President’s opening remarks on the issues related to the efficient administration of the budgetary funds and reduction of corruption risks

Good afternoon,

Today, we have gathered here to continue our consultations on the issues related to the efficient administration of budgetary funds, enhanced control over the state program currently underway and on breaking free from the bonds of corruption. In recent years, we have held a number of meetings on that issue. I believe, we have succeeded in enforcing considerably the control element and today anyone who conspires to enter into some machinations may not be sure that tomorrow he’s not called upon and asked for explanations. I think it is an extremely important achievement. We have registered some progress also in the streamlining of procurement and its technical and organizational matters. That’s the reality; however it is also obvious that it’s only the beginning of an excessive process.

It is true that basic arrangements, which were working for years, and to be honest even for decades, are well-known to everyone. We have witnessed numerous instances when tenders conducted by the organizations were won by the same companies or the same people, who stand behind these very organizations. We have also witnessed many cases when the goods and services acquired through state procurement were more expensive than on the market. We have also witnessed a score of cases when tenders were won by the organizations and individuals who have nothing to do with that particular area. Construction tenders have been and even today are won by the individuals who have never been in construction business. Afterwards, they are compelled to carry out the works through the others. But we are not talking about “classical” ways. In these cases, the worst thing is that all documents are in perfect order, in full compliance with the law. In many cases, it is very difficult to catch these persons red-handed. However we do know or at least suspect that this or that case is fishy. I mean that perfect documents are still no guarantee that the process is conducted in a fair, efficient and acceptable for the state way. It means that in such cases we are not always able to use the state funds in an efficient way but we have to. We simply have no alternative, and we certainly have to double our efforts on that direction. Yes, on this stage, when the state is the one who is speaking loudly about the existing failures and is identifying publicly the risk containing areas, a public perception may be shaped that everything and everywhere is corrupt, that corruption is on the rise and the state funds are allegedly being squandered, the more so because there is no shortage of those who would love to exploit the issue. We are fully cognizant of that danger. Nevertheless, this course has no alternatives and will get us to our destination. We cannot as before hold everything under lock just to avoid the perception that corruption is growing and at the same time hope that at some point the process will itself enter the right course. It doesn’t work that way. We have been and will continue to publicly denounce these occurrences, we will be the first to point at embezzlement; we will be the first to speak of shortcomings to create such atmosphere of intolerance toward this phenomenon which undermines the foundations of the state that will preclude anyone from taking that route tomorrow. Now we are having a situation when everyone is talking about these phenomena but at the same time the process of regularization is also moving ahead. Probably such an environment is not very pleasing to our state officials but I would like to repeat that this course has no alternative. This is the price we have to pay to get to the right place. And I am confident that that time will come in the nearest future, it’s not very far away.

Presently, I would like to talk about concrete issues. I have some observation which I would like to direct to the heads of different structures and, of course, I expect that the heads of these structures will make comments and give assessments so that we are able to arrive to the proper conclusions.

Mr. Prime Minister,

I am aware that you have already instructed responsible officials in all agencies to discuss one by one and clarify the mentioned issues. I urge you to do it fast, openly, and transparently. We have no reason to be afraid of or concerned with any fact. These problems – corruption related, criminal or any other – must be addressed and addressed fast. If the head of an agency or the government cannot decide on whether this or that problem is of the criminal or just administrative nature, sent it quickly to the appropriate bodies. It will be your most proper, the best answer to the sounding criticism. I trust that the study of the Control Chamber compels solutions. This is not just a “listen to and move on” cases, or for debating them over in different settings, but these are cases which are called upon to redress the situation. It is my opinion. We have been following the measures taken after our previous meetings, and I attach importance to all the steps which will allow us

- to do away with all problems existing in the area of electronic procurement. We have agreed on the time table and I ask you to follow it accurately.

