The main factors of economic rise in this country are not brandy, cement or foreign investments, but rather Armenians themselves. As I was making my business trip to Armenia, I was asking myself a question which may offend the people: “Is there any life in Armenia?” I don’t see any nationalism there. The Republic of Armenia, which was once a part of the former Soviet Union, has gone through so many hardships throughout the past 18 years that no other great power in the world could have survived.
The 8 point earthquake that struck in December 1988 demolished Spitak, left the city of Kirovakan (also known as Vanadzor) and Leninakan in ruins. Nearly 50,000 people died and another 500,000 people were left homeless. Reconstruction of the earthquake zone (which makes up 40% of the country) still goes on. As a result of the earthquake, Armenia’s economy declined by a quarter during the years of 1988-1991. The collpase of the Soviet Union was another blow to Armenian economy due to the fact that 90% of the nation’s industry was part of the Soviet Union. For example, Armenia’s lamp factory was the third in the entire Soviet Union.
“We received the materials in wagons from Ghrim. We produced sand and lamp and the ready made products could be delivered to Ural,” says the new owner of the factory and representative of “Grand Holding” Arman Vaneskekhyan. “We don’t have that market anymore, but production rates are so high that we can provide Armenia with a one year income in just three working days.”
The Karabagh conflict put an end to economic destruction. The Autonomous Region of Soviet Azerbaijan (ARSA) with a large Armenian population freed itself from Azerbaijan after the 1988-1994 war (to this day, Karabagh is not internationally recognized). Armenia was not officially involved in the war with Azerbaijan, but it supported the volunteer soldiers. In response to this, Azerbaijan cut off all transportation ties that Armenia had with Russia, including car and bus roads.
Then the long nightmare began-no jobs, no money, no electricity.
“I practically raised my children without water and electricity. We were forced to heat our house with some heater called “Burzhuyka”. People used to cut trees off the corner of the street,” says Arman Vaneskekhyan. The energy providing service of Armenia had cut off 40% of electricity even after the Spitak earthquake (electricity was back in 1996). Gas was through Georgia, however, the gas pipelines located in the regions where Azerbaijanis were living were exploding from time to time. As a result, as of 1993, agriculture made up 51% of Armenia’s GDP, when 90% of the country is located 1000 meters above sea level. There have not been and there aren’t any large companies in this field-we are talking about land ownership. In order take care of the citizens, in 1991, the Armenian authorities not only got rid of collective farming, but they also allowed free circulation of agricultural fields (450 thousand hectares), vineyards and wheat fields. There are nearly 350,000 farming economies in Armenia to this day. The most produced foreign product is cognac. Now do you understand why I asked myself if there is any life in Armenia?
GDP doubled
I got the answer to my question as soon as I made my way from the “Zvartnots” airport to my hotel. I saw casinos everywhere. It is forbidden by law to build casinos in the capital, but the citizens living in the capital want to play and win money. That is why the casinos had to be built outside the capital. During the past 5 years, Armenia’s GDP has doubled-from 1.9 billion dollars to 4.5 billion in 2005 (preliminary statistics). This is not bad; Azerbaijan has the same amount.
Yerevan is not too big, nice and clean. There are wide alleys and narrow trade streets. Signs on stores are in Armenian, English and Russian. In general, people here talk in Russian without any difficulty. You can dine in a café for 4000 drams (about 10 dollars and less than 300 rubles) and at the same time eavesdrop on the discussions about the statue of Arno Babajanyan. This statue has a story. This statue was sculpted by Davit Bejenyan and was installed in front of the Opera House in 2002. Many people complained about the statue. They said that it didn’t look anything like Arno-the statue of Arno had short feet, an enormous nose and long hands. After a month, the statue went through reforms. Now citizens can see the “crazy Arno” statue in front of the Opera-he has no feet at all, his hands are pointing to the sky, but the nose is just fine. There are still a lot of complaints.
Another topic for discussion is real estate prices. Prices have increased tenfold during the past ten years. Whereas you could buy a 3 bedroom house for 5,000 dollars in Yerevan in the mid-1990s, now you can buy only a 5 square meter of the house with that much money. There is a construction boom in the city and there many skyscrapers in the heart of Yerevan. What is the secret to success?
