The year 2009 is slowly approaching. Forecasters, planners, politicians, fortune-tellers, and analysts are among those who are trying to tell us what we should expect in the coming year.
Prime Minister Tigran Sargsian and his Minister of Finance officially submitted the State budget proposal for 2009 to the Parliament yesterday, 24 October. The proposed budget is based on a macroeconomic scenario that includes a 9 percent GDP growth and an inflation rate of 4 percent.
We will discuss in a future post the part of the 2009 budget that is expected to go to the education and to the higher education in particular. Here, we would like to discuss some “outside-the-budget” items; better known as bribes.
A Brief Storm in the Academia
Let us first review the situation concerning these “outside-the-budget” items in 2008.
Since last spring when Mr. Serge Sargsian became President and Mr. Tigran Sargsian Prime Minister, there has been a certain anti-corruption campaign going on in Armenia. It is surely too early to say if this is a serious and an effective operation, and how it might evolve next year. Though, some local and international journalists, observers and bloggers seem impressed (see for instance, the Businessweek dated 5 August 2008).
One of the first, or maybe the first person, who was caught in this campaign was a certain Mr. Karlen Matinian, instructor of Foreign Literature at Yerevan State University (YSU). He was arrested on 15 May 20008 with some 4,000 USD of presumed bribe money.
Among his students and colleagues, some thought his arrest was a set-up whereas the others confirmed the allegations. One of his colleagues told ArmeniaNow reporter; “Students used to stand in line in the corridor to pay, and all this was done without any precaution”.
Certain observers presumed that Professor Matinian’s arrest was the beginning of a major crack-down on the education community; the government had decided to hit the academia first as “the corrupt teachers of today educate the corrupt generation of tomorrow”.
This, however, did not happen. After Matinian’s highly publicized arrest, the government announced that the campaign would primarily focus on the police, the customs service, and the tax administration. These sectors were, in fact, prioritized by the Prime Minister himself. (Did some influential academics lobby for this change of direction? We don’t know yet).
Consequently, the calm returned to the academia. Tensions died down. Not completely though, as there is usually a lot of stress in the months of May and June. These two are important months in the academic calendar as it is during this period that final exams are held and final projects are turned in.
Moreover, during these two months a lot of grade-related transactions take place under the table (or "in the corridors"). These two months are crucial for the business. And it is a big business!
Bribery 101: Trade in Grade for Beginners
Prices of grade (mark) in Armenia, like in many other ex-socialist countries, vary depending on various factors including the subject (the course), the institution, the characteristics of the seller (the professor) and the buyer (the student). Based on the dynamics of supply and demand, a price is established in the market as it happens for any other product:
Prime Minister Tigran Sargsian and his Minister of Finance officially submitted the State budget proposal for 2009 to the Parliament yesterday, 24 October. The proposed budget is based on a macroeconomic scenario that includes a 9 percent GDP growth and an inflation rate of 4 percent.
We will discuss in a future post the part of the 2009 budget that is expected to go to the education and to the higher education in particular. Here, we would like to discuss some “outside-the-budget” items; better known as bribes.
A Brief Storm in the Academia
Let us first review the situation concerning these “outside-the-budget” items in 2008.
Since last spring when Mr. Serge Sargsian became President and Mr. Tigran Sargsian Prime Minister, there has been a certain anti-corruption campaign going on in Armenia. It is surely too early to say if this is a serious and an effective operation, and how it might evolve next year. Though, some local and international journalists, observers and bloggers seem impressed (see for instance, the Businessweek dated 5 August 2008).
One of the first, or maybe the first person, who was caught in this campaign was a certain Mr. Karlen Matinian, instructor of Foreign Literature at Yerevan State University (YSU). He was arrested on 15 May 20008 with some 4,000 USD of presumed bribe money.
Among his students and colleagues, some thought his arrest was a set-up whereas the others confirmed the allegations. One of his colleagues told ArmeniaNow reporter; “Students used to stand in line in the corridor to pay, and all this was done without any precaution”.
Certain observers presumed that Professor Matinian’s arrest was the beginning of a major crack-down on the education community; the government had decided to hit the academia first as “the corrupt teachers of today educate the corrupt generation of tomorrow”.
This, however, did not happen. After Matinian’s highly publicized arrest, the government announced that the campaign would primarily focus on the police, the customs service, and the tax administration. These sectors were, in fact, prioritized by the Prime Minister himself. (Did some influential academics lobby for this change of direction? We don’t know yet).
Consequently, the calm returned to the academia. Tensions died down. Not completely though, as there is usually a lot of stress in the months of May and June. These two are important months in the academic calendar as it is during this period that final exams are held and final projects are turned in.
Moreover, during these two months a lot of grade-related transactions take place under the table (or "in the corridors"). These two months are crucial for the business. And it is a big business!
Bribery 101: Trade in Grade for Beginners
Prices of grade (mark) in Armenia, like in many other ex-socialist countries, vary depending on various factors including the subject (the course), the institution, the characteristics of the seller (the professor) and the buyer (the student). Based on the dynamics of supply and demand, a price is established in the market as it happens for any other product:
There is also the factor called substitution that can affect both the supply of and the demand for, and therefore the price of grades. Substitution is like contact lenses replacing prescription glasses. A good substitute can weaken the demand for a certain product, and therefore push the price down.In the case of buying/paying for grades, we should first ascertain what we mean by substitution.
No, we don’t mean studying hard to earn true grades. In Armenia, studying does not necessarily abolish the need to buy grades. A good student may still be obliged to pay an extra something to obtain a high grade.
