Kickback rates reduced?
The financial week started very actively, which was mainly due to the report 2011 of the Controller Commission. The report has provided a separate section for the sector of construction.
The head of the CC, Ishkhan Zakaryan made a speech at the parliament stating that the CC had discovered a lot of violations in the sector of construction such as exaggerated capacities of work, low quality of construction works, artificially increased rates, low quality construction projects, etc. the ministry of construction chose ten education institutions through a selective method and checked up the construction works amounting AMD707,850mln, as a result of which the CC discovered violations with low quality amounting AMD52,197mln. As a result of inspection in the social investment funds premises the CC discovered low quality work and violations amounting AMD32,932 out of the invested AMD510,200.
Let’s make some calculations. The CC checked up construction works in 16 companies, the overall investment on the construction work amounted AMD1,218bln. The overall capacity of violations amounted 85 million. This means that the low quality works and violations were found only in 7% of the entire work capacity. Please remember this rate.
Now let’s go back three years ago. In October 2009 PM Tigran Sargsyan spoke about the problems in the sector of construction, specifically about the kickbacks paid and received in the sector of construction. “We should give up on that tradition that has been enrooted in the construction system; I mean the tradition of giving and taking kickbacks,” said the PM to the sports and youth minister of that time Legal State’s Gurgen Sargsyan.
The PM was angry to learn about the details of the road construction works amounting 6.8 billion drams out of the Russian borrowing of 500 million dollars. The PM found out that 5 billion would be enough to do that entire work. This means that 1.8 billion was overspent, or in other words it was kickback. That amount was 26% of the entire amount sent on those works. This means that the commission they took back amounted to the quarter of the entire amount spent on it. However, it is another question why the PM learnt about those commissions as he had lived his entire life in Armenia.
Going back to the topic above, let’s compare the rates. As a result we will come to the conclusion that since the PM’s speech three years ago the mechanism of kickbacks has not been eliminated but the rates have been reduced, which means that now they are embezzling less and saving more on construction projects.
The rates vary from sector to sector, and the highest rate of money embezzlement is usually observed in constructions sector. Even in the construction sector those amounts are different depending on the types of works done.
However, please note that this is the official information. And if you have someone from those groups, you will be surprised to see the differences between amounts spent on purchase of equipments and materials. For example, if you have someone from inside, you can sell a pen that costs 50 drams for 120 drams and share the profit with your contact person.
Even if we take into consideration that the amount of embezzled money in construction is 7% (which is really funny), it ends up with a huge amount. For example, in 2011 the construction works paid from the budget only amounted AMD10.7 billion. The construction works paid by communities amounted AMD9.9 billion, which is the money of taxpayers. Overall these two construction projects amounted AMD20.6 billion, which was done through governmental tenders (with soliciting). 7% of that amount is AMD1,440 billion ($3.5 million). This means that 3,5 million dollars paid from the pockets of taxpayers has been embezzled by a group of people, and this was only embezzled from the sector of construction. If we also add the construction works financed from international borrowings and humanitarian aids, we will understand why some people by a new car every month and others emigrate from their country.
