12, 2017

Remarks delivered by President Serzh Sargsyan at the forum on local self-government and territorial administration authorities

Dear Community Leaders,

Ladies and Gentlemen,

I am glad for the opportunity to be here and meet with you. As Mr. Terteryan mentioned, I am of course well aware that you have been discussing issues of local self-government and territorial administration for two days now. I look forward to summing up together with you the forum’s outcome a short while later. I also look forward to hearing from you about the developments you expect, the shortcomings, and why not, the achievements we have had so far.

Taking the opportunity, I congratulate all of us on the outturn of the local elections held on November 5. I especially congratulate the winners, namely those who won the trust of our people, in particular, the confidence of their community.

In this way we summed up the next key stage of community enlargement. Unfortunately, local elections are not often paid the attention they ought to. Maybe because the problems here are specific and few people want to shoulder such a particular responsibility, or perhaps because the Armenian political forces are not so well represented at the community level, and for this very reason, they consider that the local elections are of secondary importance; in the meantime, the local level is where politics can best manifest itself.

Today, instead of the former 465 communities, we have 52 large communities. Due to enlargement, more competitive aldermen’s councils have been formed in many communities: we can witness more lively and targeted discussions during their meetings.

At the same time, redistribution of staff positions is being made, as a result of which the present positions are replaced with new service units. Though, it has come to my notice that in some communities this process is not advancing for reasons still unclear to me.

Even though there may be one or two such communities, this process needs to be completed as quickly as possible; this does not necessarily imply that a newly elected community leader should substitute all of the former village mayors at once under the pretext of recruiting more loyal and efficacious people to work with.

I can tell you from my experience that this is the worst approach. I changed several ministries throughout my political career; but appointed to the post of minister, I never told my deputies or the heads of department to resign because I did not want to work with them.

It is necessary to set forth clear standards and criteria, and those who do not really meet the proposed criteria should find another job. But to say that I have come and brought along my people is a destructive approach. Then you will be dependent on them, and not those people on you.

I also know that all the shortcomings have not been eliminated yet. However, we are on the right path. By creating a wider, and, consequently, a more competitive environment, we will be able to eliminate any shortcoming by raising the efficiency of decision-making.

Last year, we held a special event to celebrate the 20th anniversary of introducing a new local self-government system in Armenia. During that gala event, I presented my vision of local self-government and territorial administration. I think we have successfully continued our joint work over the past year, making the necessary corrections.
Our strategic goals have not changed: the free and independent Armenia should rely on strong and organized communities.

We will continue the process of community enlargement. We will not hurry; we will be careful in everything, but at the same time, we will be consistent. Our independence must be strengthened day by day with the development of the State and society. That is why we need both vertical executive management and decentralized, self-organized strong communities capable of setting and resolving problems on their own. An interconnected chain of communities with integrated, large-scale resources and their most effective ownership and their inter-community associations is one of the most important pillars of our continuing development.

We are not seeking mechanical leveling at all. Our task is not to weaken stronger communities, but to strengthen them, creating new opportunities for smaller and weaker communities.

It is not a secret that many local governments can not provide the necessary services to the population for want of adequate infrastructure or, to be worse, due to their inability to make the right use of it.

The government can and must define common criteria for all communities. However, no government can ever find a better solution than the one developed and implemented by the locals, those who consider themselves to be the owners of the community. Our task is to encourage our citizens and village people to have a landlord’s sense of ownership.

This is the way to consistently strengthening the local self-government bodies. At that time, many of those powers entrusted to central and regional administrations should be handed over to local self-government authorities.

Dear Colleagues,

I have heard a lot from the financial sector, including representatives of international financial institutions, that it is always possible to find funding for ambitious and realistic projects in our communities should the latter have the institutional capacity for their transparent implementation.

Many community leaders are convinced that there are good ideas in their communities. I hope that as a result of today’s debate, the possibilities for narrowing the gap between these perceptions have become more perceptible.

I have already stated and I am confident that you are aware of our demographic and economic development targets up to 2040, which are as much important for our country’s harmonious development and inclusive economic growth.

