ARMENIA: INVESTMENT CLIMATE STATEMENT
6 SEPTEMBER1999
SOURCE: US EMBASSY YEREVAN
1. SUMMARY. THIS IS CABLE CONTAINS POST'S ANNUAL UPDATE OF OUR INVESTMENT CLIMATE STATEMENT. THE STATEMENT INCLUDES THE FOLLOWING SECTIONS:
A.1. OPENNESS TO FOREIGN INVESTMENT
A.2. CONVERSION AND TRANSFER POLICIES
A.3. EXPROPRIATION AND COMPENSATION
A.4. DISPUTE SETTLEMENT
A.5. PERFORMANCE REQUIREMENTS / INCENTIVES
A.6. RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT
A.7. PROTECTION OF PROPERTY RIGHTS
A.8. TRANSPARENCY OF THE REGULATORY SYSTEM
A.9. EFFICIENT CAPITAL MARKETS AND PORTFOLIO
INVESTMENT
A.10.POLITICAL VIOLENCE
A.11.CORRUPTION
B. BILATERAL INVESTMENT AGREEMENTS
C. OPIC AND OTHER INVESTMENT INSURANCE
D. LABOR
E. FOREIGN TRADE ZONES/FREE PORTS
F. FOREIGN DIRECT INVESTMENT STATISTICS
END SUMMARY.
A.1. OPENNESS TO FOREIGN INVESTMENT
2. ARMENIAN'S INVESTMENT AND TRADE POLICY IS AMONG THE MOST OPEN IN THE CIS. WITH AN ECONOMY THAT LARGELY DEPENDS ON FOREIGN TRADE, THE ARMENIAN GOVERNMENT MAKES SIGNIFICANT EFFORTS TO ATTRACT FOREIGN INVESTMENT. FOREIGN COMPANIES ARE ENCOURAGED TO INVEST AND ARE ENTITLED BY LAW TO THE SAME TREATMENT AS LOCAL COMPANIES (NATIONAL TREATMENT).
3. BASIC PROVISIONS REGULATING THE INVESTMENT CLIMATE ARE SET BY THE BILATERAL INVESTMENT TREATY (BIT), SIGNED BY THE UNITED STATES AND ARMENIA ON SEPTEMBER 23, 1992, AND BY THE LAW ON FOREIGN INVESTMENT ADOPTED BY ARMENIA ON JULY 31, 1994. UNDER THE TERM "FOREIGN INVESTOR," THE LAW RECOGNIZES ANY FOREIGN COMPANY OR CITIZEN, A PERSON WITHOUT CITIZENSHIP, AN ARMENIAN CITIZEN PERMANENTLY RESIDING OUTSIDE OF ARMENIA, OR AN INTERNATIONAL ORGANIZATION THAT INVESTS IN ARMENIA.
"FOREIGN INVESTMENT" IS ANY FORM OF PROPERTY, INCLUDING FINANCIAL MEANS AND INTELLECTUAL PROPERTY, THAT IS INVESTED BY A FOREIGN INVESTOR DIRECTLY IN THE TERRITORY OF ARMENIA IN ANY ECONOMIC OR OTHER VENTURE.
A "FOREIGN INVESTMENT COMPANY" IS A COMPANY OF ANY LEGAL FORM RECOGNIZED UNDER ARMENIAN LAW THAT IS FOUNDED BY A FOREIGN INVESTOR OR IN WHICH HE IS A PARTICIPANT.
4. FOREIGN INVESTORS ARE ALLOWED TO MAKE THE FOLLOWING TYPES OF INVESTMENTS IN ARMENA:
- WORLD CURRENCIES (INCLUDING THE ARMENIAN DRAM)
- REAL ESTATE, OTHER PROPERTY AND RELATED PROPERTY RIGHTS (EXCEPT FOR THE RIGHT TO OWN LAND) SECURITIES
- MONEY ORDERS OR OTHER ORDERS FOR THE IMPLEMENTATION OF OBLIGATIONS/AGREEMENTS THAT HAVE A DEFINED VALUE
- ANY FORM OF INTELLECTUAL PROPERTY RIGHTS
- THE RIGHT TO CONDUCT ANY ECONOMIC ACTIVITY SPECIFIED
BY LEGISLATION OR BY AN AGREEMENT WITH THE REPUBLIC OF
ARMENIA
- PAID SERVICES
- OTHER TYPES OF INVESTMENT ALLOWED BY ARMENIAN LEGISLATION.
5. TYPES OF COMPANIES THAT CAN E ESTABLISHED IN ARMENIA ARE DESCRIBED IN THE 192 LAW ON ENTERPRISES AND ENTREPRENEURIAL ACTIVITY AND THE 1996 JOINT STOCK COMPANY LAW. THE FOLLOWING LEGAL FORMS MAY BE USED BY FOREIGN INVESTOR TO MAKE INVESTMENTS IN ARMENIA:
(A) ESTABLISHMENT OF FULLY FOREIGN-OWNED COMPANIES (INCLUDING REPRESENTATIONS, AFFILIATES, AND BRANCHES), OR THE PURCHASE OF EXISTING COMPANIES
(B) ESTABLISHMENT OF NEW JOINT-VENTURE COMPANIES WITH THE PARTICIPATION OF ARMENIAN COMPANIES OR CITIZENS, OR THE PURCHASE OF A PORTION OF SHARES IN AN EXISTING COMPANY
(C) PURCHASE OF DIFFERENT TYPES OF SECURITIES OFFICIALLY RECOGNIZED BY ARMENIAN LEGISLATION
(D) PROCUREMENT OF PERMISSION TO USE LAND, OR A CONCESSION AGREEMENT FOR THE USE OF ARMENIAN NATURAL RESOURCES WITH THE PARTICIPATION OF AN ARMENIAN COMPANY OR ARMENIAN CITIZENS
(E) PROCUREMENT OF OTHER PROPERTY RIGHTS
(F) OTHER ALLOWED FORMS INCLUDING THOSE BASED ON AGREEMENTS WITH ARMENIAN COMPANIES OR CITIZENS.
6. FOREIGN INVESTORS ARE RESPONSIBLE FOR ANY VIOLATION OF ARMENIAN LAWS AND REGULATIONS BY THEIR COMPANIES. FOREIGN INVESTORS CAN USE THEIR PROPERTY TO SATISFY THEIR OBLIGATIONS IN ACCORDANCE WITH THESE
RESPONSIBILITIES.
