There are no easy ways to get the Armenian economy out of its post-Soviet slump, but despite the difficulties, Minister of Industry and Trade Garnik Nanagoulian says the wheels of fortune are finally beginning to turn.
Armenia has the technology, the manpower and the resources. It also has a viable industrial base which once was a major component of the old Soviet infrastructure.
With a population of a little more than three million, its chemical and electrical engineering sector produced close to 40 percent of the Soviet Union's output which had a combined population of 278 million people.
Its electronics research and development facilities were the envy of the other member states of the former USSR.
But the Soviet Union is no longer, and Armenia's once powerful and energetic industrial base is now struggling to retool and evolve with the advent of open markets and real competition with the outside world.
Factories are no longer assured ready-made markets. Goods manufactured in Armenia now have to meet international standards if they are to attract international businesses and major investors.
As a first step, Nanagoulian—who came to his new post armed with more than 10 years of hands-on experience in international trade acquired mainly in the United States as a former Soviet diplomat and later as Armenia's first Charge d'Affairs in Washington and Ambassador to Canada—began with a hard look at Armenia's so-called "industrial inventory."
Experts were recruited to draw up lists of all factories, old trading partners, sources of raw materials and old and new markets.
"We do not need to reinvent the wheel. There is a lot we can learn from the way things were done in the past. We have to keep open all our options and keep an eye on our old markets and see if they can be revitalized," Nanagoulian says.
This, however, does not mean going back to a communist-style management of the industrial sector.
"We used to take pride in the old huge enterprises... factories which employed thousands of people. Production levels were not market driven but rather designed to employ the largest number of people possible. Times have changed, and without central funding, these giants cannot survive—except for a very few which must be split into smaller and more manageable entities," Nanagoulian said.
Armenia has already privatized a good portion of its small and medium enterprises and is currently in the process of preparing for serious negotiations with an IBM affiliate along with German, Swiss and Russian industrial and financial groups who have "shown real interest" in Armenia's electronics, chemical and heavy industrial enterprises—or at least the more profitable portions of these huge factories.
"It is too early to say what these negotiations will produce, but we are serious. We are talking with a lot of interested parties from Russia, Europe and the United States. We are looking for investors who can bring their markets with them," Nanagoulian said.
He did not elaborate, but sources in Armenia said experts were not only evaluating the prospects of doing business with the West, but also "taking a serious look at some of the old markets in the former Soviet Union."
In fact, a group of Russian industrialists visited Armenia in late October to "learn more about Armenia's potentials."
While familiar with the old ways of doing business, Nanagoulian believes that major changes are needed if Armenia is to interact successfully with the rest of the free world.
Nanagoulian, aware of the needs of the international business community, has embarked on a major internal re-organization of the Ministry of Industry and Trade, setting up an Investment and Export Promotion Department headed by one of his deputies, Gagig Yeghiazarian, to launch an all-out campaign aimed at introducing Armenia to the international business community.
Yeghiazarian, one of ten American University of Armenia graduates working for the Ministry of Industry and Trade, holds a Master's Degree in Business Administration.
"We need to educate both the international as well as our own local business communities that this is a country of vast opportunities where investments can, and will pay off/' Nanagoulian said.
"We have to develop mutual trust. Armenians doing business with outsiders should understand that their foreign partners are not here to rob them. We have been too monopolistic in the past, and this has to change. At the same time, foreign investors should know and be convinced that their investments in Armenia are safe.
"We have to change the prevailing perception of Armenia which is that of a small landlocked country struggling under the weight of regional conflicts and wars," Nanagoulian said in a recent interview.
Not an easy job, given the residues of 70 years of a centrally planned and managed economy with no exposure to the outside world.
Nanagoulian believes that for Armenia to enter the international world of trade and industry, it first needs to educate its own people, starting with the factory managers, down to the smallest of businessmen.
"Things are not done with a hand-shake anymore. We have to have a solid legal environment in which business transactions are done. Many factory managers do not know what a letter of credit is. We often hear foreign businessmen saying that they were cheated... that they faced corruption. These are real problems which in part are due to the absence of a clearly defined legal framework and business ethics.
"Another problem we have is the lack of coordination between the various sectors of the country's trade and industrial components. We are dealing with both these issues very aggressively because the right hand has to know what the left hand is doing," Nanagoulian said.
Help, mainly in the form of technical assistance and expertise aimed at encouraging small businesses, is coming form various United States government agencies, the World Bank and the United Nations.
The problem of coordination will be dealt with through a soon to be established National Board for Investment Promotion headed by the Prime Minister and including not only key cabinet ministers but also major investors. The Board will answer to the President of the Republic.
