OF ARMENIA TOADDRESS THE PROBLEM OF CORRUPTION. IT IS, HOWEVER, TOO EARLY TO TELL WHETHER A SERIOUS ANTI-CORRUPTIONEFFORT WILL BE LAUNCHED BY THE NEW GOVERNMENT.

 

31.  ARMENIA CONTINUES TO USE AN AMENDEDVERSION OF THE SOVIET ERA CRIMINAL CODE IN MOST AREAS.  THE CODE CONTAINS SEVERAL ARTICLESPERTAINING TO CORRUPT PRACTICES. ARTICLES 182 AND 183 RELATE DIRECTLY TO THE ABUSE OF POWER AND EXCEEDINGONE'S AUTHORITY (RELATED TO STATE OFFICIALS).  THESE ARE PUNISHABLE BY UP TO 2-10 YEARS IMPRISONMENT.  ACCEPTING, MEDIATING, AND GIVING BRIBESIS A CRIMINAL OFFENSE (ARTICLES 185, 186) AND IS PUNISHABLE BY UP TO 8-15 YEARSIMPRISONMENT PLUS CONFISCATION OF PERSONAL PROPERTY FOR REPEATED CRIMES.  IN 1998, THE GOVERNMENT ADOPTED A NEWCIVIL CODE, AND IN 1999 IT PLANS TO ADOPT NEW CRIMINAL CODE THAT WILL ADDRESSTHE ISSUE OF CORRUPTION IN MORE DETAIL WHILE REFORMING THE COURTS AND THEECONOMIC/COMMERCIAL LEGAL STRUCTURE. NEW VERSIONS OF THE CRIMINAL CODE AND CRIMINAL PROCEDURE CODE ARECURRENTLY (SEPTEMBER 1999) UNDER DISCUSSION IN THE PARLIAMENT.

 

32.  DESPITE SEVERE PENALTIES, BRIBERY ISWIDESPREAD AND IS THE MOST COMMON FORM OF CORRUPTION, ESPECIALLY IN THE AREASOF GOVERNMENT PROCUREMENT, ALL TYPES OF TRANSFERS AND APPROVALS, AND SUCHBUSINESS-RELATED SERVICES AS COMPANY REGISTRATION, LICENSING, AND LAND OR SPACEALLOCATION.  IT MAY ALSO TAKE ABRIBE AND/OR THE SUPPORT OF A HIGH-RANKING ACQUAINTANCE FOR A PUBLIC SERVANT TOBE HIREO BY A GOVERNMENT OFFICE, DEPENDING ON THE POSITION'S "MONEYGENERATING" POTENTIAL.

 

33.  RELATIONSHIPS BETWEEN HIGH-RANKINGGOVERNMENT OFFICIALS AND THE EMERGING PRIVATE BUSINESS SECTOR IS ANOTHERPHENOMENON THAT ENCOURAGES INFLUENCE-PEDDLING BETWEEN OFFICIALS AND THE PRIVATEFIRMS FROM WHICH THEY BENEFIT. POWERFUL OFFICIALS AT THE FEDERAL, DISTRICT, OR LOCAL LEVELS ACQUIREDIRECT, PARTIAL, OR INDIRECT CONTROL OVER EMERGING PRIVATE FIRMS.  SUCH CONTROL MAY BE EXERCISED THROUGH AHIDDEN PARTNER POSITION OR THROUGH MAJORITY OWNERSHIP OF A PROSPEROUS PRIVATECOMPANY.  THE INVOLVEMENT CAN ALSOBE INDIRECT, E.G., THROUGH CLOSE RELATIVES AND FRIENDS.  THESE PRACTICES PROMOTE PROTECTIONISM,ENCOURAGE THE CREATION OF MONOPOLIES OR OLIGOPOLIES, HINDER COMPETITION, ANDUNDERMINE THE IMAGE OF THE GOVERNMENT AS A FACILITATOR OF PRIVATE SECTORGROWTH.

 

34.  THE NEW CIVIL SERVICE LAW IS EXPECTEDTO SET LIMITATIONS ON THE PARTICIPATION OF STATE OFFICIALS IN BUSINESSENTERPRISES.  REFORM EFFORTS AREALSO UNDERWAY IN THE LEGAL AND JUDICIAL SYSTEMS, INCLUDING THE DRAFTING OF ANEW COMMERCIAL LAW AND TRAINING FOR LAWYERS AND JUDGES.  CORRUPT PRACTICES EXIST WIDELY WITHINPRIVATE COMPANIES AS WELL, MOSTLY IN THE FORM OF TAX FRAUD AND UNREGISTEREDBUSINESS ACTIVITIES.

