BISNIS

Remarks by Ambassador Arman Kirakossian

Before I start, let me express our appreciation to BISNIS as well as our colleagues in OPIC, EXIM, and TDA for organizing this event, and for working together with the Armenian Government and private sector to promote business opportunities, commercial ties between the United States and Armenia. What we do together generates jobs, trade, and profits in both countries, and strengthens our bilateral ties.

I also want to thank my Georgian colleague and friend, Ambassador Japaridze, for his excellent presentation. It is symbolic of the future of the South Caucasus region that this roundtable discussion brings the Ambassadors of Armenia and Georgia together to present business opportunities in their countries. The countries of South Caucasus are destined to cooperate in economic and commercial areas, and together they represent a larger market for U.S. products and services and thus provide better opportunities for U.S. exporters than any of them would individually.

I will yet return to the theme of regional integration, but let me first make a few points about the business climate in Armenia, the government's economic policy, and major political and economic developments affecting our region.

Modern Armenia is a strategically important country located at the crossroads of Europe and Asia. One of the few young democracies in this region, Armenia looks back on more than 2,500 years of its history with pride and reflection. Like its neighbor Georgia, the people of Armenia, with their strong sense of national cohesion and identity, can draw upon the lessons of their ancient history for inspiration and guidance as they are establishing a democratic society based on the rule of law and upon a free-market economy anchored firmly within a framework of international trade.

Since independence in 1991, Armenia is laying a foundation for a modern, democratic government and a free market economy. A legal and regulatory framework for private sector development is steadily being put into place. In fact, more than 80% of the GDP is produced in the private sector. An increasing number of private businesses have already changed the economic landscape. The privatization of land is completed, and a land and real estate market is also developing fast. The tax legislation was simplified and overhauled in 2000. Political reforms are under way, and Armenia, with its highly educated and inexpensive labor force, maintains a liberal trade regime, and is on track to become a WTO member in the very near future.

Armenia's achievements in creating an open and investor-friendly economy have been recognized in a joint study by The Wall Street Journal and the Heritage Foundation, issued last November. Armenia, ranks 45th on the list of 166 countries, and is the only CIS country to have a "mostly free" economy, according to this prominent report.

Armenian enterprises offer considerable potential, a technically skilled labor force and nearby export markets. A large scale re-orientation of the economy has taken place in the last decade, and the process is far from over. The Soviet Union left us with a legacy of dependence, with an economy that was well-developed in the context of the Soviet industrial structure and, by default, not adaptable to the international market. We are certainly aware that most of the industries that we have inherited from the past are either obsolete or misplaced, and recognize it as a major problem facing our country today. The free market realities dictate that most investment, domestic and foreign, will be aimed at the sectors which are better suited to the demands of the international market.

Growing exports and foreign investments are helping to increasingly convert Armenian advantages into international profits, as reforms continue to offset the remaining adverse effects of pas economic crises. Aided by the international community, the reforms process continues and, with injections of small investments, Armenian enterprises are now poised to deliver strong, competitive international market performance. Locating and investing strategically in Armenia can help integrate larger FSU clients and markets, especially technology-based ones, into the global market place.

In general, modern-technology based infrastructure investments in which Western multinationals have already signaled an interest are in the area of telecommunications, software engineering, electronics, hotels and tourism, medical diagnostics, food processing, diamond cutting and polishing, and construction and mining. These sectors of the economy absorbed most foreign investment in the last four-five years, and these sectors showed the most growth potential.

One of the advantages Armenia possesses is the presence of the vibrant Armenian communities all over the world, including a million-strong Armenian -American community. The Diaspora has much to offer to Armenia, in terms of entrepreneurial and management skills, and foreign investment, and they have led the way in establishing first successful joint ventures and collaboration with Armenian companies.

The stable political climate, the decade-long reforms, and the rise in economic activity has led to an increase in the economic activity and growth in 2000 and 2001. Last year, the economy grew by 9% while the exports grew by an impressive 14%. The U.S.-Armenian trade has also shown a strong growth trend. In particular, the Armenian exports to the U.S. grew by 40% in January-October 2001, compared to 2000. While the U.S. exports to Armenia did not change much, there is some qualitative change as the U.S.-government-affiliated products are replaced by U.S. private sector exports to Armenia.

At the close of our first decade of independence, Armenia is again at a crossroads. We still have a long way to go to reach the appropriate level of economic prosperity and rule of law. As I see it, Armenia's key objectives are ensuring a robust and sustainable economic development, which can be translated into a rise in the general living standards of our people, and continuing to promote the rule of law and democratic governance

Armenia, in itself, is a small market. Clearly, its future lies in its economic integration within regional and international markets, together with the promotion of free trade, as Armenia's exports are a way to enlarge its domestic markets and strengthen its competitiveness. That's why the Armenian government is committed to continued liberalization and regional integration.

