Armenia: Questions over Diaspora Millions

A charitable fund set up by Armenian American billionaire Kerk Kerkorian is this month completing the biggest-ever aid project in Armenia, worth scores of millions of US dollars.

The Lincy Foundation has been reconstructing roads and houses in the Spitak region which was devastated by the 1988 earthquake, as well as repairing central streets and historical landmarks in the capital Yerevan.

The 160 million dollar investment is an enormous sum for a cash-strapped economy like Armenia, totalling 30 per cent of the national annual budget. Armenian government analysts believe that without Lincy’s financing it would have taken the state at least 30 years to complete projects of this scale.

But a debate is underway in Armenia about whether the diaspora money is being put to good use and whether expatriate Armenians should be relied upon to support the economy to such an extent.

Edward Bezoyan, who heads the fund’s road construction programme in Armenia, told IWPR the investment is making a big difference to Armenia. “We’ve seen great progress in the construction industry and related infrastructure,” he said, arguing that all Lincy projects make perfect sense economically. “Good roads are the groundwork of economic growth.”

Romik Manukian, governor of the northern Shirak Region, agreed that construction is by far Armenia’s greatest priority at the moment, and praised Lincy for building long-awaited quality housing for families made homeless by the Spitak quake.

“Lincy is not only helping housing construction, it has been working to improve the entire economy and social sector. New roads have greatly improved the psychological climate in Gyumri,” Manukian told IWPR.

But Tatul Manaserian, economics professor and Armenian opposition deputy, is less convinced, saying the latest programme was not a big priority for Armenia.

“Of course any kind of aid of this sort is important for a poor country like Armenia, but the fact that we are poor makes it much more important to spend the money well,” he told IWPR.

Manaserian questions the long-range economic rationale of prioritising roads and is concerned that none of the funds provided by Lincy to Armenia has been spent on the country’s moribund industry.

In addition, he claimed that the implementation of some of the foundation’s programmes was flawed, reflecting the views of a number of opposition deputies.

“The Yerevan-Ashtarak highway was in a relatively good condition, but they broke the existing paving and replaced it with a very thin asphalt coating,” he said. “I had a chance to see the scale of the work done there and, measuring it against the amounts spent, I believe large sums of money had gone missing.”

Bezoyan denied the allegations, saying that the overall quality of the construction work was high, and if there were any shortcomings, the contractors were obliged to do the work again at their own expense.

After suffering economic collapse following independence in 1991, the Armenian economy has shown modest signs of recovery in recent years, posting some of the highest growth figures in the Commonwealth of Independent States of around 10 per cent per year.

However, some experts are warning that much of that is due to diaspora projects such as Lincy’s and the economy will suffer a slowdown when its programmes come to an end.

The shock will come next spring, warns Gagik Atabekian of the non-governmental think tank, the Centre for Economic Studies. “Around 20,000 people were employed in Lincy projects, and they earned around 25 million dollars in salaries,” Atabekian said. “It is hard to predict what will happen to Armenia’s already fragile economy unless these programmes continue or are replaced.”

The foundation is currently deciding whether and how to continue its programmes in Armenia. Even President Robert Kocharian admitted recently that he does not know what the outcome of their deliberations will be.

“We have done our best to prove we are a reliable partner who can take on major projects and complete them to high standards and on time,” Kocharian said, visiting a Lincy construction project.

The president said that the Armenian economy could withstand the withdrawal of Lincy and the government would be able to afford more construction projects, albeit on a more modest scale.

“That is absurd,” responded Atabekian. “Economic growth in recent years has been driven precisely by these large-scale construction projects, which we owe entirely to Lincy. Once these projects are finished, Armenia’s GDP will plummet, and construction funding will no longer be possible.”

Atabekian said after an initial rush of enthusiasm following independence, diaspora philanthropists were much more cautious about spending their money in Armenia, citing corruption and red tape as obstacles, “Many Armenian expats who sought to invest here have pulled out due to bureaucratic hurdles.”

He argued that the Armenian economy needed a good legislative framework and investor climate to foster smaller businesses, “Then our economy will no longer be dependent on one big source of funding, and our compatriots abroad will give money not out of charity but from commercial considerations. When this happens, diaspora money will do us more good than it has so far.”

Tigran Avetisian is a reporter for Aravot newspaper