major sectors of the economy : jewelry and diamond processing : manufacturing : information technology : natural resources : chemicals and pharmaceuticals : agriculture : food processing : tourism : construction and construction materials : energy : transport : telecommunications : water

Jewelry and Diamond Processing

Armenia's leading mineral exports consist of precious and semi-precious stones. One fifth of Armenia's exports in 1998, worth US$ 47 million, were cut diamonds. A large proportion of these exports are polished diamonds, imported into Armenia in their rough state for finishing, taking advantage of Armenia's low wage costs and skilled jewelers. Each year the Russian government allocates export quotas of rough diamonds. In 1999 Russia supplied Armenia with up to 30,000 carats of rough gem diamonds and I million carats of industrial diamonds for processing. The gems are shipped via Alrosa, Russia's largest producer and exporter of rough diamonds, and the industrial diamonds are supplied by the Yakhutia state committee for precious metals and gemstones, via the Almazjuvelirexport trade company. Armenia may not re-export the rough diamonds, which it pays for in convertible currency at US dollar prices, based on world prices.
Yerevan Jewelry Plant is the main production unit for jewelry, but until recently the enterprise used only 510 per cent of its capacity. Russia is the main supplier of refined gold to Armenia, as well as - until 1998 the main sales market for golden jewelry items. In November 1998 a jewelry making joint venture known as Armengold was formed by Diaspora Armenians from the US and Israel and the Yerevan Jewelry Plant. US$ 10 million is being invested in Armengold, with the Yerevan Jewelry Plant providing its production facilities, technology and labor force. The Armenian side also provides the raw materials, including gold supplied through leasing. Production is to be distributed on western markets. The Yerevan Jewelry Plant is now slated for privatization.
One of Armenia's biggest refiners of precious stones is the Diamond Company of Armenia, owned by Ferfano Corporation (UK), which bought it for US$ 5.5 million in 1998. The company has had rapid growth since then, cutting and exporting diamonds worth US$ 32 million in 1999. It processes 8,000 carats of rough diamonds each month, supplied by South Africa's De Beers monopoly. The diamond industry will get a further boost as the sale of the Shogakn diamond processing company to Israel's Lev Leviev Diamonds is completed. This purchase is expected to generate over 1,000 new jobs. Negotiations are under way for rough diamonds to be supplied to Armenia from eastern Siberia, which would also contribute to sector development.
Among the founding members of the ARA (see box) is the Arslanian family, which owns Lori Ltd, based in the Armenian village of Nor-Keghi. The Arslanians are a Diaspora family with several diamond polishing operations in various countries. Lori imports rough diamonds from Belgium and Russia for polishing and then worldwide export. Lori ascribes its success to a skilled workforce and a well-developed diamond processing industry already in place in the Soviet era. It also cites the favorable climate for foreign investment, including the reduced profit tax incentives and lack of import and export taxes, as well as minimal bureaucracy compared with the Arslanian family's Russian operation.