Small and medium enterprises (SMEs) in emerging markets in Eurasia must demonstrate the ability to assess and mitigate corruption risks in order to do business with multinational firms. The vast majority of SMEs in the region are unable to do so. While corruption risks remain high, these firms are unable to access opportunities for growth. Until recently, Armenia was a case in point.
As discussed here by our colleague Katya Lysova, Armenia now has significant political momentum to fight corruption and the business community wants to do the “right thing.” To support this extraordinary opening, CIPE has recently launched an anti-corruption compliance program for the Armenian business community. Pro-active adoption of compliance standards will help Armenian SMEs not only reach international supply chains, but also, importantly, re-gain ground on their own domestic market, long dominated by oligarchs.
Besides, SMEs with compliance in place will be better able to reduce the cost of doing business, access credit and financing, attract new clients and partners, and be competitive in domestic and international procurement tenders. While these advantages are clear, the challenge is for Armenia to be able to demonstrate credibly to potential investors that its companies are ready to do business with integrity.
To provide Armenian enterprises with practical experience on anti-corruption compliance, CIPE has collaborated with Russia’s VimpelCom, a Veon subsidiary known as Beeline brand across the Eurasian markets. After VimpelCom’s FCPA settlement in 2016, the company has made tremendous efforts to promote the values of compliance and integrity, not only internally, but also across the Eurasia region. Armenians have eagerly learned what it takes to set up a robust compliance program from the ground up and what multinationals, like VimpelCom, expect from SMEs across Eurasia.
In addition, Armenian businesses realized that implementing compliance internally may not be enough for the country to become competitive. Anti-corruption collective action by companies is essential to help cultivate a broader culture of compliance and ethics in the country. Companies need to come together to address systemic corruption risks through a constructive, policy-focused dialogue with government. In addition, collective efforts help disseminate broadly best practices for ethical dealings among business partners and with the government agencies.
At the December 9 snap parliamentary elections in Armenia, citizens voted for a platform of combating corruption, giving the most recent prime minister Nikol Pashinyan’s Civil Contract party 70.5 percent of the vote. The Armenian businesses have just begun the road to compliance and the post-election climate is, like never before, conducive for doing ethical business.
In fact immediately after the elections, the new government has made public its draft anti-corruption strategy for 2019-2022. This document instructs the Ministry of Economic Development and Investments, the Ministry of Justice, and the Central Bank of Armenia to promote actively the adoption of anti-corruption compliance standards by both private and state-owned companies. It also requires transparency of public procurement process and setting up a blacklist for violators. It is very encouraging the government prioritized instilling integrity and compliance as a fundamental norm necessary for the country to move past its corrupt past.
CIPE is working with three Armenian organizations to assist domestic companies with introducing compliance programs. The partners, the Yerevan Chamber of Commerce and Industry, the Armenian Lawyers Association, and the Corporate Governance Center, are each reaching out to a wide range of firms from SMEs to large and state-owned enterprises. These compliance efforts will help position Armenia back on the map for investors, domestic and foreign alike.
Natalia Otel Belan, pictured above left, is regional director for Europe and Eurasia at the Center for International Private Enterprise (CIPE). She can be contacted here. Yulia Glubokaya, above right, is deputy director for compliance at VimpelCom Russia. She can be contacted here.