IT WILL NOT TAKE MUCH EFFORT FROM GOVERNMENT
James Hakobyan

Lragir.am
26-06-2007 15:26:21

Armenia has considerable experience in sale and donation of strategic
companies. The experience is so considerable that one will hardly
remember which one was sold and which one was donated. The border
of sale and donation is blurred. For instance, we sold the thermal
power plant of Hrazdan but we are going to pay the money from its
sale to the same Russians in return for the Russian gas within three
years. And perhaps the government could not make head or tail of
the list of sold or donated companies anymore and decided to put
out the Armenian railroad to concession. A concession is relatively
new to the history of the Armenian management. Perhaps only the
concession of the airport is known among the strategic companies,
and perhaps also the financial concession of the atomic plant. Soon
Armenia will sign the third major concession. Judging by the previous
two, it does not seem to be bad. For instance, in the sixth year the
concessionaire of the airport Eduardo Eurnekian gave us new, beautiful
and modern arrival and departure lounges. If everything is OK, by 2012
the concessionaire will give Armenia a new airport. In other words,
the concession of the airport works.

In the case of the atomic plant, although the management was taken
up by the Russians, it has worked without debts, fuel problems and
financial crisis for a few years now. In other words, we may say that
concession is justified.

Logically, the concession of the railroad is the optimal way of
management, modernization and competitiveness, when the company
remains the property of Armenia, but is improved by the efforts of the
investor. There is a nuance, however, which departs from the logic
of the tender for the railroad. A few months ago the members of the
Armenian government did not hide that they would wish Russia to take
up the management of the railroad. At first sight, this innocent custom
to give everything to the Russians is a subjective opinion, and cannot
be crucial to the tender because it has distinct measurements and the
winner must be eligible, despite the attitude of the judges. However,
Armenia has had a case of privatization when the tender was based
on clear benchmarks but in the end the company won which did not
comply with any of the benchmarks. The distribution network was put
out to tender, which was the World Bank’s stipulation for the last
disbursement of the SAC4 loan. This loan had a vital importance for
Armenia because it went to the state budget.

The network was put out to tender, and since it was held under the
scrutiny of the World Bank, the Russian companies were not eligible
because they lacked financial transparency. Meanwhile, the Armenian
government was rumored to be likely to sell the network to a Russian
company. After the Russians had been considered ineligible, the
Armenian government found the way of not selling the distribution
network to the Western companies. The terms of the tender were changed,
protests allegedly organized by the opposition were held. In other
words, total psychological pressure was put on the Western buyers. As
a result they rejected the network one after the other. The tender
was cancelled. After a lasting period the distribution network was
sold to an offshore company called Midland Resources which had no
experience of management in the energy sector. Afterwards, Midland
Resources sold the distribution network to RAO EES. In other words,
the Armenian government intended to sell it to the Russians and found
the way to fulfill its intention.

The Western companies which have strategic interests in Armenia are
certainly aware of this incident. Perhaps this is the reason why
no major Western company has made investments in Armenia. And it is
possible they will not bid for the railroad and the Armenian government
will encounter no difficulty to provide the Russian victory. The
government will not have to change the benchmarks of eligibility or
hold protest meetings. Unlike us, the world understands everything
at once.