- in the required way to publish transactions and accounts on the procurement. No need to be concerned that in one, two or three days after publishing these accounts, it will be appear in the press that 300,000 drams were spent for a banquet, or 700,000, etc. If this money is spent in line with our objectives, according to the program and decently, there is no problem. The heads of agencies should be advised not to feel offended, not to argue that a foreign delegation was taken care of with only 1 million drams while in the press they are saying that we’ve lavished one million drams. Let them talk. If there is no problem, there is no need for us to feel hurt.

- coordinated work of the Center for procurement assistance, the Ministry of Finance and customers. This is very important. These three entities must really always work in sync and the role of the coordinator should be visible.

- reduction of instances when all client organizations make purchases from one supplier. However at this point, I would like to provide some clarifications because I observe instances when our demand is distorted, when it is used as a pretext for saying “since we are restricted in buying from one supplier, we had to announce tender and the outcome was this.” I don’t mean the instances when there is a limited number of participants whose offer of goods and services is obviously higher in value than the real price. I want to bring one concrete example related to the procurement of a medication. That entire story related to insulin, when we were for years buying insulin at a high price, 4500 drams for one ampule, if I am not mistaken, and when we realized that and tried to get it from one supplier, there came forward people who offered it at a lower price than that particular one supplier who was allegedly offering it cheaper; it turned out that the discount was only for 2 or 3 drams. Obviously, we were dealing with swindling here. Neither the government, nor the minister should have second thoughts about situations like this, worrying that we would be criticized or talks that this one was paid 2 drams less. Isn’t it obvious why this one was paid 2 drams less? Who may criticize a minister for purchasing from one supplier if the stuff comes two times cheaper?

- and, of course, we must ensure a higher level of personal responsibility for the head of a given agency. And it shouldn’t be dummy responsibility; we will not engage in hair-splitting but rather must be able to assess the situation properly. It would be more acceptable for me if the head of an agency, preserving, certainly, qualitative standards, reduced the price of the purchased goods and services rather than guided by the letter of the law, in the end of the day gets goods and services at dubious prices.

Now about the Control Chamber:

Mr. Zakarian,

We must be able to preserve, uphold the understanding that each program is under serious scrutiny, while the existing shortcomings will be unavoidably revealed and will receive their due assessment. Everyone must realize that whatever they do today, all their errors, crimes tomorrow will be revealed. Make no mistake about that. Every agency must be aware of the Control Chamber’s scrutiny, Control Chamber’s heavy hand; however it shouldn’t be done through the upsetting the pre-set timetables, or illicit activities.

I also have some observations which must be taken into consideration. First, the tempo of works must not be decreased regardless of any discussion. And as I have already said, all must feel overt and even convert presence of the Control Chamber. Second, the Chamber must take a principled stance with regard to all programs and must be equally impartial in all cases. It is critically important that the failures are disclosed not one, two, or three years later but in the process. It’s a normal, preventive work which should be carried out and it will be much more efficient. Finally, since we are working in the open, public field, we should be most reserved in our expressions and definitions not to damage other processes beyond our scope of work, not to create unnecessary public misperceptions. The Chamber’s work is to reveal problems along with all structural, procedural and human factors which create them.

Any professional body, while making an oral or written statement must present facts only, the reality, results of measurable and explicable investigation and, naturally, of the research: exactly the way our National Statistical Service is working. I cannot imagine that anyone can infuriate Stepan Mnatsakanian or force him to explain reasons or consequences for any of the figures published by him. His work is to register what was the economic growth, for instance. He is not expected to say, for example, that the Ministry of Economy malfunctioned and that’s why we had economic decline. It’s a problem for other people all together; it’s a problem for a political figure, for the superiors, for experts, for specialists of different kind, everybody’s problem except for this professional body.

