Armenia’s Economy since Independence

Conference on “The South Caucasus: 20 Years On”, organized by the Carnegie Endowment for International Peace on November 28-29, 2011, in Washington, D.C.

Foreword
A common analysis of Armenia’s economic performance since independence typically focuses on the limitations imposed by geography and geopolitics and mostly ignores, or at best glosses over, the failures of governance and policy to deliver on what could have reasonably been expected. Proponents of such views fail to provide conclusive evidence of trade-imposed barriers to growth and progress in Armenia, or explain why other countries with similar governance characteristics but unhindered external trade remain poor. While I recognize the limitations imposed by the geopolitics and security considerations on the economic and social outcomes in general and in the Armenian context in particular, I am of the view that policymakers in Yerevan since 1991 have imposed additional constraints that became significantly more binding than geography and security and adversely influenced economic and social outcomes. The remainder of this article builds on this premise and highlights the specific policy failures that, in my view, are to be blamed for the current state of economic and social affairs in Armenia.

Armenia’s Economic Performance
Armenia’s path since independence from the Soviet Union in 1991 can be broken down into three rather distinct periods as follows: (i) 1991-99 (ii) 2000-07, and (iii) 2008 to present day. I highlight the specific features of these periods in Armenia’s independent history in detail below.

Post-Transition Progress (1991-99)
Armenia’s return to growth in 1994—the first among the former Soviet republics still recovering after the collapse of the USSR—was nothing short of remarkable and was achieved while the economy was recovering from the impact of a devastating earthquake and a full-blown war with the neighboring Azerbaijan.

Growth was underpinned by speedy and largely successful small- and medium-size state-owned enterprise and land privatizations. Yet the failure to create conditions for proper functioning of the markets and the lack of a meaningful role for the state became key constraints for progress thereafter. Ongoing conflict in Nagorno Karabakh and the legacy of a highly industrialized but by now mostly obsolete economic structure did not help.

Here is a short list of factors that proved critical and have influenced much of what had happened next:

• First signs of the nouveau riche concentrating sizable wealth and getting close to economic decision-making have emerged.
• The seeds of authoritarian governance were effectively sown. Generals, returning from the front lines, were getting increasingly powerful and had a major role to play in the hotly contested and violent 1996 election.
• The promise to get the Diaspora involved meaningfully in rebuilding Armenia was effectively reversed.

The assassination of then Prime Minister Vazgen Sargsyan—a controversial figure, who nevertheless is widely seen as perhaps the only hope Armenia had for building a strong statehood—and six others on October 27, 1999 in the parliament ended this period. The very high levels of public buy-in and social cohesion, which were present during the early 1990s but almost disappeared during the post-war reconstruction period, surfaced during V. Sargsyan’s short tenure in office, to never re-appear again.

Qualitative Stagnation (2000-2007)
The period coincides with the rule of Robert Kocharyan, whose particular political skills allowed him to consolidate power after the October 1999 assassinations and played a dominant role in this handling of both political and economic affairs in the country. This period witnessed double digit growth of GDP and macro-financial stability, but was marred by much of the same lack of regard for good governance and properly functioning markets.

The construction sector, which was the main engine of growth during this period, absorbed sizable amounts of credit and labor resources, driving interest rates, exchange rate, and wages up throughout the rest of the economy. Under these conditions and without effective policy intervention, the economy failed to diversify despite very strong signs of promise shown by some sectors (most notably, IT and agro-processing), effectively preparing the ground for the dramatic decline of GDP in 2009 (see below). Remittances and other transfers from abroad, which fueled this construction boom, complicated the macroeconomic management and created adverse dependence at the microeconomic/household level.

On the budgetary side, the period is characterized by a highly pro-cyclical fiscal policy, with budget being in deficit even during years of double digit growth. Despite this, Armenia’s spending on health, education, and public investment was among the lowest in the world measured as percent of GDP. Much of this was underpinned by poor tax revenue collection, itself a function of the presence of powerful oligarchs that were outside of the reach of the tax authorities. These oligarchs have functioned under the direct patronage of country’s political leadership and grew more influential in public life and economic decision making. The resulting monopolies in production and import of key commodities curtailed competition, limited growth, and resulted in higher prices.

“In the doldrums” (2008-present)
This period is characterized by political upheaval of 2008 and the impact of the global crisis. The poor crisis preparedness and inadequate policy mix during 2008-09 (with disproportionate reliance on externally financed fiscal stimulus compared to exchange rate and structural policies) resulted in a 14.2 percent decline in GDP in 2009, one of the worst performances in the world since the beginning of the current crisis. After 4 years, real GDP is still below its 2007 level and is projected to grow only modestly in the medium term, with sizable headwinds from Europe likely to undermine this outlook.

While some attempts were made to raise the level of tax-to-GDP, these efforts faced resistance from the oligarchs and the decline in economic activity. This put most of the burden of the stimulus on foreign borrowing. Public debt, while still largely on concessional terms, has reached alarming levels and composition (in excess of 40 percent of GDP by end-2011 from 16 percent as of end-2008, with close to 90 percent of it denominated in foreign currencies), with a sizable chunk of repayments scheduled for 2012-14.

Here are some highlights that should help get a better sense of the governance and policy landscape in the country at present:

• State capture, the control of the economy by special interest groups, has gotten worse. Economy remains highly concentrated in the hands of people directly/indirectly involved in politics.
• Migration, by now of the middle class, has intensified; inequality and poverty are rising.
• Developmental agenda is lacking and any future plans to vitalize the economy will face an overvalued exchange rate, corruption, uneven playing field, and weak property rights.

Overall, it is unclear as to where the potential growth could be coming from going forward, assuming the same quality of governance, ongoing political polarization and social discontent following the March 1-2, 2008 killing of demonstrators, and continued disengagement of the Diaspora (that may have acted as a catalyst for foreign investment and a champion for better governance). In the meantime, much of the same policies are being pursued and population is growing frustrated by the day with the regime’s handling of economic and social affairs and the brave face it puts while explaining its failure to deliver on promises.

In conclusion
Despite the mounting challenges on almost every important front, there remain grounds for optimism. Clearly, the experience of early 1990s, with progress made under the most severe of conditions, as well as the still sizable human capital and strong commitment to “making it work” among local population and the Diaspora, provide hope for the economy’s future, given better governance. Also, experience of neighboring Georgia, with swift improvement in governance and the elimination of retail corruption, is very encouraging. All in all, with a clean and democratic political leadership that can unite all constructive forces and help attract investments and talent from the Diaspora; a technocratic government that understands how the modern world functions and offers a meaningful way forward; and a strong public buy-in to underpin the reform efforts, there is practically no limit to what the country can achieve despite the constraints that are imposed by geography and security.

But we are not there yet and time is running out quickly given the scale and the scope of challenges posed by the pervasive nature of whole-sale corruption, adverse demographic developments, and challenging geopolitics. The main directions of the effort should be aimed at de-politicizing economic decision-making and building a vision as well as development-intensive policy capacity. The alternative to following this path is worrisome, if not outright scary.

Reprinted from the Foreign Policy Centre (London, UK) website.

David Grigorian is a Senior Economist at the International Monetary Fund’s Monetary and Capital Markets Department and a co-founder of Policy Forum Armenia, a virtual think tank with world-wide membership. He holds a Ph.D. in Economics from the University of Maryland at College Park and has published on a wide range of issues including growth and institutions, prices and fiscal policy, remittances, capital markets, and banking. This article is based on remarks delivered at the conference on “The South Caucasus: 20 Years On”, organized by the Carnegie Endowment for International Peace on November 28-29, 2011, in Washington, D.C. The views expressed herein are those of the author and should not be attributed to the IMF, its Executive Board, or its management.

References

Amnesty International (1996). “Armenia: Amnesty International Calls for Investigations into Beatings of Opposition Supporters Following Election Protests.” Available from: http://archive.amnesty.org/library/Index/ENGEUR540021996?open&of=ENG-ARM.

Policy Forum Armenia (2008a). “Armenia’s 2008 Presidential Election: Select Issues and Analysis,” PFA Special Report. Available from: www.pf-armenia.org/reports.

Policy Forum Armenia (2008b). “Implications of the World Financial Crisis for Armenia’s Economy,” PFA Special Report. Available from: www.pf-armenia.org/reports.

Policy Forum Armenia (2010). “ Armenia-Diaspora relations: 20 Years Since Independence,” a State of the Nation Report. Available from: www.pf-armenia.org/reports.

Land grabbing the Armenian way or the story of promoting rural migration?

Geraka Hanrayin Shah 2 by EcoLur NGO

In many Government of Armenia strategy papers the social and economic development of rural high mountainous, remote and borderline communities is prioritized. Prevention of rural migration is emphasized as a national priority in the RA Government’s Program. Much attention is also given to the development of agriculture in the RA Sustainable Rural Development Strategy for 2010-2020.

Nevertheless, the recent developments in Kajaran village of Syunik Marz (region) demonstrate a gap between the policy papers and actual priorities. The village is located 3-4 km from Nakhichevan (Azerbaijan) and according to the village’s mayor Rafik Atayan has 270 inhabitants. The main source of the income in the village is small-scale farming. According to the Government decision 627 (April 28, 2011) the village’s 181.7 ha of community land is to be reclassified as industrial and mining land, and is to be transferred to the mining company, which in turn has to pay compensation to the village. In other words, the village’s pastures as well as the local cemetery will become the property of the mining company “Zangezour Copper Molybdenum Combine” subsidiary of Cronimet Mining AG (Germany). The company is planning to widen its tailings area and expand open-pit mining of copper. National public good benefiting the whole State has been cited as the grounds for this case of eminent domain. Except for a couple of general statements on the economic benefit for the development of Armenia in Decision 627 itself, there are no other publicly available documents explaining why the interests of this private company to expand its activities while compromising the well-being of a local community, should be considered a “national public good.” There is no clarification why the mining company which has operated in this area since 1951 (privatized in 2004) needs to widen the tailings area and expand further environmentally unsustainable open pit mining. There are no available studies proving the absence of other acceptable alternatives for expanding the mining without compromising the well-being of the Kajaran community. As for the increased tax revenues for the State budget, there is no clarification on the difference between the amount of taxes paid by the company with and without widening of the tailings and expanding the mine.  Finally, this decision was made without any consultation of the local population and according to the village mayor, without his consent. Additionally, according to the Minister of Nature Protection, no environmental impact assessment has been completed.