In a few years, we will reach the per capita GDP threshold of USD10, 000. This implies new quality infrastructure and community institutions, as well as alternative and innovative financing approaches.

Many countries have already made their way to this path. This implies a change in community development approaches and project implementation ideas. Transition has to be made from the solution of current problems to long-term planning, strengthening the sense of ownership and responsibility in places.

The growth calls for contribution to be made by each community. In particular, communities should be able to build appropriate capacity for high quality development and specific business plans with a focus on public-private partnership and inbound private investment.
The adoption of new development financing approaches will help enhance the autonomy of our communities. In this regard, a good example is the high rating given by Fitch to Yerevan community, the results of which we can already see. The City of Yerevan has already signed a contract for the first-ever financial resource from financial institutions without State budget mediation and government guarantees.

Of course, this does not mean that communities should make an abusive use of it and take on a burden that can break them down afterwards; reasonable, favorable conditions and their realization are of great importance to us. I think that the issuance of community bonds in line with international best practices will not be too late.

I am confident that these approaches can be implemented in many other communities through the cooperative efforts of smaller communities, as well as through the introduction of clear-cut criteria and regulations.

Many training programs should be developed and implemented in order to provide communities with additional powers and successfully continue with the decentralization process. There is a need to create human resources and professional skills that will allow them to properly implement their already existing powers.

It is no accidental that this meeting is being held at the Dilijan Educational Research Center of the Central Bank. This is one of the ways to organize an effective meeting of heads of urban and rural communities in Armenia and the Central Bank on these issues.

It is necessary to adopt innovative approaches as regards community development and private investment. The financial sector of our country is quite developed, and this is not our opinion, but that of international institutions. It can proceed to new approaches. Communities should begin to understand the sophisticated language of financiers and more effectively use the opportunities provided by the financial sector.

Limited funds will be made available from a single source on the way to the aforementioned per capita GDP target. We need to introduce diversified collective investment schemes for which we are developing an appropriate legislative framework in line with the best international standards. We need to create new investment funds, possibilities for issuing real-estate, welfare and green bonds.

In the long run, projects that connect communities with global value chains will succeed. They have ensured serious progress for countries in Eastern Europe and other developing nations. By entering the global marketplace, goods or services may enjoy endless demand in practice.

The scope of program beneficiaries can be significantly enhanced through improved urban development norms and governance standards in communities. To state it more clearly in a few words, let me cite the example of our efforts over the last 2-3 years on the way to the Eurasian Economic Union.

Now there is no such a producer more or less competitive in Armenia facing problems in selling its products. Indeed, it is a challenge for us to have hundreds of thousands of farms producing small quantities of low-quality products. We have become part of that immense value chain. We have become part of a 170 million-strong market and we should take advantage of the opportunities.

I believe that in the foreseeable future we will also have an enterprise that should try to combine the possibilities of these small farms by negotiating and buying their products and exporting them to other markets under a common brand.
I hope that the financial instruments developed by the Central Bank will give you the opportunity to develop and come up with new initiatives. Positive examples may well be infectious. I think that the Central Bank can carry out training programs to introduce innovative financing approaches and implement them with new community development programs.

On this occasion, Mr. Javadyan, I think we should take the lead, understanding the attitude of the community leaders, especially our people’s so-called unfavorable opinion of the banking system.

Today, we have sufficient tools to offer attractive interest rates and use the funds available to make earnings by this yearend or in the coming years. However, the community is the one to take the initiative, and the Central Bank may initially provide advice in order to make the programs available to investors.

Communities themselves should first of all try to build the necessary capacity. Here, of course, we should rely on the best international experience involving all interested international organizations.

I am convinced that every community in Armenia is a model of the world, whose capabilities should not be neglected at the overall average level in the country. Therefore, we also need to create new flexible mechanisms through medium-term and long-term projects.

In general, our analysis shows that there is a gap between local self-governments, regional administrations and the executive power, and more specifically, a number of ministries. It seems that the stakeholders avoid even taking the opportunity to discuss the existing problems.

