Go.Armenia

Armenia on a Karabakh Presidential Platter

2008-02-13T16:34:00.002+04:00

Կոռուպցիան Համաշխարհային Բանկի Հայաստանյան ներկայացչությունում: Քաղաքականութուն

Through the past ten months, whilst the Government Accountability Project, the UK’s Foreign & Commonwealth Office, the British Ambassador in Armenia and I have been battering our heads against the World Bank’s institutional integrity brick wall, we have been debating why, since the turn of the century, the financial institutions have been orchestrating an escalation of Armenian corruption. The Permanent Representatives of both the World Bank and the International Monetary Fund (IMF) have been watching how billions of dollars worth of Armenian public assets has been stolen by a small circle of state cronies, who have concealed their involvement in the takeover process by working through a variety of overseas organizations. But the institutions have made little mention of the criminal activity, preferring to highlight how Foreign Direct Investment (FDI) has been the spearhead of a remarkable economic boom. The institutions have also overseen numerous financial schemes, which each year have facilitated the embezzlement of hundreds of millions of dollars worth of public funds. But they have praised foreign investment in major construction projects, knowing that foreign investment has been virtually non-existent and the construction has simply been the laundering of those funds.

When in 2004, Vahan Hovhanissian’s Parliamentary Commission raised the corruption problem with the World Bank Country Manager, he responded with aggression, and made sure that unwelcomed parties paid for their inquisitiveness. And when the same Parliamentary Commission presented documents to the Resident Representative of the IMF, indicating a scam of more than 100 million dollars, knowing Armenia has a ‘Technical Assistance’ agreement, under which the IMF is obliged to monitor and normalize all financial activity within the Armenian state system, the representative said that he had ‘Noticed the Problem’ and explained that his intervention to stop the scam was ‘Dependent on his Conscience’. It turned out that his conscience was not all it could have been; the scam went ahead, the Armenian people lost another valuable state asset, and the IMF joined its World Bank partner in the release of another glittering report on Armenia’s remarkable economic boom.

Why have the international financial institutions been so supportive of Armenia’s precarious economic boom and why have they been so nonchalant about the major problem of corruption, which has led to what today is already a well-entrenched Armenian autocracy? Could it have been for personal gain, or for collective gain, or in pursuit of a quick economic fix for Armenia, or could there be a more sinister reason? Information that has become available leading up to the February 19^th Presidential election gives grounds to believe the reason is the latter, in support of a political agenda.

The corrupt Armenian authorities have been pumping hundreds of millions of their illicitly earned dollars into hundreds of thousands of square meters of accommodation space. But the ever-increasing newly constructed apartment buildings have now stood empty for several years. Moreover, in the past year or two, the quality of construction has deteriorated from the not unimpressive of five years ago, to the decidedly slip-shod of today. Even half-built apartment buildings which have stood like skeletons on the outskirts of Yerevan since the end of the Soviet period are now being rushed to completion, using all manner of unsightly construction materials. And through the past several months, property agencies have sprung up around Yerevan, owned by the same state cronies and their buddies, when apart from those within the inner circle, who may receive a new apartment (or three) in return for services rendered, there is simply no sign of the thirty or forty thousand punters needed to bring Yerevan’s newly constructed real estate to life.

But the people of Armenia should not dismay; their economic boomer babes have got a multi-billion dollar ace tucked so well up their sleeves, that after several years of preparation, ably assisted by their friends in the international financial institutions, only the very best informed have an inkling of the full house the new President is about to slap on his Republic of Armenia table.

Soon after Serge Sargsyan has terrorized himself into the Presidential Palace, all will eventually be revealed. The people of Armenia will see a sudden influx of a new generation of Yerevanites, who will not only move into the spanking new apartments, but who will take up their positions in the booming Armenian economy, and in the new administration. The multi-billion dollar money laundering of the past years will then bear its bountiful fruit, no doubt with more help from the international community, and the people of Armenia will understand why the World Bank’s Department of Institutional Integrity (INT) in Washington should long ago have responded to my claim and open a full investigation into fraud and corruption in Armenia World Bank projects.

Armenia's Economic Hell - An Independent Assessment

2007-12-22T20:35:00.000+04:00

In 2006 Armenia ranked the fifth in the world with the GDP annual growth rate. Azerbaijan ranked the first. Within the last five years Armenia has ranked the fifth and Azerbaijan has been the first in terms of the same indicator.

Economic Growth: Purely quantitative indicator

Armenia has recorded an unprecedented economic growth, and the World Bank experts have even dubbed Armenia a “Caucasian Tiger”. It seems that the Armenia society should have been rather proud with this achievement. However, today the independent economists express their anxiety in whisper and talk of potential risks. There are symptoms which are more cogent, than the purely quantitative indicator called “economic growth”. The issue here is not the fact that Azerbaijan is the first in terms of pace of economic growth and excels Armenia for a number of times. Independent economists are least interested in political populism. Today we have good quantitative results in terms of GDP growth and it is high time we start worrying about the qualitative aspect of this growth. Azerbaijan, Armenia, Turkmenistan and China are the countries that have surprised the world with their economic growth in the recent five years. If the economic growth in Azerbaijan and Turkmenistan is conditioned with their natural resources, a similar comparison between Armenia and China does not tell much in favour of our country. Armenia’s economic growth does not possess the qualitative features China does. Factors accounting for the economic growth of Armenia do not target spheres and directions which would ensure a high level of competitiveness for the country in the context of international economy. On the contrary, the current economic growth of Armenia is weakening the country’s competitiveness.

Several symptoms of the issue

1. In Armenia the ratio of broad money and GDP revolves around 20% for the last seven years. In healthy economies with liquid capitals, where investments stretch beyond concrete and stone, this indicator should excel the GDP, reaching around 200%.

2. Money is centralized and ‘circulated’ in one city – Yerevan. Economic growth is not evenly distributed in Armenia both in terms of geography and social layers of the population. Skewed development is pregnant with a series of consequences, including national security which is specifically associated with the risks of internal migration.

3. If in 2001 banks provided loans to the private sector 10 times more, than to the public sector, in 2006 this indicator has reduced for five times. The public sector, especially the Central Bank, takes loans itself, which comprises half of the loans provided to the private sector. This is an apparent crowding out effect, which means that the connections between individual savings and real sector is weakening and commercial banks turn into a monetary instrument instead of acquiring the role of effective intermediary of economy.