“Armenians survive better in hard conditions. Armenia has always been a small country with not enough resources, without a sea and without transit roads. This land has always been invaded by others. Armenians have always been forced to work and find ways of survival. That is why they are more successul in medium business and other fields which don’t require many resources, such as diamond production, construction, service, trade, etc. These are the fields which have helped increase the country’s level of economy,” said director of the “Troyka Dialog” Russian company Ruben Vartanyan during an interview with “Forbes”.
Of course, foreign investments have also helped. The Yerevan Brandy Factory was purchased by the French alcohol company Perno-Ricar. The French signed a long-term contract with 4,500 farmers and currently buy two-thirds of the grapes grown in Armenia. Last year, the company produced 4.4 million liters of brandy worth 50 million dollars. The company has no problem in selling the brandy and 80% of Russians have bought the brandy.
“Armentel” company, which has monopolies in the communications field, was sold to the Greek “OTE” company, and the copper-molybdenum company of Zangezur was sold to the German “Crominet” company. Jewish jeweler Lev Levaev purchased the biggest diamond producing company of Armenia, “Cristall”.
Russian investors were really successful in grabbing the state property of Armenia. For instance the Russian “Russian aluminum” company has invested 70 million dollars in the Armenian “Armenal” company to apply modern facilities there. The Russian RAO EES controls 80 % of our domestic energetic capacity. This company was given the electric power stations in exchange for the state debt Armenia owed them, and as for the power distribution stations, they bought them from foreign companies. In 2004 the Russian “Vneshagrobank” bought 70 % of the stock of the Armenian “Armsavingsbank”, which appears to be one of the biggest banks in Armenia. We can bring lots of examples of international cooperation. But let’s discuss the next important economy development factor for our partner country. The head of the Russian Armenians’ union calls this factor “national unity of Armenians”.
All are relatives. Armenia has a very long history.. 2800 years ago, Armenians built a citadel called Erebuni (in the land of the Biblical Ararat). During the reign of Tigran the Great (B.C. 95-56) the territory of Armenia was geographically located in between Small Caucasus and Palestine. But after that period Armenians have always been in war with Iranians, Turks, Arabs, etc. “generally Armenians didn’t have a state for about 70 years, but the nations could survive and didn’t die out, they kept their Christian faith”, says Ara Abrahamyan in his interview given to Forbes. “And even those Armenians that live outside Armenia for about 5-6 centuries don’t lose their faith, traditions and still speak Armenian”, says Ara Abrahamyan.
Although there have been many migrations, however, Armenians keep their national unity, you can see this if you look through the phone number books of Moscow. For instance in 774 Armenians rose against occupants led by Moushegh Mamikonyan. In 12 centuries the head of the Russian meat producers’ union is given the same name. According to official information the number of Armenians living in Armenia covers 3,2 million. There are about 7 million Armenians living abroad, 2,2 million of which live in Russia, half a million in France and 1,4 million – in the USA. “The Armenian Diaspora is one of the strongest ones in the world, it fills the second place after the Jewish Diaspora”, says representative of “Ameria” company Gagik Sahakyan.
The fact that Armenians are united is seen clearly in the example of Russian business life. The chairman of the “Five Star” cinema house network company, Gevorg Nersisyan opens cinema houses in all trade halls opened by the Russian “Tashir” trade hall holding of Samvel Karapetyan in Moscow and Kaluga cities. The “Troyka Dialogue” investment company of Ruben Vardanyan is situated in the “Romanov Dvor” business center of Gagik Adibekyan.
A while ago the “Troyka” company purchased stocks from the Russian “RosGosStrakh” insurance company for another famous Armenian in Russia, for Danil Khachaturov. Vardanyan is currently the head of the board of directors of one of the “Sukhoy” avia-concern branches that belongs to Michael Poghosyan. And on Sundays Armenians from the Armenian Diaspora gather in the “Ararat Hyatt” hotel of Moscow to play “mafia” (which was built by the “Lusine” concern that belongs to Murad Sargsyan). The biggest businessmen give roles to each other and play to decide who are criminals and who are fair people in their game. In parallel with these games they also don’t forget about the history of their homeland. For example the wife of Ruben Vardanyan, Veronika owes stocks at the “Cactus” restaurant of Yerevan. As for R. Vardanyan, he has personally participated in the process of founding the “Ameria” advisory organization. This organization is one the participants working out the vision of the “Armenia 2020” economical program.