This is a serious omission that needs to be addressed. At the stage of development and implementation of all programs, multilateral stakeholder discussions should be held, which shall fully address and reflect the needs of regional administrations and local self-governments. Finally, these programs are meant to first of all strengthen our communities.

A key precondition for achieving the above-mentioned goals is the development of an effective system of territorial governance. We must realize that there is a need to review the relationship inherent in territorial governance, which stems from the new constitutional realities. By shifting to the parliamentary system of governance, we need to rethink and redesign the system of regional governance, develop and enforce new laws and regulations.

Marz governors have to play an important role in this respect: they must give up the stance of a passive coordinator or that of a local manager, who simply forwards messages coming from above or makes suggestions.

Governors should be able to skillfully use the opportunities offered by the Government. There is also a need to expand the range of existing tools and step up economic development in the provinces and community support functions, as well as the appropriate capacity to implement them.

Community capacity can only be built through collaborative and targeted work. Yes, you have to seek, dream, develop programs and implement them.

But let is see what the reality is. The Prime Minister urged communities to submit development programs - a very welcoming and long-awaited proposal for all of us, but we have received a total of 180 projects, of which only 108 reached the discussion stage. 58 of them were approved by the government, but 44 projects were subsequently abandoned by those who had submitted them. What does this mean? This means that the government had offered you the opportunity to work and get support, but what we had talked about so much and worked on so hard resulted in only 14 programs. You must agree that first of all it is your fault and not the government’s. You have to pay attention to these questions.

I look forward to having your comments on the matter so that we can understand and see the reasons behind the shortfall. We badly need successful stories. If we have 5, 7, 10 successful projects in each region, believe that next year they will double and triple.

It is crucial for our communities to tackle the problems of economic development and infrastructures in the near future. I am aware that the Ministry of Territorial Administration and Development has initiated the process of appointing economic development coordinators in communities. This is a good idea, but it does not mean that community leaders should throw off all responsibility.

It is clear that we can work separately with the private sector and work with pleasure, but community development programs should first of all be born on mayors’ initiative. In some communities, they have already been assigned - I mean the officials responsible for economic development.

Obviously, those responsible persons should become the engine of joint work of subdivisions with development and support functions. But let me repeat once again that in the end, the governor and the mayor are the ones to bear primary responsibility for the development of the Marz and community respectively.

Most of the rural areas in Armenia - 60% and more – find themselves in the zone of influence of urban areas. Most of our rural population lives in villages near Yerevan, Vanadzor and Gyumri.

Unfortunately, the socio-economic situation of the regions located far from the capital is still far from being satisfactory. This is basically due to the low level of business activity, the shortage of jobs and the lack of social infrastructure.

What I say does not mean at all that the social problems are addressed and people’s welfare status is good in Gyumri or Vanadzor. The only thing I mean is that the situation outside of Vanadzor, Gyumri, is even worse. But there is another point that I would like someone to address from this podium.

How come we can see that families with the same workforce have different welfare standings in communities? We can see, for example, that there is a father and two children of age in two households with apparently the same plot of land and irrigation facilities, with the same hailstorm or, otherwise, the same dry weather faced during the season, but one lives in a very good home, while the other cannot but arouse a feeling of pity.

People need to be reproached for their reluctance to work. It is enough, you see, the State is unable to deal with all social problems. If someone wants to live well, they must work hard. If you are not ready to work from morning till night, you will always face bad living conditions; you will be jealous of others, keep gossiping and thinking that everyone else is a thief in Armenia safe you.

We need to focus on these issues, communicate with such people every day. Of course, this is our problem, but first of all, it is your problem. We are working to develop special sector development centers in these regions.

Gyumri, Vanadzor, Tsaghkadzor, Dilijan, Jermuk and a number of other cities are playing such an important role today. In this respect, I would say that the “polar cities” should take on a leading role in their surroundings and for the communities in the conditional zone of influence.
It goes without saying that we will not envisage such terms in legislation; we will not classify our cities as primary, secondary or minor, central and subordinate, southern capital, northern capital, but we will do our utmost to make sure that surrounding villages might benefit from the opportunities available in major cities.