The Ministry of Industry and Trade, meanwhile, is setting up a special office to deal with serious complaints from foreign businessmen and investors involving cases of corruption and bribery.
"This will be like the toll-free 800 numbers in the United States where people can call and get the help they need in dealing with whatever problem or complication they face," said Nanagoulian who also wants to not only set up an active Internet website on business opportunities in Armenia but also have commercial attaches appointed to serve with the various Armenian Embassies abroad to also help in the task of attracting foreign investment and trade.
"Personal initiative is very important and it is already helping Armenia to get out of its industrial slump, but the government also has an important role to play. We need to create a suitable atmosphere for both businesspeople and industrialists to work comfortably," he said.
Given the country's limited financial resources, the government is unable to spend money on some of the largest industrial complexes which have all but remained idle since independence six years ago.
"Often it is wiser to spend on the search for foreign investors and international markets than some of the older factories we have. We will, however, help the export oriented enterprises if we see potential markets for their products," Nanagoulian said.
In the decades that preceded independence, the Soviet Union was Armenia's only "trading partner". Today, that has been replaced by Russia. As much as Armenia wants to do business with the West and is determined to spare no effort to attract Western capital and investment, Russia still remains an important player.
"Let's not forget how industry was structured in the past. Factories in Armenia produced components for other factories. This structure has collapsed now, but we should look into ways of making use of some of these structures," Nana- goulian says.
Planning is already underway for a Russian- Armenian Business Forum for later in 1998.
"We have asked all our factory managers who once dealt with partners in the former Soviet Union to contact these people again and invite them to come and attend the Forum. We have also invited the Russian Union of Industrialists to come to this meeting. The concept is based on looking into the possibilities of re-creating some of these old links. We will have to re-discover the new Russia—something which the West is also doing—but we have the advantage of knowing Russia better than others," Nanagoulian says.
Given Armenia's geographic location, the country could become a major trading post not only along the east-west routes, but also south and north.
"The private sector is developing very rapidly. Good business relations are developing with Iran, and Turkish entrepreneurs are showing great interest in Armenia. Time is of the essence and Armenia has to move faster than some of its other neighbors like Georgia and Azerbaijan. We cannot live under a fortress mentality...we have to be open to all countries and trading options.
"Business knows no barriers, and Armenians are proving that every day," he said pointing to the scores of low value-heavy volume industries that have started to flourish in the past 12 months.
These include the garment industry which is already producing clothes for the U.S. and Middle East markets, jewelry manufacturing, diamond cutting and similar production facilities which do not need a large workforce and heavy machinery.
"Some of these are export oriented while others are meeting the needs of the local market. New jobs are being created every day, and these new enterprises are succeeding because they are small enough to manage and do not need millions of dollars to operate. They have the growth potential because they are self-sufficient," he said.
"We should not depend on the export market to generate income. Cut- ting down on our imports is also very important because it keeps our much needed hard currency at home," he said.
Responding to the needs of the local market, a growing number of young Armenian entrepreneurs have entered the "new world of competitive business and industry."
One of them is Khatchig Soukiassian, a 35-year-old computer engineer, whose first venture into capitalism was through a car wash and spare parts outlet in 1988.
"I went with the flow of the market. The greater the freedom, the more I expanded. I moved from trading to the gambling business," he says. But those were the early years of the post-communist era.
"One of the first things I did after succeeding in business was to close down the gambling casino. I don't need that anymore...it is wrong," says Soukiassian, who now heads a multi-million empire which includes several restaurants, a car dealership and a number of small factories.
His business partners include large manufacturers in the United Arab Emirates, trading houses in Italy, Germany and other major cities in Europe.
In Yerevan, where he owns several factories that manufacture everything from plastic pipes and containers to office furniture and aluminum doors and windows, Soukiassian said he employed several hundred people, including graphic artists, designers, accountants and economists.
Often referred to as a "rich businessman with contacts in high places", Soukiassian says there is more to success than "who you know."
"In the final analysis, it all depends on what you do. It's your ability to work in the marketplace that decides whether you succeed or fail. You cannot depend on this or that government official because you might wake up one morning and that person would be gone... replaced...dismissed," he said.
Soukiassian's success is not unique. Dozens of other businessmen, entrepreneurs and industrialists are helping get Armenia out its post-communist era stagnation.
"The government is setting the ground rules and opening up new opportunities through its international contacts and the privatization process. Given a healthy business atmosphere and political stability, personal initiative will get the wheels of fortune turning," Nanagoulian says.
