Armenia Investment Map
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ARMENIA INVESTMENT MAP Consulting YEREVAN, 2012 Contents 1. General Information ...................................................................................... 1 a. Geography and natural resources .................................................................................2 b. Population ........................................................................................................................... 2 c. Education ............................................................................................................................ 2 d. Political system .................................................................................................................. 3 e. Geopolitical environment ...............................................................................................3 2. Economy ........................................................................................................ 4 a. Macroeconomic environment and trends ...................................................................4 b. Business environment ......................................................................................................7 3. Key investment and value creation themes by sector, 2012 .................... 10 a. Agriculture .......................................................................................................................10 b. Food Processing ..............................................................................................................11 c. Mining and Quarrying ...................................................................................................12 d. Energy ................................................................................................................................13 e. Construction and Real Estate ......................................................................................14 f. IT, Telecom and Engineering ..........................................................................................15 g. Financial Services ...........................................................................................................17 h. Retail and Trade ..............................................................................................................19 i. Health Care ....................................................................................................................20 j. Tourism ............................................................................................................................22 4. Entry points, opportunities and risks ......................................................... 24 a. Greenfield projects .......................................................................................................24 b. Minority stakes ................................................................................................................24 c. Majority stakes ...............................................................................................................24 d. Venture projects ............................................................................................................24 e. Co-investment ................................................................................................................24 5. Exit options ................................................................................................... 25 a. Sale to end-users ...........................................................................................................25 b. Sale to strategic investors ............................................................................................25 c. MBO or MBI ....................................................................................................................25 d. IPOs ..................................................................................................................................25 6. EV Consulting ............................................................................................... 26 a. Identity ..............................................................................................................................26 b. Services .............................................................................................................................26 c. Clients ...............................................................................................................................27 d. Team ..................................................................................................................................27 EV Consulting Armenia Investment Map 1 1. General Information Fast facts Full name: The Republic of Armenia Population: 3.27 million (as of July 2012) Capital: Yerevan Area: 29.743 sq. km (11.484 sq. miles) Major languages: Armenian (native), Russian, spreading English Major religion: Christianity Life expectancy: 71 years (men), 77 years (women) Monetary unit: Armenian dram (AMD) Average for 2011: 372.5 AMD/USD Exchange rate As of September 1, 2012: 408.6 AMD/USD Main exports: Metal products, foodstuff, processed diamonds, machinery. GDP, current USD 10,247billion USD (2011, World Bank, 2011) GDP per capita, PPP: 5,829 (current international $, World Bank, 2011) Internet domain: .am International dialing code: +374 Sovereign Country Ratings Moody’s Ba2, negative (November 21, 2011) Fitch (country ceiling) BB- (unchanged since October, 2010) Armenia’s stand in international rankings Ease of Doing Business (The World Bank): 32 (Rank, 2013, out of 185 countries) Index of Economic Freedom (Heritage 39 (Rank, 2012, out of 179 countries) Foundation): Human Development Index (UNDP): 86 (Rank, 2011, out of 187 countries) Global Competitiveness Index (World 82 (Rank, 2012-2013, out of 144 countries) Economic Forum): Note All the sources and references for the data used in the report are provided at the end of each section 2 Armenia Investment Map EV Consulting a. Geography and natural resources The Republic of Armenia is a small country located at the crossroads of Europe and Asia in the northeast of Asia Minor (Armenian Plateau), bordering Azerbaijan, Iran, Turkey and Georgia. With an area of 29,800 square kilometers, the country is about the size of Belgium or Maryland. The capital city, Yerevan, lies on the Hrazdan River, and is home to some 1.1 million people. The next three largest cities are Gyumri (pop. 146,000), Vanadzor (pop. 105,000) and Echmiadzin (pop. 58,000). Echmiadzin, located some 15 kilometers west of Yerevan, is an important city as it is the seat of the patriarchate of the Armenian Apostolic Church. The majority of Armenia is mountainous (about 2,000 meters above sea level), while one-third is pastureland. Forest and woodland cover 12 percent of the country, arid land - some 18 percent, and permanent crops cover 3 percent. The highest elevation is 4,095 meters (Mt. Aragats) and the lowest point is 400 meters above sea level (Debed River). One of the largest mountain lakes in the world, Lake Sevan, is about 2,000 meters above sea level. The climate in Armenia is continental, with lower temperatures and more precipitation in higher elevations. In the central plateau temperature varies widely with cold winters and hot summers. Armenian mountains are rich in iron, molybdenum, gold, lead, silver, clay, limestone, as well as semi-precious and ornamental stones. Armenia possesses strategic deposits of molybdenum. b. Population Based on current official estimates, Armenia’s population is 3.27 million with a moderate annual natural growth rate of 0.52%. Ethnically, Armenia is homogeneous country with 95% Armenians. While after the collapse of Soviet Union, many Armenians left the country, for the last five years the migration rate has declined by one-third. Labor Force The total labor force was 1.2 million as an average during 2011. Many Armenians emigrated during 1990- 2006, mostly to Russia as migrant workers. The Armenian population has a high rate of literacy (100%) with a relatively high rate of primary (103%1), secondary (92%) and tertiary enrollment (52%) in 2010. Currently, the official unemployment rate stands at 6.2% at the end of 2011 (however, unofficial estimates indicate much higher level). The labor participation ratio comprised 63% in 20112. Armenian Diaspora The Armenian Diaspora, estimated at around 10 million people, is spread in over 85 countries with major concentrations in Russia (2.5 million), United Sates (1.5 million), Georgia (0.25 million) and France (0.45 million). In the beginning of the 1990s, the Armenian Diaspora played a crucial role in the process of rebuilding the homeland after the collapse of the Soviet Union, transportation blockade, power shortage and conflict with Azerbaijan. Beyond the humanitarian, development work and political support, the Diaspora played an active role in attracting foreign investments through leveraging its potential to attract global companies such as HSBC, Coca Cola, Marriott, Golden Tulip, KPMG, National Instruments and Synopsis. Moreover, since 2000s the Diaspora’s involvement considerably increased due to various investments in different sectors of economy through the businesses established/co-established by Diaspora Armenians. Russia, USA and Iran are the leading countries in terms of sources of Diaspora investments. 1 The rate of primary enrollment can exceed 100% due to the inclusion of over-aged and under-aged students because of early or late school entrance