CONSTRUCTION BOOM ‘ADDS TO ARMENIAN CURRENCY APPRECIATION’
By Ruzanna Khachatrian

Radio Liberty, Czech Rep.
Oct 16 2006

An ongoing construction boom, the driving force behind Armenia’s
double-digit economic growth, has also contributed to the dramatic
strengthening of the national currency, the head of the Armenian
Central Bank said on Monday.

The Armenian dram has gained more than 40 percent in value against
the U.S. dollar since December 2003 and is continuing to appreciate,
hurting domestic manufacturers and many people dependent on cash
remittances from their relatives working abroad. The process has
sparked opposition allegations that the Armenian authorities have been
deliberately boosting the dram to siphon off a large part of those
remittances and to benefit wealthy government-connected importers.

The authorities, backed by the International Monetary Fund and the
World Bank, strongly deny any exchange rate manipulation. The Central
Bank has said all along that dram’s strengthening has primarily
resulted from recent years’ increase in hard currency wired home by
hundreds of thousands of Armenians living abroad. Their total amount
is expected to exceed $1 billion this year.

According to the bank’s chairman, Tigran Sarkisian, the rapidly
growing construction sector is also responsible for the exchange
rate fluctuations. Official figures show the sector expanding by
more than 40 percent during the first half of this year. The growth
is particularly visible in central Yerevan where dozens of expensive
apartment blocks are currently under construction.

"Today 45 buildings are being constructed in the center of Yerevan
alone," Sarkisian told hearings on the issue held at the Armenian
parliament. "Their dollar-based market value varies from $20 million
to $25 million."

The growth of Armenia’s construction sector is good for everyone,
including the low-income stratum of the population which is getting
jobs, high salaries," he added.

Trade and Economic Development Minister Karen Chshmaritian, who
also attended the hearings, acknowledged that Armenian manufacturers
increasingly have trouble competing with imported goods and selling
their production abroad. "Of course the stronger is inflicting damage
[on the manufacturing sector,]" he told RFE/RL.

But Chshmaritian insisted that Armenia’s industrial output, excluding
polished diamonds, has not shrunk as a result. He said local exporters
can offset negative effects of the dram’s strengthening by improving
their management and becoming more competitive.

But Suren Bekirski, director of the export-oriented textile company
Tosp, disagreed, warning that it risks facing bankruptcy. "As a local
manufacturer selling goods here, I gain something [from the stronger
dram]," he told RFE/RL. "But as an exporter, I lose twice as much …

If things go on like this, we will last for only a few more months."

According to official data released by the State Customs Committee
on Monday, Armenia’s net exports fell by more than 6 percent to 296
billion drams ($777 million) while imports rose by 16 percent to 573
billion drams ($1.5 billion) during the first nine months of the year.

The customs chief, Armen Avetisian, downplayed the increased trade
deficit, saying that the physical volume of Armenian goods sold abroad
was the same as during the same period last year. He claimed that the
monetary value of the exports has decreased mainly due to a drop in
international prices of some of Armenia’s key exports such as diamonds,
molybdenum and even gold.