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Armenia - Corruption

According to the Transparency International (TI) 2012 Corruption Perception Index (CPI) report, Armenia with a score of 34 (on a "100-0" scale, where "100" is the cleanest country and "0" is the most corrupt), tied for rankings 105-112th among 176 countries. Because of the change in methodology of CPI calculation, this year’s results are not comparable to the previous years’ results. The most recent findings of the Global Corruption Barometer, a worldwide public opinion survey, identified the Armenian education sector as the most corrupt, followed by the police and judiciary.

Corruption remains a significant obstacle to investment in Armenia. GOA introduced a number of reforms in the last few years, including the simplification of licensing procedures, registration of commercial legal entities, civil service reform, a new criminal code, privatization in the energy sector, and anti-corruption laws and regulations. Nevertheless, corruption remains a problem in critical areas such as the judiciary, tax and customs operations, health, education, and law enforcement. Petty corruption is widespread throughout society.

The law provides criminal penalties for official corruption; however, the government did not implement the law effectively or evenly, and officials frequently engaged in corrupt practices with impunity. The authorities did not take any substantive measures to curb systematic corruption, although junior and mid-level officials were periodically prosecuted during the year for petty corruption, usually accepting bribes for services.

The World Bank's Worldwide Governance Indicators reflected that corruption was a serious problem. The World Bank managing director, in an October 2009 visit, publicly expressed concerns over the need to address corruption in government institutions.

Beginning in January, all public officials and their family members, as well as citizens with annual incomes exceeding eight million drams (approximately $21,000), were subject to financial disclosure laws, according to which they had to file their asset declarations no later than April 15; however, to what extent officials and individuals with high incomes complied with the law remained unclear. According to local observers, the authorities lacked the will and technical capacity to verify the accuracy of the declarations, which were not fully accessible to the public, or to take action against persons who concealed their incomes.

Government programs to curb corruption continued to produce little tangible results. The activities of the governmental Anticorruption Strategy Monitoring Commission and Anticorruption Council continued to be viewed with skepticism. On 06 October 2009, the government approved the 2009-12 anticorruption strategy following two years of wide-ranging discussions in Yerevan and the regions and the posting of the strategy on the government's Web site. Local observers remained skeptical, however, that the newly adopted strategy contained adequate measures to genuinely strengthen anticorruption institutions and that indicators for monitoring implementation of the strategy were sufficient.

Civic groups working to address corruption stated that authorities continued to ignore media reports implicating government officials in corrupt practices. According to Transparency International's 2009 Global Corruption Barometer carried out between October 2008 and February, 43 percent of the individuals it surveyed in the country reported giving bribes during 2008. Respondents identified the police as the institution that demanded most bribes.

During 2009 authorities confiscated a company owned by MP and opposition supporter Khachatur Sukiasian. In 2008 authorities had seized the assets of his Bjni mineral water company to collect a 4.5 billion dram ($12 million) fine, ostensibly for tax fraud and misappropriation of state-owned water resources; local observers viewed the action as retaliation for Sukiasian's support of Levon Ter-Petrossian's 2008 presidential bid. The company was ultimately sold on 24 December 2009 to a progovernment businessman

In a 26 February 2009 interview, Vahram Nercissiants, a top economic adviser to President Sargsian, stated that the holding of top governmental offices by affluent businessmen is unconstitutional. Nercissiants stated that although the constitution prohibits businessmen from holding public office, many state officials circumvented the law by registering their companies under the names of relatives while continuing to manage them personally. The adviser also noted that when affluent businessmen hold public office, their loyalties often shifted from serving the government to serving their private interests and that the country's business environment was adversely affected when such individuals used government office to set unequal business conditions and unfairly push competitors out of the market.

On 13 March 2009, an adviser to the minister for emergency situations was arrested for alleged fraud and bribery. The SIS stated that the official, Sanatruk Sahakian, was suspected of receiving a large bribe from the family of a young man seeking to enroll at the country's police academy. According to the SIS, Sahakian had convinced the family that he could arrange the young man's enrollment in exchange for the bribe. On November 9, Sahakian was convicted and sentenced to four years' imprisonment for fraud and attempted official forgery. The sentence was subsequently reduced by one-third to two years and eight months as a result of the June 19 general amnesty.

On April 16, President Sargsian urged the police to put an end to a spate of high-profile shootouts and illegal possession of weapons and ammunition that appeared connected to Yerevan's approaching municipal elections on May 31. Expressing serious concern at the shootings, the president stated he would toughen the response of law enforcement agencies in such instances, cautioning that authorities would take strict measures even if a relative of an official was involved.