“All the money made in the Armenian Diaspora covers minimum 100 billion dollars”, said the head of the program Artashes Ghazakhetsyan during his interview given to Forbes, “it is clear that if a small part of this huge sum, for instance one billion, is invested in the economy of Armenia, we will develop rapidly. Our purpose is to win the credit of the Armenian businessmen living abroad so to make them sure that their investments will serve our country and will not be grabbed by others”.
National investments. Money comes with big quantities from the Diaspora. According to the official information of the Russian Armenians’ union the capacity of annual money transfers to Armenia from Russia covers one billion dollars, which is equal to the budget of our country. According to the information of the labor international organization there are about 300 Armenian immigrants working in Russia. The operations of money transfers are handled by the Russian “Unistream” bank of Gagik Zakaryan and the “Unistream” money transfers system that belongs to the Armenian “Unibank”.
Back in the late 80s American singer Chereline Sargsyan (Cher) and Shahnur Aznavuryan (Charlez Aznavour) organized philanthropic concerts to help the victims of the earthquake in the Armenian city of Spitak. As for Kirk Kirkoryan, who filled the 41th place (8,9 billion dollars) in the list of the world’s richest people of Forbes, has spent over 200 million dollars to reconstruct roads, schools and hospitals in Armenia. A half year ago the Russian “BAMO” construction company bought the “Complex” named after K. Demirchyan for 5,7 million dollars, which is the biggest sport-concert complex in Armenia. The head of the “BAMO” group board of directors, Murad Muradyan assures that this deal is philanthropic for 80 %. The organizers of the “Armenia 2020” economical program are happy because the philanthropic money is multiplied with business investments too. Let’s bring an interesting story: Lebanese businessman Vache Manukyan used to be the proxy of the prince of Brunei, who has spent millions of dollars on girls, games, etc. This is how he made his property. Now he lives in London, he has a race track in the US and good property in England. He makes most of his deals in Britain using the services of HSBC bank. When it was already time to think about his homeland, he took his old businessmen friends and brought them to Armenia. Now he owes 30 % of the stocks of HSBC bank / Armenia. He has also spent about 12 million dollars to organize medicine production in Armenia.
“Zvartnots” airport is the only source of connection with the foreign world for Armenia and is very busy. Those Armenians that have left for abroad to work come back, and those that live in abroad come here to travel and enjoy Armenia (tourism has already brought about 180 million dollars profit). But it turns out that the airport, which is intended for handling about 800 thousand passengers annually, handles about 1,2 million passengers. Who is going to solve this problem? The operation of the airport is given to Eduardo Ernekyan for 30 years. His company, “Aeropuertas Argentina” already operates 32 airports in Southern America. The new terminal of “Zvartnots” airport is worth 50 million dollars and is being built now. Though Ernekyan was born in Argentina, his business style is very much like Armenian, i.e. it is boring for him to do only one thing for a long time. His “Tierras de Armenia” company has already bought 3000 hectare land in Armenia with the purpose of cultivating and then exporting fruit from Armenia.
You can see the central shop of Yerevan shining with its metallic and window construction. Before it used to be called “Goum”, now it is called “Tashir”. The head of the Kaluga group of “Tashir” companies, Samvel Karapetyan also owes the “Kaluga-glavsnab” company, which provides the “Gasprom” company with certain materials, builds trade halls in Kaluga, Tula and Moscow (for instance the “Rio” entertainment center of Moscow), and has hotels in Sochi and Yalta. He also managed to implement a project in Armenia too.