7. ARMENIA IS A MEMBER 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 THE BLACK SEA ECONOMIC COOPERATION.
NEGOTIATIONS ARE UNDERWAY TO BECOME A FULL MEMBER OF THE WTO (WORLD TRADE ORGANIZATION).
A.2. CONVERSION AND TRANSFER POLICIES
8. IN 1994-1995, ARMENIA LIFTED PRACTICALLY ALL LIMITATIONS ON THE CONVERSION AND TRANSFER OF FUNDS. THIS CAN NOW BE ACCOMPLISHED THROUGH HSBC (FORMERLY MIDLAND ARMENIA) AS WELL AS THROUGH DOMESTIC FINANCIAL INSTITUTIONS. THE GOVERNMENT OF ARMENIA MAINTAINS A FREELY CONVERTIBLE CURRENCY, THE ARMENIAN DRAM, UNDER A MANAGED FLOAT. THERE ARE NO RESTRICTIONS ON THE CONVERSION OR REPATRIATION OF CAPITAL AND EARNINGS, INCLUDING BRANCH PROFITS, DIVIDENDS, INTEREST, ROYALTIES, OR MANAGEMENT OR TECHNICAL SERVICE FEES.
MOST BANKS CAN TRANSFER FUNDS INTERNATIONALLY WITHIN 2-4 DAYS. NEAR INSTANTANEOUS TRANSFERS ARE AVAILABLE THROUGH WESTERN UNION, WHICH HAS BEEN OPERATING IN ARMENIA SINCE 1996.
9. COMPANIES IN ARMENIA MAY CONVERT CURRENCY THROUGH LOCAL BANKS WITH NO RESTRICTIONS. THEY CAN OPEN HARD CURRENCY ACCOUNTS IN ARMENIAN OR FOREIGN BANKS. THERE ARE NO LIMITATIONS ON WIRE TRANSFERS. CASH EXPORTS ARE LIMITED TO USD 10,000 OR ITS EQUIVALENT. FOREIGN INVESTORS CAN FREELY REPATRIATE THEIR PROPERTY, PROFITS, OR OTHER ASSETS THAT RESULT FROM THEIR INVESTMENT AFTER ALL DUE TAXES (E.G., PROFIT TAX, VAT, EXCISE TAX) ARE PAID.
A.3. EXPROPRIATION AND COMPENSATION
10. THE CONSTITUTION OF ARMENIA PROTECTS ALL FORMS OF PROPERTY (INCLUDING PRIVATE PROPERTY) AND THE RIGHT OF CITIZENS TO OWN AND USE PROPERTY. ACCORDING TO THE FOREIGN INVESTMENT LAW, IN THE EVENT OF A CHANGE IN LEGISLATION, FOREIGN INVESTMENTS, IN ACCORDANCE WITH
THE INVESTOR'S PREFERENCE, MAY BE SUBJECT TO THE LAWS EXISTING AT THE TIME WHEN THE INVESTMENTS WERE MADE, FOR A PERIOD OF UP TO 5 YEARS. FOREIGN INVESTMENTS CANNOT BE NATIONALIZED; THEY ALSO CANNOT BE CONFISCATED OR EXPROPRIATED EXCEPT IN EXTREME CASES OF A NATURAL OR STATE EMERGENCY, UPON A DECISION BY THE COURTS AND WITH FULL MANDATORY COMPENSATION.
A.4. DISPUTE SETTLEMENT
11. ACCORDING TO THE FOREIGN INVESTMENT LAW OF 1994, ALL DISPUTES THAT ARISE BETWEEN A FOREIGN INVESTOR AND THE REPUBLIC OF ARMENIA MUST BE SETTLED IN ARMENIAN COURTS. ALL OTHER DISPUTES TO WHICH THE ARMENIAN GOVERNMENT IS NOT A PARTY CAN BE CONSIDERED BY THE ARMENIAN COURTS OR OTHER BODIES ENTITLED TO SETTLE ECONOMIC DISPUTES, OR BY INTERMEDIARY COURTS, UNLESS OTHERWISE PROVIDED FOR BY INTERNATIONAL LAW OR BY PRELIMINARY AGREEMENTS OF THE PARTIES INVOLVED. THE BILATERAL INVESTMENT TREATY (BIT), HOWEVER, PROVIDES THAT IN THE CASE OF A DISPUTE THAT ARISES BETWEEN AN AMERICAN INVESTOR AND THE REPUBLIC OF ARMENIA, THE INVESTOR MAY CHOOSE TO SUBMIT THE DISPUTE FOR SETTLEMENT BY BINDING INTERNATIONAL ARBITRATION.
12. LEGISLATION: THE PROVISIONS GOVERNING THE RESOLUTION OF COMMERCIAL AND OTHER DISPUTES ARE CONTAINED IN THE CIVIL CODE, THE CIVIL PROCEDURES CODE, THE LAW ON ARBITRATION COURT AND ARBITRATION
PROCEDURES, AND THE LAW ON ENFORCEMENT OF COURT VERDICTS AND DECISIONS.
13. MECHANISMS: EFFECTIVE JANUARY 1999, COMMERCIAL DISPUTES CAN BE RESOLVED EITHER IN STATE COURTS OR THROUGH ALTERNATIVE DISPUTE RESOLUTION MECHANISMS. ANY COURT OF FIRST INSTANCE CAN RULE ON CASES INVOLVING COMMERCIAL OR ECONOMIC DISPUTES. THE VERDICT OF A COURT OF FIRST INSTANCE CAN BE APPEALED TO THE COURT OF APPEALS. THE COURT OF APPEALS VERDICT CAN BE APPEALED TO THE COURT OF CASSATION, WHICH IS THE SUPREME COURT OF ARMENIA. AN ARBITRATION SERVICE HAS BEEN FORMED FOR INDEPENDENT DISPUTE RESOLUTION.