What remains clear that with the widening of the tailing and open pit mining the villagers will not have many options, except abandoning their community. Besides losing their pasture lands and water resources, the livelihoods of local people will most likely be significantly affected by the proximity of the proposed mining operations. The local population of Kajaran refuses to accept any kind of compensations for their land and claim that they have nowhere else to go. The members of the community headed by the village mayor and backed up by the civil society groups are calling for annulling the Decision and returning the right of the villagers to live on their own land.

The RA Government’s Decision violates the human rights of local people to adequate food, environment and land. The situation in Kajaran village has many parallels with a classic case of land grabbing in a negative sense. Although the phenomenon is common in Africa and less in Latin America and involves the large scale acquisitions of large lands by foreign states or transnational companies, the following patterns are surprisingly in-line with the case in Armenia. Michael Windfuhr, the Deputy Director of the German Institute for Human Rights, summarizes the following patterns of land grabbing:

• long term leases or transfers of the communal lands, in particular pastures often together with water sources are often the case;
• it happens in the countries with weak governance structures, and can involve cases of the high ranking officials’ corruption;
• there is an absence of the governance structures supporting the needs and interests of vulnerable groups, in particular small-scale farmers;
• the communities affected are excluded from the decision making process;
• the decision is made without grounded long-term environmental, economic and social assessments;
• the result is abandonment and/or eviction of the local population.

Whether the story in Kajaran is a case of a land grab adjusted to the reality of Armenia or just another example of business greed and unsound policy-making Armenian style remains open. If the decision is implemented, however, it will have contributed to more rural migration in a situation where the demographics is already considered by some as Armenia’s No. 1 national security threat. If the past is of any guidance, the government will almost certainly do nothing to mitigate the outflow this Decision will result in.

On an optimistic note, the people of Kajaran and its mayor demonstrated an unprecedented case of the disagreement with the current situation and determination to fight for their rights, despite pressure and threats. This is certainly worth a lot and could be a sign of more civil society awakening to come.

Anna Jenderedjian, PFA Fellow

Renewable Energy in Armenia

By: Tamara Babayan¹, Areg Gharabegian², Artak Hambarian³,
Morten Søndergaard⁴, Kenell Touryan⁵

Danish Energy Management in close consultations with main stakeholder and local experts in Armenia has prepared the Renewable Energy Roadmap for Armenia and its related technical studies which were funded by the Renewable Resources and Energy Efficiency Fund (R2E2) of Armenia under World Bank GEF Grant. This paper is a summary of the findings and conclusions of the studies and the roadmap.

Renewable energy development has been slow in the past but its application throughout the world is accelerating. Because the renewable energy industry is not yet at the same level of development as the more traditional energy industries, it needs a more favorable regulatory environment in the near-term for its development, survival, and transformation to a mainstream energy resource. Some renewable energy technologies are close to becoming commercial such as hydro, biomass, and wind. While other renewable energy technologies exhibit promising potential, they are less mature and require long-term vision, government encouragement, and favorable regulations to flourish.

Current Energy Status in Armenia

Armenia does not have any fossil fuel or coal reserves; therefore, it is entirely dependent on the exported fuel for transportation, electricity generation, and heat production. Armenia has overcome the energy crisis of the 90’s and has built a viable energy system. However, compared to the year 1988, which was the peak of economic output of Armenia, energy consumption lags far behind. Currently Armenia can meet only 35% of the total current demand for energy with its domestic resources.

Hydro power from Sevan-Hrazdan and Vorotan Hydro Power Plant cascades plus more than 150 small hydro power plants are only indigenous renewable energy generating sources of Armenia. But use of that Sevan-Hrazdan system has been curtailed substantially to save Lake Sevan by raising its water level. Presently there is a large effort in Armenia to use mini hydro plants on the small rivers and streams for generating electricity.

A number of old thermal power plants have been closed and one of the two reactors at the Metsamor Nuclear Power Plant has been shut down. Armenian government is planning to decommission Metsamor before 2021 and has embarked on an ambitious plan to build a new nuclear power plant to assure that Armenia will have electrical supply that is needed for its development and prosperity as well as enough electricity to become a major electricity exporter.

During the Soviet era, there were no air conditioning systems installed in most of the residential or commercial buildings and the district heating systems, powered by heavy oil (mazut) and natural gas were the main heating source. After the collapse of the USSR most of the urban centralized heating systems were dismantled. Now approximately 1/3 of the population, has installed individual natural gas powered heating systems and the use of air conditioning has increased noticeably.

The major changes in transportation are related mostly to the slow but steady increase in living standards in Armenia, which in turn has increased the number of privately owned cars. Increases in the use of natural gas as an alternative to gasoline has increased the proportion of natural gas powered vehicles to approximately 50% of the total vehicle fleet.

Renewable Energy Options

Renewable energy resources offer benefits because not only can they reduce pollution, but they also add an economically stable source of energy to the mix of electricity generation sources in Armenia. Depending only on imported fuel for energy production makes the country vulnerable to volatile prices and interruptions to the fuel supply. Since most renewable energy sources do not depend on fuel markets, they are not subject to price fluctuations resulting from increased demand, decreased supply, or manipulation of the market. The nation’s fossil fuel dependence also has serious implications for national security.

Hydro Power – Funding sources are readily available for the construction of new run-of-the river small hydro power generation systems or renovating existing systems. The main limitation is the availability of promising sites within reasonable proximity to good roads and transmission line access where more small hydro power generation systems can be constructed. Cost of installing electric power lines for renewable energy facilities at remote locations to get connected to the grid can be prohibitive from the perspective of overall commercial reliability. It is estimated that in 2020 small hydro power installed capacity will grow to be about 215 MW from the 100 MW that existed in 2010.

Wind Energy – According to a study, theoretically Armenia has 5,000 MW wind energy capacity. However, this does not mean that if there is capacity then it is equal to economically feasible electricity generation. Most of the areas with high wind are not easily accessible for heavy machinery that is needed for the installation of the wind turbines. Utility-scale wind farms are still not commercially viable under the existing government established electricity purchasing tariff structure from the perspective of attracting private capital investment without either additional fiscal incentives or subsidies. The attractiveness of these investments would grow as lighter weight turbines exhibit increased efficiencies and the cost of the turbines decreases over time. However, the main technical barrier is the difficulty in transporting large turbines and blades (52 meters in length) from a port of entry to the selected site in a mountainous country like Armenia. Therefore, not more than 300 MW of wind-generated capacity in 2020 would be a realistic number. As of now only 2.6 MW of wind power is operative in the Lori region.

Solar Energy – Even though Armenia has sufficient sunny days, residential and small scale solar electricity generation is still not an economically viable choice for Armenia due to the cost. Another alternative is the development of an industrial base in Armenia for manufacturing silicon-based solar cells in the country, using its abundant quartzite deposits. This alternative is expected to require an investment of approximately $300 million. Presently there are only few small pilot type solar panel installations in Armenia. However, using solar energy for water and space heating is a viable option for Armenia.

Bio Fuel – Bio-ethanol production is essential for Armenia in order to move in the direction of greater energy security of supply in the motor transport sector and to offset potential future increases in the cost of imported gasoline and compressed natural gas. Even a 5% blend of bio-ethanol with gasoline will replace approximately 14,000 tons of expensive imported fuel per year. However, the cost of production of bio-ethanol using indigenous non-food feedstocks, such as Jerusalem artichoke or animal corn feed, is presently above the wholesale cost of gasoline. This means that voluntary blending of bio-ethanol and gasoline is unfeasible unless mandated by the government. Armenian government is seriously considering starting producing bio-ethanol from home grown plants.

Geothermal – Recent explorations and test drilling conducted in Armenia have identified potential of only 75 MW. The economic viability for geothermal power in Armenia seems marginal, from both the perspective of cost and the total potential power output.

Municipal Waste – The average annual generation of municipal solid waste in Armenia today is estimated to be 1600 metric tons/day. The traditional disposal of municipal waste is in landfills or in mass burn incineration both of which generate serious environmental problems. Land for disposal is becoming increasingly scarce in urban areas and incineration emits toxic gases unless expensive sorting techniques are employed. The more recent and beneficial use has been to generate methane gas through anaerobic digestion, and then using the biogas to generate electric power.

Biogas – The Lusakert Biogas plant in Northern Armenia is the only industrial sized biogas facility in Armenia based on organic waste from poultry. Several years ago USAID had financed construction of approximately 40 small biogas units in the villages throughout Armenia, but most of these units are not operational because villagers much prefer to use the old style way of dried manure for heating and cooking, instead of using these units to generate biogas.

Biomass – Biomass for both heat and electricity production for the short term can be considered, under several conditions, including re-planting of harvested trees and using hybrid fast growing tree farms.

Environmental Benefits and Impacts

Renewable energy generation would have mainly positive, long-term environmental effects as it reduces the need for power generation based on fossil fuels, thereby reducing Greenhouse Gas (GHG) emissions. Approximately 2/3 of current power generation in Armenia is based on nuclear and hydro power which in turn lowers the per capita GHG emissions for Armenia. While still the reduction of the GHG emissions are among targets to pursue, the energy independence and reducing the cost of energy generation are of higher importance.

The main potential problems associated with small hydro power plant projects could be their impact on migrating fish stock if proper fish bypasses are not installed or proper precautionary measures are not implemented to avoid fish being sucked into the turbines. The main impacts resulting from the operation of wind farms are low frequency noise and visual pollution of the landscape. There is also a possibility of birds colliding with turbine blades.

Bio-fuel production results in virtually no net carbon emissions during a complete life cycle if forests are not destroyed to make land available for planting feedstock. Even though gasoline that is mixed with bio-ethanol has less CO₂, the blend produces higher nitrogen oxide than gasoline, which is the main component that causes smog. Depending on the feedstock, the leftover by-products could be useful as fertilizer, fuel for operating processing plants, or become waste.

Possible impacts from solar electrical panels and solar water heaters could be the visual impact of reflected light. Burning fire wood crates air emissions and small particle matters that could be harmful to human health and there could be an impact to the eco system due to the unsustainable rates of harvesting biomass.