 

35.  THE EMBASSY RECEIVES A MODERATE NUMBEROF COMPLAINTS BY U.S. FIRMS OPERATING IN ARMENIA REGARDING CORRUPTION.  RELATED PROBLEMS INCLUDE NON-TRANSPARENTCOMPETITION PRACTICES; MERCILESS ATTITUDES OF THE ARMENIAN TAX AUTHORITIES;POOR COOPERATION, CUMBERSOME PROCEDURES; BRIBES SOLICITED BY CUSTOMS OFFICIALS;AND THE UNAUTHORIZED, UNJUSTIFIED INTERVENTION OF LAW ENFORCEMENT AGENCIES INTOA COMPANY'S DAILY OPERATIONS.  THEEMBASSY WILL USUALLY TAKE ACTION UPON REQUEST OF THE U.S. FIRM TO ENSURE THEFAIRNESS OF GOVERNMENT ACTIONS. THE U.S. EMBASSY REGULARLY AND FORCEFULLY CONVEYS TO THE ARMENIANGOVERNMENT THE UNACCEPTABILITY OF CORRUPT PRACTICES.

 

B. BILATERALINVESTMENT AGREEMENTS

 

36.  ARMENIA HAS SIGNED BILATERAL TREATIESON INVESTMENT AND INVESTOR PROTECTION WITH 16 COUNTRIES:

THE U.S., ARGENTINA,VIETNAM, CANADA, FRANCE, GERMANY, GREECE, GEORGIA, EGYPT, IRAN, CYPRUS, CHINA,KYRGYZSTAN, ROMANIA, TURKMENISTAN, AND UKRAINE.  IT IS ALSO A SIGNATORY OF THE CIS MULTILATERAL CONVENTION ONTHE PROTECTION OF INVESTOR RIGHTS. THIRTY-THREE TREATIES ARE CURRENTLY UNOER NEGOTIATION (AS OF

SEPTEMBER 1999).

 

37.  A "TREATY BETWEEN THE REPUBLIC OFARMENIA AND THE UNITED STATES OF AMERICA CONCERNING THE RECIPROCALENCOURAGEMENT AND PROTECTION OF INVESTMENT" (BIT) WAS SIGNED ON SEPTEMBER23, 1992.  THIS TREATY WAS RATIFIEDBY THE ARMENIAN PARLIAMENT IN SEPTEMBER 1995 AND SIGNED INTO EFFECT BYAMBASSADOR PETER TOMSEN AND MINISTER OF FOREIGN AFFAIRS VAHAN PAPAZYAN.

 

38.  THE BIT SETS FORTH INVESTMENTCONDITIONS FOR INVESTORS OF EACH PARTY TO BE NO LESS FAVORABLE THAN FORNATIONAL INVESTORS (NATIONAL TREATMENT). IT PROTECTS INVESTMENT AGAINST EXPROPRIATION AND NATIONALIZATION, ANDREGULATES DISPUTE SETTLEMENTS BETWEEN FOREIGN COMPANIES AND THE GOVERNMENTS OFEACH PARTY.  ARMENIA DOES NOT HAVEA BILATERAL TAXATION TREATY WITH THE UNITED STATES.

 

C. OPIC AND OTHERINVESTMENT INSURANCE

 

39.  THE "INVESTMENT INCENTIVEAGREEMENT BETWEEN THE GOVERNMENT OF THE REPUBLIC OF ARMENIA AND THE GOVERNMENTOF THE UNITED STATES OF AMERICA," SIGNED IN 1992, PROVIDES A LEGALFRAMEWORK FOR OPIC'S OPERATIONS IN ARMENIA.  OPIC OFFERS POLITICAL VIOLENCE INSURANCE IN ARMENIA ANDINSURES AGAINST EXPROPRIATION, BUT DOES NOT YET OFFER INSURANCE AGAINSTCURRENCY INCONVERTIBILITY.  ARMENIAHAS ALSO JOINED THE MULTILATERAL INSURANCE AND GUARANTEE AGENCY (MIGA).

 

D. LABOR

 

4O.  ARMENIA'S HUMAN CAPITAL IS ONE OF ITSBEST RESOURCES. THE LABOR FORCE IS HIGHLY EDUCATED AND WELL TRAINED,PARTICULARLY IN ENGINEERING AND TECHNOLOGY.  ALMOST ONE HUNDRED PERCENT OF ARMENIAN'S POPULATION ISLITERATE; 59 PERCENT HAVE COMPLETED SECONDARY SCHOOL, AND 13 PERCENT HAVE AUNIVERSITY DEGREE.