14. THE LAW ON ARBITRATION COURTS AND ARBITRATION PROCEDURES ALLOWS ANY LEGAL ENTITY FUNCTIONING IN ARMENIA TO SETTLE A COMMERCIAL OR PROPERTY-RELATED DISPUTE OUTSIDE THE COURT SYSTEM THROUGH INSTITUTIONAL OR AD-HOC PANELS. THE LAW RECOGNIZES THAT SUCH BUSINESS AND COMMERCIAL ORGANIZATIONS AS CHAMBERS 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 SETTLE THE DISPUTE IN THIS MANNER. ALTERNATIVELY, THE TWO ENTITIES MAY SPECIFICALLY WRITE INTO THEIR CONTRACT THAT ANY DISPUTE BETWEEN THEM SHOULD BE SETTLED BY AN AD-HOC ARBITRATION PANEL. IN THE EVENT OF A DISPUTE, EACH PARTY NOMINATES A MEMBER OF THE ARBITRATION PANEL. THE TWO PANELISTS, IN TURN, SELECT A THIRD PANELIST. THE DECISION OF THE ARBITRATION PANEL IS FINAL AND MAY BE REVOKED BY A COURT OF FIRST INSTANCE ONLY IF THE COURT FINDS THAT LEGAL PROCEDURES WERE NOT PROPERLY OBSERVED.
15. IF ONE SIDE FAILS TO IMPLEMENT THE VERDICT OF THE ARBITRATION PANEL, THE OTHER MAY APPEAL TO A STATE COURT WITH A REQUEST TO ENFORCE THE DECISION. AFTER THE COURT OF FIRST INSTANCE REVIEWS THE CASE TO ENSURE THAT PANEL PROCEDURES WERE PROPERLY FOLLOWED, IT MAY ISSUE A COURT ORDER TO A MARSHAL MANDATING ENFORCEMENT OF THE DECISION. MARSHALS ARE EMPLOYED BY THE MINISTRY OF JUSTICE.
16. ALTHOUGH ARMENIAN COURTS ARE STILL SUBJECT TO POLITICAL PRESSURE FROM BOTH THE EXECUTIVE AND LEGISLATIVE BRANCHES, THEY ARE BECOMING INCREASINGLY INDEPENDENT. THE MINISTRY OF JUSTICE WILL GRADUALLY LIMIT ITS INVOLVEMENT IN CIVIL CASES BY 2001. ARMENIA WILL SOON SIGN THE INTERNATIONAL CONVENTION ON INVESTMENT DISPUTES AND BECOME A MEMBER OF THE INTERNATIONAL CENTER FOR THE SETTLEMENT OF INVESTMENT DISPUTES (ICSID).
17. OTHER ASSISTANCE: FOR MORE INFORMATION CONTACT:
MINISTRY OF JUSTICE (MINISTER - MR. DAVID HARUTYUNIAN)
8 KHORHRDARANI STREET, YEREVAN 375010
TEL: (374-2) 582-157; FAX: (374-2) 582-449
ECONOMIC COURT, 18 PARONYAN STREET, YEREVAN 375015;
TEL: (374-2) 532-411; FAX: (374-2) 582-449
MINISTRY OF INDUSTRY AND TRADE. INFORMATION CENTER
5 HANRAPETUTYAN ST., YEREVAN-10: TEL: (3742) 538-082, FAX: (3742) 588-321, 151-081.
A.5. PERFORMANCE REQUIREMENTS / INCENTIVES
18. FOREIGN INVESTMENT COMPANIES PAY TAXES AND ARE SUBJECT TO SIMILAR TAX PRIVILEGES AS ARMENIAN COMPANIES. SPECIFIC PRIVILEGES APPLY TO CORPORATE TAXATION IF FOREIGN INVESTMENT IN A COMPANY EXCEEDS ONE MILLION DOLLARS. NO LIMITATION ON FOREIGN OWNERSHIP, THE NUMBER OF FOREIGN EMPLOYEES, ACCESS TO FINANCIAL SOURCES, OR OTHER DISCRIMINATION IS IMPOSED.
19. ARMENIA CURRENTLY HAS NO GENERALIZED INVESTMENT INCENTIVE PROGRAMS OTHER THAN INCENTIVES AVAILABLE TO EXPORTERS (NO EXPORT DUTY; VAT REFUND ON GOODS AND SERVICES EXPORTED), INCOME TAX HOLIDAYS, AND THE ABILITY TO INDEFINITELY CARRY FORWARD LOSSES. HOWEVER, IN ACCORDANCE WITH THE LAW ON FOREIGN INVESTMENT, SEVERAL AD HOC INCENTIVES MAY BE NEGOTIATED ON A CASE-BY-CASE BASIS FOR INVESTMENTS TARGETED AT CERTAIN SECTORS OF THE ECONOMY AND/OR OF STRATEGIC IMPORTANCE TO THE ECONOMY.
20. FOREIGN INVESTMENT INCENTIVES:
OWNERSHIP: 100 PERCENT OWNERSHIP PERMITTED
ADMISSION: NO SCREENING AND NO SPECIFIC
APPROVAL/AUTHORIZATION FOR
INVESTMENT ENTRY
LAND ACCESS: LONG-TERM LEASES ARE FREELY PERMITTED
TAX HOLIDAYS: AVAILABLE FOR FOREIGN INVESTMENTS OVER USD 1 MILLION
IMPORT DUTY: NO DUTIES ON STATUTORY CAPITAL AND RAW MATERIALS
EXPORT DUTY: NONE
VAT ON EXPORT: REFUND IS PROVIDED
INCOME TAX: NO SPECIAL INCENTIVES OR EXEMPTIONS
CORPORATE TAX: HOLIDAYS FOR INVESTMENT OVER USD 1 MILLION
LOSSES: LOSSES MAY BE CARRIED FORWARD INDEFINITELY
EXCHANGE CONTROL: FREE OPERATION OF FOREIGN CURRENCY ACCOUNTS
REMITTANCE: NO RESTRICTIONS ON REMITTANCES
STAFF RECRUITMENT: NO RESTRICTIONS
LOCATION: NO SECTORAL OR GEOGRAPHICAL RESTRICTIONS ON INVESTMENT. SOME INCENTIVES FOR THE EARTHQUAKE
ZONE, MOUNTAINOUS RURAL AREAS, AND CERTAIN RURAL AREAS LOCATED ALONG THE BORDER.
SECTORAL: NEGOTIABLE
INVESTMENT
GUARANTEES: 5 YEAR PROTECTION CLAUSE, 17 BILATERAL TREATIES, AND MEMBERSHIP IN MIGA
DISPUTE RESOLUTION: ICSID SIGNATORY (RATIFICATION BY THE ARMENIAN PARLIAMENT IS ANTICIPATED).
