VIII. TRADE AND PROJECT FINANCING Brief Description of Banking System The Central Bank of Armenia is the Republic's governing bank. At present, Armenia's banking sector consists of five major public sector banks and more than forty private banks. The five major public sector banks are the Bank of Industry and Construction ("Ardshinbank"), the Agricultural Bank of Armenia (Agroardbank), State Commercial Bank, State Savings Bank ("Khnaybank"), and Armimpex Bank (former Armenian branch of the Soviet Central Foreign Economic Bank - VNESHEKONOMBANK). The Central Bank conducts state monetary policy and licenses individuals or organizations engaged in banking and related activities. To open a business account in a local bank, an enterprise must present its registration documents and a completed application with notarized signatures. Individuals or branches of enterprises cannot have business accounts. Individuals can only have savings accounts. Foreign Exchange Controls Affecting Trading At present currency exchange rates in Armenia are strongly influenced by black market rates. The Central Bank of Armenia, since the introduction of the national currency in late 1993, has conducted modest dollar interventions. Its hard currency reserves are strictly limited, however on occasion it has ordered all exchanges to temporarily apply fixed exchange rates. Central Bank interventions have not halted the steady erosion in the validity of the dram. General Financing Availability 1. Corporate resources: a majority of Armenian state-run companies are experiencing critical shortage of funds. After the break-up of the USSR, hard currency accounts of state enterprises were frozen by the former Central Soviet Banks. Although drams can readily be converted into hard currency, the profits themselves are very low on average. Newly emerging private companies, with a few exceptions, are too weak to provide serious financing for long term projects. 2. Lending from the government: the Armenian government is experiencing an extreme shortage of resources, making loans from state lending institutions almost impossible. 3. Lending from private commercial institutions: this is limited by their low capacity (very few banks can provide loans exceeding than $10,000). At present, many private banks limit their lending operations to short-term loans in local or hard currency at a very high rate of interest (up to 10-20 percent/month). The only guarantee demanded by these banks is a security of adequate market value. How To Finance Exports/Methods Of Payment A few leading Armenian banks presently offer their services for administering payment for foreign trade operations: Methods of payment include advance payment, letter of credit, and other internationally accepted forms, except for credit cards and checks. Payment in cash is also acceptable. Transactions are made on the basis of written contract between a seller and a buyer. Types Of Available Export Financing And Insurance The Armenian government is a member of various international financial organizations, including the World Bank, European Bank for Reconstruction and Development and the International Monetary Fund. These institutions provide only project financing through loans to the Armenian government. ExImBank has not approved projects in Armenia as of yet. The local Armenian banks can provide very limited short-term or long term financing in national currency or dollars. To insure their risks in dealing with Armenian partners American businessmen are encouraged to contact the Overseas Private Investment Corporation (OPIC) in Washington. OPIC is a government affiliated institution which upon agreement with Armenia offers investment insurance (and reinsurance) coverage, as well as loans and loan guarantees which are backed in whole or in part by the government of the United States of America. For more information contact: Overseas Private Investment Corporation 1100 New York Avenue, N.W. Suite Washington, D.C. 20527-0001 Tel: (202) 336-8604 (800) 424-OPIC Fax: (202) 408-9859 Fax Info Line: (202) 336-8700 Project Financing Available PROJECT FINANCING: U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT (AID): In addition to 8 million dollars provided in 1993, AID is providing 27 million dollars in 1994 for development of Armenia's energy sector. The projects include energy conservation, training, production of hydro turbines, alternative energy sources, personnel training, energy- related legislation development, and others. WORLD BANK: In 1993, the World Bank extended to Armenia a credit of 12 million dollars for technical assistance to its privatization program, for trade and customs service development, and tax policy realization. In 1994, the bank extended to Armenia a non-interest credit of USD 28,000,000 for rehabilitation projects in the earthquake affected zone. A credit of 1,5 million dollars was earlier extended for irrigation projects. Presently the Bank is considering a credit of 10 million dollars for energy sector development, and additional credit for repair of Armenian power plants. The bank is planning to implement in the nearest future a financing program aimed at improving social conditions in the country by creating new jobs, enhancement of the water supply, sewage, road infrastructure, and schools. All contracts under these loans are made on a tendering basis for non-government organizations only. EBRD: In 1994, EBRD extended a loan of 57 million dollars to the government of Armenia for reconstruction of Hrazdan Unit No.5, a 300 MW natural gas-fired power generating unit. Contracts under the loan will be made on a tendering basis. Earlier, a credit was extended for construction of a cargo terminal at Yerevan's Zvartnots airport. The bank also approved the following new projects to be funded by Technical Cooperation Funds: 1. Food Distribution and Marketing project ECU 270,000 The project is aimed to identify investment needs in the food marketing sector assess the technical and financial feasibility of these proposed investments, propose a financing infrastructure and financing plans, identify potential legal and institutional constraints at sector level, and propose possible means to address these constraints. The environmental impact of the proposed investment is also to be assessed. 2. Establishment of a Private Investment Finance Corporation ECU 190,000 The project is aimed to establish a Private Investment Finance Corporation to support private SMEs in Armenia. The study will include the definition, structure, objectives and instruments of the PIFC. For more information contact AID, WORLD BANK and EBRD respectively. LIST OF BANKS WITH CORRESPONDING U.S. BANKING ARRANGEMENTS: Central Bank of Armenia, 6 Nalbandyan St., Yerevan, 375010, Armenia, Tel:(8852)583-841, 73-06, Fax:(8852)561-564, Chairman - Mr. Bagrat Asatryan. Correspondent accounts in Bank of New York (USA), Citibank (USA). Armimpexbank, 2 Nalbandyan St., Yerevan, 375010, Armenia, Tel:(8852)589-906, 589-518, 564-617, Fax:(8852)565-958, Chairman - Mr. Samvel Chzmachyan, Correspondent accounts in Bank of New York (USA), Credit Lyonnais (USA). ArdShinBank (Industrial Construction Joint Stock Bank),3 Deghatan St., Yerevan, 375010, Armenia, Tel:(8852)560-616, 528-513, Fax:(8852)151-155, Telex:243349, Chairman - Mr.Alexander Vardanov. Correspondent accounts in Bank of New York (USA), Citibank (USA). Bank for Reconstruction and Development, 31 Moskovyan St., Yerevan, 375019, Armenia. Tel:(8852)530-156, 530-094, Fax:(8852)530-156. Chairman - Mr. Alexander Grigoryan. Correspondent Accounts in Los- Angeles Bank (USA). Aviabank, 1 P.Sevak St., Yerevan, 375014, Armenia. Tel:(8852)288 -857, Fax:(8852)281-940, Telex:243113, Teletype: 243620. Chairman - Mr. Harutyun Vardanyan. Correspondent accounts in Credit Lyonnais (USA). Aktop, 75 Bagramyan St., Yerevan, 375033, Armenia. Tel:(8852)273 -068, 273-079. Chairman - Mr. Levon Shakhbazyan. Correspondent accounts in Citibank (USA). Masis, 68 Japaridze St., Yerevan, 375069, Armenia. Tel:(8852)248 -272, Fax:(8852)247-530, Telex:243380. Chairman - Mr. Armen Arzumanyan. Correspondent accounts in Credit Lyonnais (USA).