4. In terms of expenditure components, GDP mostly grows due to import, or more precisely, due to the difference between current consumption, construction expenditures and imports. Direct or indirect expenditures made due to remittances are the major source of economic growth of Armenia.

5. In terms of income components, GDP typically grows due to gross profit or to be more descriptive, it is the rich social layers that are affected by the present pace of the GDP growth.

6. Improvement of the welfare of the poor and the middle class is defined with remittances. The economic growth is accounted for by the same factor, as well. The present economic growth is not conditioned with the development of a competitive real sector.

7. Because of the trends and policies of the fiscal sector the competitiveness of exporting sector of Armenia is declining.

Expectations

For quite a while Armenia is no more a planned economy. The biggest error would have been direct intervention into the activities of the current subjects of economy and an attempt to increase their competitiveness through direct interference. Armenia has a high quantitative growth of economy. However, paradoxically it has an uncompetitive economy, uneven distribution of income and a policy (or the lack of it) which jeopardizes the interests of exporters. This is a specific situation and quite a controversial one in many terms. There are no standard or textbook solutions, not even ones to be drawn from the international experience. The poor improve their livelihood through labour migration, ensuring economic growth through money remittances. The rich, i.e. capitalists, gain huge profits from the current economic growth. Banks provide for the monetary policy issues, gain profits and care very little about taking over the role of an effective financial intermediary. The budget is replenished with indirect taxes accrued from the growth of consumption and import, conditioned with money remittances. It can be stated that everybody is content and no one realizes that were this dynamics to continue, in ten years this ‘miracle’ can turn into a real crisis, a true hell…

There is a problem. The solution is very complex. However, before looking for any solution, the issue should be thoroughly scrutinized and understood. The current high, but disturbing economic growth should become number one priority on the state agenda. The key to poverty reduction is the establishment of real competitive economy, which we lack and whatever little there is, it is drastically deteriorating.

The paper is elaborated based on the opinions passed by the participants of the discussion “Two digit economic growth: the trends and concerns of Armenia’s economic growth”, which took place on July 27, 2007. The roundtable discussion was attended by independent analysts, government officials, and representatives of the international organizations.

The round table was organized with the support of the Friedrich Ebert Foundation

Better than Heaven Armenia

2007-10-28T08:24:00.000+04:00

Walking along the Toumanian street in the centre of Yerevan, I passed by the shop of a person I have come to know since he came to Armenia a couple of years ago to be a part of Galus Sahakyan’s ‘Better-than-Heaven’ business boom. Miran was propping up the post of his front door at the top of the few steps that lead up to his small but well-fitted ladies clothes shop, and as usual, in passing I asked, how’s life? Miran, a chirpy and optimistic person, would usually smile and reply - ‘fine thanks’ and that would be the end of our brief but pleasant encounter. But this time Miran’s smile was replaced by a ‘not altogether’.

Concerned about what had caused this apparent downturn in Miran’s outlook on life, I stopped for a chat. They won’t let me get on with my business said Miran. What’s the problem, I asked, isn’t your patron (sponsor) doing his bit, or does he already want more pie than there is pastry? What patron, Miran retorted, I don’t need a patron, I just need to be left in peace to get on with my business in a normal honest way.

The reason for Miran’s disgruntledness was immediately obvious, I had seen it so many times before, a repeat of what inevitably happens sooner or later to all members of the international community who come to Armenia to be a part of Galus’s ‘Better-than-Heaven’ business boom. Let them spend their money sprucing up a shop or restaurant and establishing a clientele, and then when all seems to be going well, hit them with a Galus Googly. At this time, our ‘Better-than-Heaven’ investor will better have become the soul mate, or even better have become the family member of his or her Armenian patron, who should be well-placed among the state authorities. Because any idea of running an honest business in Armenia is simply off the cards, irrespective of who you are or from where you hail. State Intolerance of legal business activity is the foundation of Armenian politics, it is a fundamental part of the grip the authorities have on the social framework, and any business person wishing to buck the system will find that their illegal activities will eventually be used against them.

Through this state-enforced illegal business exclusivity, the authorities are able to dictate the will of the people; especially critical at times of major decisions, such as when the people go to elect their new parliament or their new president. It is at these times the livelihood of any business person who may wish to not toe the political line will come under heightened threat, and that will often threaten the livelihoods of a long string of vote carrying workers and family members who are dependent on that business person for their meager existences.

In this way, not only do the incumbents control the votes of central and regional government workers and their families, but also the entire business community and their dependents. Opposition candidates are well aware that this seemingly insurmountable hurdle needs to be overcome for them to have any hope of coming anywhere near to challenging what has already become a very well established autocratic Armenian society.

Posts

2007-08-07T16:26:00.005+05:00

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

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

How the Armenian Sugar Project cost the Deputy his Job

2007-08-07T16:25:00.002+05:00

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 19^th 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 30^th 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

2007-08-07T15:01:00.000+05:00

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.

List of Topics

2007-07-25T14:38:00.004+05:00

The Great Armenian Economic Boom

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

Who owns the Yerevan Water Utility?

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

The Never-Ending Sugar Saga

A New Ethanol Industry for Armenia

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

Going Underground

A Parliamentary Commission Study

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

Pumping up the Pressure

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

Heating 21 Schools in Syunik Marz

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

My First Taste of Armenia

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

2007-07-25T14:38:00.003+05:00

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; imports continue to grow, the balance of payments and inflation are both under control and the Dram is as strong as it has ever been. This is all confirmed in yearly reports of the World Bank and the International Monetary Fund.

FDI in particular has been seen on every Yerevan street corner for some years, and now can be seen on the surrounding hilltops, where all manner of construction projects continue to spring up – higher and higher. They have banners slung over their upper floor windows offering modern apartments, or shop and office space, all of which are for sale or for rent. This is to meet the needs of the long list of Foreign Investors, who have been coming in droves to Armenia for the past several years and who continue to beat at the door to get on board the Armenian economic bandwagon. The opportunities to make it rich in Armenia are endless.

They teem through Yerevan’s streets, soaking up the aura of success; Americans, Brits, Italians, French; even Japanese and Koreans; they are all flocking to Armenia to be a part of this economic revolution. All the major high street names are clambering for pole positions in the newly constructed commercial centers, eager to stay ahead of their international competitors. Luckily for Armenia, the authorities have not been overwhelmed by the invasion; they manage to maintain a level of calm. Thankfully, because of their cautious response to this investor onslaught, moderation has been maintained.

