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Armenia Set To Create Tax Haven For Argentine Airport Tycoon


By Ruzanna Khachatrian

The government will seek changes in Armenia’s tax, gambling and other legislation next week to allow an Argentine tycoon of Armenian descent to create a tax-free economic zone around the country’s main airport to be operated by his company for the next 30 years.

The one square-kilometer area adjacent to Zvartnots International airport is to accommodate businesses exempt from profit tax and possibly other duties, under government proposals pending debate in the parliament. The National Assembly will meet for an emergency session on Monday to consider the legislative package which is bound to stir up controversy among its factions.

The proposed amendments are part of a far-reaching agreement signed last December by the Armenian government and Argentine billionaire Eduardo Eurnekian. The deal, personally negotiated by President Robert Kocharian, gave Eurnekian’s Corporacion America company long-term management rights to Zvartnots. The company has pledged to invest $50 million to bring the aging Soviet-era airport into conformity with international standards.

Details of the management contract were made public only recently, leading to opposition allegations that it is highly unfavorable for Armenia. Opposition parliamentarians argue that the Argentine firm is not bound by any investment and employment commitments and is instead entitled to prolonging the management deal unilaterally. They also strongly object to a clause granting Zvartnots a legal monopoly on servicing all flights beyond Russia and other former Soviet republics.

However, the parliament’s pro-Kocharian majority effectively endorsed the deal with Eurnekian on Wednesday when it passed a government bill on civil aviation in the second, final reading. The law contains provisions upholding Eurnekian’s control of the airport located 12 kilometers west of Yerevan.

Government officials announced later in the week that the creation of a “free economic zone” near Zvartnots is also part of the deal. Justice Minister David Harutiunian, presenting the proposed amendments to parliament committees on Friday, said the tax haven will turn the airport into a regional trade hub and allow Eurnekian to utilize Zvartnots’s huge loss-making cargo terminal. Built in the late 1990s with a loan from the European Bank for Reconstruction and Development, the terminal has since operated at a fraction of its capacity.

Harutiunian argued that the Argentine businessman, who runs 33 airports across South America, would not take over Zvartnots without being able to ensure a much greater use of the cargo terminal.

The tax-free zone would allow Eurnekian to sell business licenses to foreign and Armenian companies willing to open shop there. Entities based there would be exempted from profit tax. Also, they would not have to pay value-added tax or any customs duties on imported goods if those are used in the on-spot manufacturing of products designed for export. Officials say that arrangement should be especially attractive to companies assembling computers and other hi-tech equipment.

The government also wants to amend Armenia’s gambling legislation to allow Eurnekian to open casinos inside the tax haven. Under the existing law passed by the parliament last year, no casinos are allowed to operate within a 50-kilometer radius of the Armenian capital. The restriction was due to be effective from January 2003. The government now wants to narrow the restricted area to 10 kilometers, just enough to legalize gambling sites at Zvartnots.

The free economic zone would also encompass some of the fertile agricultural lands which is currently cultivated by local vine-growing farmers. Its proposed confiscation promises to be particularly controversial.

Opposition deputies and some of their pro-government colleagues voiced strong objections at the idea during Friday’s hearings. One of the them, Vartan Bostanjian, said the tax-free zone would enable Eurnekian to create a mini-state that would not be controlled by the government in Yerevan.
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