In a number of high-profile cases of alleged or reported violence during 2009 that involved relatives or members of the ruling party, no investigation or criminal proceedings were conducted, prompting local observers to question whether these individuals used their political connections to the ruling party and authorities to avoid legal prosecution.

According to media reports, on 30 June 2009, Ishkhan Zakarian, chairman of the Control Chamber, an official auditing body that monitor's government budgetary activity, reported irregularities in the prices of public land sold to private individuals in the Armavir region. Zakarian stated that the Control Chamber discovered instances of land sales considerably below actual market value. Zakarian indentified one initial sale of 10 acres that went for 35,000 drams (approximately $94) per acre; this land was then sold two days later for 3,900,000 drams (approximately $10,500). Zakarian also reported the sale of land in Parakar village at below-market prices for the construction of casinos and furniture shops. The Control Chamber also stated that it had discovered irregularities in expenditures allegedly allotted to town planning in Armavir that amounted to 86 million drams (approximately $232,000).

On 07 October 2009, Zakarian presented to the National Assembly the Control Chamber's 2008 report, in which the chamber registered financial violations and wasteful spending by government agencies during the year that totaled almost 8 billion drams (approximately $21 million), of which approximately 6 billion drams ($16 million) could be recovered. At year's end official sources did not provide information as to the progress of these cases involving wasteful spending.

During 2009 the Control Chamber published similar findings on gross violations and financial abuse in numerous state bodies; as in previous years, however, these cases were rarely prosecuted. According to the local affiliate of Transparency International, the government ministers and regional governors implicated by these reports simply returned some of the money to the budget and continued to work without any legal action being taken against them.

According to official statistics, authorities investigated 451 corruption cases during 2009. In the first nine months of the year, courts convicted 146 persons, including 63 officials. The majority of officials investigated or convicted worked in the police or the Ministry of Justice, and most of the officials were section heads or other low-level officials.

According to a May 25 media report, the local NGO Achilles Society for the Defense of Drivers' Rights identified corruption as permeating all departments of the traffic police. According to the NGO, bribes solicited by the traffic police ranged from 5,000 to 50,000 drams (approximately $13 to $130).

Armenia is a member of the UN Anticorruption Convention. GOA’s most recent anti-corruption strategy paper and action plan for 2009-2012 did not yield any significant results. Priorities set by the new strategy included improvement of legislation and infrastructure to combat money laundering, an increase of transparency in the public sector, and enhancement of the accountability of all branches of government. In July 2012, the President approved a new strategy and action plan for Justice Sector Reforms for 2012-2016 which addresses most of the problems in the judiciary, prosecutors’ office, and civil, criminal, and administrative legislation. In January 2012, pursuant to the law on Public Service adopted in 2011, an Ethics Commission for High-Ranking Officials was established. The Commission collects and monitors the asset declarations of high-level officials. However, there are no criminal penalties for noncompliance or filing of false declarations.

The Law on Civil Service, in force since 2002, restricts participation by civil servants in commercial activities. Relationships between high-ranking government officials and the emerging private business sector encourage influence peddling. Powerful officials at the federal, district, or local levels acquire direct, partial or indirect control over emerging private firms. Such control is exercised through a hidden partner or through majority ownership of a prosperous private company. This involvement can also be indirect, e.g., through close relatives and friends. These practices promote protectionism, encourage the creation of monopolies or oligopolies, hinder competition, and undermine the image of the government as a facilitator of private sector growth.

Corrupt practices exist widely within private companies as well, mostly in the form of tax fraud and unregistered business activities. GOA has made several attempts to cut back on shadow economic activity and tax evasion, as well as to increase budget revenues, through tax amendments and stricter regulations and enforcement. A recent effort to increase tax compliance by larger companies was legislation permitting the State Revenue Committee (SRC) to place tax inspectors on the premises of large companies (those with annual turnover exceeding USD 10.5 million, and/or those with more than USD 1.3 million in imports in a three-month period) to oversee sales volumes, prices and corresponding documentation, product deliveries, etc. The amendment went into effect in January 2010; in 2012 the list of companies with resident tax inspectors increased from 25 to 37. In another move to increase transparency and awareness of major tax-dodgers, GOA has published quarterly lists of the country’s largest business taxpayers since 2006.

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Page last modified: 18-10-2013 18:53:51 ZULU