IMPRESSIONS FROM ARMENIA Comments on a May 2004 visit

I went to Armenia last May for the sixth time since 1998. I was there for a week, and contrary to previous trips which had been consecutive, this one took place after a gap of nearly two years. Statistics and press reports, even with the added speed of internet, are one thing. Seeing and feeling for yourself is another.

I was lucky to the extent that I extended this time the scope of my contacts, meeting up with think tanks and academic groups involved in activities close to what is my real profession, but that hitherto had been absent from my usual activities in Armenia. This continue to be centered around the Avemaria girls' choir, which I have been sponsoring since 1997, and a few other people met separately and with whom I have kept up contact. I even gave a talk about the methodology of Country Risk Analysis to the Caucasus Resource Research Centre (financed by the Eurasia foundation).

The first impression of arriving somewhere is always the airport. Yerevan's Zvartnots airport was concessioned out to Mr. Eurnekian, an Argentine-Armenian, who also runs Argentina's terminals. His stated idea was to make it a regional air freight platform. Some two years into the new management, it is hard to see any change, apart from a few overpriced Duty Free boutiques and coffee shops, in the visible aspects of the terminal. Immigration procedures were quicker, but that is a government matter (and the system whereby you can obtain an Armenian visa on the Foreign Ministry's website worked perfectly). Luggage delivery was quicker, though the swarm of (also overpriced) porters accosting you on the belt-side was a nuisance. The public address system is mostly unintelligible.

It was interesting that my usual hotel (the highly recommended Hy-Business

Suites) had reduced its rates by some 20 % since my last visit (U$ 75 a

night for a comfortable fully equipped apartment, including breakfast, and

more importantly, a constant water supply. The shortage of water, about

which more later, is a permanent problem in Yerevan, and not even the

refurbished Marriott Armenia, at twice the price, is immune from it). There

is now an oversupply of hotels in Armenia, particularly at the top end.

Unfortunately, and despite laudable isolated efforts, this is not the case

outside the capital, though the main problem for tourism continues to be

the limited air services from the West, and their high cost (it costs twice

as much to fly from London to Yerevan than to New York). The national flag

carrier, Armenian Airlines, passed away after a long illness, giving birth

to two newcomers, the health of which is unclear (Armenian International

Airways and Armavia). Another handicap is the shortage of English-language

tourist material.

A glossy publication called Tour-Info is full of interesting information,

but strangely most of it is in Armenian. This being said, it was reassuring

to see on a Sunday morning, in the lobby of the same Marriott Armenia

hotel, a group of elderly Japanese tourists preparing for an excursion.

They were obviously not part of the Armenian Diaspora.

The question everyone asks or will ask is : is Armenia doing better ? As my

stated profession is that of Country Analyst, I have a very precise

criteria for answering that question, irrespective of statistics, rating

agencies or comments from Wall St. Analysts or multilateral organisations.

This consists of finding out if the majority of people are, and more

importantly feel, better off, materially and morally, than before.

Arriving in the middle of the night, one can only notice that there is much

more street lighting and illuminated buildings and monuments. Daytime

impressions are that of more and better cars in the street, a wider variety

of shops and new restaurants and cafés. More people have cell phones in

their hands and computers at home. New apartment buildings and office

blocks are also clearly visible. Another noticeable change is the repaired

streets in Central Yerevan (unfortunately, only in Central Yerevan), as

well as the refurbished public buildings.

The latter is the result of a generous programme financed by the Lincy

Foundation, the charitable arm of Las Vegas multi-millionaire (and MGM

shareholder) Kirk Kerkorian. A selfless donor for years, the foundation's

refurbishment programme, at a cost of some two hundred million dollars, not

only had a noticeable impact on GDP and employment, but contributed to give

back to the citizens the pride of enjoying in their full glory buildings

they were proud of, but which had fallen in a sad state of disrepair. I can

quite believe, as would happen in any country, that such a major public

works programme may have included corruption, but in any case the results

are there to be seen. Unfortunately, it is nearing its end, and though

private construction (mainly of apartments for Diaspora members and the

minority of locals who has made good) may continue, it is bound to reflect

on future growth and employment.

Another source for growth is remittances from the Diaspora and those

working abroad. This was officially estimated at some U$ 550 million last

year, and makes a big difference to the recipient families whose members

would be unable to survive on pensions of U$ 15 dollars a month (if that)

or salaries ranging from U$ 25 to 80 dollars, when they are paid. The

apparent affluence has had a negative corollary, that of pushing up prices,

from housing to food, for all the population. The 51 % of the population

classified as poor therefore suffer even more. Statistics for GDP make

China appear to be in recession (I saw a figure quoting 22 % growth in the

first quarter of 2004), but the reality is that of a two-speed economy,

with a small minority (albeit increasing, particularly if they have foreign

help, have found a useful business niche or have worked abroad and saved

money), doing better, but the great majority feeling as helpless and

despondent as ever.

There is a substantial increase in the number of banks, many with

impressive buildings and banking halls. It is not obvious what sort of

business they are catering for, with such a narrow deposit base, and lack

of quality lending opportunities. Up to a year or so ago, high interest

rates on government paper with low inflation, meant that you could make a

good spread at little risk. With interest rates falling sharply, this is no

more an attractive business proposal. Much of the new banking presence is

said to have Russian money behind it. Some Armenians regard this as a sign

of quality and security, ignoring what happened to the Russian private

banking system just a few years ago. The market leader continues to be HSBC

Bank Armenia, the only "Western" affiliated banking group present on the

local market. It is however abusing its dominating position, and not just

by offering the lowest interest rates to depositors (Citibank also does

that in Chile).