Sound familiar? – Of course not; it is all a hoax.

The truth is that there is virtually NO Foreign Direct Investment in Armenia. State companies and other assets have been transferred to state officials, who represent themselves through a variety of foreign entities. They are often in Russia, or in South America, but are also in North America, in Europe, and no doubt in a number of other overseas locations. The operations are often facilitated through a variety of financial mechanisms, which show tens of millions, or even hundreds of millions of dollars worth of investment, but in fact are worthless pieces of paper. The actual construction work, which is done by local workers, is financed by the local currency, which is squeezed out of the Armenian common folk every day, and in ever-increasing amounts. That money often comes from relatives who have found no other alternative but to become part of the Diaspora living abroad, and their donations increasingly figure into the economic boom equation.

The value of the Dram has been driven upward through recent years to increase profits for those who are involved in this FDI scam, and they are the same people who monopolise imports of the most saleable and profitable goods and materials. The fact that exports suffer as a result is of little concern; the prime objective is to take advantage of the domestic market, which is totally under the control of the authorities.

The only real Foreign Direct Investments in Armenia have been the Ararat Gold Recovery Company and the diamond polishing plant. The gold company is owned and run by an Indian group, and although the diamond polishing plant is owned by an Armenian, he actually lives and operates outside of Armenia. Some years ago, the same very wealthy and patriotic Armenian investor purchased the central universal store, and despite major modernisation, the store remains closed. That is testament to the attractiveness of Foreign Investment in Armenia today.

Diamond exports, which have been the backbone of Armenian exports, have been forced into decline through recent years, and now that the price of gold has increased to recent highs of more than $600 per ounce, from the $180 per ounce it was when the Ararat factory was built in 1997, the Armenian Authorities have decided to drive one of their most prominent Foreign Investors out of the Republic and to impose Armenian ownership.

The FDI bubble is about to burst, nearly all state assets have been “Privatized by Foreign Investors”. There is nothing left, and there is no sign of the foreigners rushing to become a part of the Armenian Economic Boom.

But this should not be cause for concern; the Armenian authorities have yet another ploy in the pipeline to maintain the impetus, and the signs are that the World Bank and the IMF are ready to stay on board, even though they have long known that Armenia’s economic roller coaster will soon be rattling off its rails.

Who Owns the Yerevan Water Utility?

2007-07-25T14:38:00.001+05:00

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 my claim of fraud, corruption and embezzlement under 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 might seem to be of little significance - but the wider implications need to be understood. So, through this Blog, which covers matters of interest, rather than through my ‘Blowing the World Bank Whistle’ Blog, which is designed to release facts, I will expound on why the Security Agreement is so important.

The World Bank finances water projects in many parts of the World, and they inevitably involve ‘International Operators’, as do the water projects for Yerevan. Those operators are usually subsidiary companies of one of the four major water companies, which are referred to as the ‘Water Barons’, and they have been making massive profits, in no small way thanks to World Bank projects. Three of those four Water Barons have been in Armenia for the past seven or eight years – ACEA (Italy) SAUR (France) and now Veolia (France). Scandals often follow these projects; the price of water goes up and often there is no noticeable improvement in water supply. Moreover, there are reports of where water supply situations have actually deteriorated as a result of these World Bank projects.

But one major philosophical aspect of the approach to providing water has recently been challenged by the international community; most notably of late by the United Nations. The international community has acknowledged that water is not a ‘Commodity’, to be bought and sold, such as wheat, or rice, or even oil. Water is a ‘Human Resource’ that people have the right to, and those who are responsible for providing that resource have an obligation to do so in the most effective way for the water consumer, even if the cost to provide the resource needs to be subsidized in one way or another.

The World Bank has been very reluctant to subscribe to this approach, and in some cases continues even to press for privatization of water resources and the utilities.

This is the crux of the need to pay attention to the Yerevan Water & Sewerage Company security agreement with the Ministry of Finance & Economy, in which the water company is obliged to pledge ‘All its Assets’ against the World Bank loan.

In 2002 the Yerevan Water & Sewerage Company assets were re-valued by a local auditing company, in accordance with a Government Decree. The revaluation was done in a competent manner, but the water company manipulated the results in their accounts, to show a massive over-valuation for the ‘Non-Fixed Assets’, which are worth very little, and a miniscule amount for the ‘Fixed Assets’ which include all the buildings and infrastructure, including the major pipework systems.

If the company assets are pledged against a security agreement, the company has an obligation to repay the Municipal Development Project credit. On the contrary, if the security agreement is not in place, the water company has no obligation to repay the loan. Or as things stand at the moment, with only the non-fixed Assets pledged, the Company is obliged only to the extent of the value of the non-fixed Assets, which are virtually worthless.

Today, thanks to financial jiggery-pokery by the Italian operator A. Utilities, highly valuable fixed assets are not only free from the security burden, they are valued at such a low figure that any potential ‘Buyer’ can pick up the Yerevan water utility for a song.

So when the Yerevan water utility becomes yet another part of Armenia’s Foreign Direct Investment (FDI) statistic - ‘Privatized’ by one of our state cronies, through one of their international ‘Front’ organizations, and ‘Rubber-Stamped’ by the Government, our children will finish up paying back the $30 million dollars World Bank credit - for the privilege of knowing that the owner of the water company can go on making massive profits ………… ‘Year-in-and-Year-out’.

So, through my action with the World Bank, one of the items for consideration is the valuation of the Yerevan Water & Sewerage Company assets. Hopefully, the Bank will respond to my claim and have this and other problems investigated, so that Yerevan’s water utility will remain our children’s property, and our children’s children’s property, for years to come. – Or maybe we are already too late?

The Never-Ending Sugar Saga

2007-07-25T14:37:00.004+05:00

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, a new atomic power station, production of high-tech products, and the return of the Armenian sugar industry.

The latter is of particular interest because in 1999 a serious effort began to determine the possibility of re-establishing the Armenian sugar industry. Armenian sugar production ended in 1988 when the Spitak earthquake destroyed the sugar factory.

In 2000 the U.S. Trade Development Agency (USTDA) signed an agreement to part-finance a study to determine the feasibility of re-establishing the sugar industry and for the next eighteen months more than a dozen international specialists studied every aspect of re-establishing the Armenian sugar industry. They were a team of sugar technologists, supported by agro-technologists, meteorologists, seismologists, and marketing and finance experts.