Conclusions

The findings of a comprehensive review of renewable energy potential in Armenia have ranked small hydro power plants and solar hot water heaters as the most economical for Armenia in the short to medium-term, followed by wind farms and the use of heat pumps. Photovoltaics, geothermal power, and bio-fuels, especially bio-ethanol, are ranked as more costly in today’s prices and are not expected to be commercially viable in the short to medium-term, but may play a more important role in the longer term. Biomass is also a viable source for heat and electricity production for the short term. Finally, although not strictly a renewable resource, municipal solid waste in landfills is a practical source for generating methane for power production.

Renewable energy may not be the major source of energy development in Armenia but it should be an important component of it. As a result of dropping prices of various renewable energy technologies, in the near future renewable energy production cost could be competitive with more traditional sources. Developing all feasible and economically viable renewable energy resources will create a stable domestic power generation capabilities, which in turn could be a major component of Armenia’s national security.

 

1 – Tamara Babayan is the director of the Renewable Resources and Energy Efficiency Fund (R2E2), Yerevan, Armenia.

2 – Areg Gharabegian is a Policy Forum Armenia Senior Fellow and principal project manager with Parsons, Pasadena, CA.

3 – Artak Hambarian is a professor in School of Engineering of American University of Armenia, Yerevan, Armenia.

4 – Morten Søndergaard is a project manager with Danish Energy Management, Denmark.

5 – Kenell Touryanis a visiting professor in School of Engineering of American University of Armenia, Yerevan, Armenia and retired researcher from NREL, Denver, CO.

A Foreign Perception of Foreign Policy: The EU through Armenian Eyes

Hrant Kostanyan
Fellow, Policy Forum Armenia

The European Union’s (EU) nature generally, and its ‘actorness’ in the Eastern neighborhood particularly, are often misunderstood by a large proportion of Armenian policy makers, the expert community, journalists and the general public. Both ‘traditional’ and online media further contribute to this misapprehension by interviewing incompetent analysts in both Brussels and Yerevan. The scope of this commentary does not permit the unveiling what the EU is or what it might do in Armenia and in the region at large. Rather, I aim to counter some existing myths about the EU that are circulating in Armenia, while reaffirming that increased interest in the EU enhances ‘socialization’ and encourages the further ‘Europeanization’ of Armenian society.

The major source of confusion about the EU is related to the distribution of formal and informal competences. To identify who is responsible for what in the EU external action’s conceptualization and implementation is as complex as loosening ‘the Gordian Knot.’ Who holds the power of shaping and making decisions? Which decision-making procedure is applicable? Who has the informational advantage or right of (exclusive) initiative? To varying degrees, inter alia the European Council, the Council of the EU, the Rotating Presidency, the European External Action Service (EEAS), the European Commission, and the European Parliament are all involved in EU external action.

Moreover, with each issue area, e.g. the Common Foreign and Security Policy (CFSP), trade, migration, energy and aid, the distribution of power within the EU shifts from one actor to another. Furthermore, when faced with ‘cross-policy’ issues, conducting the EU external action becomes even more complex since it threatens to open up a ‘Pandora’s box’ of various actors’ competences. The competition or ‘turf wars’ among involved actors further complicate the analysis. In addition, since the enactment of the Treaty of Lisbon (2009) and the establishment of the EEAS (2010), the EU is undergoing unprecedented transformation, which has led to further uncertainties in policy making that are expected to continue for years to come.

I tend to think that the lack of knowledge about these important dynamics accounts for why a resolution of the European Parliament concerning the South Caucasus is interpreted in Armenian media as a roadmap for the EU’s foreign policy. Although any resolution coming from the European Parliament is very important in terms of shining a spotlight on an issue, the Parliament has very limited formal competences in the CFSP. On the other hand, the European Parliament has been successful in strengthening its voice and pressuring the EU member states and institutions, inter alia through the use of mechanisms such as budgetary power (subject to co-decision) or putting questions to the EU foreign policy chief. Although the powers of the European Parliament are expected to increase, its current influence should not be overstated.

The roles of the European Commission in general, and of Štefan Füle, the Commissioner for Enlargement and European Neighbourhood Policy, in particular, are also often misrepresented. The European Commission remains a major actor in areas such as trade, aid and migration. However, in the current EU institutional architecture, the European Commission shares these responsibilities (except for trade) with the EEAS at the EU level and with the member states at the national level. For example, the European Commission currently does not have a Director-General (DG) for neighbourhood policy, which includes Armenia. Further, the Commissioner responsible for neighbourhood policy is assisted by the EEAS in this area. Moreover, with the enactment of the Lisbon Treaty, the Commission delegations became EU delegations, which has implications for the power distribution in the EU that are yet to be understood.

The EEAS is the most recent EU institutional innovation and is very much still in the making. Besides taking over several functions that were formerly carried out by the European Commission and the General Secretariat of the Council (GSC), and hosting national diplomats, the EEAS has also assumed the role of EU external representation in CFSP matters that was previously performed by the Rotating Presidency. This allows the EU to formulate a long-term policy.

Although the EEAS is supposed to become the epicenter of the EU foreign policy making, the service and its head, Catherine Ashton, are facing serious challenges. It is widely known that she and the EEAS act in the CFSP area after consulting the EU member state governments, which closely monitor sensitive and politicized issues in particular. EU foreign policy remains an intergovernmental affair, and decisions are mainly taken by unanimity. This means that in this issue area, the EU will act in Armenia, in the South Caucasus or elsewhere only when there is a consensus among all 27 EU member states.

The misrepresentation in the press is also related to Armenia’s contractual relationship with the EU. The Partnership and Cooperation Agreement (PCA) is the basis for the EU’s bilateral relationship with Armenia and not the basis for the Eastern Partnership. The latter is mainly multilateral frameworks of cooperation. This is why Belarus is included in the Eastern Partnership (and even in the European Neighbourhood policy) without ratification of the PCA. Moreover, the negotiations of the Association Agreement between the EU and Armenia are ongoing and the negotiations for the Deep and Comprehensive Free Trade Area (DCFTA) are set to follow that of the Association Agreement. However, it will take years before Armenia meets the preconditions to even begin the negotiations for DCFTA. Among all 6 Eastern Partnership countries, only Ukraine is close to signing the agreements. The next in line for negotiations are Moldova and possibly Georgia.

Those unjustifiably raising expectations among the Armenian public should understand that the DG Trade of the European Commission, which is responsible for negotiations, is trying to postpone starting DCFTA negotiations with the rest of the Eastern Partnership countries. These negotiations require a lot of time and resources, and countries like Armenia are ‘insignificant’ for the EU in terms of trade. Moreover, for decades there has been tension between the EU institutions responsible for the political side of external policies and trade. These tensions are aggravated now by the recent institutional changes, which are expected to further slow down the process.

More importantly, an analyst recently went so far as to suggest that the OCSE Minsk Group will leave the Nagorno-Karabakh peace process after the signing the Madrid Principles, adding that in the face of Russia’s failure to find a solution to the conflict, the EU will take over the peace process. Those making such claims should understand that Russia is there to stay and the Madrid Principles might not be signed for years to come. Even suggestions that the EU might replace France in the Minsk Group are not expected to materialize. Those presenting the EU’s ‘takeover’ of peacekeeping operations in Nagorno-Karabakh as a pragmatic option must also understand that the EU does not have an army and that peacekeeping contributions are voluntarily made by the EU member states. The member states have limited resources, lack necessary interest, are reluctant to operate in the Common Security and Defence Policy (CSDP) framework, and are currently stretched thin due to other ongoing obligations.

A few weeks ago, I listened to an analyst on television who is considered to be a leading expert in EU affairs in Armenia, describing the capabilities of the EU ‘rapid reaction force’ to the public and why and how it can assume peacekeeping operations in Nagorno-Karabakh. I was amazed that the expert neglected to mention that the EU ‘rapid reaction force,’ both in the form of ‘Headline goals’ or the ‘Battlegroup concept,’ have never actually been deployed, yet he presented it as a feasible option for Nagorno-Karabakh.

The expectations of the Armenian public have also been unjustifiably raised regarding the upcoming Eastern Partnership Summit. Before the summer holidays, I was present at the conference about preparations of the summit where the panel included Štefan Füle and Radosław Sikorski. Armenia was mentioned only once while naming the Eastern Partnership countries. It is my understanding that the summit will focus mainly on Ukraine, which is the only country that could be presented as a success story, considering that it may sign an Association Agreement with the DCFTA.

The majority of those analyzing EU policies towards Armenia should certainly revisit their methodology. There is a large gap between rhetoric and reality in EU foreign policy, and overreliance on EU documents, statements or demarches often makes their assessments incorrect. The EU is constantly upgrading the language of its external policies, but the substance of these policies rarely changes drastically, thus causing the ‘expectations-capability gap.’

Finally, the EU is currently preoccupied with the economic crisis and the large debt of some member states; a crisis that threatens the very existence of the monetary union. In the field of foreign policy, given the turmoil in North Africa and the Arab world, it is expected that the EU will continue to focus considerable resources and energy on its Southern neighborhood for years to come. There will therefore be some increase in the EU’s activities in its Eastern neighborhood but one should not expect a revolution.

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Hrant Kostanyan is a visiting fellow at the Centre for European Policy Studies (CEPS), an expert at the European Neighbourhood Policy Instrument (ENPI) Info Centre and a PhD candidate in political science (EU studies) at Ghent University, Belgium.

White Paper on “Hayastan” All-Armenian Fund Part IV

To Donate Or Not To Donate?
White Paper on “Hayastan” All-Armenian Fund
Part IV and Appendix

By Ara K. Manoogian

Full versions of this article can be found at:

Armenian Language:  http://www.thetruthmustbetold.com/2011/08/01/haaf-arm/  English Language:  http://www.thetruthmustbetold.com/2011/08/01/haaf-eng/

This is the concluding part of the white paper on “Hayastan” All-Armenian Fund (hereafter HAAF, or the Fund). The final chapter explores how Armenian authorities have been shrinking Armenia’s potential of self-sustainment by tolerating government corruption, shadow economy, as well as using the HAAF as an accessory for large-scale tax evasion. The theme of Part IV is Armenia at 20, No Longer Needs a Baby Walker.

1.    “Hayastan” All-Armenian Fund Missing the Mark

Many HAAF donors continue giving money selflessly, despite the realization that most of the collected funds will inevitably sift through the fine sieve of the large-scale corruption in the two Armenian states. “Armenia is too poor to be able to take care of all of its citizens’ needs” appears to be a prevalent argument. Other arguments are that the existing corruption is the consequence of having a weak economy, which charitable projects tend to strengthen.

