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Katya Lysova: Armenia’s breakthrough moment against corruption

Armenia doesn’t top many investors’ lists. The former Soviet republic is in an ongoing military conflict with neighboring Azerbaijan, has two closed trade borders with Turkey and Azerbaijan (borders with Iran and Georgia are open), and pervasive corruption prevents Armenia’s three million citizens from prospering.

But the country’s s new leader, Nikol Pashinyan, is taking aim at corruption.

Within days of becoming prime minister and leading his Velvet Revolution, Pashinyan set fighting graft as one of his highest priorities.

“Not one official that makes corrupt, clan-based decisions and accepts bribes should sleep well… Corruption is a cancerous tumor, which for many years has squeezed the lifeblood out of Armenia,” Pashinyan said.

In several high-profile investigations, Pashinyan has demonstrated that his government will hold everyone accountable. The effort started with a prominent general and member of parliament, moved on to the brother of the former president, and even a former president.

Pashinyan and his team have credibly presented these cases as being guided by the rule of law to end enduring impunity, and not a political vendetta.

How did we get to this breakthrough moment? This spring, widespread public outrage over the previous ruling elite’s systemic corruption fueled a massive public revolt.  A quarter million demonstrators flooded the streets of the capital and many other cities.

CIPE‘s partners — Armenia’s leading business associations — are witnessing a heightened sense of responsibility among both businesses and public officials to do “the right thing,” to capitalize on the political will and the country’s post-revolution euphoria.

Anecdotally, several businesses have told CIPE that customs officials have stopped requesting bribes, while businesses now want to come out of the shadow and start paying taxes properly, knowing that oligarchs are being forced to pay their share of taxes.

The most prominent example is an influential businessman and member of parliament, Samvel Aleksanyan, who paid almost $11 million in back taxes this summer.

Armenia’s new government seems to be finally following through on past recommendations by the OECD and Transparency International to reinforce competition in “quasi-monopoly / oligopoly sectors” and enforce the country’s existing anti-corruption laws. Among key challenges are the government’s ability to deliver on public expectations and maintain popular support, while facing resistance from the previous elites who remain powerful outside the capital.

CIPE’s global experience shows that because local small and medium-sized companies need a level playing field to thrive, they can be a highly-motivated force backing a government’s anti-corruption efforts.

This dynamic of politically engaged entrepreneurs frustrated with corruption becoming the engine of anti-corruption reforms is central to CIPE’s approach in emerging markets worldwide. It led to the launch of an Anti-Corruption Mobilization program that swiftly deploys resources to countries — like Armenia — where a window of opportunity for anti-corruption reforms suddenly opens.

It isn’t surprising that Armenian companies increasingly seek information on anti-corruption compliance as a way to raise their competitiveness and attractiveness both domestically and internationally.

For instance, the Armenian Corporate Governance Center independently initiated the translation of CIPE’s publication “Anti-Corruption Compliance: A Guide for Mid-Sized Companies in Emerging Markets” into Armenian and presented it to the Armenian business community in June this year.

That level of enthusiasm is good news for potential investors who may now be ready to explore opportunities in Armenia.

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Katya Lysova, pictured above, is a Eurasia Program Officer at the Center for International Private Enterprise (CIPE). She works on anti-corruption compliance for SMEs and business-led anti-corruption collective action. She previously worked on anti-corruption compliance at TRACE International and the World Bank’s Integrity Vice Presidency (INT). She can be contacted here.

Katrina Keegan, a summer intern at CIPE, contributed research for this post.

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