The data from the study was passed on to an internationally recognised auditing firm, whose experts developed a comprehensive financial model, to determine which parameters would be needed for a sustainable sugar industry. The result was that, with minimal support from the Armenian government, a very sustainable Armenian sugar industry could be developed, assuming a ‘Strategic Sugar Industry Partner and Investor’ could be found.

In January 2002 a Government Commission was established, Headed by Mr Hovik Abrahamyan, Minister for Territorial Administration and in response to a directive from president Kocharyan. The project was selected out of three projects as being most suitable for Armenia and the Minister Abrahamyan committed the Government’s support to the project.

A company was established as a vehicle to develop the project and a search began for a suitable Strategic Sugar Industry Partner and Investor. More than 8 companies applied and after a selection process, agreement was reached with ‘Sudeco International Limited’ (Sudeco), one of the most prominent internationally recognised sugar industry specialist companies. Sudeco made a formal proposal to the Armenian Government, committing more than $20 million to the project and to managing the project for the first 5 years of production.

Sudeco designs and manufactures the latest sugar technology machinery and equipment, which was included in a totally new sugar factory and refinery, to be built on a 62-hectare site at Akhuryan, fully approved by the regional and local authorities.

Numerous Ministers, including Karen Tschmaritian (Trade & industry) David Lokian (Agriculture) Hovik Abrahamyan (Territorial Administration), Serge Sargsian (Co-Chairman for Armenian – Russian economic development), provided letters of support to the project, which all turned out to be worthless. In March 2003, President Kocharyan wrote to the Prime Minister of the Russian Federation, asking him to look at the possibility of Russian finance for the project. That was later understood to be the con of all cons.

Armenia imports more than 100,000 tons of sugar each year and the Armenian sugar industry is worth more than 100 million dollars, with profits in excess of 30 million dollars. A new Armenia sugar industry would provide work places for some 20,000 farmers and factory workers in the devastated northern earthquake zone. Moreover, sugar beets add valuable soil nutrition and their re-introduction into the northern agricultural Shirak and Lori plains would be a tremendous help in halting the soil deterioration that has been going on for the past nearly 20 years, during which time the soil has been bombarded year in and year out with the single potato crop.

In November 2004, it became evident that, despite a number of very attractive financing opportunities for the project, the Armenian authorities simply will not allow a new Armenian sugar industry. The authorities will not support a project that will improve the lives of thousands of the Armenian working class for fear of sacrificing their millions of dollars of yearly gains.

And it would be foolhardy to believe the recent stories about 'Sugar Sam's' new sugar factory. Even though he may personally want to develop sugar production in Armenia; and that possibility should not be disregarded - They will not let him!

A thought for Juan

2007-07-25T14:37:00.003+05:00

How many of us can remember back to the good old days when we used to huddle up around the coal fire in the evenings, chatting away, playing cards, maybe a bit of rough and tumble, or just sitting and watching the goggle box.

Then mother would come in from the kitchen and slide a plate of sliced bread between us, which we would one by one, and almost without thinking, attach to the end of our forks and toast over the hot coals.

There were those of us that quite enjoyed this pastime, and we became rather proficient at the art – on with the bread and after a couple minutes and a few dextrous twists of the wrist, off would come a slice of nicely crisped and evenly browned toast.

But there were others amongst us who no matter how hard they tried simply could not come up with an evenly toasted piece of bread. One corner would be over done and the other would look like it had hardly seen the light of day.

Then there was the other category of open fire toaster who had absolutely no interest whatsoever; not in the process and certainly not in the toast. He would simply hang his piece of bread on his fork, in whatever manner it happened to end up, and then he’d poke his piece of bread somewhere in the general direction of the fire and wait until he sensed the smell of the burning bread, or he would see the flames out of the corner of his eye. Then he’d pull his charred offering away from the heat, blowing out any flames; he’d turn over what would be left of the already sorry excuse for a piece of toast to be and he’d repeat the process on the other side. When both sides had been well and truly charred, he would use the edge of his fork, or take a knife, and nonchalantly scrape off the blackened coating in to the fire. For him, it was of little consequence whether, or not the charred and scraped remains of his surrogate piece of toast had sufficient substance to support the butter and the jam that awaited it.

My friends mother was of the third category; not altogether because she had no interest in the toast, but more because she had much greater interest in a whole range of other household affairs. Anyway, the result was the same, the toast always finished up a burnt offering, which she would scrape without second a thought and put to one side ready to burn the next in line.

One day, when I was round at my friends house, his mother was waving her slice of bread in the direction of the coals, chatting with my friend and his little sister Katy, when suddenly the phone rang. In those days the phone was exclusively the parent’s domain, it was of course on a fixed line, and theirs was in the hall, as it was in most homes. So my friend’s mother had to break away from her toast to answer the phone.

Katy, who was about five years old, saw her chance to become a first time toaster, never having been trusted with the responsibility up to that time. Mummy, she excitedly exclaimed, let me do it! Mummy was already half way to the phone in the hall and without thinking she handed Katy the toasting fork, complete with its half toasted piece of bread. Katy sat in front of the fire and carefully positioned the bread up to the coals. Turning and twisting the bread, keen to make sure that her mother would be proud of her first toasting effort, Katy carefully went through the entire toasting experience.

My friend and I looked on with great interest, seeing that this was a moment Katy would remember for the rest of her life – as did most of us. Then she jumped up with a gleam across her face; more from excitement than from the heat of the fire. She ran out to the hall, where her mother was still chattering away on the phone; she waved the charred offering toward her mother and asked: “Is this ready for scraping yet?”

When I think back to that time, I find myself wondering: Why is it that those who have the opportunity to be part of worthwhile cause, so often finish up producing charred remains? Is it simply that, like Katy, they have seen that that is what is expected of them?

Katy of course learned that burning the toast is not absolutely necessary. But if others can’t, or don’t want to learn like Katy did, then maybe they could try to improve the scraping process, so that those waiting for their supper, instead of repeatedly having to stomach charred vestiges, or even worse, to going without, would be able to look forward to something altogether more appetizing.

Juan – What do you think?

A New Ethanol Industry for Armenia

2007-07-25T14:37:00.001+05:00

Background Information

The groundwork needed to determine the feasibility of a new Armenian Ethanol Industry has been done, through a prolonged period and by many of the very best international specialists, although the original objective was not the production of ethanol.

