Armenia’s Arduous Path to Reform
One of the more challenging – and promising – lines of work that CIPE’s Anti-Corruption & Governance Center has developed in recent years involves scanning the world for signs of a government that has sincerely embraced anti-corruption reforms. Sometimes it is hard to tell what is real and what is not. Newly ensconced leaders’ flowery proclamations about the evils of corruption are often followed by no action, no expenditure of political capital. It can take months for us to decide to make a bet on a country that appears to be trending in a healthy direction.
Recently, we made a bet on Armenia, deciding to support the government’s efforts to establish a registry of beneficial ownership in the country’s crucial mining sector. It is a small, niche program running less than a year and designed to nudge forward a process that, if successful, could provide crucial momentum to reform efforts. During a late-September visit to Armenia’s capital, Yerevan, the program was on track, experts in place, relevant government officials on board, and key observers still in agreement that this is what Armenia needs now.
But the jury is still out regarding the trajectory of the country as a whole. Yes, prime minister Nikol Pashinyan, a former anti-corruption journalist who came to power last year, still talks about the issue loudly and often. And, yes, Pashinyan’s ministers are proceeding to take the nuts-and-bolts steps necessary to create the anti-corruption infrastructure that is essential to normalize and sustain the effort. An Anti-Corruption Committee, Commission, and Court, are all in the works. But what is happening at the next tier down, with people and institutions not under the direct control of the prime minister?
By at least one, purely anecdotal measure, early signs are good. Businesspeople and the related stratum of professionals – academics, development bankers, consultants, and attorneys – which observes, nurtures and profits the business community appear keenly interested in corruption issues.
Khachik Harutyunyan, of the Armenia chapter of Transparency International, succinctly summed up for me what has changed since last year’s Velvet Revolution that brought Pashinyan into office.
In my opinion, before the Revolution, what we had was state capture and the merger of business and political elites in the country. The big part of the pie was made up of representatives of the political elite (they either had some shares personally or via nominal persons such as driver, 3rd rate cousins, friends from high school and etc.). Only a small number of big companies were not connected with the political elite, and in these cases the companies were mainly foreign companies from the West which are strong enough to conduct business “as they wish.”
The situation now has changed. The same players remained but now the rules of the game are different. Everyone must pay taxes and do business in accordance with the law. If previously, the big companies belonging to or connected with representatives of the political elite didn’t have any motivation to fight corruption (because they were corrupted themselves), now the majority seems smart enough to do business in accordance with the spirit and letter of law, to show that they are anti-corruption champions.
Likely evidence of what Harutyunyan is describing was on display at a September 24, conference, “International Compliance & Anti-Corruption Congress,” attended by about 150 people, organized by longtime CIPE partner Corporate Governance Center, and underwritten by Corporacion America Airports, a multinational company which manages Armenia’s two largest airports and is listed on the New York Stock Exchange.
The minister of justice gave an update on the government’s latest reform effort. Experts from Germany and Spain offered advice to an audience made up mostly of local businesspeople. I spoke about the experience of anti-corruption reforms in post-Soviet success stories like Estonia and Georgia. By far the most telling part of the daylong conference was an honest exchange between the Western experts and the local representative of a large telecom company who insisted that the vast majority of Armenian businesses cannot survive without giving bribes. The candor of the discussion was a healthy sign that at least some of Armenia’s entrepreneurs are struggling to reconcile their everyday reality with the difficult path before them. It would have been easy to gloss over the uncomfortable gap between the low-corruption idyll in the West, as described by some speakers, and the still toxic operating environment in Armenia. But at least some business operators have decided that the reforms are here to stay, that they must adapt to an improving environment.
Frank Brown, Director, ACGC