Tuesday, August 7, 2007


August Posts

* Georgia - Another World-

Through recent weeks, it has been disturbing to meet with the ever-increasing number of Armenian’s, who now travel to and from Armenia’s Northern neighbor, either to visit their friends, or of late, to look at how they might develop a foothold in the Georgian Republic.

Click for More .................. Georgia - Another World

July Posts

* The Great Armenian Economic Boom

Armenia leads the way in economic development, ahead of all other Republics of the Former Soviet Union. Foreign Direct Investment (FDI) is at the head of the charge. But is it all what the Armenian authorities would have you to believe?

Click the link for more ………. The Great Armenian Economic Boom

* Who owns the Yerevan Water Utility?

If you are following my efforts with the World Bank’s Department of Institutional Integrity, for them to send a team to Armenia and investigate the Municipal Development Project, then you will see that I make an issue about a ‘Security Agreement’ which the Yerevan Water & Sewerage Company should have entered into with the Ministry of Finance & Economy, pledging its assets against the World Bank loan. This is of considerable significance, and our children will thank us - if we can succeed?

Click the link for more ............. Who Owns the Yerevan Water Utility

* The Never-Ending Sugar Saga

Running up to the recent Parliamentary elections the media was filled with all manner of impressive new investment projects for Armenia; oil exploration, a new oil refinery, production of high-tech products, and the return of the Armenian sugar industry. The latter is of particular interest -

Click the link for more ……… The Never-Ending Sugar Saga

* A New Ethanol Industry for Armenia

The World Bank in Armenia refers to ethanol as a high-quality ecologically clean renewable fuel substitute. It’s made from a variety of vegetable Feedstock and now it’s cheaper and better than gasoline. Through the past five years, a World Leader in Ethanol Technology has studied the potential for Armenia and is now ready to invest in a Sustainable Armenian Ethanol Industry, using Sugar Beets as the Agricultural Feedstock.

Click the link for more ………A New Ethanol Industry for Armenia

* Going Underground

Walking through Yerevan’s North Eastern Parkway and trying to navigate a passage around the Nalbandian Street construction site, I was prompted to think more deeply about why our authorities had decided to apparently spend a not insignificant amount of money and the best part of two years, digging up two major intersections to make a couple of pedestrian underpasses.
Click the link for more ……… Going Underground

* A Parliamentary Commission Study

In January 2004, an 'Ad-Hoc' Parliamentary Commission initiated a study into the World Bank financed Municipal Development Project. The International Operator was involved in a wide-ranging program of Fraud and Corruption, plus a scheme to Embezzle Tens of Millions of Dollars of Public Funds

Click the link for more …………… Municipal Development Project

* Pumping up the Pressure

In 2004 a study into the Yerevan Water Company found that the Company Management was abusing the water system by pumping up the pressure in the distribution pipeline. After a period of lobbying the water authorities, a program to upgrade Yerevan’s system of Booster Pumps was agreed and the water pressure in the distribution pipeline was reduced to its original design level.

Click the link for more ………Pumping Up the Pressure

* Heating 21 Schools in Syunik Marz

This program is associated with the work with the Armenian State Water Committee, when the water authorities were persuaded to reduce the water pressure in Yerevan’s distribution pipeline and to upgrade the system of Booster Pumps.

Click on link for more ………. Heating 21 Schools in Syunk Marz

* My First Taste of Armenia

My first taste of Armenia was actually in Russia, when I spent several months with Bagrad, an Artic fellow doing business in Voronezh. Bagrad and I did a bit of business together and in 1992 he and his wife spent a few weeks at my home in the UK.

Click the Link for More ............ My first Taste of Armenia

How the Armenian Sugar Project cost the Deputy his Job

In May, Vahan Hovhanissian, through his Parliamentary Commission, was still keen to expose as much wrongdoing as possible, and I was his man at the helm. Vahan wrote to Minister Moffsissian, confirming my authorisation to study all companies in the energy sector which were affected by the Governments Integrated Finance Rehabilitation Plan, of which there were eight, as listed by the International Monetary Fund (IMF) in their annual reports – including Haigasart.

After meeting with Minister Mofsissian, when he agreed that I could continue with the study, I set off to find Haigasart, whose registered address was on a small ally off the Komitas street. It turned out that although the address was correct, Haigasart by that time had moved to a cosy little office on the other side of Abovyan town. Eventually I found the office, where a secretary gave me the contact details of Mr. Israelian, the company’s General Director.

A meeting was arranged with Mr. Israelian at a convenient location in Yerevan and we discussed how I should approach a study in to the Governments Integrated Finance Rehabilitation Plan, which was built around his little defunct company. Mr. Israelian asked all manner of questions about my previous 10 years life in Armenia, obviously reluctant to talk about the Finance Rehabilitation Plan. The discussion quickly moved on to my involvement in the effort to re-establish Armenia’s sugar industry, which I saw he was already aware of. I explained that our group had everything ready, we just needed the support the Government had committed to in a string of letters, but which had not been forthcoming.

Mr. Israelian proposed a meeting with Mr. Meruj Michaelian, the most influential Deputy Minister of Finance and Economy, who would arrange the Government support needed for the sugar project. And that would mean I would no longer have to study his company and the Governments Integrated Finance Rehabilitation Plan.