Re-establishing the Armenian Sugar Industry was the original objective, when during 2000 and 2001 a U.S. Trade Development Agency funded Feasibility Study determined that a new Armenian sugar industry would be financially sustainable and it would improve the lives of thousands of Armenians living in the most depressed regions.

But the Armenian authorities turned down offers from Serious Foreign Investors to build a New Armenian Sugar Industry.

In 2003, Sudeco International Ltd. (Sudeco), one of the World's most prominent sugar industry specialist companies, submitted a proposal to the Armenian Government to build a sugar factory and refinery. Sudeco’s project cost was significantly lower than that estimated by the feasibility study, the proposal featured all new machinery and equipment, with the very latest technology, and Sudeco committed to manage the development stages of a new Armenian sugar industry, through to full production capacity - and beyond.

Sudeco agreed to make a significant investment into the multi-million dollar project, to produce 110 thousand tons of sugar each year. A comprehensive Business Plan was developed, a brand new factory and refinery was designed, including the latest Sudeco 'Continuous-Flow' technology, and arrangements were made to build a new factory and refinery on a 62-hectare site at Akhuryan, near to Gyumri.

Through 2002 and 2003, Agricultural Specialists came to Armenia from the UK, America, Germany and India, to determine the requirements for the major Agro-Development Program needed to effectively re-introduce sugar beets into Armenia's Northern agricultural plains. Discussions were held with the USDA, the USAID and IFAD, all of which expressed an interest to support the Agro-Development Program.

But Armenia's sugar market is one of the many Import Monopolies, and although the project was Approved by a Government Commission, the Government did not stand by its written commitments of support. So Armenia's farmers did not get their new sugar industry.

Now Armenia can draw on that groundwork to Build a New Armenian Ethanol Industry - Producing Ethanol from Sugar Beets

A New Armenian Ethanol Industry will give local producers the opportunity to supply Armenia's fuel importers with a significant proportion of their gasoline - Cheaper, Cleaner - and Domestically Produced.

Armenia depends on imports for energy, including fuel products which are strategically vital, for daily life, for commerce and for security reasons. Armenian Ethanol Production will replace a substantial part of those vital fuel imports and keep Millions of Dollars within the Republic.

A New Ethanol Industry will Target the Earthquake Zone and will respond to three priority objectives:

It will establish the Domestic Production of an Ecologically Clean Renewable Fuel Substitute
It will create a wide range of new opportunities – in the Agricultural sector, at the factory and in a multitude of support activities which will develop around the new industry
The Thousands of Work Opportunities will Reduce the Poverty Level in the Earthquake Zone

World Ethanol Development

World Ethanol Production has been projected to increase by a factor of Three Times from 20 million tons in 2003, to 60 million tons in 2010

Brazil has been using Ethanol for the past 30 Years

Brazil has developed Ethanol through the past 30 years as an alternative to petrol. Brazil now produces 18 million tons of ethanol each year and uses as much ethanol as it does gasoline.

America is catching up fast

America has followed the Brazilian trend and is expanding its ethanol production at a rate of 20% each year. Today America produces almost as much ethanol as Brazil.

Europe also getting involved

Europe has recently embarked on an Ethanol Development Progam, with plants already operating in France, Spain, Sweden and the UK.

Subsidies and Special Directives

In 2000, the EU introduced a Biofuel Directive and as a result European Ethanol Production is projected to expand to more than 12 million tons per year by 2009.

Ethanol development is also important for Far Eastern countries. China has the World's largest Ethanol Refinery, producing up to 800, 000 tons a year, whilst Japan's imports of Ethanol are expected to increase beyond 6 million tons by 2012.

What is Ethanol made from?

Brazil makes its ethanol from Sugar Cane whereas America uses Corn and Europe uses Sugar Beet as the agricultural feedstock.

How is Ethanol used?

Brazilian vehicles are flexi-fuel and run on almost pure ethanol, - switching to petrol when ethanol is not available. America mixes 15% ethanol with its petrol - and standard petrol engines run nicely on the mixture without modification. Europe is developing both philosophies.

Irrespective of how it is used - the ethanol fuel is ecologically cleaner than unblended petrol.

Ethanol can be a New ‘Core’ Industry for Armenia

Ethanol has been proven as a Realistic Alternative to Gasoline - and now Armenia has a real opportunity to establish a new ‘Core Industry' - to produce this Ecologically Clean Fuel Substitute.

The Reasons for Producing Ethanol

Brazil has a massive surplus capacity to grow sugar cane, so they developed the production of ethanol, which turned out to be a marvelous idea and very cost-effective. America uses enormous amounts of fuels and is burdened with ever-increasing fuel imports. So they developed ethanol production in an attempt to reduce their reliance on imported fuels. Europe is more concerned about the environment, so it developed ethanol production to take advantage of the distinct ecological benefits.

Armenia has a multitude of reasons to develop an ethanol industry. Firstly, Armenia is landlocked and ethanol will reduce the dependence on imported fuels; Secondly, to create work opportunities in the most depressed regions; Thirdly to reduce Armenia's 'Ecological Footprint'; Fourthly and most importantly, to stop soil degradation in the Northern agricultural plains through the re-introduction of sugar beets.

The development into ethanol has already been done and although some questions still remain, in the right circumstances ethanol can be an attractive proposition. Armenia can now become a part of the ethanol revolution.

The principal of using ethanol as a fuel additive would no doubt be best for Armenia - especially for the first few years of production.

What is the Cost of Ethanol?

The cost to produce ethanol is made up of two prime factors;

Firstly; the processing cost

Secondly; the cost to get the agricultural feedstock to the factory

Making Ethanol from Sugar Beets is Cheaper

The processing cost for sugar beets is similar to that for corn but less than for sugar cane - and by using recently developed ‘Continuous Flow’ technology the processing cost can be reduced to the absolute minimum.

Making Ethanol from Sugar Beets is Best for the Farmer

On a Hectare-to-Hectare basis, Sugar Beet is the most land-efficient agro-based feedstock for ethanol production.

A hectare planted with sugar beets produces more ethanol than a hectare planted with sugar cane and more than twice as much ethanol as a hectare planted with corn.

