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"Country Of Our Dreams"?: Not For Some Diaspora Investors

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  • "Country Of Our Dreams"?: Not For Some Diaspora Investors

    "COUNTRY OF OUR DREAMS"?: NOT FOR SOME DIASPORA INVESTORS
    By Gayane Abrahamyan

    ArmeniaNow
    05.09.12 | 11:17

    President Sergh Sargsyan, meeting with Diaspora in London in July.

    Business investors from Armenia's far-flung diaspora, a key engine
    for the South Caucasus country's sluggish economy, increasingly are
    expressing frustration with what they describe as Armenia's corrupt
    judicial system and state bureaucracy. The government, for its part,
    asserts that it promotes favorable conditions for diaspora investors.

    Reports vary about how large a stake diaspora investment holds in
    Armenia's Gross Domestic Product of $18.17 billion, the lowest in the
    South Caucasus; estimates range from "60 to 70 percent" to as little
    as 10 percent.

    But, given the diaspora's strong networks, keeping those investors
    happy is key. "Profit, while at the same time building the country
    of our dreams," President Serzh Sargsyan urged diaspora Armenians in
    London on July 31.

    In interviews with EurasiaNet.org, though, some diaspora investors
    claim that such appeals fail to materialize into reality.

    "Diaspora Armenian businesspersons are leaving Armenia to avoid
    total bankruptcy," alleged Valerie Ashkhen Gortsunian, the founder of
    coffee importer and popular retailer Le Cafe de Paris, which employs
    50 people in Yerevan.

    As part of a divorce from her husband, Armenian jazz drummer Vazgen
    Assatrian, Gortsunian lost control over her company in 2007 when a
    Yerevan court awarded Assatrian half of the property rights in Le
    Cafe de Paris. The decision was made despite a marriage contract,
    signed in France, which defined Gortsunian as the sole owner of the
    business, she said.

    Faced with a "huge" 80-million-dram fine (about $200,000) for unpaid
    taxes - a fine Gortsunian says should be applied to the company itself
    rather than her personally - the diaspora businesswoman says she
    eventually had to sell her remaining half-stake in Le Cafe de Paris.

    Reasons for why the court did not honor the terms of Gortsunian's
    alleged marriage contract were not immediately available. Gortsunian
    charges that her ex-husband, a prominent musician, used "bribes,
    acquaintances, connections with the top" to secure the ruling.

    Assatrian declined to comment to EurasiaNet.org about the case.

    Gortsunian, who moved back to France from Yerevan this January, says
    that she "ended up leaving Armenia empty-handed" after investing
    roughly $2 million into the company since 1995.

    "If the president makes promises, offers assurances for us to come and
    invest, he has to ensure fair competition as well," she fumed. "The
    corruption of Armenia's judicial system has reached a point when it's
    simply impossible to run a business there."

    Edmond Khudian, a real estate investor from Glendale, California,
    has similar complaints.

    In 2010, Khudian filed a lawsuit against his two Armenian partners,
    Eduard Yesaian and Vladislav Mangasarian, in construction business
    Arin Capital for allegedly embezzling funds from the company and
    forging his signature on documents for the sale of apartments in a
    13-storey building in downtown Yerevan that had already been sold to
    diaspora buyers.

    When the company declared bankruptcy, the initial diaspora buyers
    were unable to reclaim the $4 million they had paid for the flats.

    In 2010, Khudian filed a criminal case against Arin Capital, but claims
    that the company's director, Eduard Yesaian, has not been called in
    for questioning and that his own fingerprints have not been taken to
    test his accusation of forgery.

    "No action has been taken to investigate those deals, because they
    have powerful sponsors in the top," he said in reference to Yesaian,
    whom he described as a friend of President Sargsyan's brother, Levon.

    Levon Sargsyan, a former member of parliament for the ruling Republican
    Party of Armenia, has denied the acquaintance.

    Contacted by EurasiaNet.org about Khudian's charge of deliberate
    negligence, General Prosecutor's Office case investigator Tigran
    Harutiunian responded that "[i]t's my business when to call in someone
    for questioning."

    "This case needs more time than the diasporan thinks," Harutiunian
    said, hanging up the phone.

    Similar scenarios have marked the investments of several other
    diaspora Armenians, leading to the loss of sums ranging from a few
    hundred thousand dollars to a few million.

    Senior officials have been quick to absolve the government from any
    blame for the failed investments. In general, the losses of diaspora
    investors are "not massive, and the state isn't at fault, but rather
    some deceitful people and diaspora Armenians' lack of knowledge about
    Armenia's legislation," asserted Armen Alaverdian, deputy chairperson
    of Armenia's State Revenue Committee.

    One advocacy group for diaspora Armenians argues otherwise. The main
    stumbling block for diaspora investors, claimed Chamber of Advocates
    Vice-President Nikolai Baghdasarian, a member of the Initiative Group
    for the Protection of Diaspora Armenian Investors' Rights, occurs when
    individuals in the elite abuse their ties to the state bureaucracy.

    "Documents are forged and through these 'legal' documents everything
    is seized and appropriated, and when the [diaspora] investor turns
    to the courts, fake bankruptcy is declared," claimed Baghdasarian.

    International monitors long have chastised Armenia for a judiciary
    system that allegedly does the executive branch's bidding and for
    widespread corruption among government bureaucrats. The 2012 US
    Department of State Human Rights Practices Report identified corruption
    as "a serious problem."

    "Officials frequently engaged in corrupt practices with impunity,
    and authorities took limited preventive measures," the report found.

    Armenia's courts, meanwhile, are expected "to find the accused guilty
    in almost every case."

    But Minister of Diaspora Hranush Hakobian is convinced that Armenia's
    diaspora still believes in the government's sincerity. "Those cases
    will not affect the overall sentiment" of Diaspora investors toward
    Armenia," she told EurasiaNet.org.

    "The issue here is not about trust, but, rather, [the] economic
    profitability" of individual investments, Hakobian stressed.

    Economy Minister Tigran Davtian agrees, telling EurasiaNet.org that
    "serious investors" take into consideration "weighty international
    ratings" that show supposed improvements in Armenia's business climate,
    and "macroeconomic data" that shows 8 percent growth in the first
    five months of 2012, rather than individual cases" of bad investments.

    "Naturally, we don't want our compatriots to leave Armenia in
    disappointment, but not everybody can succeed in business," said
    Davtian.

    (This article was commissioned by Eurasianet: www.eurasianet.org)

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