Tuesday, August 31, 2004


18-25 August 2004

Business and Government: What is the state of economic rights in Armenia?

Human rights are no abstract notion. They are always concrete and specific in content. But when we speak about human rights, we tend to mean, for some reason, political and civil rights. We forget that human rights have a specific economic content as well, and that the violation of individual economic rights is one of the main factors hindering the development of civil society.

The implementation of a person's economic rights is connected to the right of the person to freely choose the forms and spheres of his or her economic activity. That is, the main elements of a person's economic rights are:

1) the right to chose the form of economic activity (individual, group, cooperative, etc.), 2) the right to chose the sphere and location of the economic activity.

If there are no particular problems in the Republic of Armenia with the first element, there are very serious problems with the second. There are, for example, spheres in Armenia where in order to do business it is necessary to get the OK either from the government or from the people or clans who have a monopoly in these spheres. Furthermore, the people with the monopoly are either relatives and friends of government officials or the government officials themselves. Thus, the OK to do business in these areas must inevitably come from the government. These "elite" and highly profitable areas of trade include oil, sugar, liquefied gas, etc.

On the whole, the situation in Armenia 's business sector is as follows: a businessman's economic "achievement", or his "success", does not depend at all on his professional abilities. The principal condition for a businessman's success is his degree of proximity to the government. The closer he is to the government, the more successful he is. The farther he is from the government, the less successful he is. If we take a look at the list of the most successful businessmen in Armenia, we see that those closest to the government are at the top of the list. There are no strangers on the list. How have these businessmen achieved their success?

First, in contrast to businessmen who are not close to the government, they have direct and easy access to financial resources, raw materials, etc.

Second, they receive state contracts.

Third, they are able to obtain "fat pieces" of state property without tenders or auctions.

Fourth, making use of legal loopholes and illegal schemes, they avoid taxes. They either pay no taxes at all, or they pay paltry amounts. It is no wonder that almost all successful businessmen describe unprofitable businesses on their annual balance sheets. This is a typical Armenian phenomenon, that a businessman can be successful without making a profit.

Moving on, even the location of a business depends on a governmental OK. For example, to do business in the center of Yerevan or other regional centers, one has to have close ties with the government. The nightclubs and cafes that surround the Opera House are a glaring example of this. There is no one who just happens to own one of these establishments; all of the owners are people who are close to the government.

Thus, there are serious problems with t he implementation of economic rights and the conditions for conducting business in Armenia, and unless they are solved, it will be impossible to establish civil society and the rule of law.

Eduard Agadjanov

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