That is, people in the resorts of Jermuk or Tsakhkadzor should not buy sour cream, eggs or meat in Ashtarak,, but in nearby villages. In turn, they will have to provide these villages with development plans and opportunities to help local farmers produce the needed commodities.

We have completed the preparatory process of territorial development by approving Armenia’s territorial development strategy for 2016-2025, Marz development strategies for 2017-2025 and the regional development programs for 2018-2020. We have fixed the following specific indices:

Firstly, by 2025, the per capita GDP in each region will exceed 60 percent of the national average per capita GDP, with less than 30 percent of the population in communities remaining under the threshold of less than 70 percent of the national average per capita GDP. The problem is that we have to ensure that income is distributed equally and the gap between households is narrowed.

Secondly, by 2025, the number of middle-professional and higher education graduates, non-agricultural formal farmers and active businesses in all provinces will increase by at least 10 percent as compared to 2014. I understand that there will be skeptics; many will say that people keep leaving the countryside, especially those with higher education, but there are mechanisms, there are tools that can bring the situation to the desired situation.

According to EU experts’ estimates, qualitative documents have been prepared to that effect. However, it is important to ensure that communities have at least two registers: one for agriculture and the other for construction. These registers shall first of all indicate the economic growth rates of the community and then the region.

Here, I want to focus on one specific problem, trying to understand it for myself. Why are our economic entities always trying to show lower income? Why are farmers trying to show fewer yields: in fact, which is the reason?

It still goes untaxed; nobody asks them to make an extra contribution for excess crops. This is a bad habit, a fairly bad phenomenon as it impairs the planning process; just because the other chains of the same circuit are prevented from properly organizing their activities.

What is the reason? If a man has five animals, how come he states only three? I can not see the point? Who will come to take away his own livestock? But in other instances, we can see the opposite phenomenon. The head of community states figures without making any calculation and submits them to the regional administration to have them included in the reports.

Both these are very bad phenomena. Let us take a look at construction indicators. As a matter of fact, the ministers, the prime minister and I pay regular visits to the provinces, calling at different settlements. We are pleased to witness construction works underway in different villages; but sometimes we are bewildered to see that there is zero construction.

I think one of the reasons here is that in many cases paperwork is not being made. But there is one thing: sooner or later one will come to say, well, where is your building permit? It is best not to make it right and submit a report than to face unnecessary inquiries three or five years later, for example, concerning a manufacturing enterprise operating in the village, but not registered anywhere.

Today, unfortunately, there are many cases when communities are provided with incomplete information, which makes it difficult for the development of effective targeted development programs at the state level. This issue should be resolved quickly, of course, with the involvement of relevant government agencies. Any new orchard, greenhouse, construction site, etc. should be fully registered.

I want to give another example. We already have companies that have contracts with large trading networks. These are very tough contracts both for trade networks and exporting companies. By stipulating a specific quantity in the contract, the exporting company has to supply the goods at any cost, otherwise it will face penalties.

And planning here is very important. If they state a small number, no matter how much the product is, they will not be able to buy it completely, and if they state higher figures, they will actually face another problem.

We all have to realize that the problem with one of these chains becomes the problem of the other one: not that I have produced and went away. There is another example. Very often buyers are initially told a lower price, but when the farmers see that the client is ready to buy, they mark up the lot. I cannot understand this approach.

The manufacturers should see what profit they expect, and how much it costs to sell the product at a store in Moscow. None of us can understand what costs are being spent so far to sell that product. That is, if my apricot is worth it, I do not know 400 drams, and that's profitable for me, so it's all the same for me that this apricot is sold in Moscow for 10 dollars.

Preliminary data show that 20,214 hectares of fruit trees are registered in the State Committee of the Cadastre, while the actual fact that I am sure is not accurate, has shown another figure of almost 25,000 hectares. That is, the difference is 5000.