The Economic Research Service of the U. S. Department of Agriculture

7.85 Tons of ethanol are produced from each hectare of Sugar Beets
6.75 Tons of ethanol are produced from each hectare of Sugar Cane
3.40 Tons of ethanol are produced from each hectare of Corn.

Plus, Growing Sugar Beets requires Less outlay and provides More Income for the Farmer

Farmer receipts for sugar beets are considerably greater than for both sugar cane and for corn, plus the cost of growing sugar beet compares very favourably.

Ethanol is a Very Attractive Proposition - All Round

These factors make a new Armenian ethanol industry a very attractive proposition – for the factory, for the farmer and ultimately for the Armenian economy.

Establishing Ethanol Production must include Two Major Components:

Firstly: A New Ethanol Processing Plant.

Secondly: A Wide-Ranging Agro-Development Program

New Ethanol Processing Plant

Sudeco proposes building a New Ethanol Processing Plant to produce 30,000 Tons of ethanol each year. This is a very worthwhile quantity and will provide a 15% ethanol additive to the 200,000 Tons of gasoline presently used in Armenia.

The Factory should be Located near to the centre of the sugar beet region, so agreement has been reached with the Akhuryan authorities to use a 30-hectare site next to the railroad near to Akhuryan.

The Latest Continuous Flow Technology should be used to keep production costs to the very minimum.

The factory will have an Independent Power Supply to ensure continuous thermal and electrical energy supplies for the production processes.

International and local Emissions Standards need to be observed throughout all stages of the production process.

There will be Sugar Beet Depots for reception of the beets, and quality will be chaecked in laboratory facilities, before the beets are stock-piled ready for processing.

The Ethanol will be mixed with Petrol at the factory - and pumped into railway cisterns. The factory will be located near to the main railroad lines which bring imported petrol from the Black sea. And they go through the earthquake zone.

The Ethanol will need to be Stored in Tanks - because the operation is seasonal and it will be necessary to maintain continuous supply right through the non-operational period.

Future Increase in Production Capacity will be built in to meet any increases there may be in the demand for ethanol and in the supplies of sugar beets.

The Agro-Development Program

There are a number of reasons why the Agro-Development Program is so Important

Armenia has been 20 Years without Sugar Beets

The Spitak earthquake of 1988 destroyed the Armenian sugar factory and since then sugar beets have not been grown in large quantities in Armenia.

Re-introducing sugar beets after a period of nearly 20 years will be a wide-ranging commitment, - especially taking into account the implications of land privatisation of the mid 90’s.

Armenia’s Farmers have been totally dependent on Potatoes - as the only realistic means to make a worthwhile income. The incessant cultivation of potatoes has led to Very Serious Soil Degradation - reducing the ‘Black Soils’ of the northern agricultural plains to a light brown sandy substance. If nothing is done to halt the process the degradation will simply continue.

The USDA Knows the Importance of Sugar Beets

Studies by the U.S. Department of Agriculture have shown that when sugar beets are taken out of crop rotation, the result is inevitably a Degradation of soil quality, which is followed by lower crop yields - and reduced quality of the farm produce.

Armenia needs to stop the Rot and an effort is now vitally important to prevent further deterioration. The lands in the earthquake region have already suffered too much since the absence of sugar beets.

Sugar Beets are not Potatoes and the farmers cannot simply grow a few tons and sell them on the wholesale market like they do potatoes, so they are waiting for their new sugar beet market. The new ethanol factory will give Armenian farmers the Market they Need, but they will only get that market if they guarantee to grow tens of thousands of tons of sugar beets.

It is a Chicken and Egg situation

The factory will need 300,000 tons of sugar beets to produce 30,000 tons of ethanol. That means that 4,285 hectares of land will need to be planted with sugar beets each year, and so assuming a 3-year crop rotation, 12,855 hectares of land will be needed for the proposed ethanol Program.

But as long as there is no factory the farmers will not grow sugar beets and as long as there are no sugar beets there will be no factory.

Sudeco has Studied the Problem

Sudeco has been studying this problem for several years and knows that it should be attended to as soon as possible. Today ethanol production can be the answer - using sugar beets as the feedstock material.

Sugar Beets will bring Enormous Benefits

The inclusion of sugar beets in a crop rotation introduces valuable nutrition which will halt the ongoing soil deterioration.

The sugar beet leaves are also a great benefit - and can be used as a fertilizer or as animal feed.

Improved Quality and Yield of the Potato Crop will inevitably follow re-introduction of sugar beets in the crop rotation cycle, because of the nutritions sugar beets add to the soil.

Animal Husbandry will be given a Great Boost because the pulp residue from the processed beets makes a large volume of High Value Animal Feed.

ATTENTION !! This is a Most Competitive Option.

Sudeco has already Developed and Used Innovative ‘Biotechnology' in which the Sugar Beet Leaves, the Pulp, and other Organic Materials are used in a process to make Methane. The Methane is then transferred to a Continuous Heat and Power (CHP) engine which Generates Electrical Energy, Hot Water and Hot Air, which are used for ALL the Process Power Inputs. In this way, the Factory Produces ALL its Own Power, Free of Charge. No Boilers are Needed - which Eliminates the Expensive Fuel Usually Used to fire them. Energy is the Single Most Expensive Input Expense in Ethanol Production.

In recent years, hailstones have been common in the Northern regions of Armenia through the growing months of June and July. And unlike potatoes, hailstones do NOT harm sugar beets.

There are more than 45,000 hectares of irrigated Land Available - in the northern agricultural region of Armenia, plenty to start a very worthwhile ethanol industry and sufficient for future expansion.

Major Investments have already paved the way

The Spitak earthquake destroyed the majority of the irrigation infrastructure in the region, including numerous water reservoirs and hundreds of kilometres of water channels.

But most of those irrigation systems have now been reinstated thanks to nearly $200 million dollars worth of investments from the World Bank and other Governmental and non-Governmental organizations.

Plus, other important components of the region’s infrastructure have been built or re-furbished, including numerous apartment buildings, schools, clinics and roads.

Armenia now needs to build on that Investment

Despite all that money spent and despite all the work that has been done, the soils will simply continue to deteriorate if there isn’t proper crop management.

A new Ethanol industry is the Ideal Opportunity for Armenia – to grow sugar beet in rotation with potatoes and re-introduce the nutrition which is now so urgently needed for the soils.

A new ethanol industry therefore represents the ideal opportunity to revitalize agriculture in the region and build on the considerable investments already committed.