However, it is true that if the student is diligent, this may boost his/her negotiating leverage and reduce the final price of grade. Studying is therefore an “imperfect” or “distant” and not a good substitute for grade trading.
The real substitute for grade trade is the trade of exam questions. This is a special service that some professors provide prior to the exam period as opposed to selling grades that happens after exams. True, buying/selling exam questions has a very short life cycle (2-3 weeks) nevertheless it competes with grade trade.
The trade in exam questions does require some non-financial participation from the buyer (student). In order to pass the exam, the buyer must review and prepare the questions and attend the exam session.
To compare, the trade in grade to the trade in exam questions is like eating at a restaurant vs. buying a half-cooked frozen food from a supermarket. In the second case, the customer must still handle the final stage of the process in order to consume the product.
The 2008 Market Survey
According to Aravot daily newspaper, the grade trade was rather strong in the month of June this year. In an article dated 11 July 2008, Aravot reporter Ms. Tatev Haroutunian updated us on 2008 prices.
She covered 3 pubic universities: Yerevan State University (YSU), Khachatour Abovian Yerevan State Pedagogical University (YSPU) and Yerevan State University of Economics (YSUE). Unfortunately, two universities with the most elaborate and extensive grade markets; the Mekhitar Heratsi Yerevan State Medical University (YSMU) and State Engineering University of Armenia (SEUA-Polytechnic), were excluded from the survey.
Based on Ms. Haroutunian’s data, it seems that in 2008, as in the past, the prices of grade were rather low at YSPU: 5.000–15.000 AMD (17–50 USD) whereas at the Department of Legal Studies at YSU, the price reached 400 USD.
The fact that at YSPU prices were quoted in AMD instead of U.S. Dollars clearly indicates that the grade trade remains rather underdeveloped and below standard in this institution . This is demonstrated also by the fact that the suppliers (professors) at YSPU engage in barter transactions. Last summer, buyers (students) had the option to submit 2-3 phone cards, worth 5.000 AMD each, instead of paying in cash.
On the other end of the spectrum, at Yerevan State University of Economics (YSUE), the market seems much more sophisticated. In 2008, certain suppliers (professors) offered special packages such as a “3-grade combo” for 600-700 USD. This signified a saving of around 100-300 USD for the customer or, simply put, the student could get 3 grades for the price of 2.
Some readers may think that the demand for the “3-grade combo” should be rather limited compared to the demand for a single grade. After all, to fail in 3 or more subjects the student must be really lazy or dumb, or the university’s admissions procedure lousy and sloppy, or all of the above.
Not necessarily! Let's not forget that the suppliers (the professors) can always create, or at least amplify, the demand for their services by designing super-challenging exams. Thanks to such marketing techniques, those who need 3 or more grades sometimes outnumber students who fail in only 1-2 subjects.
In other words, in certain institutions or departments, the market for 3 and more grades may even constitute the mainstream segment whereas the market for a single grade may just be a small niche.
Influencing the market and boosting the consumer demand in such ways may seem easy but it is not. It is not just a question of designing a super-challenging exam. In order to provide complex products such as the “3-grade combo”, the suppliers (the professors) must spend considerable time and energy coordinating and collaborating with each other before and after the exams (after is when the revenue is distributed). But, as already mentioned, this extra effort pays off in terms of a larger market and a strong demand for hybrid and expensive services.
Purists might object combo deals on anti-trust/anti-monopoly grounds. They may claim that the whole arrangement is collusion among suppliers which reduces competition and raises the price.
Not at all! The suppliers (the professors) who collaborate on combo packages are not competitors. They teach different and usually complementary subjects. It is like satellite services; consumers get a package that combines several and usually complementary T.V. channels. This eases the transaction both for the suppliers (T.V. channels) and for the buyers (subscribers), and reduces the price per channel.
In other words, the combo provides certain value to the customers called convenience. For a student who has failed 3 exams, buying a combo is much more convenient than going around and discussing the matter separately with 3 or more professors.
Unfortunately, as already mentioned, YSMU and SEUA-Polytechnic, that are at the cutting edge of the business, were excluded from the survey which is therefore incomplete. Hopefully, Aravot’s 2009 survey will be more comprehensive.
Market Forecasts for 2009
It is uncertain how the market will evolve next year. Several scenarios may be considered.The prices of grade may sharply rise if the authorities decide to stage a grandiose trial for Professor Matinian followed by a severe punishment. Or if somehow the Prime Minister changes his mind and arrests more professors. Such events will cast shadow over the whole business and create a high-risk business climate. As a result, some suppliers may, at least temporarily, withdraw from the market which will create a serious shortage and send prices up.
The prices of grade may fall if some professors who, in the name of moral values or the law, have stayed outside the market up to now, suddenly decide to enter the market. This will increase the supply of grade, and intensify the competition in the market. This scenario is however very unlikely. The market has thrived for many years and all those who had the slightest flaw in their integrity, have already joined the market.
The most likely scenario, according to some experts, is the natural rise in prices. If we ignore the world economic crisis and its impact on the Armenian economy – in other words, if we adopt the wishful-thinking approach of Mr. Tigran Sargsian - it is safe to expect that grade prices will automatically adjust for 2009 inflation rate, and will rise by 4 to 5 percent.
Further Reading:
A very informative survey conducted by the Center for Regional Development and Transparency International Armenia in 2006. It includes a study of the public perception of corruption in different sectors including the education system.Corruption Perception Survey, in PDF (846 KB)
Also:
Corrupt Schools, Corrupt Universities. UNESCO & IIEP, 2007, in PDF (1.25 MB)
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