 

41.  THE 1992 LAW ON EMPLOYMENT GUARANTEESEMPLOYEES THE RIGHT TO FORM OR JOIN UNIONS OF THEIR OWN CHOOSING WITHOUTPREVIOUS AUTHORIZATION.  HOWEVER,THE NUMBER AND INFLUENCE OF LABOR UNIONS IS MINIMAL.  THE LAW PROHIBITS FORCED LABOR.  THE STTUTORY MINIMUM AGE FOR EMPLOYMENT IS 16.  A STANARD WORK WEEK CONSISTS OF 40HOURS.  MINIMUM ANNAL PAID LEAVE IS15 WORKING DAYS, ALTHOUGH THE PRDOMINANT PRACTICE IS 24 DAYS.  THE MINIMUM WAGE S SET BY GOVERNMENTALDECREE AND HAS INCREASED PERIODICALLY SINCE 1993.  WAGES ARE NORMALLY PAID BIWEEKLY.  FEMALE EMPLOYEES ARE GRANTED PRIVILEGES THAT INCLUDEPROHIBITIONS AGAINST: HARD AND HAZARDOUS JOBS, NIGHT SHIFT-WORK (IN CERTAINCASES), OVERTIME, WORKING ON HOLIDAYS, AND BUSINESS TRIPS FOR WOMEN WITHCHILDREN UNDER THE AGE OF 2.  THEPROVISIONS ALSO GRANT FROM A MINIMUM OF 140 DAYS TO A MAXIMUM ONE YEARPARTIALLY PAID MATERNITY LEAVE WITH A FURTHER YEAR OF UNPAID LEAVE GUARANTEED;COMPANIES ARE ALSO PROHIBITED FROM FIRING PREGNANT WOMEN AND WOMEN WITHCHILDREN UNDER THE AGE OF 18 MONTHS.

 

42.  THERE IS A SIGNIFICANT SUPPLY OFQUALIFIED SPECIALISTS IN RESEARCH/ENGINEERING AND PRODUCTION IN THE FOLLOWINGSECTORS: ELECTRICAL AND ELECTRONIC COMPONENTS AND DEVICES; ELECTRICALCOMPONENTS AND APPLIANCES; SOFTWARE; ELECTRIC MOTORS AND GENERATORS; OPTICS(INCLUDING SPACE OPTICS); APPAREL PRODUCTION; CHEMISTRY; ARCHITECTURE ANDCONSTRUCTION; JEWELRY; ARTS AND CRAFTS; AND FOOD PROCESSING.

 

E. FOREIGN TRADEZONES/FREE PORTS

 

43.  ARMENIA HAS NO FOREIGN TRADE ZONES ORFREE PORT AT PRESENT.  THEGOVERNMENT ANO THE LOCAL BUSINESS COMMUNITY ARE EXPLORING THE POSSIBILITY OFESTABLISHING SEVERAL INDUSTRIAL PARKS THAT WOULD

INVOLVE ZVARTNOTSINTERNATIONAL AIRPORT AND SUCH EXISTING LARGE ELECTRONICS COMPANIES AS MARS (ALOCAL ELECTRONICS FIRM) OR TRANSISTOR. THE PARKS MAY ALSO ENJOY AN FTZ REGIME IN THE FUTURE.  THE GOVERNMENT IS CURRENTLY EXPLORINGTHE POSSIBILITY OF ESTABLISHING A BONDED WAREHOUSE NEAR GYUMRI IN NORTHERNARMENIA.

 

F. FOREIGN DIRECTINVESTMENT STATISTICS

 

44.  APPROXIMATELY 1,350 PARTIALLY OR FULLYFOREIGN-OWNED COMPANIES ARE REGISTERED IN ARMENIA TODAY.  OVER 70 PERCENT OF THESE ARE INVOLVEDIN TRADING ACTIVITIES.  A NUMBER OFMULTINATIONAL COMPANIES ARE NOW OPERATING IN ARMENIA, INCLUDING COCA-COLA,FIRST DYNASTY MINES, HUNTSMAN, IBM, MARRIOTT INTERNATIONAL, BRISTOL MYERSSQUIBB, PERNOD RICARD, CASTEL, CARITAS, ITALTEL, HSBC, MACMILLAN, SIEMENS,AMYOT EXCO, ARTHUR ANDERSEN, AND KPMG.

 

45.  THE ANNUAL INFLOW OF FOREIGN DIRECTINVESTMENT FROM 1995-1997 RANGED BETWEEN USD 2O MILLION AND USD 51MILLION.  THE MINISTRY OF INDUSTRYAND TRADE ESTIMATES THAT TOTAL DIRECT FOREIGN INVESTMENT IN ARMENIA WAS USD 365MILLION AS OF JANUARY 1999. FOREIGN DIRECT INVESTMENT COMES PRIMARILY FROM THE ARMENIAN DIASPORACOMMUNITIES IN THE U.S., RUSSIA, IRAN, FRANCE, GREECE, THE UK, GERMANY ANDSYRIA.

