Interview of National Competitiveness Foundation of Armenia (NCFA) Executive Director Pegor Papazian to Mediamax Agency

- When we speak of NCFA, often one can hear the following thesis: it is impossible to have a competitive economy in Armenia today or take up measures in this direction because of a number of reasons: monopolies, corruption, etc. 

- Of course, Armenia will not be able to fulfill its potential fully as long as these and many other issues are not addressed. Our activity is based on the vision that as a result of political and a number of other reforms we will gain a more open, effective and attractive market for investors.  

In order to overcome structural problems, we need to implement programs the content of which will contribute to the growth of competitiveness. Our activity is focused on developing such catalytic programs.

As a result, the prize for creating stronger structural foundations and a more open playing field will become far greater, and the incentives of system reforms will increase. This is already happening with the Tatev Revival Project and the Southern tourist corridor. Such programs will bring Armenia to within one or two reforms away from attracting large financial flows.

- The most noticeable example of NCFA activity last year was the opening of Tatev ropeway. According to you, did it become the symbol of a new Armenia?

- I believe it did. First of all, it clearly demonstrated that the strategy of implementing catalytic projects is truly effective. Building the Tatev ropeway signaled that big changes can be triggered. As a result, the process of attracting funding for a wider range of initiatives was inititated.

Secondly, the state, which had not carried out major repairs of the roads in the Tatev region for over a decade, seeing that the supporters and partners of the program are making real investments, realized that it could not delay the reconstruction of roads any longer. Thus, the construction of the ropeway and the repair of the Monastery became catalysts for infrastructure investments.

After the opening of the ropeway, we immediately took up the project of strategic planning for the Southern Corridor. We already have a first draft, and in a few months the final draft will be ready for review by stakeholders. The Tatev Revival Project is one of the programs of the Southern tourist corridor which we have launched ourselves, but it is meant to be a frontrunner among a much wider set of exciting projects in Tourism.

- When do you plan to launch the Southern corridor plan and when will it be fully ready?

- In April we plan to have the project ready in final draft form. It will include planning of financial flows, creation of infrastructure, land use recommendations and recommendations about developing new tourist products.

It will also contains a proposal to set up a new structure similar to, for example, the well known Tennessee Valley Authority in the US, which will regulate development activity in the Southern corridor. The process of making amendments to the proposed Southern corridor plan based on stakeholder review will take a few more months, and by the end of the year the plan will gain official status in its final form.

- In fact, the main function of the NCFA in the sphere of tourism development is to create infrastructure and introduce a new culture. Are the market participants – private tourist companies, ready for that?

- Yes, although we are actively trying to provide examples, to develop model projects, we only intend to implement one or two of them directly ourselves. The ultimate goal is to create a positive enabling environment for the active involvement of tour operators and other industry players in the process.

I think that tour operators in Armenia are quite well prepared and are one of the most progressive representatives of the Armenian business community. The majority of the players in the tourism sector are ready for a new reality, and there is therefore great potential. Our programs need to provide the foundations for growth for the most competitive tour operators, which are today deprived of that opportunity.

- Critics of Armenia’s tourism sphere note that tourism cannot develop in a country, where there are no relatively cheap hotels.

- Since we are talking about a non centrally planned economy, this issue should be considered from a systemic market point of view. The main problem is the low tourism demand. If the number of tourists visiting Armenia increases, the prices for hotel rooms will go down. Today, hotels adopt a price policy which maximizes revenues over a limited number of active months per year and with a small number of customers. If the flow of tourists increases, the number of hotels, the occupation of rooms will also increase, and this will have a positive influence on prices.

Today the main problem for Armenian tourism is not at all that, for instance, German tourists refuse to come here because of expensive prices or bad infrastructure.  They do not come here because they have simply not heard of Armenia or do not consider it attractive enough. So we need to be much more active in promoting ourselves in a large number of source markets and we need to develop attractive new products.