A.6. RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT
21. FOREIGN INVESTORS HAVE THE RIGHT TO PRIVATE OWNERSHIP AND THE ESTABLISHMENT OF BUSINESS ENTERPRISES IN ARMENIA. ALTHOUGH FOREIGNERS HAVE NO RIGHT TO OWN LAND (THEY CAN ONLY LEASE IT), A COMPANY REGISTERED BY A FOREIGNER IN ARMENIA AS AN ARMENIAN BUSINESS ENTITY HAS THE RIGHT TO BUY LAND. FOREIGNERS HAVE THE RIGHT TO OWN ALL OTHER TYPES OF PROPERTY AND HAVE RIGHTS EQUAL TO ARMENIAN CITIZENS TO ESTABLISH DIFFERENT TYPES OF COMPANIES. EXPLOITATION OF NATURAL RESOURCES IS TO BE MADE ONLY WITH A CONCESSION AGREEMENT SIGNED BY THE GOVERNMENT OF ARMENIA.
A.7. PROTECTION OF PROPERTY RIGHTS
22. THE RIGHT OF CITIZENS TO OWN PROPERTY IS PROTECTED BY THE CONSTITUTION. THE NEW CIVIL CODE EXPLICITLY DEFINES OWNERSHIP ANO OTHER PROPERTY RIGHTS. THE LAW ON PROPERTY REGISTRATION, WHICH WAS
AOOPTED IN APRIL 1999, REGULATES ISSUES RELATED TO THE REGISTRATION OF PROPERTY RIGHTS ACCORDING TO THE NEW CIVIL CODE. PROPERTY RIGHTS OF U.S. BUSINESSES IN ARMENIA ARE PROTECTED BY THE LAW ON PROPERTY, THE 1992 TRADE AGREEMENT BETWEEN THE U.S. AND ARMENIA (DESCRIBED BELOW), THE BILATERAL INVESTMENT TREATY, AND THE FOREIGN INVESTMENT LAW. ACCORDING TO THE FOREIGN INVESTMENT LAW, FOREIGN INVESTMENTS CANNOT BE NATIONALIZED OR CONFISCATED. INVESTORS MUST BE FULLY COMPENSATED FOR ANY CONFISCATION RESULTING FROM A STATE OF EMERGENCY.
23. AN AGREEMENT ON TRAOE RELATIONS BETWEEN ARMENIA AND THE UNITED STATES SIGNED IN 1992 STATES THAT BOTH PARTIES SHALL ENSURE THAT DOMESTIC LEGISLATION PROVIDES FOR THE PROTECTION OF INTELLECTUAL PROPERTY RIGHTS ON LITERARY, SCIENTIFIC AND ARTISTIC WORKS (INCLUDING COMPUTER PROGRAMS AND DATA BASES), PATENTS AND OTHER RIGHTS ON INVENTIONS, INDUSTRIAL DESIGN, KNOW-HOW, TRADE SECRETS, TRAOEMARKS, AND SERVICE-MARKS. THE AGREEMENT ALSO INCLUDES PROTECTION AGAINST UNFAIR COMPETITION. THOUGH INTELLECTUAL PROPERTY RIGHTS LEGISLATION HAS BEEN ADOPTED, ENFORCEMENT MECHANISMS ARE STILL WEAK. PIRACY OF LITERARY, VIDEO, AUDIO, AND SOFTWARE MATERIALS IS WIDESPREAD AND POORLY CONTROLLED. ENFORCEMENT MECHANISMS WILL LIKELY BE STRENGTHENED AS ARMENIA PROGRESSES TOWARD WTO ACCESSION.
A.8. TRANSPARENCY OF THE REGULATORY SYSTEM
24. THE ARMENIAN REGULATORY SYSTEM PERTAINING TO BUSINESS ACTIVITIES, THOUGH ONE OF MOST DEVELOPED IN NIS, STILL LACKS TRANSPARENCY. INCOMPLETE LAWS AND STATE CONTROLLED ACTIVITIES HAVE LEAD TO A SITUATION WHERE CERTAIN SECTORS, THOUGH OFFICIALLY OPEN, MAINTAIN NEAR MONOPOLIES THAT ARE DIFFICULT TO BREAK (E.G., THE AVIATION AND TELECOMMUNICATIONS SECTORS). THE LACK OF A LEGAL INFRASTRUCTURE TO FIGHT THE SHADOW ECONOMY, ESPECIALLY IN THE AREA OF TRADE, OFTEN UNDERMINES FAIR COMPETITION. CHANGES IN LEGISLATION ARE ONLY RARELY ANNOUNCED OR PUBLICLY DISCLOSED BEFORE IMPLEMENTATION. ARMENIA RECENTLY CREATED AN INDEPENDENT ENERGY REGULATORY COMMISSION AND PLANS TO CREATE AN INDEPENDENT SECURITIES AND EXCHANGE COMMISSION IN THE COMING YEAR.
25. LABOR, SAFETY AND HEALTH REQUIREMENTS, MOSTLY REMAINING FROM THE SOVIET PERIOD, GENERALLY DO NOT IMPEDE INVESTMENT ACTIVITIES. ALTHOUGH THE COUNTRY'S TAX AND ACCOUNTING SYSTEMS ARE BASED ON SOVIET-STYLE MODELS, ARMENIA IS SLOWLY IMPLEMENTING INTERNATIONAL ACCOUNTING STANDARDS. THE LAW PROVIDES TAX INCENTIVES AND FACILITATES TAX REPORTING FOR FOREIGN-OWNED FIRMS AND JOINT VENTURES. BUREAUCRATIC PROCEOURES CAN BE BURDENSOME AND TIME CONSUMING WHEN AN INVESTOR NEGOTIATES A CONTRACT WITH THE ARMENIAN GOVERNMENT, AS THE CONTRACT MAY REQUIRE APPROVAL BY SEVERAL MINISTRIES.