But is it not the way Armenia and Artsakh are governed that prevents their economic growth, therefore leaving the populations of both republics in continued dependence on charitable handouts? What lenient, apolitical Armenian charitable organizations do can be compared to filling a bucket with a hole in it—this creates the illusion that the leaky bucket can hold water without being fixed.

Yet another category of donors justifies its donations by the presence of top-priority problems that have to be addressed, before necessary economic reforms can take place. The number one concern cited is the emigration from Armenia and Artsakh. But how much is the Armenian government really doing to address this issue?

Unlike the 1990s, poverty today is not the sole incubator of emigrants. Classified wires from the U.S. Embassy in Armenia, publicized by WikiLeaks in February 2011, confirm what Armenian demographers have been whistleblowing about for a long time—the dominating ground for emigration in today’s Armenia is social, economic and political injustice. The leaked wires clearly document that even the more or less successful representatives of the middle class leave the country, since they don’t believe in the future of Armenia any longer.

Instead of fixing the problem, the Armenian government is allowing Russia to lure Armenian families with the help of a “Compatriots,” a state run program offering immigrants from Armenia unprecedented opportunities in exchange for settling in sparsely populated areas in Russia. If a country’s government is careless about the massive emigration, then no fund, even as big as HAAF can stop people from leaving that country.

What is really happening on the ground? How desperate is the Armenian state for assistance? While the remainder of this paper focuses on both of these questions in detail, it has to be emphasized that HAAF’s activities, while well-intended, barely hit the mark and almost never address the core problem—the socio-economic injustice and human rights abuses faced by Armenia’s citizens on a daily basis.
1.    Resource Curse

In his interview about the Fund, discussed throughout Part I and Part II, Sarkis Kotanjian, Executive Director of HAAF U.S. Western Region, made the following statement:

“Because, let’s not forget that all of us, most of us help our families in Armenia. Every month, be it $50, $100 or… unrelated to “Hayastan” All-Armenian Fund. And I encourage them to provide even greater support because these people have needs in Armenia.”

Sending remittances to needy households in Armenia or Artsakh is, indeed, a noble cause; and for many households there they are the only source of income. However, the benefits of remittances in Armenia in general are often overstated. In a paper published recently in the reputable Review of Development Economics, entitled “Destined to Receive: The Impact of Remittances on Household Decisions in Armenia”, economists Dr. David Grigorian and Professor Tigran Melkonyan document the impact of remittances on household behavior in the Armenian context. They demonstrate that beneficiaries of remittances work fewer hours, spend less on education of their children, and while they save more than their peers who do not receive remittances from abroad, they do not leverage those savings for the purposes of setting up new businesses and expanding economic activity. But perhaps more importantly, as the authors conjecture, remittances encourage further emigration. This is the disastrous economic development model adopted by Armenia’s ruling elite and supported by some in the Diaspora, including the Executive Director of HAAF.

Remittances can also be regarded a resource curse, which describes a feature of modern economic growth when economies abundant in natural resources have tended to grow more slowly than economies without substantial natural resources (see here). “Remittances and Institutions: Are Remittances a Curse?”, an International Monetary Fund (IMF) working paper, shows how “an increase in remittance inflows can lead to deterioration of institutional quality—specifically, to an increase in the share of funds diverted by the government for its own purposes.” On the other hand, remittances also serve as tranquilizers for potential protesters against unfavorable government policies, which adversely affect living standards. When prices for goods are arbitrarily raised, public attitude is not always unanimous. Instead of fighting a government agency, most remittance-receiving households are likely to ask for more aid from their supporter abroad. Therefore, many citizens who have no such external source of income are dealt a double blow. On the one hand, they are hurt by an unfavorable economic situation; on the other hand, by the passivity of their remittance-receiving fellow citizens in the struggle against injustice.

What will happen if private money transfers from abroad cease entering Armenian households? When journalists asked this question of Vahe Vardanyan, Head of the Department of Financial Stability and Development of the Central Bank of Armenia, on April 26, 2011, according to 1in.am Armenian News &Analyses, he responded: “It will be sad, because private transfers amount to 13-14% of Armenia’s GDP.” One of the major shortcomings of Armenia’s heavy dependence on remittances is that its economy becomes more vulnerable to economic crises occurring in foreign countries. That’s the reason why Armenia was among the countries hit the hardest by the 2008 global economic crisis, from which it hasn’t recovered yet.

In response to the criticisms about HAAF, voiced by French-Armenian forum users (see Deleted Forum) who had largely alluded to Part I and Part II of this white paper, Bedros Terzian, President of the Fund in France, wrote in Nouvelles d’Armйnie: “Our accusers have no idea of the means of the Armenian states, nor of the scope of needs in Armenia and Karabagh. And they want to prevent us from helping them!” (Indeed, how original to claim that the opponents have no idea of what they are talking about.) But what Mr. Terzian and others need to understand is that any funding given without proper oversight and strings attached—both at the household level or at the level of country budgets, as discussed above—creates fundamental disincentives and ends up turning into a resource curse by its corrupt government… courtesy of unsuspecting and complacent donors.

1.    Armenia is 20 years old and no longer needs a baby walker

There are prerequisites to suppose that the Republic of Armenia has the potential to sustain itself without the help of donations and remittances. The potential resides chiefly in efficient tax administration. The failure to carry out proper regulation of the sphere has been strengthening the country’s shadow economy instead.

According to “Tax Potential vs. Tax Effort: A Cross-Country Analysis of Armenia’s Stubbornly Low Tax Collection,” an IMF working paper published in 2007, Armenia had been consistently under-collecting as much as 6.5% of Gross Domestic Product (GDP) in taxes between 1996 and 2006. Using the pre-crisis value of Armenia’s GDP (and slight improvement in the tax ratio in recent years), these losses would account for $400-$500 million per year. In a 2010 report entitled “Armenia-Diaspora Relations: 20 Years Since Independence,” Policy Forum Armenia looks at the spending side of Armenia’s budget and estimates that the procurement-related losses of the budget in 2008 alone accounted for $225-280 million. These two numbers together (from the tax/revenue and expenditure side of the budget, respectively) suggest a budgetary leak in the magnitude of three-quarters of a billion dollars annually.

When Armen Martirosyan, Head of Zharangutyun (Heritage) faction of the Armenian National Assembly, brought up the issue of tax under-collection based on the IMF report during a parliamentary hearing, Prime Minister Tigran Sargsyan merely said they were working on it.

A recent assessment of that work which has been done paints a different reality. “Unfortunately, we don’t see any correct step or procedure regarding this shortcoming,” Gillermo Tolosa, a resident representative of IMF in Armenia, was reported by Panorama.am as saying in April 2011. Their analysis of the tax collection levels in Armenia shows that the situation is not improving. According to Tolosa, the percentage of tax revenues in the Armenian economy in 2010 was as unfavorably low as in 2009, “which mean that the shadow economy hasn’t shrunk in Armenia.” By tax-GDP ratio, Armenia is far behind all the post-Soviet Republics, except for Tajikistan.

Juxtaposition of the numbers calculated by the IMF, with total amount of the donations HAAF has attracted since its establishment in 1992, reveals an astonishing picture. The Fund’s total donations collected in 1992-2010 (over $200 million) is less than 50% of the total amount of the estimated tax revenues the Armenian government could, but failed to, generate in taxes within a single year: 2006. This failure was largely due to leniency toward the widespread tax evasion among the country’s biggest companies owned by oligarchs. The following section provides a few concrete examples of how this grand scale evasion happens.

1.    Economic Suicides
The Banana King
As mentioned in Part III, Grisha Harutiunyan is the co-owner of Griar, a construction company erecting elite apartment buildings at the intersection of Buzand and Aram Streets. Grisha Harutiunyan had secured part of the money for the construction of luxury apartments in the heart of Yerevan by means of Catherine LLC. According to Hetq, the company claimed to have imported about 6,500 tons of bananas to Armenia in 2005-2007 with the purpose of reprocessing and eventual export to the Bahamas. Thanks to that, Catherine, LLC. became exempt from various customs taxes and levies, as well as VAT. However, the investigative journalists of Hetq proved that the company had not exported any reprocessed banana products from Armenia, despite the fraudulent documents, thus robbing the state budget of about $1.5 million. Moreover, Hetq has found out that in that same period “huge amounts of bananas, several times more than registered by the State Council on Statistics and the State Customs Committee, were imported into Armenia.”

The investigative journalists rule out the possibility that the National Security Agency, the State Revenue Committee, Prosecutor’s Office and other state institutions were unaware of these illicit activities. However, no criminal charges have been pressed against the co-owners of the company, Grisha Harutiunyan and Mihran Poghosyan. The former was simply dismissed from his office, while Poghosyan, who was appointed head of the Judicial Acts Compulsory Enforcement Service by Serzh Sargsyan about a month before the publication of the first article about the banana business in July 2008, still holds the office.

Unprofitable Gold
For six consecutive years, GeoProMining Gold, which has been mining gold from two of the largest gold mines in the former Soviet Union—Sotk and Meghradzor in Armenia—paid not a penny in taxes. From 2004 to 2010, the company reported losses of tens of millions of dollars a year. The highest loss was reported in 2008 in the amount of AMD 17 billion 273 million (about $56 million). However, as GeoProMining Gold reportedly incurred these sizable losses, the price for a gram of gold in the world market jumped from $21 in 2007 to $40 in 2010. Ishkhan Zakaryan, Head of the Parliament’s Control Chamber, pointed out numerous other violations of the license agreement, amounting to about AMD 200 million (over a half a million dollars), in his report in November, 2010.

It is common knowledge in Armenia that no company of such proportions could operate with such monstrous violations for such a long time without the knowledge and protection of the country’s top leadership. That is perhaps why Ishkhan Zakaryan had to turn down the journalists’ request to identify the real owners of this company registered in the Cayman Islands, a major offshore financial center. (Watch A1+ video commentary, the full report, or read more details).

Such activities only appear to be a manifestation of the authorities’ good will. According to Lragir, this belated initiative is a result of hard pressure from international financial institutions on the Armenian government to force the mining industry—enjoying excessive profit and VAT exemption on exports—out of the shadows before asking for loans. The government, thus, had to put together an improved bill on mining, which would increase tax obligations. The outcome of these drastic measures speaks for itself: the mining industry grew by 24.3% in 2010 alone and paid AMD 18 billion (over $51 million) in taxes vs. AMD 0 ($0) in 2009.

