Allegations of Injustice, Corruption Dog Armenia’s Construction Boom

An ongoing construction boom has kept Armenia's economic growth in double digits in recent years, but at the same time has laid bare serious problems with the rule of law and growing social inequality. Hundreds of Armenians have been forced to vacate their homes, later torn down to make room for expensive residential and office buildings. Some have resisted eviction by staging street protests, going on hunger strikes and even threatening to commit suicide.

Local civic groups, media and opposition politicians say the construction projects, largely concentrated in the capital Yerevan, are proceeding in gross violation of Armenians' constitutionally guaranteed property rights. They also claim that it has been driven by high-level government corruption.

"Construction definitely contributes to corruption in Armenia," said Edik Baghdasarian, a prominent investigative journalist who has extensively covered the issue for years. An opinion poll conducted by an Armenian non-governmental organization last year found that 70 percent of Yerevan residents share this view.

The integrity of the process has been questioned even by President Robert Kocharian. Still, Kocharian and his administration insist that the development has otherwise been a blessing for an impoverished country still suffering from the economic after-effects of the Soviet Union's collapse in 1991. Indeed, construction is now the fastest growing sector of the Armenian economy, which itself expanded by almost 14 percent in 2005. Official statistics show that the aggregate monetary volume of construction jumped by 35 percent in 2005 to nearly $1 billion, or five times more than it was a decade ago.

The sector, which now accounts for nearly one-fifth of Armenia's Gross Domestic Product, has been rapidly growing on the back of strong demand in luxury housing and office space, with dozens of modern high-rises currently under construction in Yerevan. Many of them will be part of a Western-style commercial district built in the city center in place of old and mostly decrepit houses. Virtually all of their 500 or so residents have been already had to relocate since the launch of the $150 million redevelopment project four years ago. Many of them are unhappy with what they see as small compensation paid by the government for their properties. The compensation reportedly has not exceeded $300 per square meter, a sum that pales in comparison with the prices of new upscale apartments in the area, which usually start at $1,000 per square meter.

Disgruntled owners of the demolished houses believe that government officials have pocketed most of the money paid by private real estate developers for what was state-owned land. The municipal authorities have repeatedly dismissed such allegations, saying that the majority of the displaced residents are satisfied with their compensation.

But this is hardly true for the residents of at least one street in downtown Yerevan who have put up the fiercest resistance to the redevelopment. Last summer, the authorities sent a special police unit into the neighborhood to clear barricades built by angry protesters. The government did not relent even after four local women went on a hunger strike last December in a desperate attempt to avoid eviction. The entire left side of Buzand Street has since been razed to the ground and is now a big construction site. The last local house was torn down on February 23 immediately after its occupants moved out their possessions under the watchful eyes of police officers and court bailiffs.

Mihran Safian must have had a sense of déjà vu as he watched the proceedings. The 30-year-old man, his parents, brother, wife and a small child were similarly forced out of the same neighborhood last year. The $31,000 compensation offered for their 200 square-meter house is barely enough to buy a one-bedroom in the city outskirts. The family is refusing to accept the proposed payment in hopes of being awarded a heftier compensation by the European Court of Human Rights. "We hope for a just ruling that will demand a just valuation of our property," said Safian. "What our government offered us is a joke."

Vahe Grigorian, a lawyer who helped the Safians and several other local families file lawsuits to the Strasbourg-based court, was arrested last October on what he and local human rights groups consider trumped-up fraud charges. Grigorian was set free in February pending trial.

The Armenian constitution stipulates that private property can be confiscated only in "exceptional cases defined by law" and with "commensurate compensation" paid to their owners. The ongoing redevelopment in Yerevan, however, is being regulated by government directives. Critics, among them former human rights ombudsperson Larisa Alaverdian and opposition leaders, say the entire process is therefore illegal. The opposition Justice alliance tried this year to initiate a parliamentary appeal to the Constitutional Court on this issue. But the appeal failed to collect the minimum of 27 supporting signatures by members of the Kocharian-controlled National Assembly needed for legal action.

Equally controversial has been a serious lack of transparency in the allocation of municipal land to property developers. Few of the lucrative land auctions handled by the Yerevan mayor's office have been announced through mass media with at least one month's notice, as is required by Armenian law. "You won't find a single person in Yerevan who believes that the land auctions are fair," Kocharian publicly blasted Mayor Yervand Zakharian and his aides on January 20, effectively accusing them of corruption.

However, no government official has been prosecuted or sacked as a result. "Kocharian's statements are pathetic because nobody acquired land in central Yerevan without permission from the presidential administration," said journalist Baghdasarian. "All big companies engaged in construction have powerful patrons in the government."

In a detailed report on the problem released in early February, the Armenian branch of the anti-corruption watchdog Transparency International urged the authorities to extend their stated anti-corruption measures to the booming construction sector. The report concluded that the government has so far lacked the political will to tackle urban development practices that create a "fertile ground for corrupt transactions."

"There have been no known cases of any urban development activity in Armenia affected by an official or unofficial expression of public opinion," the report charged.