Ethanol can also precipitate other agro-related fuel substitutes. Brazil’s buses are already running on a bio diesel mixture, which they make from Soya and other bean crops. These crops will undoubtedly fit in nicely with sugar beets and potatoes, so a future bio diesel project could become a real opportunity.

Sudeco has looked at the Initial indicators - and initial studies show that a New Armenian Ethanol Industry will not only be Financially Viable but it will undoubtedly bring Tremendous Economic and Social Benefits to the Earthquake Region of the Republic.

Enormous Economic and Social Benefits

Because despite all the tremendous efforts to date in the Shirak and Lori regions, the number of unemployed and those living under the poverty level are still amongst the highest in Armenia.

Tremendous Work Opportunities

A new and substantial ethanol industry will create Tremendous Work Opportunities, during the factory construction period and on through the Long Years of Ethanol Production at the factory. But the greatest benefits will be seen as a result of Revitalizing the Vitally Important Agro-Industry.

Living standards for up to 15,000 families Will Improve because of the new Armenian Ethanol Industry, using sugar beets as raw material.

Armenia's farmers now need the Fuel Importers to agree to purchasing 15% of their gasoline requirements locally and for the Armenian Government to add their backing, through Ministry of Agriculture cooperation and with help securing support for the Agro-Development program.

Together with Sudeco, we continue to Lobby the Government, Hoping for a Positive Response

Going Underground

2007-07-25T14:36:00.003+05:00

Putting aside the question of whether there is an actual need for the underpasses, and putting aside the fact that the work is undoubtedly being financed by one or another of the international donor organisations, when I look at any development project in Armenia I recently find myself asking – What is in it for them?

Of course, they will need a reason to persuade a donor to provide the money in the first place, and a couple of pedestrian underpasses would seem to fit that bill. Then having agreed the finance, the state will find a preferred construction company to build the underpasses, probably one with Karabagh roots, and there will understandably be a healthy profit in it for them. And the work will no doubt be done for a fraction of the value of the financing, to make sure that there will be leftovers to be handed around. That of course is how the authorities manage to support their excessive life styles.

But there has to be something else that gives these pedestrian underpasses priority over other seemingly more profitable ventures, such as ‘privatizing’ another state asset, or building another Northern Prospect.

A little brain racking was sufficient to come up with the answer.

Of course any self respecting underpass should have a full range of amenities; shops, stalls, cafes, all of which will no doubt be sold or leased to the not-so-fortunates who no longer qualify for their places under the sun. They will no doubt soon be pressured into paying an arm and a leg for the privilege of being driven underground.

I wonder if Yerevan’s so thoughtful authorities will think about providing convenience facilities in their new underground emporiums. Or will that be overlooked in the same way as they overlook the need to provide police control for the traffic chaos that has been the daily treat for Yerevan’s commuters, as a result of their philanthropy.

And who will be surprised if Yerevan soon becomes the proud possessor of two privatized underpasses?

Time will tell

A Parliamentary Commission Study

2007-07-25T14:36:00.001+05:00

The Municipal Development Project

In January 2004, an 'Ad-Hoc' Parliamentary Commission initiated a study into the World Bank financed Municipal Development Project. The Authorized Representative of A. Utilities 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

2007-07-25T14:35:00.002+05:00

In 2004 a study into the Yerevan Water Company found that the International Operator for the World Bank financed Municipal Development Project was abusing the Yerevan water system by pumping up the pressure in the distribution pipeline.

It started in 2002, when the Yerevan Water & Sewerage Company introduced a blanket system of water meters for Yerevan’s domestic consumers, who were subsequently required to pay for the metered water they used, rather than a fixed monthly sum. As a result, consumers discontinued their normal practice of leaving their taps open, fearful that their monthly water account would become excessive. In that way, the flow of water was restricted and the water pressure in the distribution pipeline system increased. By 2004 the pressure had increased by a factor of three, major pipeline failures had increased to four times more than in 2001, and ever-increasing amounts of water spewed out of the ailing distribution pipeline system.

The water company explained that the increased pressure would enable them to eliminate the booster pumps, which were old and expensive to operate; and that would provide important cost reductions. The plan, however was to make a case that the distribution pipeline system was no longer serviceable and that further loans of more than $400 million would be needed for it to be replaced.

Yerevan’s distribution pipeline system is indeed old; the large diameter steel pipes are in various states of disrepair and they will not tolerate a three-fold pressure increase. The water company management was fully aware of this, as were the Armenian water authorities, and so was the World Bank.

Booster Pumps are an integral part of Yerevan’s water distribution system; they are located near to high-rise apartment buildings to deliver water to residents living on the upper floors. The Booster Pumps also allow the pressure in the large diameter pipework distribution system to be maintained at the low level of two atmospheres – specifically to minimise the incidents of pipeline failures.

The findings of the study were discussed and eventually the newly appointed Head of the State Water Committee agreed that the water pressure in the distribution pipeline should be returned to its design level and that Yerevan’s system of 800 Booster Pumps should be upgraded to operate efficiently.

A local fund developed a project to replace the entire system of old, inefficient pumps with new, reliable and efficient pumps. The Head of the State Water Committee agreed that grant funding would be beneficial, especially as donor organizations had expressed an interest to finance the project. A pilot project was approved and three new booster pumps were produced and installed. The pilot project proved that efficient booster pumps would provide ‘Round-the-Clock’ water more cheaply and reliably than the original pumps that operated for four hours each day.

In January 2007, the Yerevan water company announced that it would be replacing 500 old booster pumps with new, reliable, efficient booster pumps. It is however interesting that the company appears not to want to take advantage of the opportunity to use grant funding for the project, which would help to reduce the financial burden on Yerevan’s water consumers, who are continually being asked to pay more for their water – without reason.

Heating 21 Schools in Syunik Marz

2007-07-25T14:35:00.001+05:00

Persuading the Armenian authorities to do anything worthwhile for their citizens is not an easy task; they would prefer that water and mud continues to swill throughout Yerevan’s streets, so that a suitable donor can be found to provide $400 million for more project work. But a person with a questionable reputation, but with enviable clout, understood the problem and supported the effort. That person was Suren Sergeivich Khachatryan, Marzpet of Syunik Marz, who is well known for his specific way of performing his duties, but who has a basic human quality that too many in central government could never understand. Suren’s support for the project led to something very well worthwhile for Yerevan’s water consumers.