Nevertheless, journalists from various Armenian news agencies have been urging the Control Chamber to make similar audits at other major mining companies, such as those in Kajaran, Kapan and Akhtala, where they claim the situation is as bad. The Control Chamber, however, does not seem to be as prompt as expected in reacting to these allegations.

Robin Hood of the 21st Century
In 2007 it became clear that Armenia has its own Robin Hood. The most striking difference from the classical character, though, is that his Armenian counterpart happens to be Armenia’s richest person—Gagik Tsarukyan. Does this mean he robs himself to feed the poor?

An excerpt from a Zhamanak journalist’s interview with Roza Tsarukyan, who runs the agricultural division of his son’s business empire, in April of 2007, sheds light on a significant portion of the seemingly fantastic figure, with which the IMF specialists had come up in their working paper:

- Mrs. Tsarukyan, what’s the total number of the jobs you have created?
- Oh no, if I say it, the tax inspector will then come and ask “why don’t you show all the taxes?”
- Say as many as reported.
- 78.
- Mrs. Tsarukyan, so is it true that you don’t show your taxes in full?
- We hide some of them, we don’t show some of them, we show some of them, of course!
- That’s why people say that you evade taxes and then do charity for the people with it.
- And right we are! If we have been smart enough to do that, then we’re doing the right thing…
- Why don’t you pay your taxes, so that the state can give pensions, allowances?
- You want me to give it to them so they go to Monte Carlo? I’m not going to give… I’m giving it to the socially vulnerable strata of the society, I’m giving it to a kindergarten, I’m giving it for free medical treatment.

What conscientious tax-payers of Armenia expected to happen following this frank conversation was a full-blown investigation into the disclosed information. But these statements only came to prove Gagik Tsarukyan’s invincibility in relation to the incumbent authorities. Even the obvious humiliation of the then Prime Minister Serzh Sargsyan, who allegedly lost big dollars in Monte Carlo while gambling, bore no visible consequences.

On the contrary, the relationship between Serzh Sargsyan and Gagik Tsarukyan has been growing warmer and warmer ever since. Gagik Tsarukyan was welcomed into the Government coalition in April 2008. A month later Gagik Tsarukyan entitled himself with the right to pardon himself, when he made the following statement on TV: “Let bygones be bygones, a line has to be drawn from now on, and everyone should work with documents and pay one’s dignified taxes.”

About three years later he signed a coalition memorandum, which was a guarantee of support for Serzh Sargsyan’s candidacy at the upcoming presidential elections. And last but not least, Serzh Sargsyan recently appointed Gagik Tsarukyan a member of the Armenian National Security Council. Among other issues, A1plus reports, “customs and tax reform programs in 2011-2013 were discussed at the session.” It is quite ironic, if not disastrous, that one of Armenia’s major tax evaders will henceforth be “reforming” the country’s tax system.

Serzh Sargsyan had the tax collectors ravage another oligarch, Khachatur Sukiasyan, after the latter publicly declared full support for Levon Ter-Petrosyan during the presidential elections of 2008. It is obvious, the former head of the National Security and, currently, the self-declared president of Armenia, Serzh Sargsyan is concerned more about the security of his seat than that of the state and its citizens.

The Ministry of Dead Souls
The recent scandal that erupted from Armenia’s Ministry of Labor and Social Affairs shows that the Armenian government had the potential to increase pensions even despite Tsarukyan’s continuing tax evasion. In November of 2010, the Control Chamber of the Republic of Armenia revealed colossal abuses in the State Service of Social Security, which reportedly forced Vazgen Khachikyan, the Head of the Service, to seek medical treatment. According to Zhamanak, Armenia’s Ministry of Social Security had been issuing pensions for about 60,000 deceased persons for many years. Some of the listed pensioners have been already dead for 18-19 years. As a result, close to $4 million a month might have disappeared into the pockets of public officials. Ishkhan Zakaryan, Head of the Control Chamber, provided unsettling details of the scam in a report on May 12, 2011. And it is important to realize that, as Lragir emphasized, these 60,000 dead souls were not the only source of extra income for public officials, but also 5% of the active electorate, whose votes are an easy game for vote rigging. (Policy Forum Armenia’s report on 2008 election outcome explains in detail how these dead souls may have been used in an election that is widely known as fraudulent.)

Vazgen Khachikyan was dismissed soon after the publication of the facts. He continues to be a member of the ruling Republican party because, as he said in an interview to Radio Liberty, “we have, so to say, good friends in the party.”

Khachikyan’s dismissal was followed by yet another scandalous disclosure; an accidental one. In journalists’ presence, on January 27, 2011, Artur Grigoryan, Armenia’s Minister of Labor and Social Affairs, had the carelessness to publicly say the following to the former employees of the dissolved Service of Pension Payments: “We are not going to require those 200 drams from you for each pension delivered, because those at the top don’t require it any longer” (Aravot). When journalists wondered who “those at the top” were, the minister chose not to specify: “I haven’t had to deal with taking those 200 drams. The issue was closed when I came” (Panorama.am). At the time of this dialogue, it was his seventh month as minister.

AMD 200 a month from each of about 500 thousand Armenian pensioners amounts to AMD 100 million a month (about $3.8 million a year). Where has that money gone? Another question that craves an answer is why Armen Grigoryan’s accidental frankness was not followed by interviews with the former Ministers of Labor and Social Affairs in the Armenian media.

Shadow Employment
The National Statistical Service published a report, February 11, 2011, called “The Unregistered Field and Unregistered Employment in Armenia, 2010,” according to which, more than one third of the construction jobs in Armenia is hidden, as quoted by Zhamanak. According to the same report, the percentage of unregistered jobs in retail and wholesale businesses is 26.9% and 11.8%, respectively, in the processing industry.

However, that report has failed to reflect a wide-spread practice in the Armenian job market of paying employees higher salaries than reported. And it is ironic that certain news agencies reporting on such illegal practices, according to someone who has worked in a couple of them, applied the same methodology when it came to paying their employees.

The VIP Resort
Tsaghkadzor has been one of the leading areas by size and number of investments in Armenia since the early 2000s. The above-mentioned Grisha Harutiunyan and Gagik Tsarukyan have hotels in the Tsaghkadzor resort. As a result of an ongoing construction boom, there are over 35 hotels in this small town, including a number of 3-, 4- and 5-star hotels.

“When you see these luxurious buildings, you would think that the residents of Tsaghkadzor have jobs. But go and see for yourself, the people Tsaghkadzor are sitting at home without work,” told a local to a Hraparak journalist.

The town’s population of 3,400 in 1989 has declined over the years by more than a half to about 1,600 in 2009. According to a number of people interviewed by the journalist, residents of Tsaghkadzor do not comprise the majority of employees at the dozens of hotels and restaurants in the city. Besides, many of the jobs are seasonal. Oligarchs tend to keep their employees’ salaries at the same level as Armenia’s minimum wage—AMD 30,000 a month (as of 2010, about $80), and the excuse is usually the economic crisis.

Over $9 million dollars has been invested in the infrastructural development of Tsaghkadzor resorts from 2006-2007 by the Fund alone:

2006 – AMD 950,000,000 ($2,500,000) for the construction of the fourth station of the Tsaghkadzor ropeway;
2006 – $6,522,199.93 for the construction of the ski tracks of Tsaghkadzor-4 and two garages;
2007 – $60,360.30 for the construction of a parking lot for the Tsaghkadzor funicular;
2007 – $20,051.28 for technical supervision of the Tsaghkadzor funicular;
2007 – $53,974.10 for the design and expertise of the Tsaghkadzor funicular;
2007 – $18,838.34 for technical supervision of the Tsaghkadzor funicular.

Many Tsaghkadzor families have suffered from these rapid developments, since they are no longer able to breed cattle. About ten years ago, the mayor of Tsaghkadzor banned the residents from breeding cattle, which fed otherwise unemployed families. The reason for the ban was the fear that it might repulse foreign tourists and disgust the nouveaux riches who have built houses in the town. Almost all the Armenian oligarchs have property and businesses in Tsaghkadzor. And HAAF has made its unique contribution to their prosperity. But whom should these oligarchs really thank?

The official website of HAAF presents the Republic of Armenia as the sponsor both for the Windsurfing center at Lake Sevan (see Part I) and the infrastructural developments of Tsaghkadzor. This brings us back to the question raised in Part I: “It is also interesting to know what exactly the Fund implies by presenting the Republic of Armenia as the donor for the windsurfing project.” According to a well-informed former Fund insider, who preferred to remain anonymous, HAAF was dragged into these construction projects by the authorities mainly for one reason: it allows some of its donors to benefit from the tax-exempt status.

“The Republic of Armenia,” thus, is a mask that some public officials and oligarchs were authorized by Robert Kocharyan to wear for the purpose of making beneficial investments in Tsaghkadzor. By having HAAF undertake the construction of the above-mentioned projects in Sevan and Tsaghkadzor “sponsored by the Republic of Armenia” alone, Robert Kocharyan and his cronies appear to have saved about $2 million (20% of about $9 million spent on the construction of infrastructures in Tsaghkadzor and about $815 thousand spent to build a Windsurfing Center in Sevan) that would otherwise be due in taxes.

It is clear why a ski route was named after Robert Kocharyan and not, say, HAAF. It was thanks not to the Fund, but Kocharyan’s unconditional power over it that oligarchs made “discounted” investments in Tsaghkadzor, that is, at the state’s expense. Such favors also explain the zeal, with which most oligarchs backed Kocharyan during the elections and anti-government demonstrations, most notably in early 2008.

Despite all this, these leaders or their subservient representatives cross thousands of miles to squeeze donations out of the Diaspora Armenians in the name of Armenia’s economic development. It is hard to disagree with a statement made by Glendale TV host Harout Bronozian during a program: “They come here once a year and preach patriotism to us, but denounce it during the remaining 364 days” (Armenia Fund Telethon Part 2, Nov 24, 2010, at 2:33).

