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Caucasus Report: October 16, 1998

16 October 1998, Volume 1, Number 33

Deja Vu In Baku. On 15 October, the Azerbaijani Central Electoral Commission released the final results of the 11 October presidential poll that confirm the reelection for a second term of 75-year old incumbent Heidar Aliev, with 76.11 percent of the vote. According to the CEC statistics, Azerbaijan National Independence Party chairman Etibar Mamedov came in second with 11.6 percent, and Independent Azerbaijan Party chairman Nizami Suleymanov third with 8.6 percent. The remaining three candidates each polled less than 1 percent.

Neither the outcome of the voting, nor the widespread violations that accompanied it, nor the condemnation of those violations by international monitors, nor the refusal of Mamedov and two other defeated opposition candidates to accept the validity of the CEC data, were unexpected. But in terms of their impact on the course of Azerbaijani domestic politics, all of those developments were overshadowed by an issue of principle which came to dominate the entire election campaign: that of crafting a legislative framework for conducting elections that minimizes the possibility for manipulation and malpractice.

The absence of such legislation at the start of the campaign impelled five leading Azerbaijani opposition politicians to threaten a boycott of the poll. In response to pressure from the international community, the Azerbaijani parliament in July did amend the original election law to conform more or less to international standards. But the Azerbaijani leadership refused to meet the opposition's demands for one-third of the seats on the 24-person Central Electoral Commission, half of whose members are nominated by the parliament and the remainder by the incumbent president. It was this lack of parity that convinced the opposition "five" that Aliyev had no intention of allowing a free and fair election in which he might risk failing to garner the two-thirds majority needed for a first round victory. (Interviewed by "RFE/RL Caucasus Report" last week, one of the "five," Musavat Party chairman Isa Gambar, quoted Stalin's cynical observation that "It's not whom you vote for that matters, but who counts the votes.") The "five" therefore stood fast by their boycott threat, confident that the international community would respond by unequivocally condemning the elections as undemocratic. At the same time, they continued to lobby for a postponement of the poll in the hope of extracting further concessions from the leadership.

Although their calculations proved wrong on both counts, the opposition campaign to expedite the democratization process scored one landmark success -- the abolition in August of media censorship -- and contributed to an unprecedented degree of public interest in the election campaign. The primary beneficiaries of that interest were the opposition candidates, in particular Etibar Mamedov, Nizami Suleymanov, and the leader of the Association of Victims of Illegal Political Repression, Ashraf Mehdiev, all of whom succeeded in tapping the support of significant numbers of the country's impoverished and disadvantaged. (In that respect the poll was a surrogate referendum in which the electorate were faced with a choice between stability, as personified by Aliev, and opposition candidates' promises of improved economic conditions.)

Both Mamedov and Suleymanov rejected the election returns issued by the CEC. Mamedov claimed that Aliyev received no more than 60 percent of the vote despite massive falsification. Suleymanov also disputed the official estimate of voter turnout at 77 percent, claiming that it did not exceed 50 percent. Only one challenger, Khanguseyn Kazymly, accepted Aliev's claims of victory as valid and characterized the poll as democratic.

Both Mamedov and Suleymanov have announced their attention of appealing the poll results. Mamedov told Reuters on 15 October that he does not recognize Aliyev as president, and will attempt to "remove him from power by legal means." Is that objective realistic? Both Gambar and fellow boycotter Lala Shovket Gadjieva predicted mass popular protests if Aliyev gerrymandered his reelection, but other opposition figures and several journalists anticipated that Aliyev will "tighten the screws" to preempt any move against him. Much will depend on whether the defeated candidates and the five opposition leaders who boycotted the poll can belatedly agree to coordinate their future activities, and whether popular anger and resentment against Aliyev will persist, or yield to apathy. (Liz Fuller)

A New CIS Abkhaz Initiative? A delegation from the CIS Executive Secretariat visited Sukhumi earlier this week in an apparent attempt to wrest the initiative in mediating a solution of the deadlocked Abkhaz conflict from the Russian Foreign Ministry and the UN-sponsored "Friends of Georgia" group. "Nezavisimaya gazeta" reported on 16 October that during talks with Abkhaz President Vladislav Ardzinba, the delegates proposed creating a CIS mission in Abkhazia to monitor the situation in the conflict zone, given that the only information available about developments there is supplied by Russia (the unspoken implication being that such information is not always 100 percent reliable). Ardzinba argued that any formal decision related to resolving the Abkhaz conflict should be taken at a CIS summit, and only after both the Abkhaz and Georgian leaderships have approved it. In his previous post as Russian Security Council deputy secretary, CIS Executive Secretary Boris Berezovskii tried unsuccesfully to mediate a settlement to the conflict in July1997. (Liz Fuller)

Obstacles To Foreign Investment In Armenia. A flawed legal framework coupled with arbitrary taxation practices deters foreign investment in Armenia, a foreign entrepreneur said last month. In the words of Varoujan Kouzoukian, who runs a consulting firm in Yerevan, the existing economic laws give Armenian officials a disproportionately broad leeway for their interpretation. "Laws are kind of two-faced here," he complained. "You read one thing on paper but face something different in practice."

A Lebanese citizen of Armenian origin, Kouzoukian heads the Foreign Investors Assembly which he founded five years ago. The firm provides a wide range of financial and legal services to foreign investors interested in Armenia.

Speaking to RFE/RL on 21 September, Kouzoukian criticized Armenia's taxation system primarily for giving what he believes is too much leeway to tax collectors in theirs dealings with the business community. He said frequent tax inspections and check-ups of firms create additional nervousness among entrepreneurs, contributing to investor reluctance to expand business in Armenia. He also described as "short-sighted" the existing legal criteria set for foreign investors to qualify for tax breaks during the initial period of their operations. Last year, the Armenian parliament raised from $100,000 to $1 million the capital threshold that exempts a foreign company or joint venture from paying income tax in the first two years of its existence and halves the tax rate for another eight years. With the average volume of an investment package in Armenia varying between $100,000 to $200,000, the provision is of little practical importance for foreign businessmen, Kouzoukian said. It is small and medium-size enterprises that have much better chances of attracting foreign capital, according to him.

In fact, most of the roughly 1,200 registered businesses with foreign participation fall into that category. Experts say no more than 20 percent of them operate at the moment. They also point out that most of them were registered over the last two years, which apparently testifies to greater investment opportunities. Kouzoukian agreed that conditions for doing business in Armenia are better now than they used to be five years ago. The improvement is substantiated by official statistics which put at around $100 million the amount of direct foreign investments in the first eight months of the year, much higher than in 1997.

However, economists caution that even these figures are insufficient to bring about a drastic upswing in living standards that have declined dramatically since the collapse of the Soviet Union. One potentially effective way to spur the economy is to attract unused internal savings. Some Armenian bankers estimate that $500 million to $1 billion in hard currency is currently being circulated in Armenia, bypassing the banking system. Making use of that potential and attracting more foreign investments requires a more effective government. As Kouzoukian put it, the Armenian state should do more than simply not bullying investors. (Atom Markarian)

Quote Of The Week. "[Media] freedom is like vodka, you shouldn't try to swallow too much at once, it goes to your head." -- Mais Mamedov, General Director of the independent Azerbaijani TV station ANS, interviewed by "RFE/RL Caucasus Report," 5 October 1998.

Observation Of The Week. "There are laws of etiquette, laws of ethics, laws of political ethics and laws of political culture. The law of morality is universal, but each country has its own laws of immorality." Azerbaijan Liberal Party chairwoman Lala Shovket Gadjieva, interviewed by "RFE/RL Caucasus Report," 8 October 1998.