26. KEY BUSINESS LAWS AND REGULATIONS AFFECTING THE BUSINESS ENVIRONMENT:
01/22/90 LAW ON FARMS AND COLLECTIVE FARMS (AMENDED 3/30/92)
10/31/90 LAW ON OWNERSHIP IN THE REPUBLIC OF ARMENIA
01/29/91 LAND CODE
03/14/92 LAW ON ENTERPRISES AND ENTREPRENEURIAL ACTIVITY
03/19/92 LITHOSPHERE CODE
03/02/93 WATER CODE
06/29/93 LAW ON THE PRIVATIZATION OF STATE AND PUBLIC HOUSING STOCK
O8/21/93 LAW ON PATENTS
O8/27/93 CUSTOMS CODE
08/31/93 LAW ON COMMODITIES EXCHANGE
09/02/93 LAW ON THE STATE REGISTER OF ENTERPRISES
O9/08/93 LAW ON THE CIRCULATION OF SECURITIES
12/27/93 INDIVIDUAL BUSINESSMEN LAW
04/27/94 LAW ON LAND TAX
06/17/94 LAW ON THE STATUS OF FOREIGN CITIZENS
07/31/94 FOREIGN INVESTMENT LAW
O5/19/95 BASIC PRINCIPLES FOR RETAIL TRADE
06/15/95 BANKRUPTCY LAW
11/15/95 MORTGAGE LAW
04/3O/96 ADVERTISEMENT LAW
04/30/96 JOINT STOCK COMPANY LAW
05/13/96 COPYRIGHT LAW
06/11/96 LAW ON STATE DUTIES
06/29/96 BANK BANKRUPTCY LAW
06/30/96 LAW ON THE CENTRAL BANK
06/3O/96 LAW ON BANKS AND BANKING ACTIVITIES
11/19/96 INSURANCE LAW
O5/12/97 LAW ON CUSTOMS DUTIES
05/12/97 LAW ON TAXES
05/27/97 STANDARDIZATION AND CERTIFICATION LAW
06/10/97 LAW ON TRADEMARKS
06/10/97 LAW ON BRAND NAMES
06/15/97 LAW ON VALUE ADDED TAX
06/24/97 LAW ON EXCISE TAX
07/19/97 LAW ON DUTIES
11/27/97 LAW ON PROFIT TAX
12/10/97 LAW ON THE PRIVATIZATION AND DENATIONALIZATION OF STATE OWNED ENTERPRISES AND UNFINISHED CONSTRUCTION PROJECTS
(PERIODICALLY AMENDED)
12/27/97 LAW ON INCOME TAX
12/27/97 LAW ON STATE DUTIES
12/27/97 LAW ON PROPERTY TAX
02/03/98 LAW ON TAX PRIVILEGES FOR ENERGY SECTOR ENTERPRISES
02/03/98 LAW ON INTELLECTUAL PROPERTY PROTECTION FOR MICROCHIP TECHNOLOGIES
02/03/98 LAW ON TRANSPORTATION
02/I7/98 LAW ON TELECOMMUNICATIONS
03/18/98 LAW ON TAX PRIVILEGES FOR STATE PROCUREMENT, CLEARING SHIPMENTS, AND GOODS AND SERVICES PROVIDED UNDER INTER-GOVERNMENTAL AGREEMENTS
05/05/98 LAW ON ARBITRATION AND ARBITRATION COURTS
05/19/98 LAW ON ACCOUNTING RECORDS
06/17/98 LAW ON ADOPTING A NEW CIVIL COOE
12/15/98 LAW ON CUSTOMS DUTIES
12/28/98 LAW ON ENVIRONMENTAL PROTECTION AND PAYMENTS FOR ENVIRONMENTAL DAMAGE
12/28/98 LAW ON CUSTOMS FEES
04/14/99 LAW ON PROPERTY REGISTRATION
A.9. EFFICIENT CAPITAL MARKETS AND PORTFOLIO
INVESTMENT
27. CURRENT POLICIES DO NOT RESTRICT THE FLOW OF CAPITAL RESOURCES IN PRODUCT ANO FACTOR MARKETS. CREDIT IS ALLOCATED ON MARKET TERMS WITH ANNUAL INTEREST RATES AT ABOUT 50 PERCENT AS OF AUGUST 1999. CREDIT IS MOSTLY LIMITEO TO HIGH-INTEREST, SHORT-TERM COMMERCIAL LENDING FROM LOCAL BANKS AND OTHER SUBSIDIZED PROGRAMS ESTABLISHED BY INTERNATIONAL FINANCIAL INSTITUTIONS 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 THESE INSTRUMENTS ARE JUST STARTING TO ENTER INTO CIRCULATION. PREVIOUSLY, SHARE REGISTRIES WERE KEPT THE BY ISSUING CORPORATIONS THEMSELVES. ON APRIL 1997, THE GOVERNMENT PASSED A RESOLUTION REQUIRING ALL CORPORATIONS WITH MORE THAN 50 SHAREHOLDERS TO KEEP THEIR REGISTRIES WITH THE NATIONAL SHARE REGISTRY. NO RESTRICTIONS EXIST FOR FOREIGN INVESTORS TO INVEST IN EXISTING COMPANIES AND
CORPORATIONS. NO REGULATIONS EXIST THAT WOULD LIMIT OR PROHIBIT FOREIGN INVESTMENT, PARTICIPATION, OR CONTROL AT THE TIME OF INCORPORATION. A NEW COMPREHENSIVE REFORM EFFORT IS UNDERWAY TO CREATE CAPITAL MARKET MECHANISMS OVER THE NEXT TWO YEARS.
28. THE PRIVATE BANKING SYSTEM IS DEVELOPING INTO A STRUCTURE THAT WILL ALLOW ONLY RELATIVELY STRONG AND SOLVENT BANKS TO FUNCTION. THE INTRODUCTION OF STRICTER REGULATIONS IN 1995 LED TO A PROCESS OF BANK CONSOLIDATION AND A REDUCTION IN THE NUMBER OF BANKS. THE REQUIRED LEVEL OF BANK CAPITALIZATION IS GRADUALLY INCREASING, WITH A MINIMUM REQUIREMENT OF USD 1 MILLION IN 1999. AT THE END OF 1998, TOTAL ASSETS OF ALL BANKS IN ARMENIA WERE LESS THAN USD 300 MILLION. IMF ASSISTANCE HAS HELPED TO ESTABLISH REGULAR AUDITS AND COMPETENT CENTRAL BANK SUPERVISION. AFTER CONSOLIDATION, A CORE OF 15-25 SOLID BANKS IS PREDICTED. SINCE THE ADOPTION OF THE LAW ON BANK BANKRUPTCY IN 1996, THE GOVERNMENT'S ROLE IN THE MANAGEMENT OF MAJOR BANKS AND ITS ABILITY TO BAIL OUT BANKS HAS BEEN LIMITED. THE GOVERNMENT'S ONLY OWNERSHIP IN THE COMMERCIAL BANKING SECTOR INCLUDES A 100 PERCENT STAKE IN THE SAVINGS BANK AND 28 PERCENT OWNERSHIP OF ARDSHINBANK (A SOVIET-ERA BANK OF INDUSTRY AND CONSTRUCTION).
