July 1997

by Armen Vahradyan & Andrew Hovhannisyan

Armenia's Shirak Province is a region with a mixed industrial and agricultural economy in the northwestern corner of this Caucasus republic. Shirak has a population of 310,000. It is one of 11 provinces established in 1996 as the result of changes in the country's administrative subdivisions. A number of U.S. Government and World Bank financial programs support investment in Shirak Province.

Covering 1,019 square miles, Shirak has a 40 mile-long border with Turkey in the west and a somewhat shorter border with Georgia in the north. The climate is continental, with hot summers and severe winters--low temperatures reach minus 4-11 degrees Fahrenheit. Shirak's capital, Gyumri (formerly Leninakan), is the second largest city in Armenia and has a population of 211,000.

1988 Earthquake
Shirak Province suffered heavy damage in a 1988 earthquake, which severely damaged the provincial capital and hundreds of small villages around it. Rehabilitation has proceeded slowly, supported largely through a World Bank rehabilitation loan, which will fund the construction or renovation of approximately 1.6 million square feet of housing, as well as a few industrial facilities by the year 2002.

The province has 68 medium-sized and large enterprises, including 18 apparel, 6 machinery, 13 electronic, and 16 food processing companies. Most of these firms were heavily damaged by the 1988 earthquake. The medium- and large-sized manufacturing facilities are undergoing privatization. More than 500 new small private firms are mainly involved in importing and retailing foodstuffs and consumer goods. Eighty percent of the region's industry is located in Gyumri.

The province's natural resources include various types of building stone, including tuf, granite, and basalt, as well as largely unexploited coal reserves estimated at 400-500,000 tons. Shirak's second largest city, Artik, is known for its deposits of tuf. The state enterprise Artiktuf, once a major building stone exporter, is rehabilitating its facilities.

Thirty-two percent of Shirak's land area is arable. The province's main agricultural products are corn, potatoes, and other vegetables. In 1996, Shirak Province produced 44,500 tons of potatoes and 73,000 tons of grain.

Two road and rail transportation corridors currently link Shirak Province to foreign markets: one via Georgia to the Black Sea port of Poti (see BISNIS Bulletin, June 1997, Page 7), and a second, also via Georgia, to the Turkish port of Trabzon. Shirak International Airport in Gyumri is under utilized, although a subsidiary of Armenian Airlines operates several flights a week to destinations in Russia and the United Arab Emirates.

Financing
The relatively new private Armenian banks are not strong enough to provide long-term project finance for projects in Shirak. Several international finance projects have been designed to address this problem until national financing mechanisms are established. In 1997, the Eurasia Foundation will expand implementation of a U.S. Agency for International Development grant/loan program for small and medium-sized enterprises. A similar program will be administered by the U.S. Department of Agriculture for Shirak's agricultural sector. Both programs will make loans ranging between $25,000 and $50,000.

Larger Shirak companies are counting on private foreign investment, as well as a new $16.7 million World Bank enterprise development loan. Of this total, $4 million is allocated to pay for technical assistance and $11 million is for lending (with a $500,000 ceiling per loan). A similar program is being developed by the European Union. At the same time, two U.S. Government-supported funds targeted at the countries of the Caucasus are expected to begin operations in 1998 and provide financing and guarantees to projects involving U.S. companies and procurement of U.S. products. For more information on Armenia's Shirak Province, visit BISNIS Online at www.mac.doc.gov/bisnis/cables/970408am.htm.

Armen Vahradyan represents BISNIS in Yerevan. Andrew Hov-hannisyan is with the U.S. Commercial Service in Yerevan.

This report is provided courtesy of the Business Information Service for the Newly Independent States (BISNIS)