The Armenian and Georgian peoples share a common border, history, and set of values. Armenia's relations with Georgia are excellent, which is a key element of the regional stability in South Caucasus. Our countries have a free trade agreement, and a vibrant economic cooperation. Georgia is Armenia's primary outlet to the sea and a major transit route. A lot of Armenia-bound cargo is unloaded in Black Sea ports of Poti and Batumi and transported by rail to Armenia. Armenia is exporting electricity to Georgia. The wholesale market on the point where the borders of Armenia, Georgia, and Azerbaijan merge in Bagratashen/Sadakhlo area is the largest wholesale retail market in the Caucasus, and is a good example of the commercial activity that transcends political and ethnic boundaries.

Some foreign investors and international financial institutions have already recognized the synergies associated with greater regional cooperation. The European Union, for example, will hold two South Caucasus conferences in our countries in April: the Tbilisi conference is on environment while the IT conference will be held in Yerevan, on April 15-17. I am sure there is serious commercial potential in joint projects in Armenia and Georgia, involving transportation, energy, and construction. It is not difficult to envisage a project generating electricity in Armenia with subsequent exports to Georgia, and, in the future, to Turkey and other neighboring countries as well.

Transportation and transit routes in South Caucasus are an example of the political decisions prevailing over sound economic sense. The Turkish-Armenian border has been closed since 1993, and so the only railroad connecting Turkey with the Caucasus and Central Asia is closed. The Turkish government imposes a number of political conditions on the reopening of this railroad link and the border, despite appeals from international community and its own business establishment. There are major benefits to be shared by all countries in South Caucasus, and even Central Asia, from reopening Kars-Gyumri railroad. Especially in the wake of September 11 terrorist attack and increased U.S. commitment to the stability of Central Asia and our region, there is no reason the railroad should remain closed. And its reopening will not require any major financial resources.

To sum up, there are many areas of the Armenian economy with good investment prospects. I hope that today's presentation will be helpful to you as you consider investing or trading with Armenia. The Embassy can provide you more information on potential investment projects and Armenian products and services. A lot of that information is available on our website, at www.armeniaemb.org. We will also continue to work with BISNIS, OPIC, EXIM, and TDA to foster U.S.-Armenia commercial relations and promote U.S. investments in Armenia.

Thank you.