This is a significant circumstance. Only about 1,000 hectares are registered in Aragatsotn. Well, who will come? I understand that there are some light expenses there, but one thing is that sooner or later someone will come and ask, so from the very beginning you have to do the right thing. Especially the growers of large gardens are not necessarily in great need.

It is evident that land users avoid having their orchards registered due to higher rates of land tax and cadastral registration fees. But as I said, this circumstance has a very negative impact. After all, I repeat again, one thing is not now, six months later, not six months later, one year later, and ask. In 2017 there were many such facts that people are forced to pay parallel fines.

One of the most important functions of communities is garbage disposal and sanitation, which are also often not fully implemented. About 60% of these services are financed through subsidies provided to communities, and collections from individuals and legal entities reach about 40%. I will not explain this issue.

I think it is either discussed or this question should be discussed very seriously. And we do not need to be so kind to people, at the expense of our development. I understand very well that community leaders think tomorrow, the next day there will be a choice, I do not know, some problems, etc.

Believe me when we show weakness and say that we are doing good to both of us, we do not want to impose their taxes, besides all, it is affecting the elections negatively, because the rest see that there is injustice. Those others, on the contrary, vote against and not for the party. Obviously, our communities have begun to build garbage disposal schemes, closure of landfill and acquisition of garbage trucks, but there is still much to be done.
The solution of waste management and sanitary clearance issues will help promote tourism in the regions, address environmental, a number of other issues, increase the quality of services provided. We should also be able to develop green energy investment projects adjacent to major landfills.

I have already pointed out that the communities should gradually deduce the money and implement extra means for the “more for more” budget from the State budget.

This should become the main motivation of the community to ensure complete collection of its own revenues. To this end, the government should invest in the best mechanism of financial incentives.

And it is unacceptable when governors and community leaders say that this year we gathered 5 percent more than last year, but it is not clear what the base is because there is a region that collects much more and it is difficult to grow to give: And there is a region where the base is very low, giving 10% growth, and we should say thank you. That whole base should be investigated, examined and standardized.

We increase the level State subsidies and subsidies, but we also need a response. If this is not the case, we will not be able to implement serious projects.

Strong local self-governance and independent judiciary are probably the most important exam we are taking as a statehood-building nation. The future of our country depends on.

This is our state, our common responsibility, so we should not seek an excuse and justification for blame on someone else. The concept of democracy is meaningless without established local self-government. This makes it really important for our society and the state.

We can and must jointly and honestly pass this exam, but in order to be able to do so, we are obliged to change our attitude towards our responsibilities.

It is no secret that many community leaders misuse their position; they use various cunning ways to get incomprehensible and unacceptable incomes; they sell land belonging to communities; they manage community budgets in a dishonest manner; I will not elaborate, because this is a very unpleasant topic for me.

One thing I just want to say. We have been forgiving community leaders because we used to think that this institution should be established even with some adverse manifestations during this period.

I do not want to scare anyone, just want to warn all of you: if someone wants to continue doing so, they had better go elsewhere.

Frankly, we are ready to treat you as light of our eyes, we are ready to assist you, whether it is a personal or community matter, but we are not ready to watch you take public money to your homes. It is a shame.

We can make an arrangement that if such phenomena occur, nobody will blame anyone else. Even if you do not say yes, I say the following: if such instances are encountered in the newly enlarged communities, of course, even if others are found, let no one ask forgiveness, especially as I have already learned from Mr. Lokyan about the expected salaries.

I will only be glad that the salaries of the community heads are high, but this opportunity should be within the bounds of law. No one should say, for example, I am not going to walk up and down the village all day long for some 200,000 drams.

Whoever does not want to be a servant, let him be a landlord, let him find another job. And, please, let nobody after the New Year, whether a governor, minister, or a person close to me, ask for forgiveness with regard to any faulty community mayor.

I repeat once again: we are prepared to assist you in everything, but deliberately we are not ready to smear our hands. Perhaps for the first time you hear such words from me, but my approach has always been such.

We have already matured and need to be aware of our responsibility for every citizen of our community.

Thank you.

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