It was clear, after having already seen all manner of wrongdoing in the Municipal Development Project that the Governments Integrated Finance Rehabilitation Plan was going to be a lot to handle for our Commission. So, after gaining approval from my Head of Commission, I agreed to a meeting with the Deputy Minister to discuss what was needed to build the new Armenian sugar industry. The Deputy Minister asked for a week to study our business plan, which included three volumes of technical specifications, contracts, agreements, a financial model, drawings of buildings on the 62 hectare site at Akhurian, plus a proposal to finance the project.

At our next meeting, which included senior officials of our sugar company, Mr. Michaelian expressed his high regard for the project, exclaiming that he was from Gyumri, and he asked for two weeks to prepare and submit the necessary documents to the President for his approval,

Two weeks passed, a month passed, three months passed, and then six months passed, with the Deputy Minister making excuse after excuse about why the President had not approved the project. In the meantime, I had been gathering details about the Government’s Integrated Finance Rehabilitation Plan. The plan was to ‘Rehabilitate’ energy sector debts, including more than 200 million dollars worth of ‘Bad’ Receivables and about the same amount of ‘Bad’ Payables, some dating back to 1996, and most of which had been resurrected for final elimination by Haigasart.

It turned out that Deputy Minister Michaelian had been appointed Head of a Commission to decide what to do with a packet of a little more than 60 billion Drams worth of old debts; about 110 million dollars, that had been left over.

The Government’s Integrated Finance Rehabilitation Plan was being financially supported by the World Bank and was subject to ‘Surveillance’ by the IMF, under a technical assistance program. The IMF was therefore monitoring all activities under the plan. On the 19th November I met with Mr. Jimmy McHugh, the Permanent Representative of the International Monetary Fund (IMF) in Yerevan, who agreed that the old debts had already been ‘Written Off’, and he suggested that the financial scam of some 100 plus million dollars, was no doubt intended for one of the many ‘Foreign Direct Investment’ projects that were in vogue in Armenia; or to put it more plainly, for a state crony (or cronies) to take over another valuable state asset.

The term of our Parliamentary Commission had already been extended, but the extended term was also ending. So it was time to get a final commitment from Deputy Minister Michaelian. I asked him straight; will we get the approval for the sugar factory, or I will I have to report his scam. The Deputy had absolutely no intention of going through with his promise to support the sugar project and he was confident that my chances of using the information to compromise his position were negligible. But he was wrong!

On the 30th November 2004, I detailed the findings of our commission study into the Government’s Integrated Finance Rehabilitation Plan in a letter to Mr. Jimmy McHugh, the start of a number of correspondences.

A few days after that letter, the President’s Anti-Corruption Team announced they had found that Mr. Michaelian was involved in minor financial wrongdoings, and he was removed from office. Deputy Minister Michaelian was not dismissed because he was involved in corruption, but because he allowed the details to be reported to the IMF. And the not-too-minor scam went ahead.

Later, in recognition of the excellent manner in which Haigasart disposed of more than Four Hundred Million Dollars worth of old debts, under the Government's Integrated Finance Rehabilitation Plan, the defunct company, which until 2002 had been fighting off liquidation, became a major shareholder in the state company Nairit and Mr. Israelian was appointed General Director. Nairit is now no doubt yet another Foreign Direct Investment project in the making – If it has not already been made!

Georgia – Another World

Through recent weeks, it has been disturbing to meet with the ever-increasing number of Armenian’s, who now travel to and from Armenia’s Northern neighbor, either to visit their friends, or of late, to look at how they might develop a foothold in the Georgian Republic.

They talk about all manner of unbelievable happenings, that through their recent years in Armenia, they had come to accept were no more than the incomprehensible ramblings of those who wandered off the straight and narrow, often in foreign lands.

The Georgian people are allowed to travel around the Republic without being constantly assisted by the authorities. They are even being coerced into developing small and medium business enterprises, where they are being obliged to pay dues to the state budget, in accordance with the laws of the land.

Agricultural land is being offered to investors, on the understanding that it is used exclusively for agriculture, and the land purchaser has to commit to employing a minimum of four farm workers on each hectare they own. Foreign Investors are rushing in to the Republic to take advantage of this very questionable proposition. How is it possible that a state authority could develop such a worthless endeavor as agriculture that will only benefit farm workers, and which will be of little benefit to the state? Maybe President Sahakashvilli has some kind of illusion that agriculture is important to a developing economy.

Auctions of state properties are being conducted in rooms full of people professing to be investors, who actually have the gall to bid for properties. And if they happen to be the highest bidder, they say that they will pay with real money.

And then in Georgia’s second largest city of Kutaisy, the entire administration has just been dismissed for misappropriating a couple of hundred thousand dollars from the town budget. Not because they took too little, but because they are not expected to take any money that has been allocated to benefit the town’s common folk. Who are they kidding?

Armenia’s younger generation know that what is happening in Georgia is absolutely ridiculous. State authorities are not expected to pave the way to better lives for their people; except of course for those who are connected to one or another of the state cronies, or those who have demonstrated their allegiance by buying themselves into a Government post.

Let us hope that the future Armenian Presidential elections are not marred by external influences which might impose upon Armenia any kind of tendency to replicate in any way what the poor Georgian people are now going through.