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In more than a decade after the war, Karabakh finally seems to be recovering

Relative economic stability has been established in Karabakh 13 years after a ceasefire was signed. Most of the buildings ruined in the 1991-1994 war have been restored, and unlike other places in Karabakh, the capital Stepanakert does not seem to bear the traces of the war at all. Wages and pensions have been raised in the past several years, new houses have been built and new jobs created.

But it is very difficult for the small country with a population of some 130,000 to survive in conditions of the blockade imposed by Azerbaijan, especially in its status of an unrecognized state.

Experts say that if it were possible to attract foreign investors to Karabakh, the country’s economy would have shown a more dynamic development even in conditions of a total blockade by Azerbaijan.

“Investors do not want to invest money in Karabakh because it is a high-risk zone,” says Ruzan Mangasaryan, Dean of the Faculty of Economy and Law of the Artsakh State University, candidate of economic sciences.

“Besides, the uncertain status of Karabakh, its being unrecognized is becoming a big obstacle for cooperation with international organizations and banks. Today, not only international programs are not being carried out in the republic, but it is impossible to make use of the programs being implemented in Armenia by the United Nations, the World Bank, the European Bank for Reconstruction and Development and other donors.”

Today, Karabakh is linked with the outside world only with a single motorway – Stepanakert-Goris. Karabakh has had no air, railway or any other link since 1992. It considerably complicates the country’s economic development and increases the cost of exported and imported products.

But experts also point out that Karabakh itself needs new reforms. They are sure with a better organization, proper tax and credit policies of the authorities, higher economic growth would have been possible.

“The faulty and imbalanced tax system has a negative effect on the country’s economic development,” Mangasaryan says. “Under such conditions entrepreneurs try to evade taxes in every possible way. This results in a ‘double accountancy’ and passage to the shadow economy. New laws, internal instructions are issued almost every day and the entrepreneur is the last one to know about them, which is an impediment to entrepreneurial activity of businessmen.”

Levon Hayriyan, who lives in the village of Mets Tagher of Karabakh’s Hadrut region, has his own opinion on how people should survive in conditions of the continuing blockade. Hayriyan says that people cannot wait until politicians settle the conflict and the authorities get wiser and start reorganizing their own economic policy.

“People themselves should look for different ways to earn their living and maintain their families,” Hayriyan says.

“During the first post-war years, in 1995-96, the problem of bread procurement was very acute. Then everyone began to sow wheat. The state also supported the land tenants. As a result, Karabakh managed to provide itself with grain. Then people got an opportunity to expand their business. And then I decided to plant a vineyard. I had to wait several years for the yield. But we have nowhere to hurry, don’t we?” Hayriyan, 46, says. “Patriotism is not a lofty word. It is creating opportunities for people to work and live dignified lives in their land.”

It is a good sign that Karabakh people, who had sown grain for many years, have started to engage in vineyard-growing. It means that people are ready to wait several years for the yield, as a vineyard gives first produce only five years after it is planted.

The government of Karabakh plans to allocate 1.4 billion drams (about $4.6 million) for the development of the agricultural sector this year. Processing mills and milk reception points will be constructed in several villages.

Today, Stepanakert has a population of 50,000. The population of the whole Karabakh, according to the data of the 2004 census, is 137,500 people. The 2008 budget of Karabakh provides for 49 billion drams ($162 million) in its revenues. Karabakh will earn 19.5 billion drams ($64.5 million) itself – taxes, transfers, turnover from capital. Armenia will extend 26.7 billion drams ($88 million) in the form of an interstate loan. (Some $10 million of deficit the government will cover through the remainder from the 2007 budget.)

Karabakh boasts only three large enterprises, which are the main taxpayers. These are the Drmbon copper mining and processing plant, the Karabakh Telecom company and the Artsakhenergo closed joint stock company. Local production mainly satisfies the population’s needs in grain and grapes. All other products and consumer goods are imported. Therefore, commerce and customer service are profitable.

The average pension in Karabakh in 2008 will be raised by 60 percent and will make 23,000 drams ($75), but even in this case it will not reach the minimal consumer basket of 39,000 drams ($130).

Arkady Arzumanyan, a 73-year-old resident of the village of Togh in the Hadrut region, is a former village school headmaster, a father of four children. One of his sons was killed in the war. Together with his other son he currently lives in the neighboring village of Mokhrenes where his son works as a school teacher.

“I live with the family of my son. Our life is not bad, but in order to secure such a minimum, we need to work hard. We cultivate land, we have wheat, a kitchen garden, we also have livestock – cows, chicken,” Arzumanyan says. “I think that when (if) Stepanakert has a population of 200,000, the situation of villages will be improved – there will be a sales market for the produce.”

“We have produce, but it gets rotten in the yards. There are no processing enterprises, nor procurement centers. The state must think about it,” he adds.

Wife and husband Ofelia Stepanyan and Ashot Barseghyan are teachers who moved to Karabakh from Yerevan. It is the third year that they work in the school of the village of Jivani in Karabakh’s Martuni region. It is a village abandoned by the Azeri population where Armenians settle according to a state program. The village is almost destroyed; houses are being built here due to state funds.

“Of course, conditions here aren’t enviable, but you can get accustomed to them. The salary is enough for a small family. Gradually, we are getting back on feet. Besides, it is always difficult in the beginning,” Stepanyan says.