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Caucasus: Nagorno-Karabakh Looks To Spark Economic Growth

By Vahan Hovanissian

Yerevan, 3 December 1996 (RFE/RL) -- Rebuilding a country economically after a war is always difficult. That task is infinitely more complicated when the fighting has given way only to a truce, not a real settlement, and when the state involved is not even recognized internationally.

The self-proclaimed Nagorno Karabakh Republic is in such an unpromising situation. The largely ethnic-Armenian enclave sought to break away from Azerbaijan in a bloody three-year war, capturing enough additional Azerbaijani territory to link it to Armenia proper, and thus to the outside world.

Complicating the picture is the continuing unclear status of the enclave, with Azerbaijan insisting on recognition of its territorial integrity, while expressing willingness to grant the enclave a high degree of autonomy. Russia is leading a multi-national effort to negotiate a solution to the issue.

Fighting ended two years ago, with Nagorno Karabakh's economy completely devastated, and many among the residual population of 150,000 people despondent about their future.

The task of rebuilding is daunting, but not hopeless. Two important factors work in favor of the mountain enclave. One is the presence of Armenia, which in peace and war has lent support to Nagorno Karabakh. The other is the powerful Armenian diaspora, the world-wide network of Armenians who are prepared to offer financial and moral support to their kin.

As to the first, the Armenian government provides the finance necessary to keep the enclave running from day to day. With a budget this year of some $20 million, Nagorno Karabakh relies on Yerevan for much of this money. For 1997, the Armenian budget for example foresees a long-term credit to Karabakh of $13 million. The Armenian money goes to maintaining basics like social welfare, education and health.

As to the diaspora, assistance from that quarter has been directed mainly at the energy sector and transport. A non-government organization called the "All Armenian Armenia Fund" is in charge of the fund-raising and project development. An RFE/RL correspondent in Yerevan reports that the focus for resources at present is the construction of the Goris-Lachin-Stepanakert highway to connect Karabakh with Armenia. This road, which runs through captured Azerbaijani territory, is seen as an essential element in the enclave's future.

Last May the Fund organized a world donation day among Armenian communities, entitled the "Stepanakert-Yerevan-Los Angeles" marathon, to highlight the importance of the road link. Some $10 million was raised for the highway.

By such means Nagorno Karabakh has ensured its economic survival. But what of the future? The self-proclaimed republic's President Robert Kocharian said recently that the military gains would lose any sense unless efforts are successful to raise the living standards of the population.

To this end, the Nagorno Karabakh government has developed an economic strategy aimed at stemming mass emigration by equalizing living standards with those of Armenia. This strategy relies heavily on the development of small business and tourism. A private business assistance project is already in operation, financed by an anonymous investor from the diaspora. This has been granting low-interest credits for agriculture and food production. Although composed of less than $1 million, the fund has been able to show the anonymous investor a small profit, and he is continuing the funding.

Officials are confident the fund can be enlarged through the participation of other investors. They see Karabakh food production as a winning business with a ready consumer market in Armenia, and one which can also help stem the tide of unemployment in the enclave.

The other main point on the agenda is tourism. That may at first seem a rather unlikely sector for growth. But the ceasefire is very stable, and the enclave has an undeniable charm and natural beauty. Plans are in hand to market the area to Armenian foreigners, and the government has already signed an agreement with a foreign investor to renovate a hotel in Stepanakert.