A.10. POLITICAL VIOLENCE
29. NO INCIDENT INVOLVING POLITICALLY MOTIVATED 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 EXPERIENCED AN INFLUX OF RESIDENTS FROM NEIGHBORING IRAN, MAINLY FOR TRADING PURPOSES; THAT INFLUX IS CURRENTLY DECLINING. NO INCIDENTS INVOLVING IRANIAN CITIZENS DIRECTED AGAINST U.S. OR OTHER BUSINESSES HAVE OCCURRED.
A.11. CORRUPTION
30. ARMENIA HAS INHERITED THE CORRUPT PRACTICES THAT WERE COMMON THROUGHOUT THE USSR. FACTORS SUCH AS THE KARABAKH WAR OF 1989-1993, THE CORRESPONDING SHARP DECREASE IN ECONOMIC ACTIVITY ANO REAL INCOME OF THE POPULATION, A FAST GROWING GAP BETWEEN RICH AND POOR, THE PREDOMINANT USE OF CASH IN THE ECONOMY, FLAWS IN NEWLY ADOPTED LAWS, AND THE ABSENCE OF EFFECTIVE LAW ENFORCEMENT MECHANISMS HAVE AGGRAVATED THE SITUATION. IN LATE 1996, THE ARMENIAN GOVERNMENT OPENLY ADMITTED THAT CORRUPTION HAD GROWN BEYOND PREVIOUS LIMITS AND HAD BECOME A MAJOR PROBLEM. THE GOVERNMENT HAS SINCE TAKEN SOME ANTI-CORRUPTION STEPS. A NUMBER OF SENIOR GOVERNMENT OFFICIALS HAVE BEEN ARRESTED FOR ALLEGED CORRUPTION AND ARE CURRENTLY UNDER INVESTIGATION. ALSO, MANY HIGH RANKING OFFICIALS IN THE CUSTOMS AND TAX INSPECTORATE OFFICES HAVE BEEN REPLACED. THE NEWLY-APPOINTED PRIME MINISTER HAS FORCEFULLY STATED HIS COMMITMENT TO FIGHTING CORRUPTION, AND THE U.S. GOVERNMENT PROVIDES TECHNICAL ASSISTANCE TO THE GOVERNMENT OF ARMENIA TO ADDRESS THE PROBLEM OF CORRUPTION. IT IS, HOWEVER, TOO EARLY TO TELL WHETHER A SERIOUS ANTI-CORRUPTION EFFORT WILL BE LAUNCHED BY THE NEW GOVERNMENT.
31. ARMENIA CONTINUES TO USE AN AMENDED VERSION OF THE SOVIET ERA CRIMINAL CODE IN MOST AREAS. THE CODE CONTAINS SEVERAL ARTICLES PERTAINING TO CORRUPT PRACTICES. ARTICLES 182 AND 183 RELATE DIRECTLY TO THE ABUSE OF POWER AND EXCEEDING ONE'S AUTHORITY (RELATED TO STATE OFFICIALS). THESE ARE PUNISHABLE BY UP TO 2-10 YEARS IMPRISONMENT. ACCEPTING, MEDIATING, AND GIVING BRIBES IS A CRIMINAL OFFENSE (ARTICLES 185, 186) AND IS PUNISHABLE BY UP TO 8-15 YEARS IMPRISONMENT PLUS CONFISCATION OF PERSONAL PROPERTY FOR REPEATED CRIMES. IN 1998, THE GOVERNMENT ADOPTED A NEW CIVIL CODE, AND IN 1999 IT PLANS TO ADOPT NEW CRIMINAL CODE THAT WILL ADDRESS THE ISSUE OF CORRUPTION IN MORE DETAIL WHILE REFORMING THE COURTS AND THE ECONOMIC/COMMERCIAL LEGAL STRUCTURE. NEW VERSIONS OF THE CRIMINAL CODE AND CRIMINAL PROCEDURE CODE ARE CURRENTLY (SEPTEMBER 1999) UNDER DISCUSSION IN THE PARLIAMENT.
32. DESPITE SEVERE PENALTIES, BRIBERY IS WIDESPREAD AND IS THE MOST COMMON FORM OF CORRUPTION, ESPECIALLY IN THE AREAS OF GOVERNMENT PROCUREMENT, ALL TYPES OF TRANSFERS AND APPROVALS, AND SUCH BUSINESS-RELATED SERVICES AS COMPANY REGISTRATION, LICENSING, AND LAND OR SPACE ALLOCATION. IT MAY ALSO TAKE A BRIBE AND/OR THE SUPPORT OF A HIGH-RANKING ACQUAINTANCE FOR A PUBLIC SERVANT TO BE HIREO BY A GOVERNMENT OFFICE, DEPENDING ON THE POSITION'S "MONEY GENERATING" POTENTIAL.
33. RELATIONSHIPS BETWEEN HIGH-RANKING GOVERNMENT OFFICIALS AND THE EMERGING PRIVATE BUSINESS SECTOR IS ANOTHER PHENOMENON THAT ENCOURAGES INFLUENCE-PEDDLING BETWEEN OFFICIALS AND THE PRIVATE FIRMS FROM WHICH THEY BENEFIT. POWERFUL OFFICIALS AT THE FEDERAL, DISTRICT, OR LOCAL LEVELS ACQUIRE DIRECT, PARTIAL, OR INDIRECT CONTROL OVER EMERGING PRIVATE FIRMS. SUCH CONTROL MAY BE EXERCISED THROUGH A HIDDEN PARTNER POSITION OR THROUGH MAJORITY OWNERSHIP OF A PROSPEROUS PRIVATE COMPANY. THE INVOLVEMENT CAN ALSO BE INDIRECT, E.G., THROUGH CLOSE RELATIVES AND FRIENDS. THESE PRACTICES PROMOTE PROTECTIONISM, ENCOURAGE THE CREATION OF MONOPOLIES OR OLIGOPOLIES, HINDER COMPETITION, AND UNDERMINE THE IMAGE OF THE GOVERNMENT AS A FACILITATOR OF PRIVATE SECTOR GROWTH.