In general, I see the work of the Control Chamber as that of a powerful auditing company. Unfortunately, in many cases our Control Chamber has become a specialized agency, a simple accountant. Looking into the account reports and inspection results, you will notice immediately that it is all about financial violations only. And if that’s the case, why have we created the Control Chamber in the first place? If CC is doing the same job which is done by the department of financial oversight at the Ministry of Finance, why have we created the Chamber, why have we called it an independent body, why are we paying its employees the highest wages in the country? You have a huge staff. We have to work very seriously on the restructuring of the CC’s work and if necessary - on the legislative amendments. You must understand that nobody expects to hear your opinion. Nobody cares what you think about the Prosecutor General’s Office, or any other structure. You’re disappointed or exited – it’s your own business. Speak about it at home. You can speak about it when you’re in my office. Who said the Chairman of the CC has any right to make public statements like these? And if in some cases there was no such statement but it appeared in the press, the Chairman of CC must provide explanations to the press. Then what about, let’s say, Special Investigation Service assessing the work of the Control Chamber? Where will it get us? And in general, this is not about the CC only. Every official must be responsible for his or her words. If an official makes a statement or gives an interview, he or she must work on that statement or that interview. If it seems to someone that people walking down the street can just turn around and start speaking impromptu about our economic problems or about problems present in our society, such people cannot bring any good to our state-building. If I am inviting a meeting like this one and if I am reading my remarks it is not because I cannot present them orally. We all must be very careful on these issues. One person is more emotional than the other, the third is more tranquil. However it doesn’t mean that from different podiums, in different places we must try to promote our own PR. No way. I will not accept it.

On the Prosecutor’s Office:

Mr. Hovsepian,

Your task is to be precise and adhere to the requirements of the law, regardless of whether the CC has sent you a report or not. If it’s been published or stated, you are obligated to study and give a legal assessment. If the Chairman of the CC declares that 70 percent of our state budget i.e. 701 billion drams are threatened, it is quite obvious that it’s a very unsound and short-sighted statement. You needed only 2 or 3 days to go through that report and make a statement, such as “Dear citizens of the Republic, the report reveals suspicions on squandering of only 200 or 300 million drams, the rest is simply doesn’t hold water.” It is your direct obligation. And that’s the right thing to do rather than call the Chairman of the CC and ask why he has done it. You know about the call, the Chairman of CC knows about the call. Meanwhile, the whole country is speaking about 700 billion drams being devoured. An ordinary citizen has every right to think so but every one of us does understand that we are talking 70 percent of our state budget and that 700 billion are not for services or construction, not for services or goods, or construction works. Isn’t it obvious that the number has been given deliberately, so that everyone understands it; almost one-third of that figure is administered by the Ministry of Defense, while nearly 50 percent of all funds at the Ministry are for wages? Who is allowed to make statements like that and not to be called to answer? This is inadmissible. It’s your job, you must do it. In cases when there is criminal intent, please, otherwise questions may arise as to who has sent the materials to the Prosecutor’s Office, why, or why has not sent? What is sending-not sending? If it’s been published or made known, it must be looked into but not looked into and keep silent. It must be checked and the relevant statement must be made. On all these cases we must work like we were working during the elections. When a statement is made, it is immediately being taken note of, evaluated, and the findings are made public. Hence, I expect all law enforcement bodies to make clear-cut assessments in all cases but I also want you, the Special Investigation Service and investigation body of the Police refrain from the former practices when there is just one fact, but it is immediately being expanded, stretched to cover our entire economic area. When it is about one particular organization, to go to that organization and start inspecting it on every direction, then inspect other organizations related to that particular one, etc. - all this is simply unacceptable. We cannot work like that: a concrete fact, evaluation of that fact and then a decision. And in general, the law enforcement bodies must not interfere much with our economy. They must interfere only when it is absolutely necessary; when there is unmistakably a crime is taking place. Let people work uninhibited. We have tax bodies which will take care of that.

Finally, we will certainly speak, but not here, about the position of the political majority in the parliament. We will discuss that within our Party, because it is a purely partisan issue. We will decide on how to proceed in similar situations.