- On the one hand, we say that the flow of tourists is not sufficient, on the other, if we look at official data, each year significant growth of the number of tourists is observed in Armenia. One asks: how correct is the approach, when in fact all foreigners, coming to Armenia, are classified as tourists?

- Indeed, we need to change the methodology and introduce new mechanisms for estimating tourism flows. The published figures represent the number of visitors to Armenia, but not all of those are tourists. But the pattern of growth is real: tourism to Armenia is on the increase. This is the result, among other things, of a well-functioning airport. And although the flights to Armenia are still expensive, tourists now have a wider range of itinerary choices.

- Another large-scale program of the Fund is the Armenian Oncological Center of Excellence. What steps will be made in this direction this year? 

- The program consists of three components. In order to realize the first of those components - the radiopharmaceutical production center, we mobilized €5mln in financing in 2010, €1.7 of which was provided by the government of Belgium as a grant. This year, the government of Armenia will allocate €3mln for construction of the center’s building and to cover initial operating costs. The center will produce pharmaceuticals needed for diagnosing and treating common forms of cancer. These radiopharmaceuticals cannot be effectively  imported, since they lose their effectiveness within hours or even minutes of being produced and so they need to be used immediately after production. The center for the production of radiopharmceuticals will not target profits but rather to simply cover its own costs and enable effective public-private partnerships.

The second component is the diagnostic center, which will act as one of the main customers of the radiopharmaceutical production center, and the third component is a new clinic, which will become a center for the treatment of oncological diseases. These second and the third components are intended to be private entities for which we are now in the process of attracting investors.

All three components together will  constitute the Armenian Center of Excellence in Oncology and will be located in the the Alikhanyan National Science Lab (formerly the Yerevan Physics Institute) .The construction of the first component will begin this year. in March, we will announce an international tender for it architectural design.

We are implementing this project in collaboration with the Belgian company IBA Molecular, which is now assembling the main piece of equipment for the center: a cyclotron particle accelerator. The construction of the radiopharmaceutical production center has to be completed in time to receive and install the accelerator as soon as it is ready.

Simultaneously, we are cooperating with potential investors in order to have them on board within 2-3 years, following the arrival of the accelerator in Armenia.

- One of other priorities of NCFA this year will be education. What will the educational program be like and what will it aim at?

- Indeed, in 2011 we will fully elaborate the Competitiveness Foundation’s education project and identify its partners and sources of financing. The emphasis will be on developing and consolidating the research and development capability of Armenia’s higher education system. The program will be based on the concept of a university-science-technologies triangle.

The goal is to establish a new research center, which will cooperate with a number of Armenia’s leading institutions of higher education. For instance, it is possible to set up a center of computational science which will work with the biology department of Yerevan State University in bioinformatics, with the Brusov State Linguistic University in computational linguistics, with the department of applies mathematics of the State Engineering (Polytechnic) University of Armenia in artificial intelligence, and so on.

The project is still at the development stage but the goal is clear: to create a networked structure, based on shared resources, which will work with a handful of universities, providing them with new sources of financing and of knowledge transfer and brokering their relationships withleading center of educational and research excellence abroad. The cost of the project will likely be in the 10-20 million range and will fit our public-private partnership format, attracting both donations and investment financing.

- Businessmen with Armenian origin, who have made great achievements outside Armenia, are mainly represented in the Board of Trustees of the Fund. Is there increase of interest towards the activity of the Fund registered from the part of local businessmen, who would like to be involved in the Board of Trustees of NCFA? It turns out that the domestic business is represented in the Board only by General Manager of “VivaCell-MTS” Ralph Yirikian.

- I should first note that besides the 13 main members of the board, we also have 10 associate members among whom there are local business poeple as well.

Since our goals are economic integration and networking at a global scale, it is important to have international board members. At the same time, the composition of the members of any such board is always an evolving one.

Let me also share a recent development: the Head of the EU Delegation in Armenia Raul de Luzenberger has now become one of our 13 main board members. He is replacing the former representative of the World Bank in Armenia Aristomene Varoudakis as the representative of international donor community.