34. THE NEW CIVIL SERVICE LAW IS EXPECTED TO SET LIMITATIONS ON THE PARTICIPATION OF STATE OFFICIALS IN BUSINESS ENTERPRISES. REFORM EFFORTS ARE ALSO UNDERWAY IN THE LEGAL AND JUDICIAL SYSTEMS, INCLUDING THE DRAFTING OF A NEW COMMERCIAL LAW AND TRAINING FOR LAWYERS AND JUDGES. CORRUPT PRACTICES EXIST WIDELY WITHIN PRIVATE COMPANIES AS WELL, MOSTLY IN THE FORM OF TAX FRAUD AND UNREGISTERED BUSINESS ACTIVITIES.
35. THE EMBASSY RECEIVES A MODERATE NUMBER OF COMPLAINTS BY U.S. FIRMS OPERATING IN ARMENIA REGARDING CORRUPTION. RELATED PROBLEMS INCLUDE NON-TRANSPARENT COMPETITION 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 INTO A COMPANY'S DAILY OPERATIONS. THE EMBASSY WILL USUALLY TAKE ACTION UPON REQUEST OF THE U.S. FIRM TO ENSURE THE FAIRNESS OF GOVERNMENT ACTIONS. THE U.S. EMBASSY REGULARLY AND FORCEFULLY CONVEYS TO THE ARMENIAN GOVERNMENT THE UNACCEPTABILITY OF CORRUPT PRACTICES.
B. BILATERAL INVESTMENT AGREEMENTS
36. ARMENIA HAS SIGNED BILATERAL TREATIES ON 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 ON THE PROTECTION OF INVESTOR RIGHTS. THIRTY-THREE TREATIES ARE CURRENTLY UNOER NEGOTIATION (AS OF
SEPTEMBER 1999).
37. A "TREATY BETWEEN THE REPUBLIC OF ARMENIA AND THE UNITED STATES OF AMERICA CONCERNING THE RECIPROCAL ENCOURAGEMENT AND PROTECTION OF INVESTMENT" (BIT) WAS SIGNED ON SEPTEMBER 23, 1992. THIS TREATY WAS RATIFIED BY THE ARMENIAN PARLIAMENT IN SEPTEMBER 1995 AND SIGNED INTO EFFECT BY AMBASSADOR PETER TOMSEN AND MINISTER OF FOREIGN AFFAIRS VAHAN PAPAZYAN.
38. THE BIT SETS FORTH INVESTMENT CONDITIONS FOR INVESTORS OF EACH PARTY TO BE NO LESS FAVORABLE THAN FOR NATIONAL INVESTORS (NATIONAL TREATMENT). IT PROTECTS INVESTMENT AGAINST EXPROPRIATION AND NATIONALIZATION, AND REGULATES DISPUTE SETTLEMENTS BETWEEN FOREIGN COMPANIES AND THE GOVERNMENTS OF EACH PARTY. ARMENIA DOES NOT HAVE A BILATERAL TAXATION TREATY WITH THE UNITED STATES.
C. OPIC AND OTHER INVESTMENT INSURANCE
39. THE "INVESTMENT INCENTIVE AGREEMENT BETWEEN THE GOVERNMENT OF THE REPUBLIC OF ARMENIA AND THE GOVERNMENT OF THE UNITED STATES OF AMERICA," SIGNED IN 1992, PROVIDES A LEGAL FRAMEWORK FOR OPIC'S OPERATIONS IN ARMENIA. OPIC OFFERS POLITICAL VIOLENCE INSURANCE IN ARMENIA AND INSURES AGAINST EXPROPRIATION, BUT DOES NOT YET OFFER INSURANCE AGAINST CURRENCY INCONVERTIBILITY. ARMENIA HAS ALSO JOINED THE MULTILATERAL INSURANCE AND GUARANTEE AGENCY (MIGA).
D. LABOR
4O. ARMENIA'S HUMAN CAPITAL IS ONE OF ITS BEST RESOURCES. THE LABOR FORCE IS HIGHLY EDUCATED AND WELL TRAINED, PARTICULARLY IN ENGINEERING AND TECHNOLOGY. ALMOST ONE HUNDRED PERCENT OF ARMENIAN'S POPULATION IS LITERATE; 59 PERCENT HAVE COMPLETED SECONDARY SCHOOL, AND 13 PERCENT HAVE A UNIVERSITY DEGREE.
41. THE 1992 LAW ON EMPLOYMENT GUARANTEES EMPLOYEES THE RIGHT TO FORM OR JOIN UNIONS OF THEIR OWN CHOOSING WITHOUT PREVIOUS 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 40 HOURS. MINIMUM ANNAL PAID LEAVE IS 15 WORKING DAYS, ALTHOUGH THE PRDOMINANT PRACTICE IS 24 DAYS. THE MINIMUM WAGE S SET BY GOVERNMENTAL DECREE AND HAS INCREASED PERIODICALLY SINCE 1993. WAGES ARE NORMALLY PAID BIWEEKLY. FEMALE EMPLOYEES ARE GRANTED PRIVILEGES THAT INCLUDE PROHIBITIONS AGAINST: HARD AND HAZARDOUS JOBS, NIGHT SHIFT-WORK (IN CERTAIN CASES), OVERTIME, WORKING ON HOLIDAYS, AND BUSINESS TRIPS FOR WOMEN WITH CHILDREN UNDER THE AGE OF 2. THE PROVISIONS ALSO GRANT FROM A MINIMUM OF 140 DAYS TO A MAXIMUM ONE YEAR PARTIALLY PAID MATERNITY LEAVE WITH A FURTHER YEAR OF UNPAID LEAVE GUARANTEED; COMPANIES ARE ALSO PROHIBITED FROM FIRING PREGNANT WOMEN AND WOMEN WITH CHILDREN UNDER THE AGE OF 18 MONTHS.
42. THERE IS A SIGNIFICANT SUPPLY OF QUALIFIED SPECIALISTS IN RESEARCH/ENGINEERING AND PRODUCTION IN THE FOLLOWING SECTORS: ELECTRICAL AND ELECTRONIC COMPONENTS AND DEVICES; ELECTRICAL COMPONENTS AND APPLIANCES; SOFTWARE; ELECTRIC MOTORS AND GENERATORS; OPTICS (INCLUDING SPACE OPTICS); APPAREL PRODUCTION; CHEMISTRY; ARCHITECTURE AND CONSTRUCTION; JEWELRY; ARTS AND CRAFTS; AND FOOD PROCESSING.
