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8 most important economic events of 2016

8 most important economic events of 2016

Past year’s achievements and failures

PanARMENIAN.Net presents the most important economic developments of the year 2016.

PanARMENIAN.Net - Nairit plant adjudged bankrupt

In March 2016, the Armenian Minister of Energy and Natural Resources, Levon Yolyan initiated formation of a working group to investigate the state of affairs at Nairit synthetic rubber plant to decide on follow-up action. Previously to that, it was announced that Armenia is searching for an investor into the plant, which, according to auditors’ estimates, needs about $200-300 million for restart.

In May, former Economy Minister Artsvik Minasyan said that Nairit must be re-launched: “We should exert every effort to preserve the plant.” However, during the October 20 government meeting, Prime Minister Karen Karapetyan remarked that there have been no specific proposals regarding the plant.

On November 14, the Ministry of Energy Infrastructures and Natural Resources announced a tender for Nairit re-launch. On November 14, the General Jurisdiction Court of Shengavit administrative district adjudged the plant bankrupt, since it failed to pay the electricity debt amounting to AMD 1,235,003,232 as of March 2, 2015. The same year, Electric Networks of Armenia CJSC petitioned the court to declare the plant bankrupt.

Adoption of new tax legislation

On October 4, the Armenian National Assembly passed the bill on introduction of amendments to the tax law with a vote of 78-19-0, thus supporting considerable changes to take place.

The income tax will make to 23% in case of the salary amounting to AMD 120,000-150,000. For the salary of AMD 150,000-2,000,000, the tax will total 28%. Those, whose salary exceeds AMD 2,000,000, will pay a 36% income tax. The turnover threshold will be increased from AMD 40 million to AMD 58,35 million.

Harshly criticized by businessmen and opposition, the package aroused mixed feelings even among the members of the ruling Republican Party of Armenia. Experts are sure that the new legislation will increase the tax burden of the middle class.

Emergence of budget airlines

On October 24, Prime Minister Karen Karapetyan announced that the RA government expects to attract budget airlines to Shirak airport in Gyumri. The next day, it became known that Pobeda airlines got a permission to operate Moscow-Gyumri flights. A decision was taken to halve the airport’s aviation maintenance tariff in order to promote its development. Meanwhile, Pobeda refused to operate flights from Rostov-on-Don to Yerevan due to the expensiveness of Zvartnots airport. On December 15, Pobeda launched the Gyumri route, selling tickets starting with RUB 999 (about AMD 7500). In case of paying additional RUB 500 (AMD 3700), the company arranged transportation from Yerevan to Gyumri. “Plus” and “Premium” services were also offered for a higher price. As Aeroflot’s budget carrier, Pobeda operates Boeing -737 and Boeing -800 aircraft to 58 directions, including 8 international flights.

MoU on purchase, sale and transit of gas with Iran

On July 26, Iran’s Oil Minister Bijan Namdar Zangeneh announced that the amount of gas delivered from Iran to Armenia will be tripled. Later, the Armenian government initiated the formation of Energoimpex CJSC that would increase the import of the Iranian gas, thus boosting the efficiency of Iran-Armenia gas pipeline. During a visit to Iran on October 31-November 1, a delegation of the RA Ministry of Energy Infrastructures and Natural Resources, a Memorandum of Understanding on purchase, sale and transit of gas was initialed by the Iranian National Gas Export Company and Armenian Energoimpeks. On November 4, Deputy Minister Hayk Harutyunyan said that Armenia is negotiating the purchase of Iranian gas and if the talks were successful, the gas would be available for the Armenian consumers. “The Iranian gas will be used when its price is competitive with that of other importers,” he said. On December 15, the completion of gas distribution network in Meghri and Agarak communities was announced. As part of the project, Meghri town and a part of Agarak were supplied with gas. Earlier, on December 8, Iranian Minister of Industries, Mines and Trade Mohammad-Reza Nematzadeh assured that Iran will promote creation of free trade zone in Meghri. The official opening ceremony of the gas distribution network took place on December 21. The symbolic flame was burnt during the visit of Iran’s President Hassan Rouhani to Armenia.

Gas and electricity price cut

On November 25, the Public Services Regulatory Commission (PSRC) of Armenia discussed a petition by Gazprom Armenia CJSC on revision on gas tariffs in the country. As result, the gas price for Armenian consumers was lowered by AMD 7,7. Besides, it was decided to set new tariffs for consumers engaged in greenhouse business, canning and dairy production.

On July 31, Tashir Group of Companies completed acquisition of Electric Networks of Armenia. The next day, the electricity price in Armenia was cut by 5,9% (AMD 2,58). However, in August 2015, the price went up by AMD 6,9. Thus, the population still pays AMD 4,4 more.

On December 23, the PSRC decided to lower the electricity price by AMD 1,22 from February 1, 2017. Consumers will pay AMD 44,98 per kW during daytime and AMD 34,98 at night. Needy families will pay AMD 40 and AMD 30 respectively. Thus, as compared to the tariffs set before the August 2015 surge, the electricity price will still be higher by AMD 3,1.

Increased water price

In December, the price for drinking water in Armenia was set at AMD 180/1m3. The PSRC decided to grant Veolia Water CJSC the license for the drinking water delivery and wastewater treatment at the following prices: 1) delivery of drinking water – AMD 153/1m3 (VAT included); 2) wastewater treatment – AMD 27/ 1m3 (VAT included). The new tariff took effect on January 1, 2017.

Veolia company won the tender for water and wastewater services covering the whole of Armenia for a period of 15 years. The contract was signed by the Ministry of Energy Infrastructures and Natural Resources in November.

Solar station owners to supply energy to general network

On March 16, the Armenian National Assembly unanimously backed the bill on introduction of amendments and changes to the Law on Energy Efficiency and Renewable Energy. The amended law will henceforth allow physical and legal persons to install solar power facilities with capacity of up to 150kW. Those owing solar stations will be offered a possibility to supply the surplus of the produced energy to the general network at half of the price. On November 23, Deputy Minister of Energy Infrastructures and Natural Resources Hayk Harutyunyan said that the government plans to reduce the energy expenses by 38%. To develop solar energy production, an international tender will be announced for the construction of 50MW solar power facility.

Construction of new substation for Yerevan thermal power plant

As part of the Electricity Transmission Network Improvement Project (ETNIP) for Armenia, the International Bank for Reconstruction and Development (IBRD) will provide a loan for construction of a 220 kW substation of the Yerevan thermal power plant. AB Substations and Sobra Instalaciones and Servicios S.A. (Sweden-Spain) won the 17-month construction tender amounting to USD 11,3 million, EUR 4,7 million and SEK 6,9 million. On November 29, PM Karapetyan said that the Yerevan TPP reconstruction program will save USD 10 million.

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