It provides an inefficient and arrogant service. I closed my own account

there less than three years after opening it, because they were unable to

carry out a simple local remittance instruction from my current account to

a local beneficiary without long delays and constant chasers. As I

commented my decision around Yerevan, I was overwhelmed by the negative

stories I heard about the bank's services and reputation, including from

several of their local clients. Apart from the inefficiency and arrogance

in refusing to accept mistakes, which I myself had experienced (not

forgetting the 2 % above market rate I was charged when reconverting my

local currency into Sterling), I heard horror stories about "disappearing

deposits" , "missing bank notes" in the hands of the cashiers, and

"surprise" charges and commissions applied without warning or notice to

clients. The local currency has been solid as a rock, slightly appreciating

against the dollar though not as much as the Euro.

It is no accident that shortly before my arrival, there were a series of

anti-government demonstrations, some repressed with a heavy hand. Though

these were called for by opposition groups, the impression was that behind

the movement was a "fed-up" attitude. Fed-up with poverty, fed-up with bad

and expensive public services, fed-up with the lack of jobs for the

unemployed and the lack of job security for the nominally unemployed,

fed-up with the corruption at high level (and low level), and fed up with

the lack of proper legal redress. Students of Latin America, like myself,

are in familiar ground. But there is a difference. Whereas most of Latin

America's poor (the impoverished Argentine middle classes excepted) have

been so for generations, the inhabitants of Armenia who now find it

difficult to pay U$ 500 a year in university fees could afford two holidays

a year on the Black Sea less than a generation ago, whilst living in decent

accommodation with affordable heating, electricity and water.

One immediately noticeable illustration of the current situation is the

exponential increase in the number of beggars. In a single day in Yerevan I

was accosted by more beggars than in all my previous trips put together.

Whereas this may be impressionistic, talking to people one knows reveals a

dire situation. Jobs continue to be hard to come by, however badly paid.

People are so desperate that they hang-on to jobs even without contracts,

sometimes going unpaid for months and not even knowing how much they are

supposed to be receiving. Ringing-in to say you are ill is often met with

the reply that you need not come to work, today or ever. Even in the

better-run foreign organisations, people are afraid to take their holiday

entitlement just in case their job disappears in their absence.

The privatised utilities were sold to unscrupulous operators who have

increased rates but invested little. The water distribution system,

irrespective of how much rainfall there has been, is a mess and the

availability of water throughout the day in most households is a constant

lottery. The network is in a terrible state, and nobody is ready to spend

what is needed to put it right. The Greek-operated phone system is also a

mess, the subject of a legal dispute with the authorities. This has one big

development consequence. The lack of a quality telecommunications network

rules out until further notice any hopes for Armenia to play, as it could,

a role in IT activities for export. This is causing the best brains to be

drained abroad. Admittedly the brain drain is affecting all sorts of other

professions too. With continuing international pressure to do away with

the Medzamor nuclear power station, it is not clear who will be ready to

invest in exploiting the vast untapped potential for hydroelectric or other

alternative power sources.

I have always maintained that Armenia's full potential cannot be realised

without a solution to the Karabagh question, itself leading to the formal

opening of the border with Turkey. I say "formal", because despite a

theoretically closed border, there are regular air and bus services between

Turkey and Armenia. However, this falls short of a close access to a sea

outlet, which is even more urgent as recent events in two of Georgia's

separatist regions (which control much of the Black Sea coastline) have

stressed the vulnerability of the existing main trade route. Of course,

this is a necessary but not a sufficient condition, as the availability of

infrastructure, marketing skills and distribution networks is also

essential, for instance if Armenia were to export its quality fruit and

vegetable surpluses to European or Middle Eastern markets.

I continue to believe that in the pursuit of its probably vain attempt to

join the EU, Turkey will try to make some sort of amend on its denial

policy about the Armenian Genocide, accompanied by an opening of the

border. In the meantime, Turkey is also continuing on its propaganda

exercises, which consist of "encouraging" pliant academics and writers to

support their cause. Their latest recruit is Louis de Berniéres, the

author of the book "Captain Corelli's Mandoline" on which the famous film

was based. He is working on a book about the Armenian Genocide (I am sure

he does not call it that) from a "Turkish viewpoint".

Unfortunately, Armenia's civil service, and particularly its diplomatic

corps, is not up to the task of properly upholding either the Karabagh

question or the Genocide denial . They have no historical perspective nor

conflict resolution experts. Generally speaking, whenever foreign training

seminars are offered, these are grabbed by the bosses (and not just in the

Foreign Ministry) rather than the right young things. One anecdote heard

was that of a diplomat at the Armenian embassy in Washington, addressing a

number of scholarship students having just finished their term and eager to

get back home and put their newly acquired skills to the service of the

country : "Why don't you try to find a job and stay in the USA" ? he told

them.

An even worse example of callousness was the total lack of reaction by the

Armenian authorities when the British Ambassador to Armenia, at a press

conference last January to commemorate the first anniversary of her arrival

in Yerevan, declared that the events of 1915 could not be described as

"Genocide". She tried to justify her remarks on the legalistic basis that

the United Nations definition of Genocide did not exist at the time. As

they say in French ; "Elle n'a rien compris". One has to rely on the

efficient private lobbies of the Diaspora (such as ANCA), now inspired and

backed with enthusiastic graduate organisations in Armenia itself (such as

the Club of Young Diplomats, based at Yerevan State University) .

Anyway, these were my impressions and thoughts, but the best thing is to go

and find out for yourselves.