E. FOREIGN TRADE ZONES/FREE PORTS
43. ARMENIA HAS NO FOREIGN TRADE ZONES OR FREE PORT AT PRESENT. THE GOVERNMENT ANO THE LOCAL BUSINESS COMMUNITY ARE EXPLORING THE POSSIBILITY OF ESTABLISHING SEVERAL INDUSTRIAL PARKS THAT WOULD
INVOLVE ZVARTNOTS INTERNATIONAL AIRPORT AND SUCH EXISTING LARGE ELECTRONICS COMPANIES AS MARS (A LOCAL ELECTRONICS FIRM) OR TRANSISTOR. THE PARKS MAY ALSO ENJOY AN FTZ REGIME IN THE FUTURE. THE GOVERNMENT IS CURRENTLY EXPLORING THE POSSIBILITY OF ESTABLISHING A BONDED WAREHOUSE NEAR GYUMRI IN NORTHERN ARMENIA.
F. FOREIGN DIRECT INVESTMENT STATISTICS
44. APPROXIMATELY 1,350 PARTIALLY OR FULLY FOREIGN-OWNED COMPANIES ARE REGISTERED IN ARMENIA TODAY. OVER 70 PERCENT OF THESE ARE INVOLVED IN TRADING ACTIVITIES. A NUMBER OF MULTINATIONAL COMPANIES ARE NOW OPERATING IN ARMENIA, INCLUDING COCA-COLA, FIRST DYNASTY MINES, HUNTSMAN, IBM, MARRIOTT INTERNATIONAL, BRISTOL MYERS SQUIBB, PERNOD RICARD, CASTEL, CARITAS, ITALTEL, HSBC, MACMILLAN, SIEMENS, AMYOT EXCO, ARTHUR ANDERSEN, AND KPMG.
45. THE ANNUAL INFLOW OF FOREIGN DIRECT INVESTMENT FROM 1995-1997 RANGED BETWEEN USD 2O MILLION AND USD 51 MILLION. THE MINISTRY OF INDUSTRY AND TRADE ESTIMATES THAT TOTAL DIRECT FOREIGN INVESTMENT IN ARMENIA WAS USD 365 MILLION AS OF JANUARY 1999. FOREIGN DIRECT INVESTMENT COMES PRIMARILY FROM THE ARMENIAN DIASPORA COMMUNITIES IN THE U.S., RUSSIA, IRAN, FRANCE, GREECE, THE UK, GERMANY AND SYRIA.
46. THE GOVERNMENT OF ARMENIA STATED THAT FOREIGN INVESTMENT IS UNACCEPTABLY LOW AND DOES NOT APPROACH THE FULL POTENTIAL OF AVAILABLE OPPORTUNITIES. IN 1993-1996, THE GOVERNMENT ORGANIZED SEVERAL INTERNATIONAL CONFERENCES (INCLUDING ONE IN LOS ANGELES IN JUNE 1996) TARGETING POTENTIAL INVESTORS. WHILE THESE EVENTS PRODUCED VERY MODEST RESULTS, CERTAIN ECONOMIC IMPROVEMENTS OBSERVED IN ARMENIA IN 1995-1997 AND A LASTING CEASE-FIRE WITH AZERBAIJAN HAVE RESULTED IN A NOTICEABLE POSITIVE CHANGE IN U.S. BUSINESS INTERESTS IN ARMENIA. AFTER A LONG PERIOD OF HESITATION (199O-1994), DURING WHICH ONLY 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 ORGANIZE INVESTMENT CONFERENCES IN THE U.S. TO GENERATE INTEREST AMONG POTENTIAL AMERICAN INVESTORS. THE ARMENIAN DEVELOPMENT AGENCY (ADA), A STATE-RUN INVESTMENT PROMOTION ORGANIZATION, WILL SOON BE RESTRUCTURED TO BECOME A ONE-STOP-SHOP FOR INVESTORS LOCATED DIRECTLY IN THE PRIME MINISTER'S OFFICE.
48. U.S. FIRMS IN ARMENIA HAVE FORMED MANY JOINT VENTURES AND SUBSIDIARIES, THEREBY BRINGING THE TOTAL NUMBER OF U.S.-OWNED FIRMS TO ABOUT 150. WHILE SUCH MULTINATIONALS AS PROCTER & GAMBLE, M&M-MARS, XEROX, DELL, IBM, AND MANY OTHERS HAVE BEGUN SUPPLYING THE ARMENIAN MARKETS WITH THEIR PRODUCTS, A FEW HIGH-PROFILE INVESTMENT PROJECTS ARE ALSO UNDERWAY. IN 1997, GREEK-OWNED OTE PURCHASED 90 PERCENT OF ARMENTEL, THE LOCAL TELECOM MONOPOLY FOR USD 79 MILLION. THE CONTRACT OBLIGES OTE TO INVEST NO LESS THAN USD 300 MILLION TO DEVELOP ARMENIA'S TELECOMMUNICATIONS SECTOR OVER THE NEXT 10 YEARS. TWO MAJOR HOTELS, THE ARMENIA AND THE ANI, WERE PRIVATIZED THROUGH INTERNATIONAL TENDER IN 1998. BOTH HOTELS HAVE BEEN PURCHASED BY AMERICAN INVESTORS: THE HOTEL ARMENIA FOR USD 8 MILLION WITH AN INVESTMENT COMMITMENT OF USD 22 MILLION, AND THE HOTEL ANI FOR USD 4 MILLION WITH AN INVESTMENT COMMITMENT OF USD 11 MILLION. THE OWNERS OF THE HOTEL ARMENIA CONTRACTED MARRIOTT INTERNATIONAL TO MANAGE THE HOTEL. THE COCA-COLA BOTTLING PLANT BEGAN PRODUCTION IN 1996. A USD 12 MILLION GOLD PROCESSING PLANT WAS 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 USD 20 MILLION ON OIL AND GAS EXPLORATION. AN AMERICAN-ARMENIAN JOINT VENTURE IS IN THE PROCESS OF UPGRADING ITS WINE AND COGNAC PRODUCTION AT YEREVAN'S ARARAT WINERY. DIKA LIGHT PURCHASED A LARGE PERLITE MINING 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 CONSTRUCTION OF HYDRO-POWER PLANTS ARE CURRENTLY IN VARIOUS STAGES OF NEGOTIATION.