	AMBASSADOR'S ROUNDTABLE: BUSINESS OPPORTUNITIES IN THE REPUBLIC OF ARMENIA AND THE REPUBLIC OF GEORGIA
	Remarks by Ambassador Arman Kirakossian Before I start, let me express our appreciation to BISNIS as well as our colleagues in OPIC, EXIM, and TDA for organizing this event, and for working together with the Armenian Government and private sector to promote business opportunities, commercial ties between the United States and Armenia. What we do together generates jobs, trade, and profits in both countries, and strengthens our bilateral ties. I also want to thank my Georgian colleague and friend, Ambassador Japaridze, for his excellent presentation. It is symbolic of the future of the South Caucasus region that this roundtable discussion brings the Ambassadors of Armenia and Georgia together to present business opportunities in their countries. The countries of South Caucasus are destined to cooperate in economic and commercial areas, and together they represent a larger market for U.S. products and services and thus provide better opportunities for U.S. exporters than any of them would individually. I will yet return to the theme of regional integration, but let me first make a few points about the business climate in Armenia, the government's economic policy, and major political and economic developments affecting our region. Modern Armenia is a strategically important country located at the crossroads of Europe and Asia. One of the few young democracies in this region, Armenia looks back on more than 2,500 years of its history with pride and reflection. Like its neighbor Georgia, the people of Armenia, with their strong sense of national cohesion and identity, can draw upon the lessons of their ancient history for inspiration and guidance as they are establishing a democratic society based on the rule of law and upon a free-market economy anchored firmly within a framework of international trade. Since independence in 1991, Armenia is laying a foundation for a modern, democratic government and a free market economy. A legal and regulatory framework for private sector development is steadily being put into place. In fact, more than 80% of the GDP is produced in the private sector. An increasing number of private businesses have already changed the economic landscape. The privatization of land is completed, and a land and real estate market is also developing fast. The tax legislation was simplified and overhauled in 2000. Political reforms are under way, and Armenia, with its highly educated and inexpensive labor force, maintains a liberal trade regime, and is on track to become a WTO member in the very near future. Armenia's achievements in creating an open and investor-friendly economy have been recognized in a joint study by The Wall Street Journal and the Heritage Foundation, issued last November. Armenia, ranks 45th on the list of 166 countries, and is the only CIS country to have a "mostly free" economy, according to this prominent report. Armenian enterprises offer considerable potential, a technically skilled labor force and nearby export markets. A large scale re-orientation of the economy has taken place in the last decade, and the process is far from over. The Soviet Union left us with a legacy of dependence, with an economy that was well-developed in the context of the Soviet industrial structure and, by default, not adaptable to the international market. We are certainly aware that most of the industries that we have inherited from the past are either obsolete or misplaced, and recognize it as a major problem facing our country today. The free market realities dictate that most investment, domestic and foreign, will be aimed at the sectors which are better suited to the demands of the international market. Growing exports and foreign investments are helping to increasingly convert Armenian advantages into international profits, as reforms continue to offset the remaining adverse effects of pas economic crises. Aided by the international community, the reforms process continues and, with injections of small investments, Armenian enterprises are now poised to deliver strong, competitive international market performance. Locating and investing strategically in Armenia can help integrate larger FSU clients and markets, especially technology-based ones, into the global market place. In general, modern-technology based infrastructure investments in which Western multinationals have already signaled an interest are in the area of telecommunications, software engineering, electronics, hotels and tourism, medical diagnostics, food processing, diamond cutting and polishing, and construction and mining. These sectors of the economy absorbed most foreign investment in the last four-five years, and these sectors showed the most growth potential. One of the advantages Armenia possesses is the presence of the vibrant Armenian communities all over the world, including a million-strong Armenian -American community. The Diaspora has much to offer to Armenia, in terms of entrepreneurial and management skills, and foreign investment, and they have led the way in establishing first successful joint ventures and collaboration with Armenian companies. The stable political climate, the decade-long reforms, and the rise in economic activity has led to an increase in the economic activity and growth in 2000 and 2001. Last year, the economy grew by 9% while the exports grew by an impressive 14%. The U.S.-Armenian trade has also shown a strong growth trend. In particular, the Armenian exports to the U.S. grew by 40% in January-October 2001, compared to 2000. While the U.S. exports to Armenia did not change much, there is some qualitative change as the U.S.-government-affiliated products are replaced by U.S. private sector exports to Armenia. At the close of our first decade of independence, Armenia is again at a crossroads. We still have a long way to go to reach the appropriate level of economic prosperity and rule of law. As I see it, Armenia's key objectives are ensuring a robust and sustainable economic development, which can be translated into a rise in the general living standards of our people, and continuing to promote the rule of law and democratic governance Armenia, in itself, is a small market. Clearly, its future lies in its economic integration within regional and international markets, together with the promotion of free trade, as Armenia's exports are a way to enlarge its domestic markets and strengthen its competitiveness. That's why the Armenian government is committed to continued liberalization and regional integration. The Armenian and Georgian peoples share a common border, history, and set of values. Armenia's relations with Georgia are excellent, which is a key element of the regional stability in South Caucasus. Our countries have a free trade agreement, and a vibrant economic cooperation. Georgia is Armenia's primary outlet to the sea and a major transit route. A lot of Armenia-bound cargo is unloaded in Black Sea ports of Poti and Batumi and transported by rail to Armenia. Armenia is exporting electricity to Georgia. The wholesale market on the point where the borders of Armenia, Georgia, and Azerbaijan merge in Bagratashen/Sadakhlo area is the largest wholesale retail market in the Caucasus, and is a good example of the commercial activity that transcends political and ethnic boundaries. Some foreign investors and international financial institutions have already recognized the synergies associated with greater regional cooperation. The European Union, for example, will hold two South Caucasus conferences in our countries in April: the Tbilisi conference is on environment while the IT conference will be held in Yerevan, on April 15-17. I am sure there is serious commercial potential in joint projects in Armenia and Georgia, involving transportation, energy, and construction. It is not difficult to envisage a project generating electricity in Armenia with subsequent exports to Georgia, and, in the future, to Turkey and other neighboring countries as well. Transportation and transit routes in South Caucasus are an example of the political decisions prevailing over sound economic sense. The Turkish-Armenian border has been closed since 1993, and so the only railroad connecting Turkey with the Caucasus and Central Asia is closed. The Turkish government imposes a number of political conditions on the reopening of this railroad link and the border, despite appeals from international community and its own business establishment. There are major benefits to be shared by all countries in South Caucasus, and even Central Asia, from reopening Kars-Gyumri railroad. Especially in the wake of September 11 terrorist attack and increased U.S. commitment to the stability of Central Asia and our region, there is no reason the railroad should remain closed. And its reopening will not require any major financial resources. To sum up, there are many areas of the Armenian economy with good investment prospects. I hope that today's presentation will be helpful to you as you consider investing or trading with Armenia. The Embassy can provide you more information on potential investment projects and Armenian products and services. A lot of that information is available on our website, at www.armeniaemb.org. We will also continue to work with BISNIS, OPIC, EXIM, and TDA to foster U.S.-Armenia commercial relations and promote U.S. investments in Armenia. Thank you.