Interview with Makar Ghambaryan, Head of the policy development at Ministry of Finance of the Republic of Armenia PRINT E-mail
makar[04/01/2012] Mr Makar Ghambaryan, Head of the policy development at Ministry of Finance of the Republic of Armenia.

He has Ph. D. in Economics in the sphere of State administration. He was specializing in regulating of interrelationships between the Central and local government bodies of power. He has expertise and experience in the sphere of public sector procurement, budget, finances and internal audit and control.

He became the Director of the Central Department of State Internal Financial Control Methodology and Public Procurement in 2011. Before that he was the Director of the Internal Audit Department in the RA Ministry of Finance, and before that he worked as a Head of Supervision Groups in the Central Department of Financial Supervision of the RA Central Bank.

We used the opportunity to ask Mr Ghambaryan few questions regarding the UNCITRAL Model Law and the Public Procurement in Armenia:

Q: For any legislative reform to take place there must be an open and inclusive process of consensus building with all the stakeholders involved coupled with the use of local and international experts. How have government officials in Armenia reached out to local entrepreneurs, public officials, citizens and other stakeholders to fully embrace the reforms implemented?

Mr Ghambaryan: Prioritizing the importance of availability of the effective public procurement management system, as well as the need of decreasing the budget process corruption risks, simultaneously with the implementation of some reforms in the public finance management sphere, beginning from 2000 the authorities of the RA initiated the process of introducing procurement system in the public segment in compliance with the generally accepted and international standards. In the framework of this process in 2000 the first law of the RA "On Public Procurement" was adopted, on the basis of which the wide range of legislative acts was adopted, which provided the enforcement and application of the law. Together with that the training of procurement specialists from public sphere, bodies of local selfgovernance and public enterprises was organized. The sustainable system providing publicity of procurement process was also introduced. As during any reform at the initial stage of the system introduction there were some difficulties, but due to the consistency of the RA Government work and in particular the work of the RA Ministry of Finance the legislation of the RA on public procurement was successfully introduced. At first the system represented the wholly centralized structure, which in the course of the several years in compliance with the accepted by the Government policy as well as with the effective assistance of international experts was reformed into a partially centralized system (2005), and later on was wholly decentralized (2011). So, in the course of the last decade the transformations of the legislation regulating the procurement sphere in the country were conducted with logic consistency in compliance with which the powers and obligations of both the clients and participants of the process were revised.

Q: Experience in transition countries suggests that advances in law reform and economic progression or regression go hand in hand. Creating a sound and stable business environment is critical to supplementing a healthy public procurement environment. What steps is the Armenian Government taking towards improving property rights, transaction laws, IPR and other laws that protect and nurture the business environment?

Mr Ghambaryan: For sure it is right, when such transformations go hand in hand with the tendency of development of the whole business environment, and Armenia is not an exception in this respect. As an example I may give you only the last achievements. The imperatives of the XXI century regarding reforms on business environment development require the exclusion of any obstacles, created by the bureaucratic administration, simplification and providing the transparency of the procedures used and so on. Guided by the purpose of implementing of the abovementioned, in our country the following innovations has been introduced and are being introduced: the electronic registration of the private business, the electronic registration of the intellectual property, electronic signature, new electronic systems for providing taxation reporting and many other systems. We may refer to the development programs sphere the system of e-procurement introduction, including the system of electronic auctions in the RA, which was actually introduced in the current year, and we managed to perform the first electronic procurement, and in the next 2012 the more comprehensive usage of this system will be already launched. Regarding the property rights protection regulation, including the intellectual property rights in Armenia, these rights are regulated by the corresponding laws, and the civil legal relations are established in compliance with the Civil Code of the RA. At the same time the RA legislation on public procurement, the main purpose of which is the organization of procurement process in compliance with general rules of competition, transparency, publicity and equality, has the direct influence upon the forming of stable business climate and development of sound competition in the private segment.

Q: Typically in transition economies, the difference between the law on the books and the law in practice is reconciled over a period of time with adequate intervention and participation from various stakeholders. What role do public officials play in ensuring that a robust public procurement environment is created and the implementation gap is reconciled?

Mr Ghambaryan: In spite of the fact that the introduced in Armenia former model of public procurement (before 2011) was characterized as the one corresponding to international standards, in practice it turned out to be not sufficiently effective: there was a range of problems, which negatively influenced the business climate development and sound competition. With a view of eliminating the abovementioned problems the RA Government approved in 2009 the strategy of transforming the procurement system according to which it was planned to remove with the help of different measures the existing gaps between the used practice and the established by the legislation system. In December of 2010 there was adopted and in January of 2011 came into force the RA law „On Public Procurement", for the introduction of which the RA Government on February 10 2011 approved the following document: „The Procedure of Procurement Process Organization". With the help of these legal documents the earlier existing problems managed to be resolved, and those exceptional gaps of the system, which are left up to date, in the nearest future will be wholly eliminated due to the decentralization of the procurement system. The reason is that the clients performing their procurements themselves in order to simplify their further work will be interested in publicizing facts of inconsistencies between the legislation and the reality.

Q: Why do you believe that strengthening Armenia's 'Conflict of Interest' legislation is critical in creating a healthy, competitive and transparent business environment? What impact will strengthening these laws have on the overall public procurement environment?