During the past ten years the capacity of diamond production has increased tenfold: from 28 million dollars in 2005 up to 250 million. “We have our place in the international labor distribution. We make money from nothing thanks to the work of Armenian masters”, says the head of diamond and jewelry production department of the trade and economical development ministry, Gagik Mkrtchyan. Who supported this development? For example diamond producer from Belgium Hayk Arslanyan, who has founded a diamond production factory in Kotayk marz. The lobbyist of this field in the world is the head of the Armenian jewelers’ union, Ara Barmakyan (Barmakyan Jewelers). The rights of the businessmen working in this field in Caucasus are protected by the head of the Russian Armenians’ union Ara Abrahamyan. Ara Abrahamyan’s brother, Gagik Abrahamyan heads the “Diamond Company of Armenia”.
As a matter of fact, the “Collaboration-Armenia” company of Ara Abrahamyan is building a huge construction in the center of Yerevan, which has shops with a 60 k s.m. territory. Good apartments are purchased not only by local Armenians, but also Diaspora Armenians. This is not only histroy in the making, but also a good investment. The prices for apartments will continue to rise for sure. According to the organizers of the “Armenia 2020” project, the GDP of Armenia will go up twice during the coming 14 years.
The Strongest
Owner of the “Multi Group” compan Gagik Tsarukyan loves animals. He has a zoo in his villa in one of Yerevan’s districts where he keeps bears, deers, a tiger and a lion, which is the symbol for “Multi Group”. Tsarukyan has a good physical appearance. He has six children. He has graduated the Institute of Physical Education of Yerevan in 1989 and has worked as a wrestling trainer. In 1996, he has been declared a world champion in arm-wrestling. In 2004, after the Armenian team came back empty-handed from the Olympics in Athens (none of the 18 members received medals), Tsarukyan became head of the National Olympics Committee. Besides all this, Tsarukyan is simply your typical, Armenian businessman. He is an MP and does any profitable business. His “Multi Group” includes a milk factory and the “Kotayk” beer factory, the “MEK” network of furniture stores, “Ararat-Cement”, which is the largest cement factory in Armenia, the “Aviaservice” food factory, the “Multi-Leon” gas station chain and, of course, brandy production. The Yerevan Brandy-Wine-Vodka factory belongs to Tsarukyan and the factory produced approximately 1 million liters of “Noy” brandy just last year. The Yerevan Brandy Factory, located in front of Tsarukyan’s factory and owned by the French Perno-Ricar factory, produced five times more brandy. It appears that the brandy produced by the French company is sold more, but the owner of “Multi Group” is not disappointed in that. “Multi Group” makes 150 million dollars a year and Tsarukyan is one of the top five businessmen of Armenia.
The Most Genius
Owner of “Mika Limited” Mikhail Baghdasarov was born in Moscow. He has studied in St. Petersburg and has worked in Russia. First, Baghdasarov served for the Internal Forces of the Ministry of Internal Affairs and has made his way up to a general, after which he has started to get involved in the trade of oil products.
“In 1997, the Armenian authorities invited me to regulate the field of benzene and aviation kerosene. At the time, Armenia was in a blockade and I was making arrangements with the “LUKOIL” branches in Rumania and Ukraine. I was bringing the benzene and kersosene to the Poti harbor in Georgia and then transporting it to Armenia,” says Baghdasarov.
To this day, “Mika Limited” controls one third of the oil field of Armenia. Business made a turn for Baghdasarov in the end of 1990s. He owns the “Armavia” airlines ( he got that last year from “Sibir” airlines), the cement factory, and 30% of ArmEconoBank (one of the largest banks in Armeni with more than 100 branches). He sold his share-holding packet to the Russian “Vneshtorgbank” last year. “I had to have well-known colleagues in order to move forward,” says Baghdasarov. Baghdasarov says that he gets 200 million dollars yearly. As a hobby, Baghdasarov has a soccer team called “Mika” which places second in the Armenian championship and is even included in the UEFA championship cup.
“To tell you the truth, the last season was not too good. We were playing with the Germans in Frankfurt. The stadium there is huge and the world soccer championship will take place there. The boys didn’t like the playing field and lost four goals,” says Baghdasarov. Currently, Baghdasarov is construcing a new stadium in Yerevan worth 20 million dollars.