 

46.  THE GOVERNMENT OF ARMENIA STATED THATFOREIGN INVESTMENT IS UNACCEPTABLY LOW AND DOES NOT APPROACH THE FULL POTENTIALOF AVAILABLE OPPORTUNITIES.  IN1993-1996, THE GOVERNMENT ORGANIZED SEVERAL INTERNATIONAL CONFERENCES(INCLUDING ONE IN LOS ANGELES IN JUNE 1996) TARGETING POTENTIAL INVESTORS.  WHILE THESE EVENTS PRODUCED VERY MODESTRESULTS, CERTAIN ECONOMIC IMPROVEMENTS OBSERVED IN ARMENIA IN 1995-1997 AND ALASTING CEASE-FIRE WITH AZERBAIJAN HAVE RESULTED IN A NOTICEABLE POSITIVECHANGE IN U.S. BUSINESS INTERESTS IN ARMENIA.  AFTER A LONG PERIOD OF HESITATION (199O-1994), DURING WHICHONLY TWO TO FOUR U.S. FIRMS PER YEAR REGISTERED IN ARMENIA, MORE THAN 15 U.S.FIRMS SETTLED HERE IN 1995 ALONE. INTEREST AMONG FOREIGN INVESTORS GREW FURTHER FROM 1996-1999.

 

47.  THE GOVERNMENT CONTINUES TO ORGANIZEINVESTMENT CONFERENCES IN THE U.S. TO GENERATE INTEREST AMONG POTENTIALAMERICAN INVESTORS.  THE ARMENIANDEVELOPMENT AGENCY (ADA), A STATE-RUN INVESTMENT PROMOTION ORGANIZATION, WILLSOON BE RESTRUCTURED TO BECOME A ONE-STOP-SHOP FOR INVESTORS LOCATED DIRECTLYIN THE PRIME MINISTER'S OFFICE.

 

48.  U.S. FIRMS IN ARMENIA HAVE FORMED MANYJOINT VENTURES AND SUBSIDIARIES, THEREBY BRINGING THE TOTAL NUMBER OF U.S.-OWNEDFIRMS TO ABOUT 150. WHILE SUCH MULTINATIONALS AS PROCTER & GAMBLE, M&M-MARS,XEROX, DELL, IBM, AND MANY OTHERS HAVE BEGUN SUPPLYING THE ARMENIAN MARKETSWITH THEIR PRODUCTS, A FEW HIGH-PROFILE INVESTMENT PROJECTS ARE ALSOUNDERWAY.  IN 1997, GREEK-OWNED OTEPURCHASED 90 PERCENT OF ARMENTEL, THE LOCAL TELECOM MONOPOLY FOR USD 79MILLION.  THE CONTRACT OBLIGES OTETO INVEST NO LESS THAN USD 300 MILLION TO DEVELOP ARMENIA'S TELECOMMUNICATIONSSECTOR OVER THE NEXT 10 YEARS.  TWOMAJOR HOTELS, THE ARMENIA AND THE ANI, WERE PRIVATIZED THROUGH INTERNATIONALTENDER IN 1998.  BOTH HOTELS HAVEBEEN PURCHASED BY AMERICAN INVESTORS: THE HOTEL ARMENIA FOR USD 8 MILLION WITHAN INVESTMENT COMMITMENT OF USD 22 MILLION, AND THE HOTEL ANI FOR USD 4 MILLIONWITH AN INVESTMENT COMMITMENT OF USD 11 MILLION.  THE OWNERS OF THE HOTEL ARMENIA CONTRACTED MARRIOTTINTERNATIONAL TO MANAGE THE HOTEL. THE COCA-COLA BOTTLING PLANT BEGAN PRODUCTION IN 1996.  A USD 12 MILLION GOLD PROCESSING PLANTWAS COMMISSIONED BY GLOBAL GOLD AND FIRST DYNASTY MINES (U.S.) IN JANUARY 1998;FUTURE INVESTMENT COULD REACH USD 200 MILLION.  THE AMERICAN ARMENIAN EXPLORATION COMPANY HAS SPENT OVER USD20 MILLION ON OIL AND GAS EXPLORATION. AN AMERICAN-ARMENIAN JOINT VENTURE IS IN THE PROCESS OF UPGRADING ITSWINE AND COGNAC PRODUCTION AT YEREVAN'S ARARAT WINERY.  DIKA LIGHT PURCHASED A LARGE PERLITEMINING AND PROCESSING PLANT IN 1999. A NUMBER OF PROJECTS CONCERNING THE PRODUCTION OF ELECTRONIC COMPONENTS,MACHINE-MADE RUGS, FRUIT JUICE PROCESSING AND PACKAGING, AND THE CONSTRUCTIONOF HYDRO-POWER PLANTS ARE CURRENTLY IN VARIOUS STAGES OF NEGOTIATION.