Mr. Aljian, November 2003 is the date set for the completion of the projects implemented by the Lincy Foundation. How would you assess the process? Are you satisfied with the projects that have been implemented so far? How does the Lincy Foundation office supervise the projects in Armenia?

a) All projects are scheduled for completion prior to November 1, 2003.

b) The process was difficult due primarily to our need to comply fully with United States Tax Law.

c) The Projects are developing as planned.

d) Lincy does not supervise the projects, or control their progress; we do have a staff in Armenia that includes a general manager and experts that monitor compliance with the Grant Agreement.

There have been shortcomings during the implementation of the projects, as a result of which poor quality work was performed. We are referring to the streets and sidewalks in the Kentron district of Yerevan. Some of them have undergone damage and are being paved again, and some have remained in the same condition. From our discussions with specialists we found out that the construction materials used were of particularly poor quality. In the case of the asphalt, Iranian tar was used, which the experts don’t recommend for paving roads in Armenia. Isn’t it possible to organize the working process in your office in such a way as not to waste financial resources? We would also point out that the construction organizations implementing the projects are in a difficult situation. These organizations offered low prices during the tender. Don’t you think that the method of organizing tenders in which the only criterion is the lowest price is not effective?

a) The Armenian Government has not approved some work performed to date and they have required the contractors to correct unsatisfactory work at the contractors’ cost.

b) To our knowledge, no Iranian asphalt has been used in our projects other than a small quantity purchased recently under a license from the United States Government.

c) Contractors are expected to bid at an amount sufficient to pay their costs and earn a profit. If a bid is unrealistically low, and the Armenian Government has determined that the contractor has insufficient experience, equipment and/or financial resources to complete the project, the bid is not accepted. The lowest bid does not always get the contract.

Violations have taken place during the implementation of the lending projects of the Lincy Foundation in collaboration with local banks as well. Loans were granted to banks that were in a bad state. Some of these were declared bankrupt after they received loans. The Central Bank granted loans to these banks knowing that they were not stable. As a result, according to our information, $5.5 million will be impossible to recover because of these banks. Let us give you just one example - Trust Bank, which is bankrupt today, owes a one-million-dollar debt to the government. We have documents at our disposal proving that the Central Bank had been informed about the problems of this bank. However, nobody knows why this and other similar banks were on the list of banks that were granted loans.

Our loan is to the Armenian Government, which is responsible for the repayment of the loan in accordance with its terms. You should inquire of them as to the collectability of the balance due on their loans.

During the construction work, the construction cost is being increased without an increase in the volume of work. Our study shows that almost in all projects the tender cost has been increased by 20% on the average. How would you explain this?

Costs of construction did involve some cost increases, sometimes with additional scope of work, sometimes due to unexpected problems. Unexpected problems include such items as repair of work after flooding due to rain; added problems discovered when walls were opened. We are not able to separate the various types of overages, however, including all reasons for increases in cost; these increases are substantially less than 20%.

In your opinion, why did the Investment project fail, and how much money was spent during the operation of the office for this project?

The investment project was terminated and funds redirected to other needed projects due to insufficient demand from viable investors. Our representative office was not involved in this program.

In November 2003 the time limit for the projects being implemented by the Lincy Foundation will expire. If not all the money allocated for these projects is spent, what will happen to it? Is it possible to extend the deadline, since it is probable that a portion of work will be done poorly because of the haste?

a) We hope that all projects will be completed and all funds will be utilized.

b) The deadline will not be extended.

c) Poor workmanship should not occur, as only acceptable work will be approved by the Government and considered for payment. Any work completed to correct poor workmanship after the completion date will not be paid by Lincy.

What other projects is the Lincy foundation planning after the implementation of the ongoing projects?

No discussions have occurred concerning any future projects.

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