An initiative like HAAF has been conceived as an important asset for the Republic of Armenia, both for uniting all Armenians and helping the country develop its infrastructure by generous donations. The Fund’s aid was invaluable in the early 1990s, when Armenia was at war and on the verge of economic collapse. These gratuitous funds have been an important alternative to the loans from international financial institutions or countries. However, it is now obvious that the caring Armenians’ donations can easily become a resource curse when entrusted to a corrupt government, such as those ruling Armenia and Artsakh today.

CONCLUSIONS
“To Donate or Not to Donate,” the white paper on the Fund, is an attempt to help Armenian donors all over the world  find answers to some of their questions. This research is an alternative to propagandistic and often misleading answers the concerned public has to hear from the Fund representatives. While this has indeed been overdue for a while, I owe it to the TV interview of Sarkis Kotanjian, Executive Director of HAAF U.S. Western Region for helping expedite the drafting of this series of reports.

By resurrecting long forgotten news about mismanagement of the Fund’s resources by officials and their cronies; indicating violations, the perpetrators of which have not been punished by law; publicizing confessions of former and current Fund insiders (some on condition of anonymity); and, eventually, connecting all these dots, the paper defines the Fund’s cooperation with the corrupt governments of Armenia and Artsakh as an illustration to an old proverb: “The road to hell is paved with good intentions.”

Despite Executive Director of HAAF U.S. Western Region Sarkis Kotanjian’s allegations, Parts I and II of this paper show that the Armenian and Artsakh governments’ impact on the Board of the Fund and its decision-making is significant. Moreover, all four parts manifest that this overpowering influence has been detrimental to the Fund’s overall performance.

The methods of misappropriation of funds by officials and/or their cronies have evolved over time from straightforward wire transfers to more sophisticated procedures, such as having the Fund build developments in areas belonging to them or abusing the tax exempt status of the Fund for personal gain. Facilitation of bid-rigging in favor of the construction companies owned by government officials or their cronies has been yet another widespread method of significant misappropriation.

The dire consequences of the government’s overwhelming control over the Fund have been discussed in all four parts of the paper. Poor quality of construction is often due to officials’ patronage, which dramatically reduces the construction companies’ incentive to ensure quality. The same powerful patronage has been exempting the culprits from prosecution. The disappointing outcome of the Fund’s initiatives, as well as ample evidence of mismanagement of the money raised by the Fund, has created a trust vacuum among thousands of donors throughout the world. Instead of carrying out meaningful reforms in the Fund, the authorities, as detailed in Part II, have been systematically compensating the trust vacuum by forcing state employees in Armenia and Artsakh to make mandatory donations to the Fund.

The government’s de facto (if not de jure) control over HAAF has made the latter a silent accomplice of its undemocratic moves. Considering all the evidence that the authorities’ powerful presence in the Fund’s administration is detrimental to its performance, I believe that it would be in the nation’s best interest if all the public officials gave up their membership of the Fund’s Board of Trustees. First of all, this step would deter the government from using HAAF as a cash cow for fulfilling its own duties. This enhanced independence will make the government more resourceful than having a non-profit pick up its slack. Secondly, this step could also diminish government corruption risks associated with its direct interference in the Fund’s projects, biddings and other procedures. Thirdly, the Fund will have a chance to regain the trust of numerous potential donors, who happen to be in opposition to the incumbent authorities. Thus, independence from the government may eventually boost the Fund’s reputation in the society.

As for choice of targets, the new Board of Trustees and the Fund administration have to make sure their choice of projects are not a part of the public services the government is supposed to provide. Alternatively, cooperation with the government may be acceptable only on condition that, like the Millennium Challenges Corporation, HAAF could hold the government accountable for the funds provided, thus using its financial potential as leverage to curb potential corruption. The Fund’s projects should be highly selective and properly targeted. Preference should be given to cultural, educational, and demographic projects. The latter may include support of repatriation efforts in Artsakh and liberated territories.

In order to restore justice and to rehabilitate the Fund’s reputation, a forensic audit of the HAAF needs to be conducted. In the event that violations are discovered, the culprits should be prosecuted, the missing funds should be recovered and directed to the implementation of future projects. The Fund should publicly condemn forced donations and provide an option for all the involuntary donors, who have been forced to donate by their employers, to get their money back.

Armenia has enough resources to care for most of its needs, if only its rulers wished to use those resources towards those needs. With such a will, the country could generate twice as much revenue in a single year as the Fund has in eighteen years. However, large-scale corruption in the government, tax evasion, and power abuse for personal gain—as demonstrated in this series of reports—are the key reasons why Armenia has been unable to realize its full potential. Under such circumstances, by cooperating with the corrupt government, readily picking up its slack and even contributing to the prosperity of oligarchs, the Fund actually feeds into the corrupt system, making it stronger. As long as HAAF has not dissociated itself from the current corrupt regime, every donation is effectively a vote of confidence for the corrupt ruling elite and the people on the very top.

Ara K. Manoogian is a human rights activist representing the Shahan Natalie Family Foundation in Artsakh and Armenia; a Fellow of the Washington-based Policy Forum Armenia (PFA); creator of www.thetruthmustbetold.com.

Appendix to “To Donate or Not to Donate,”
a white paper on “Hayastan” All-Armenian Fund
By Ara K. Manoogian

As I was working on the final part of the white paper, Part III was attracting more and more attention from people both pleased and displeased with activities of the “Hayastan” All-Armenian Fund (hereafter, HAAF or the Fund). As belated as it was, for the first time, Ara Vardanyan, the Executive Director of the Fund, reacted to the white paper in the form of a lengthy comment. He wrote: “As the present Executive Director of “Hayastan” All Armenian Fund I hereby state that articles published by Ara Manoogian are purely slanderous.”

Expressed through a number of comments, Ara Vardanyan’s main message was nothing new: “Is it possible to fail to notice the hundreds of schools, residential buildings, water mains, hospitals, gas pipe lines, and kindergartens, which “Hayastan” All-Armenian Fund has built in Armenia and Artsakh” (comment #6). With slight paraphrasing, this statement is voiced by nearly all Fund representatives and staunch supporters (Ara Vardanyan, Sarkis Kotanjian, Vardan Partamyan, Stepan Partamian and others) in response to accusations of corruption or low quality. Such response translates into a well-known saying: “Never look a gift horse in the mouth.”

I, Ara K. Manoogian, hereby declare that I have succeeded in personally noticing the hundreds of schools, hospitals, etc., which HAAF has built with quality often lower than the allocated funds suggest. The problem is that these projects are the natural responsibilities of the Armenian and Artsakh governments, which could potentially afford building more and better than that, provided that they had enough political will to reduce corruption and collect all taxes due from the poor and the wealthy alike. If these governments are not capable of doing this much, then what are their merits to run the Fund? As impotent as they are the leaderships of both countries have absolutely no place in the Presidium of the Board of Trustees of the HAAF and should therefore resign.

Despite the Executive Director’s attempts to discredit the research, there were people who spoke in defense of the white paper. After ‘K,’ an anonymous user, declared in a comment that, disheartened by the findings in the research, he/she was “now a FORMER donor,” (comment #6) a mysterious user under the pseudonym of ‘Pahakazor’ (Armenian for ‘patrol’ or ‘sentry’) joined the debate. As the nom-de-plume suggests, this person took up the role of the Fund’s guardian angel, fending off inconvenient opinions. In doing so, ‘Pahakazor’ demonstrated surprising similarities with the Executive Director of the Fund.

Like Ara Vardanyan, Pahakazor refused to understand why corrupt officials are featured in a paper about the HAAF; like Ara Vardanyan, Pahakazor reduced the white paper to a compilation of gossip; like Ara Vardanyan, the Fund’s guardian angel also wondered if those criticizing the Fund had ever bothered to visit the office in Yerevan or any of the project sites. Both posted comments under the English and the Armenian versions of Part III. The similarities of the standpoints made me wonder who Pahakazor really was. I had my strong doubts as to his/her identity, therefore I created a commenter, ‘Arthur,’ whose mission was to smoke the real person out of the nom-de-plume. In these fragments of different comments, Pahakazor presented himself as follows:

1. “Remember the amount of assistance that we sent to Armenia after the earthquake in 1988 and 1989?” (comment #11)
2. “I am a donor who tries to travel to Armenia at least once every year” (comment #18).
3. “As I said three times before I am a long time donor to Armenia Fund who cares where my donations end up. I visited several Armenia Fund projects, spoken with people in those villages, contractors and office workers of Armenia Fund in Armenia” (comment #55)
4. “I actually do stop by at the Himnadram office in Armenia, I try hard to go to the villages where the projects are and I do check with the Himnadram’s financial department to see where my money goes” (comment #25).

The first statement suggests that Pahakazor is a Diaspora Armenian who has lived in the U.S. since before the collapse of the USSR and is old enough to have provided humanitarian aid to Armenia back in 1988. The rest of the statements imply that this person is so preoccupied with the Fund, its projects, and safeguarding its dignity, that I felt the Fund should reward Pahakazor for his/her exceptional enthusiasm.

A Google search of the nom-de-plume led me to Asbarez.com, where Pahakazor had left a comment about the Ramgavar Azadagan Party U.S. Western region having unpaid pledges to the HAAF amounting to $100,000. Such knowledge was yet another indicator that Pahakazor had been closely associated with the Fund. When ‘Arthur’ asked ‘Pahakazor’ whether he/she worked for the Fund, the answer was negative: “Years back I volunteered answering phones during the Telethon” (comment #55). In response to ‘Arthur’s’ inquiry where he/she had dug out such confidential information, Pahakazor said: “I checked the info and it turned out to be true” (comment #25).

Barely had Sarkis Kotanjian, Executive Director of the HAAF U.S. Western Region, set foot in the battlefield of comments, when he accidentally stepped on a mine that blew ‘Pahakazor’s’ cover. The very first comment by Sarkis Kotanjian, whose highly controversial interview had served as an urge to embark on the white paper, came from the same Internet Provider (IP) address as those by ‘Pahakazor’s.’

For additional proof of identity, I contracted John Olsson, an independent forensic linguistics expert from the United Kingdom, Co-ordinator of the Forensic Linguistics Programme at the University of Bangor, North Wales, UK. In his report into the authorship of texts signed with the nom-de-plume ‘Pahakazor,’ John Olsson concluded: “In my opinion, on the balance of probabilities, Mr Kotanjan is a probable author of the texts attributed to ‘Pahakazor’. I suggest that the combination of features in common across the two text sets would most likely be used by only a very small percentage of the population.” Thus, my doubts were confirmed, and ‘Arthur’s’ mission was accomplished. The report in its entirety can be accessed here. The discussions with Pahakazor’s active participation can be found in the comments sections of “To Donate Or Not To Donate” (PART 3) and its Armenian version.