The Most Experienced
Khachatur Sukiasyan has started his business career at the age of 24 when the Soviet Union had just adopted the law on corporations. In the beginning, Sukiasyan had two jobs. He was the head of a shoe company and a company producing automobile parts for “Jiguli” cars; at the same time he was the owner of the “Sirius” computer company based in the city of Abovyan. In the mid-1990s, Sukiasyan created the first pizza restaurant chain in Yerevan (“Pizza di Roma”) and built the “Sil Plaza” complex. He was the first in Armenia to provide trade spots for rent and became the exclusive distributor for “Phillip Morris” and “L’Oreal” in Armenia.
“I have always been the first in everything. I remember how people were amazed to see glass walls with signs on them and that everything could be seen from those walls. When we announced that we are giving trade spots for rent, many thought that I was leaving the country and I am selling everything rapidly,” says Sukiasyan.
Then Sukiasyan purchased the “Bjni” mineral water factory, the Yerevan furniture factory, and took “ArmEconomBank” under his control. He also has office buildings measuring 60,000 square meters in surface. The yearly income of all the companies of “SIL” (Sukiasyan International Limited) makes up nearly 100 million dollars in total. However, Sukiasyan is still the electric repairman that he is.
“I have modernized the current mineral water factory. I will make everything electronic there, there will be cameras and electronic chips. Information will be provided by telepathic waves and I can control the process. I like doing that,” says the businessman with a smile.
The most perspicacious
Valeri Mejlumyan lived far from his Alaverdi city for a long time. The main guarantee to help this city survive was the copper-molybdenum factory of Alaverdi. Mejlumyan is a mathematician. After the collapse of the Soviet Union he became a stock owner of the same company he used to work at, which is called “Vallex Group” and trades different metallic materials, has a medical center and office territories of 10.000 s.m. in Moscow. One of his visits to Armenia brought a lot of changes.
“When I came here in 1996 to visit my parents I saw that the factory had stopped working and was legally bankrupt. I wanted to reopen the factory, because a lot of citizens of my city wanted this too”, remembers Valeri Mejlumyan. “Valex Group” has invested over 20 million dollars in this factory. Last year the profit of this company from copper covered about 70 million dollars. This mark is four times less than the same mark of the Zangezur copper-molybdenum factory. But Mejlumyan assures that his company is going to be the biggest one in this field in Armenia. “We have bought a mine production institution in Yerevan and have equipped it with modern facilities and currently we are working in 20 countries. For instance if someone brings us a beautiful stone with lines on it our institutions go to that place and work there to find out details about those territories and the mine capacities there”, Mr. Mejlumyan. There is no doubt that there are rich mines in Armenia. “About 60 % of the territory of Armenia is situated in tectonic basins. It is a very important place first of all for molybdenum, copper and then gold”, assures Mr. Mejlumyan.
The most featured
A lot of Armenians are successful in film production. For instance Kirk Kirkoryan owes the “MGM” film studio in Hollywood. In Russia one of the leading film producers is Ruben Dishdishyan (“Central Partnership”). The head and stock owner of the “Paradise” company group Gevorg Nersisyan can be proud too: he was the first to found the first film production company in Russia that has a full cycle, which provides 40 million a year. “back in the days of the Soviet Union I used to work in this field with my friends”, says Mr. Nersisyan during his interview given to Forbes, “in 1990 my friends and I founded a company for movie rentals. Then when everything turned bad in Armenia we moved back to Moscow”. He was clever to make a good investment: he was the one to introduce the Russians to the films Emir Kusturitsa and Pedro Almodovar. Thanks to the cooperation with the foundation of Roman Bikov, “Paradise” bought cinema houses: “Rolan” and the first “Five star” cinema houses (on Bakhrushin street). “Paradise” also organizes film festivals called “Window to Europe”. Now there are 32 cinema houses in the “Five Star” network. And their first product is the “Drags” war drama, where he invested two million dollars only for the purpose to advertise and has shown this film on 400 screens. The next films are going to be the “Alexandr Nevski” and the “Star of Shamiram”, which tells about the love between Shamiram and Ara Geghetsik. Nersisyan doesn’t forget about his country: his company owns two cinema houses in Yerevan, the “H2” TV channel and the right to broadcast advertisements on “Rossia” TV channel.