Mr Ghambaryan: In the range of additional reforms in the procurement system the approval and implementation of measures to avoid the possible conflict of interest of course require more close attention, but alongside with this the task of implementation of these transformations cannot be deemed as critical. Apart from this, regarding this issue the legislation of the RA has approved the corresponding provisions, for example the legislation regulating the procurement sphere, stipulated, that members of the Public Procurement Review Board, established for procurement process complaints review, should announce beforehand the absence of conflict of interest in the subject to consideration concrete case. Another example, in compliance with the same legislation the public official, which was taking part in forming of technical specifications of the procurement subject matter, cannot be involved in the work of the bid evaluation committee for procurement of the abovementioned subject matter and so on. As a tool of limiting possible conflicts of interest I consider it necessary to emphasize the corresponding RA Government decree, according to which there is a special limitation on receiving gifts of precious metals and stones by State bodies and public officials at the amount exceeding 3,000 times the amount of the established by the legislation minimal salary. And in case of receiving such gifts, the gifts should be given to the State Treasury of Precious Metals and Precious Stones of the RA. Nevertheless, we consider it to be important to establish some provisions in the sphere of procurement, limiting the possible conflict of interest and/or establishing the norms of ethics and behaviour for public officials, involved in the sphere of procurement. These provisions will allow to distinctly indicate the „rules of the game" for the abovementioned persons, and that in its turn will exert positive and effective influence on the public procurement process.

Q: Foreign investors and traders might have been confronted with poor access to information on commercial laws in the past and this has been a hindrance to their functioning. What steps is the Government taking to aid and encourage the participation of foreign investors in the economy?

Mr Ghambaryan: I consider that there is no problem of access to information. With a view of providing one of the main principles of the RA law „On Procurement", the principle of openness and transparency, the website of the RA Ministry of Finance was established (www.procurement.am), as an official public procurement electronic inquiry desk, where the official information pertinent to the procurement process is published, including the RA legislation regulating public procurement. Or on the website of www.president.am all the edicts of the President are published. You may also get acquainted with all laws, adopted by the National Assembly on the website: www.parliament.am, and with the Decisions of the RA Government and Prime-minister you may get acquainted on the following websites: www.gov.am, www.e-gov.am, with all normative legal acts – on the website: www.arlis.am. I also should mention that all the information on the websites is available in thee languages: Armenian, Russian and English.

Q: In 2010 to remedy Armenia's business environment, a new electronic business registration system and single window registration procedures were introduced aimed at substantially reducing transaction costs and time law. Besides promoting entrepreneurship and professionalization of business how has the implementation of these laws affected the overall public procurement environment?

Mr Ghambaryan: As it has been already mentioned earlier in the answer to the second question, the transformations of the last years are interconnected between each other, which in their turn entailed the introduction of the e-procurement system and e-auctions. But instead of evaluating the consequences of some transformations, I would like to emphasize the fact, that each of such transformations promotes the formation and development of the electronic community, which at the present time is the driving force of the competitive economy.

Q: The UNCITRAL Model Law is a potential platform to start the process of public procurement reform on. However, each country needs to frame its own laws in accordance with its own realities, legal traditions and stakeholder participation. What has been the role of civil society in drafting public procurement laws and reforms in Armenia?

Mr Ghambaryan: As in other spheres, the RA Government is responsible for reforms in the sphere of public procurement as well. But multitudes of public organizations, suppliers taking part in the public procurement process and appealing the decisions of bid evaluation committees studied and prolong the study of the existing differences between the current legislation system and the practice of its application; and in case of detecting some problems and contradictive points in the legislation they need additional comments, that's why they apply to the RA Ministry of Finance with concrete proposals on corresponding changes and/or the requests to comment or explain the existing inaccuracies. Such collection of information and generalization of results is one of the foundation stones for organizing the processes of the legislation improvement.

Q: Progressive laws and strong institutions are the cornerstones of a healthy economy and nation. What are some of the efforts that the Armenian Government is making towards capacity building and institutional strengthening?

Mr Ghambaryan: The new law of the RA „On Procurement" which came into force on January 1 2011 attracted special attention to institutional bodies of public procurement sphere. Among them in particular the attention was attracted to the three main ones: the Authorized Body (the RA Ministry of Finance), the Procurement Support Centre, which earlier was the body, conducting centralized procurement; and the Public Procurement Review Board, which is a wholly independent body. There is a distinct differentiation of functions between these bodies, which on the whole could be presented in the following way: the Authorized Body conducts the methodological management on issues of forming the legislation in the sphere of public procurement, processes and procedures of public procurement. The Procurement Support Center conducts the training of public procurement process participants, rendering them consulting services and so on. The Public Procurement Review Board is mostly involved in appeals and complaints review. The latter two bodies are relatively new creations, in connection with this the RA Ministry of Finance focuses its attention on the implementation of programs for capacity building of these very bodies. I should also mention that the implementation of such programs is also supported by international organizations.

Q: How can international organizations aid the public procurement environment in Armenia?

Mr Ghambaryan: International organizations rendered considerable assistance both on the issues of the procurement process formation and in the further development of this process. Studying the system of public procurement in the RA, these organizations were submitting their proposals on the improvement of the current system, and those proposals were accompanied by different types of professional and technical assistance. The results of substantial and effective assistance of the international organizations were always highly appreciated by different experts of this sphere, since considerable steps were taken in the development of public procurement sphere of our country. And the highest mark of the joint work of our specialists with the colleagues from international organizations is that being a member of the World Trade Organization (WTO) from 2003, in 2011Armenia joined the Government Procurement Agreement of the WTO. I should also mention that Armenia is the first country of the CIS, which was included in this Agreement. But we are not going to be limited by only this achievement, and we are far from stating that all the difficult issues in the procurement sphere are resolved. That's exactly why I consider that in terms of further effective organization of work the assistance of international organization from the point of view of professionalism and experience has very important implication in the public procurement sphere of the RA.


Interview with Public Procurement Expert prepared by Ms Sanjana Govindan Jayadev, Lee Kuan Yew School of Public Policy, National University of Singapore, EBRD UNCITRAL Initiative Website Editor.

The views and opinions expressed herein are solely personal and can in no way be interpreted as the official position of the EBRD or UNCITRAL.

 
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