But what he doesn't know is that his good deed for Yerevan led to improvements for the people of the Syunik Marz.

The Syunik Marz is capable of providing nearly all of Armenia’s electricity needs. That is from the Vorotan Hydro-Cascade, which comprises of four hydro-stations in the Syunik Marz, with a total capacity of about 430 megawatts, plus water is now delivered from the Syunik Marz, through the recently completed Jermuk – Sevan tunnel, to feed the Hrazdan Hydro-cascade, a further four hydro plants with a total of about 550 megawatt capacity.

The quirk is that the people of Syunik receive absolutely no benefit for this questionable privilege. To the contrary, because of the high altitudes, they suffer from the longest and hardest winters in any region of Armenia. Syunik has one of the highest percentages of people living under the poverty line in Armenia, and the people of Syunik burn more wood through the winter months than almost any other Marz.

The Project management Unit Director of the of the World Bank school heating project heard of Suren’s good deed and considered that an effort should be made to reduce the hardship the people of Syunik Marz suffer through their long, hard, cold winter months. In 2005 she arranged a pilot program to heat five Syunik schools.

Today, thanks to a good deed that Marzpet Khachatrian did for the people of Yerevan, twenty-one schools in the Syunik Marz have been included in the World Bank funded schools heating project.

My First Taste of Armenia

2007-07-25T14:34:00.000+05:00

Bagrad used to tell me about the drastic situation in Armenia, how he had been forced to move to Russia to make a few bob to send to his parents, who spent freezing winters in Artic at temperatures 15 and 20 below freezing. Bagrad told me how Armenia was desperate for fuel oil to fire their power stations and town heating systems.

Early in 1993 I travelled from the UK to Voronezh to spend a bit of time with Bagrad - some business, some pleasure; and on my way home through Moscow I dropped in to the Armenian Embassy on the Starry Periuluk to speak with the Armenian Ambassador about getting some mazoot to Armenia. I had already spoken to my business associate in Washington, and he told me there was a pot of U.S. State department money we could use for fuel deliveries to Armenia.

The Ambassador put me in touch with Edward Nikolayevich Arzumanian, Deputy Minister of Energy for Armenia, based at the Armenian Embassy in Moscow. Edik was amazed to hear that the U.S. had funding for fuel deliveries to Armenia that he did not know about, explaining that the Russian Federation (as it already was) would provide mazoot for Armenia on credit. All he needed to do was to pay for the transport from the Russian Black Sea port of Novorossiysk, through Batumi and to Airum on the Georgia / Armenia border.

I decided to stay in Moscow, where I had a combined apartment and office near to the Pavaletskaya Voksal (railway station), and exchanged a couple of faxes (no E-mails at that time) with my American partner. Within a couple of days, we got confirmation that the U.S. State Department would finance delivery costs of mazout to Armenia to the value of $5 million, assuming that Russia would provide the mazout, which Edik confirmed they would.

Edik was ecstatic, he sent me to talk with Felix Pirumian, his transport man at the energy department in Moscow, and before too long we were sending a fax to Washington, asking for funds to send a first 20,000 Metric Tonne shipment of mazout from Novorossiysk to Airum. Mr. Steve Druhot of the New York based consultancy firm ‘International Services’ issued a tender, which was won by a Greek shipping company and low and behold, we sent a few less than 20,000 tonnes of mazout to Armenia.

Edik Asked - What do we need to do to send more?. Send another application, I answered - and that is how it went on. Working from my office, where Edik spent several nights through the next six months, we made application after application for funds to finance shipments of mazout to Armenia.

Stepan Tashian, Armenia’s State Minster, came to see me (at that time there were five State Ministers). Miron Constantinovich Shishmanian came to see me, Armenia’s Minister of Energy, and many others; all wanting to know who it was arranging these shipments of mazout to Armenia.

By the end of October, which I was informed was the end of delivery season for mazout to Armenia (because of the cold weather setting in) we not only used up the $5 million promised by the U.S. State Department, we had gained agreement for funding of up to $15 million, and that had all been used up in a total of 13 shipments of mazout to Armenia, each of between 18,000 and 20,000 metric tonnes, a total of more than 200 thousand tonnes.

I was absolutely thrilled to think that I had been able to help Bagrad’s people make it through what would have been another hard, cold winter.

But then I met a young lady, who changed my whole outlook on life, who explained to me that there was no mazout in Armenia. I explained – that is not possible, I’ve spent six months here in Moscow, applying for funds, preparing documents and receiving confirmation from a New York consultancy organisation that Armenia has received thirteen shipments of mazout – in total more than 200 thousand tonnes.

Sorry to disillusion you, she said, but there is no mazout in Armenia, people are queuing up for kerosene to burn in their homes because there is no electricity and the town central heating systems are all out of operation.

We started to spend time together and in June 1994 we came to Armenia; and I am glad to say that since 1995 she has been my wife.

In 1997, I was beckoned to the Ministry of Internal Affairs, to explain my involvement with the mazout shipments of 1993. Apparently the Ministry wanted to tie up a few loose ends regarding the 200 thousand tonnes of mazout that never made it to Armenia. I was asked to provide the documents that I had processed in 1993, to prove that 200 thousand tonnes of mazout should have actually been shipped to Armenia.

I contacted my old friend Steve Druhot at International Services, with whom I had spoken on numerous occasions in 1993, and with whom I had exchanged dozens of faxes, preparing tender documents and receiving confirmation that mazout had actually been delivered to Armenia. Out of the 13 deliveries I had processed in 1993, Mr Druhot could confirm only five deliveries.

I then realised why, after spending six months in Moscow with Edward Nikolayevich, processing 13 shipments of mazout, totalling more than 200 thousand tonnes, for delivery to Armenia, on one eventful evening, when we were out gadavanting, everything was completely gutted from my apartment; my furniture, my clothes, my money, my personal documents, and my fax and computer, with all the information about the mazout shipments.

But although Armenia apparently never did get those 200+ thousand tonnes of mazout, at that time, when life was at its most desperate, I still felt a certain satisfaction that I had at least made the effort to do something worthwhile for the Armenian people.

Today, the philosophy has not changed – grab what you can, while you can. The only difference is that the names have changed and the value of the pot gets ever greater. And it seems that their friends in Washington and New York are still close by their sides.

Ce’s La Vie – as they say in Armenia.