This discovery made me look back at certain statements made by ‘Pahakazor’ under a completely different light. For instance, I was trying to picture Sarkis Kotanjian in 1988, a boy in his early teens who lives in Yerevan but manages to send humanitarian aid to Soviet Armenia from the U.S. (comment #11). Below are a few more interesting fragments:

1. “The Los Angeles director that speaks on Youtube about Armenia Fund actually makes sense to me as a pragmatic down to business type” (comment #22).
2. “I am not surprised that the Fund discovered this post recently. I myself discovered it about a week ago — it’s not like this is a widely popular blog. ” (comment #18).
3. “I can’t help you with that. Maybe this guy Ara Manoogian is a decent guy, who knows – neither you are me have met him in person” (comment #27).

I will leave the first statement without comments. As for the second allegation, it is an outright lie, since Sarkis Kotanjian was the first to read Part I of this white paper, after I handed him a copy near the end of our face-to-face meeting. This means he had access to the paper not just a week but a couple of months before the comment was posted by ‘Pahakazor,’ his alter ego, who, in the third statement, denies altogether having met me in person. A few comments later, Sarkis Kotanjian eventually did admit having met with me in person to discuss the state of the Fund and other issues (comment #57). Sarkis Kotanjian also added in the same comment: “Yes, Ara Vardanyan is well aware of our meeting.” And this admission put Ara Vardanyan into quite an awkward position, since the latter had declared earlier: “As the director of the Fund’s executive board I have always been open to any dialogue and it surprises me that Ara Manoogian has never contacted us with a request to set up a meeting for an interview” (comment #5).

Thus, assuming a fake identity, Sarkis Kotanjian was praising and promoting the Fund by giving false testimony. By claiming to be a diligent donor, who has checked and is now completely satisfied with the way his money translates into projects, Sarkis Kotanjian misleads people into trusting and donating to an organization he works for.

The deception on the part of the top administration of the Fund is present in a number of comments the two executives left under Part III.

1. “ARMENIA FUND IS NOT CONTROLLED BY ANYONE,” emphasized Ara Vardanyan in the comment #33. But when a concerned commenter reiterates a point we made in Part I about the importance of changing auditing companies, Ara Vardanyan passed the decision-making privileges over to the Board of Trustees: “Firstly, your claims about Grant Thornton Amyot will be passed to them, and it will be up to them to follow up. As I have stated hundred times, we have a board of trustees which consists of 35members, 25 of which are representing Diaspora. These are the people who make the decisions concerning audit selection and other strategic things” (comment #46). This last segment—particularly, “other strategic things”—is eloquent about who controls the Fund: those ten who make up the Presidium of the Board of Trustees, the majority of whom are government officials, and who Mr. Vardanyan tries to circumvent. The detailed presentation of this topic can be found in Part I.

2. It was surprising to hear what one of these 25 members of the Board of Trustees, Ara Boyajian (Canada), had to say about the Fund at the end of the Board meeting on May 31, 2011:  “The general structure of the “Hayastan” All-Armenian Fund stands on a quite solid foundation, because it’s the only organization, which, indeed, is regularly audited by Western standards. And, as a matter of fact, we haven’t heard of any violation for the past 20 years” (watch the video).

It is unthinkable that someone on the Board could fail to have heard of any violations in the past 20 years, when even the incumbent Executive Director, Ara Vardanyan, admits it: “I surely can say that in some cases we did have problems with quality . . .” (comment #30). So does Sarkis Kotanjian, when he declares: “I said it during that meeting and I will say it now that as any organization, Armenia Fund in its 20 years of existence had its share of challenges through which it learned. […] Armenia Fund is not what it was back in 1994, 1998, 2003 or 2006 – it changes with time and it changes with people” (comment #57). Clearly, the right hand doesn’t know what the left is doing. Who could, after all, deny that the self-promotion of the Fund as dependable is misleading?

3. Whether or not the issue of alternating auditing firms was passed over to the Board of Trustees, as promised by Ara Vardanyan is unclear. However, it is a fact that this issue was not in the agenda during the annual meeting on May 31, 2011. The same commenter, who shared our concern about auditing, had also complained about forced donations. According to her, for years, AMD 1,000 has annually been withheld from the salary of her mother, a school teacher, to be donated to the HAAF without her consent. In reply, Ara Vardanyan qualified the practice of forcing donations as illegal: “I feel sorry that I have withheld AMD 1,000 from your mother’s salary. But it is not legal, and the headmaster of that school has to be held accountable. We don’t encourage such donations” (comment #6). To the best of my knowledge, neither has any headmaster been held accountable, nor has Ara Vardanyan or any of the members of the Board of Trustees addressed this issue.

Ara K. Manoogian is a human rights activist representing the Shahan Natalie Family Foundation in Artsakh and Armenia; a Fellow of the Washington-based Policy Forum Armenia (PFA); creator of www.thetruthmustbetold.com.

ARF and Armenia: How to Withstand the Challenges of the Future?

Below are the comments delivered by David Grigorian (Senior Fellow, Policy Forum Armenia) at the public forum titled “The ARF at 120: A Critical Appreciation,” held at the New York Hilton Hotel on Nov. 21, 2010. Click here for the comments delivered by the other panelists and the response of ARF Central Committee chair Antranig Kasbarian.

Recent past: A snapshot

On behalf of my colleagues at Policy Forum Armenia (PFA)—a virtual think-tank uniting over 60 Armenian professionals from around the world—I thank the organizers, particularly, Dr. Antranig Kasbarian, for an opportunity to address this anniversary gathering.

The fact that a developmental economist, like me—who by the nature of his profession focuses more on the future than on the past—is invited to speak here, is a welcome development and says a lot about where the ARF’s thinking is aimed at.

Before I begin, however, I am required to make a disclaimer. The views expressed here are my own and should not be attributed to the institutions I am affiliated with.

I should mention that neither my English nor my presentation is as polished as those of my fellow panelists, who spoke here before me, for which I apologize. So please bear with me. I am also perhaps the most impatient one among the panelists in my desire to see change take place, and for that I do not apologize!

There is something I would like to say from the onset, something that has to do with why I am here today. And that thing is the understanding that the ARF is the most active and well-organized element of the Armenian Diaspora. It is second to none in terms of the patriotic upbringing of youth and the role it played in the Artsakh War.

Much of what I am going to say today is on the record already, as part of PFA’s report on Armenia-Diaspora relations of the past 20 years. There we argue for a more active diaspora involvement in Armenia’s affairs, and so the rest of my presentation will essentially be based on that premise.

First, I would like to review some facts of the ARF’s involvement in Armenia in recent years—election results since 2007—and offer some reasons for the worse-than-expected outcomes.

Second, I would like to share with you my take on Armenia’s developmental challenges and, time permitting, put that in the perspective of both our own resources as well as the trends taking place in the rest of the world.

Finally, I would like to offer some recommendations on what the ARF can do to better meet the challenges before itself and the Armenian nation as a whole.

I wanted to start off with a brief trip to a not-so-distant past and ask you to visualize a bar chart that has the following percentages of votes received by the ARF in the 2007 parliamentary elections, the 2008 presidential elections, and the 2009 Yerevan municipality elections.

While PFA’s research shows evidence of fraud and irregularities against certain political parties and candidates, we conclude—at least in the cases of 2008 and 2009—that there was little, if any, systemic fraud conducted against ARF (or its candidates) in these elections. So these numbers are really the fraud-free popularity ratings of the ARF in Armenia.

Now, I am sure many of you have wondered about these outcomes. After all, if anything we know about elections and what drives them is correct, the ARF should have been receiving much higher and perhaps even increasing levels of support.

Blunders of the past

I do not want to dwell on these numbers (see table) too much—after all, they are in the past and not much can be changed there. What I do want to do, however, is offer some potential reasons behind these performances and generally the ARF’s low popularity ratings in Armenia. I call these reasons “Six Blunders of the Past.”

ARF’s performance in Armenia’s elections (2007-2009).

Blunder #1: Handling of freedom fighter Pavel Manukyan’s case in June 2005, who was severely beaten by Seyran Ohanyan (and a number of others) in his office. The case was pushed under the carpet without receiving much by way of legal due process. Since then, Ohanyan moved to become the defense minister of Armenia, while others who participated in the beating were promoted (including to the rank of general). This was seen by many as an unwillingness of the ARF leadership to rock the boat, in an attempt not to risk the cozy relationship with then-President Robert Kocharyan, and may have contributed to the current scandalous environment in the Armenian Army.

Blunder #2: Supporting a legislative amendment introduced by the Kocharian Administration in February 2007 to ban absentee voting. As part of a legislative initiative to introduce dual citizenship, which the ARF was the main force behind, casting votes by Armenian citizens residing abroad—previously allowed at Armenia’s embassies worldwide—has been banned.

Blunder #3: The signing of the infamous March 18, 2008 statement by five diasporan organizations (ANCA as one of the signatories) and the signing of the Coalition Agreement with the Republican Party and others on March 22, 2008. This is even more surprising if viewed together with the fact that Vahan Hovhanissian, the ARF’s candidate, resigned from his position of vice speaker of the parliament citing gross violations during the February elections. These two steps basically gave Robert Kocharian and Serge Sarkisian a free hand to “handle” the opposition and throw several dozen of them in jail, effectively closing the window for any meaningful political reform in Armenia. Fundamental developmental changes promised by Serge Sarkisian and signed up to by the coalition members, including the ARF, are yet to materialize.

Blunder #4: Unwillingness to cooperate with the Ter Petrossian-led opposition. The whole rhetoric that Levon Ter-Petrossian is one of the founding fathers of the crooked system we have now—while true—is reminiscent of holding grudges, which is not only difficult for the people of Armenia to comprehend—given the country’s state of affairs—but also difficult to reconcile with Kocharian’s own record of anti-ARF activities in Artsakh during the war, which did not prevent the ARF from becoming his power base for a decade.

Blunder #5: The ARF’s membership in the coalition governments. During the past 12 years, the party was in control of critical areas of education, social security, and agriculture, having to report little, if any, positive change in these areas. In fact, the ARF’s leadership in these areas witnessed Armenia entering the lowest quintiles of world countries in terms of budgetary spending on education and health.

