California-Armenia: Unmet Potential A Brief Glimpse of Two Economies: California and Armenia

California’s diverse economy is the 8th largest in the world’s just behind China but much ahead of Spain. Occupying 411, 000 sq km and a population number nearing 35 million, California leads the nation in the production of fruits, vegetables and domestic wine. California’s economy also is strongly bolstered by aerospace, technology, entertainment and tourism. It is home to Silicon Valley, Hollywood, fertile farms, and a breathtaking coast’s all contributing to the great Californian economy. Half a world away is Armenia, a small and ancient country that regained its independence only 15 years ago. With an area close to 30,000 sq km and a population slightly exceeding 3 million people, Armenia is one of the fastest growing economies in the world’s economic growth over the past 5 years was 10 percent per annum. Although it is at odds with half of its neighbors, Armenia has a favorable trade regime which includes a growing market in the Commonwealth of Independent States as well as parts of Europe, parts of Western Asian, the US and Israel. During its control by the Soviet Union, Armenia was one of the most industrialized republics, with well-developed chemical, electronic, and high-tech industries. Armenia’s developed modern industrial sector supplied machine tools, textiles, and other manufactured goods to sister republics in exchange for raw materials and energy. Following the collapse of the Soviet Union and the disruption of main trade routes, the structure of Armenia’s economy changed drastically. Today, agriculture produces the largest share of the Gross Domestic Product’s 22.6 percent in 2004. It is followed by industry and construction. Mining, jewelry production, chemicals, machinery and equipment production are major branches of the Armenian industry. The California Trade Office in Armenia: Success in Funding and Work The California’s International Trade program was disbanded in 2003. As a result, more than a dozen trade offices throughout the world were closed. Two years later, with a new funding model and the hard work of the Armenian community, California opened a trade office in Armenia. Located in the Armenian capital Yerevan, the California Trade Office (CATO) serves as the regional commercial address for California and covers an impressive geographic region including the CIS, as well as parts of Europe, and Western Asia. The CTO employs a new funding model ‘s rather than being funded by the State of California, the CATO operating revenues are supplied privately by California businesses. The rationale is that if businesses are interested in expanding their trade and believe a trade office is beneficial, then they should be able to sponsor such an office. Thus, with a limited fiscal obligation for the State, the CATO improves California’s foreign trade balance and generates more cash for the economy. The CATO provides a varied scope of work, but mainly generates economic ties across the ocean. It assists Californian and Armenian companies seeking to expand to diverse and different markets by providing business information and market research, partner identification and partner research, business and trade facilitation, and business and trade mission organization. Furthermore, the CATO collaborates with the State Business, Transportation and Housing Agency by promoting California goods and services, identifying investment opportunities in California, and advocating California trade interest with government and industry representatives in Armenia. California’s Armenia Trade Relations: Unmet Potential Armenia enjoys a good trade relationship with the US Numbers from 2005 show that Armenia exported 6 percent of its goods to the states totaling $65 million, while 6 percent of Armenian imports came form the US totaling $45 million. Trade included precious stones, food, beverages and textiles from Armenia. The US supplied pharmaceuticals, food, precious stones, equipment and machinery. California is Armenia’s second largest US trading partner. It has great potential for growth. In 2005, Californian exports to Armenia consisted of transportation equipment, computers, metal manufactures, food and pharmaceuticals. The exports totaled $14.5 million. Even better, the exports for the first quarter of 2006 equaled $4.5 million, which may indicate a 20 percent increase from the previous year. The potential continues as there are almost 40 Californian companies with subsidiaries in Armenia. Californians are investing millions annually to the Armenian economy. The Armenian companies with Californian interests including IT, real estate development, agriculture, trade and hospitality. A few successful Armenian businesses have made significant investmen’s in Southern California’s mainly concentrating in real estate development. Unfortunately, neither the US nor Armenian official statistics capture Armenia’s exports to California; however, empirically one can say that California is a top importer of Armenian produce. Can trade relations between California and Armenia continue to grow? The common belief in both hemispheres is “yes”. In December 2005, an assessment of Californian companies showed the Armenian market is significantly underutilized. The sectors that have the highest potential for Californian companies are computer hardware and peripherals, software development, energy, agricultural goods and processing equipment, hospitality, textile and clothing retail, tourism and financial sector. However, this is not an exhaustive list of Armenian opportunities as the potential is exponential. To demonstrate existing opportunities in different sectors of the Armenian economy, the California Trade Office has commissioned a series of articles and analyses by some prominent experts in their respective fields that were published in the press through Armenia’s Diaspora Business Forum to be held in Yerevan on September 20, 2006.


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