Blunder #6: Handling of Armenia-Turkey protocols. While the end result—the ARF leaving the coalition—was as expected, many observers felt it was too little too late. It is difficult to imagine that as a coalition member the ARF was not in the loop with the preparations underway and could not have blown the whistle earlier on this biggest of all “Russian roulettes” played in Armenia’s recent history.

But let me not single out the ARF here and give you a snapshot of our assessment of the overall diaspora performance in recent years; here I cite the conclusions of the PFA’s Diaspora Report:

—Diaspora missed an opportunity to line up its vision, values, and aspirations with those of the people of Armenia. Diaspora economic assistance lost its scale/scope, and may have reduced incentives of those in power in Yerevan to undertake meaningful reform;

—Diaspora failed to produce a credible warning to the government of Armenia as to the limits of what can and cannot be tolerated in terms of human rights abuses and economic mismanagement;

—By being complacent and minding its own business, Diaspora effectively encouraged the abuses that have undermined the prospects for development and are effectively tearing the socio-political fabric of the Armenian society.

The good news is that the diaspora—and that includes its most active element, the ARF—is still the best source for change that we have, by the virtue of the fact that it is free from Yerevan’s censorship and has the intellectual and financial resources to do much better.

Current challenges

Going forward, I will list the challenges faced by Armenia today as I see them. Among these, nothing has such a profound implication for the conditions the country is in now (and as a matter of fact, for the remainder of the items of the list) as the first item below, the state capture:

—State capture (defined as control of economy and economic decision-making by a narrow interest group or individuals) has reached enormous and unprecedented proportions in Armenia;

—Demographic disaster: According to several observers, such as Stephan Astourian and Ara Papian, given the outflow of population, Armenia may soon reach a point of no return from in terms of both economic and geopolitical viability;

—Brain drain has accelerated since the events of 2008 with little, if any, hope of slowing down;

—Damage to the social fabric and values: The economic model of recent years has (on the microeconomic level) encouraged over-dependence on remittances and transfers and discouraged investment in education and business activities;

—Economic stagnation, growing public debt: Crisis management over the past two years has turned into a disaster, with sovereign debt about to cross a dangerous threshold of 50 percent of GDP by the end of 2010, tripling in two years! The current economic model holds no promise of any drastic improvements. The most recent quarterly GDP numbers show that the economy might be headed for an L-shaped recovery, with serious implications for unemployment and poverty;

—Environmental desecration: The recent surge of problems on this front is a direct outcome of the economic model where (low value added) mining is the main driver of the economy at the expense of the environment and safety;

—Geopolitical challenges and threats remain very serious.

The Armenia we currently have is not what its citizens wish it was, or what they deserve. It is also fair to say that the Armenia of today is not the Armenia of your dreams. Let me push this further: I will stand corrected if any one of you tells me today that Armenia’s political leaders are the kinds of leaders you envisioned in your dreams 25 years ago.

Despite these challenges, Armenia can be as prosperous and strong as we want it to be. The current state of affairs is a direct outcome of the country’s corrupt and incompetent leadership of the past and present, and the limits imposed by Armenia’s “international partners,” who have the country’s rulers on the hook.

Going forward: What can the ARF do?

Where do we go from here? In sum, the main directions of effort should be aimed at:

—De-criminalizing politics;

—De-politicizing economic decision-making; and

—Building (development-intensive) policy capacity.

The diaspora’s role in each of these dimensions is critical. The actions and steps the ARF can take to better prepare itself for achieving these broadly defined goals could be as follows:

—Revise its operational model: The ARF remains very centralized. This may not be conducive to change that is needed to address the internal challenges and to stay alive and relevant. While in recent years a disproportionate amount of power has been concentrated in the hands of Armenia-based leaders of the party, this should not prevent the grassroots from making their leaders accountable for the mistakes of the past and from changing course. A change of leadership over time in any institution is essential and term limits should be introduced;

—Embrace forward-looking thinking: While genocide recognition efforts have provided the ARF with a strong follower base and kept the issue alive, more needs to be done in terms of channelling the energy and potential of the party’s strong grassroots membership toward the challenges of today and tomorrow. The realization and message that if Armenia were a stronger and more democratic state our efforts toward addressing historical wrongs may have been more efficient should be stressed;

—Secure consistency of message: The view that the Armenia-based leadership is very close to the ruling regime is strong among people in Armenia, and stronger and more credible efforts should be made to change this perception. A message that is consistent: (1) across time, (2) with party’s own objectives, and (3) what works and what doesn’t in the world is long overdue.

Having said this, once again, you are the most active and well-organized community in the whole of the diaspora. Dust the “revolutionary” of the ARF and put it to use. The nation’s future pretty much depends on you—don’t squander it!

Thank you.

Facebook gives a voice to nameless victims

This puppy has no name. In late September 2010 some kids in a Yerevan neighborhood tied him up with a rope and poured water on him. The little one did not survive the torture, but his image is still among the photos of dozen animals who need a new home, posted on a designated Facebook page by 27-year-old filmmaker Ovsanna Hovsepyan’s volunteer rescue group.

With dark traces of tears on the white fur around his sad black eyes, the nameless puppy’s image has become the profile photo of 25-year-old Ani Voskanyan of Astoria, New York, who says she kept going back to look at his photo as though to “make peace or rather accept” that this has happened.

“It is not something one should ever make peace with,” wrote Voskanyan in one of her Facebook posts. “I pity those children and their parents. They are in the dark. Think of him being in a more peaceful place now. He was born and placed into a bad environment and he has been freed of that… I say this with discomfort of course; anyone who is cruel to animals should be punished.”

With the growing popularity of Facebook and other social networking sites, animal rights activists are making good use of the Internet to find, rescue and place stray animals in reliable homes.

Some of them need veterinary care, so the members of the group raise funds to pay for their treatment, closely collaborating with musician Nune Mehrabyan, the founder of Armenia’s only animal shelter. If this trend continues, it will help reduce the number of strays in the streets of Yerevan and other cities, and teach valuable lessons in humanity to those who follow the often dramatic real-time search-and-rescue operations unfolding on Facebook. On the other hand, “documenting suffering, even of the nameless, legitimates and elevates the need to respond to that suffering,” says Brian Lowe, a sociology professor at the State University of New York College of Oneonta and the author of Emerging Moral Vocabularies. (http://books.google.com/books?id=PHo7ZdNP-QMC&printsec=frontcover&dq=brian+lowe+emerging+moral+vocabularies&source=bl&ots=QSjRYTKlHu&sig=3Xvi7SZ9V_RvYV78RqjRpDUFblk&hl=en#v=onepage&q&f=false)

Voskanyan’s photo gallery on Facebook documents how kittens and puppies born in the streets and basements of Armenian cities have a hard time surviving the harsh winter. Some of them, abandoned or thrown out of homes, spend their days crying and wondering what they have done wrong. Nothing, really. There are just too many of them. In the United States, for example, only a minority of all companion animals placed in shelters end up in adoption; the rest are euthanized, says Lowe. The adopted ones enjoy legal protection and care from humans, which includes wide varieties of gourmet chicken, beef or salmon meals, while Armenian cats and dogs often rely on a diet of leftover bread and cereals that volunteers like Hovsepyan gather through donations and food drives.

“They do not need much. Dry bread, some rice or buckwheat porridge… Anything will do,” she says.

One of the latest food and find drives was inspired by the miraculous hope for recovery of a gentle, once domestic, poodle-sized mutt with a broken leg. The unknown owner of a fighter pit-bull released his larger animal on the defenseless creature just as a volunteer rescue team was on its way to pick him up for adoption. The veterinarian who treated the victim for internal bleeding said the dog’s lungs had descended down to the stomach and his throat was badly torn. As soon as the crisis is over, the vet says he plans to operate on the dog’s injured leg, and although its health prognosis is still touch-and-go, he made his way back into a human home and out of anonymity.

Things are different for those who live neglected in building entrances and eat from dumpsters. The eyes of this dark-brown puppy with big tan paws are full of hope when he looks up at 25-year-old Vlad Petrosov’s camera from the insecurity of his temporary spot near the MG supermarket in Second Massive. Hovsepyan’s February 7, 2011 caption under this Facebook photo reads:

“He has a hard time surviving the bitter cold, especially at night… He asked me to find him a home: maybe he will get so lucky to and end up in a warm place, with a bowl of hot food once a day… Gosh, it is not so much to ask for, is it?”

Later that day the puppy was seen wondering down towards the monument of Hayk, a dangerous place for a stray animal, according to another Facebook member. An eyewitness said he looked hungry and weak, hardly standing on his feet because of a leg injury. Petrosov spent hours looking for the dog that day, and so did Anna Jamkharyan, 36, who started off standing by at her computer for real-time news on the rescue, but later went on to scour the street herself. Two days later the makeshift Facebook team stopped the search, hoping that someone took pity and sheltered the dog. However, there is little reason for optimism.

“I don’t think the dog was rescued…. This is Armenian reality…. We have to wait for news from Vlad,” wrote Zhamkharyan. The news never followed.

A recent poll shows that 60 percent of the population is opposed to rescuing stray animals because they believe their aggression and diseases may pose a threat to the city’s human inhabitants. Ovsanna Hovsepyan says the government has commissioned a specialized company, Unigraph-X, for an annual amount of 180 million Armenian drams during the last four years, to spay and neuter stray animals across Armenia. Despite the “feedback” section on their web site, company employees do not seem to be open to public scrutiny, which is understandable in the light (or dark?) of their silent charge: “neutralizing” vagrants in a special area outside of the city, away from the eyes and ears of the animal lovers.

No worries for the fans of unfair dogfights and public bloodshed though: neither their sleeping consciousness nor the hibernating laws seem to bother them for now. And if public opinion continues demonizing animals thrown out into the cold streets after centuries of domestication and dependency, the youths who tortured the nameless white puppy are not at any “risk” of feeling regrets any time soon.

Click here http://www.facebook.com/profile.php?id=24006767#!/album.php?aid=173414&id=586473243 to see the Facebook image gallery of animals who desperately need homes. You can help Armenia’s only animal shelter at http://www.savetheanimals.am/

Donations can be made to the following account: ARDSHININVESTBANK 247010070156 (RA Drams), or 247010070156/0001 (US $)