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Armenia
FY 2001 Program Description and Activity Data Sheets
>> Regional Overview >> Armenia Overview FY 2001 Program
USAID's FY 2001 assistance efforts will focus simultaneously on economic, political and social institution building, as well as on grassroots initiatives to provide concrete improvements in the quality of life of the population.
In the area of economic restructuring and growth, USAID is requesting funds for tax and fiscal modernization, public sector resources management, customs reform, privatization, land registration and titling, capital markets development, and enterprise-level assistance (credit and technical assistance). Energy sector activities will focus on the privatization of distribution and generation companies, increased operational efficiency, and analysis of alternative energy sources.
USAID’s FY 2001 democracy and governance programs will support political processes, citizen advocacy, government accountability and transparency, media development and rule of law. With continued Government of Armenia enthusiasm for addressing issues related to corruption, USAID will place increased emphasis on anti-corruption efforts across the USAID portfolio, as well as initiate a targeted anti-corruption activity under the rule-of-law program. Similarly, to ensure citizen awareness of and support for the reform process, USAID will enhance public education efforts in all of its programs.
In the social sectors, USAID will provide targeted support to Government of Armenia efforts to broaden the benefits of reform. Programs will develop options for social insurance systems, demonstrate different approaches to increasing the efficiency and effectiveness of social assistance and health care systems, and design alternate mechanisms to meet the immediate needs of the most vulnerable populations. In this context, USAID will continue to promote recovery and reconstruction in the zone affected by the 1988 earthquake.
USAID will pursue options to promote Caucasus regional cooperation in the sectors outlined above, with a possible new focus on the regional implications of water resources and environmental management. The U.S. Congress has directed the Administration to provide some FY 2000 FSA funds "...for confidence-building measures and other activities in furtherance of the peaceful resolution of the regional conflicts, especially those in the vicinity of Abkhazia and Nagorno-Karabagh." USAID and the State Department Coordinator are collaborating in the design and implementation of such activities.
Training to support USAID’s overall objectives and multi-sectoral logistical requirements are funded under the crosscutting and special initiatives category cited in the attached funding tables. The major portion of resources under this rubric is allocated to technical cooperation programs of other U.S. agencies funded under the FREEDOM Support Act (e.g., U.S. Departments of State, Energy, Justice, Agriculture, Treasury and Commerce). These programs complement USAID-funded activities. In Armenia, for instance, U.S. Treasury advisors play a strong role in modernizing tax administration and drafting a new Customs Code in accordance with WTO standards. As in FY 2000, FREEDOM Support Act funds will be provided in FY 2001 for programs designed to enhance border security and export control capabilities under the Administration’s Expanded Threat Reduction Initiative (ETRI). ETRI assistance is expected to play a role in reducing regional tensions, and contribute to the nonproliferation of weapons of mass destruction, and associated delivery systems, material, technologies and expertise.
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ACTIVITY DATA SHEET
PROGRAM: ARMENIA
TITLE AND NUMBER: Growth of the Competitive Private Sector, 111-013
PLANNED FY 2000 OBLIGATION AND FUNDING SOURCE: $10,000,000 FSA
PROPOSED FY 2001 OBLIGATION AND FUNDING SOURCE: $9,000,000 FSA
STATUS: Continuing
INITIAL OBLIGATION: FY 1999 ESTIMATED COMPLETION DATE: FY 2003USAID has been providing support since 1993 for a variety of initiatives. Activities have been designed to facilitate Armenia’s recovery from the negative impacts of the 1988 earthquake, the collapse of the Soviet Union, the war with Azerbaijan, continuing restrictions of access to external markets, and new shocks related to the financial crisis in Russia. However, a comprehensive approach to supporting private sector growth was not initiated until late 1998. This objective was redefined and approved in 1999 as part of a new USAID strategy for Armenia. In conjunction with other economic objectives, it contributes to the Mission’s goal of creating employment opportunities in Armenia and supports the U.S. Mission goal of economic prosperity by making Armenia more attractive to potential investors. The assistance approach is two-fold: (1) concentrate on firm-level interventions to create jobs and generate income; and, (2) promote policy, legal and regulatory changes to improve the prospects for competitive business development. By 2003, it is expected that the private sector will be contributing at least 85% of GDP (compared to an estimated 60% of GDP in mid-1997) and will account for 72% of total employment (compared to 56% in 1997). These changes will reflect a more productive and dynamic private sector, directly benefiting entrepreneurs and labor, and indirectly benefiting the entire Armenian population.
Key Results: The USAID program is designed to accomplish four results: (1) improved business skills; (2) improved business climate; (3) access to broader markets; and (4) local economic development. The major impact of USAID’s work in these areas is expected to occur in the coming years—pending policy commitments and legislative action. Nevertheless, Armenia has experienced growth in private sector activity--which now exceeds 70% of the total GDP from a 1997 baseline of 60%, and exports have increased two-fold since 1997.
Performance and Prospects: Performance over the past year has been somewhat uneven, especially in terms of a slowed privatization process. However, USAID views these problems as delays, not course changes. With USAID technical assistance and training, the Government of Armenia has undertaken a series of measures to move towards a modern market economy. Agricultural land, housing, and a significant percentage of state-owned enterprises have been privatized. Price and trade liberalization accomplished. A civil codes has been adopted, creating the legal framework for property rights and contract enforcement. Significant progress has been made toward World Trade Organization accession. The legal and institutional framework for commercial banking established.
Despite the slowing pace of macro-level reforms, conversion to free-market principles remains the only means for Armenia to develop a sustainable national economy. However, as a result of USAID’s strategy exercise in spring 1999, the Mission recognizes the need for shorter-term employment creation and income generation to sustain political support for continued economic reform. Responding to this need, USAID’s program has been expanded to support the improvement of business skills, the identification of export opportunities, and the provision of credit. Micro and small/medium enterprise sectors are specifically targeted, in order to tap their potential for rapid job creation and income growth. Without the requested funding for this objective, USAID and the Government of Armenia will lose an important opportunity to expand the benefits of reform to the firm and individual level.
Prior to 1999, Armenia made rapid progress towards mass privatization: most of the country’s state and collective farms were dismantled and distributed to individuals as private farms, and more than 90% of small enterprises and about 70% of medium and large enterprises have been privatized. With the transition from voucher privatization to cash privatization at the end of 1998, the pace of privatization slowed considerably, and only 50 of the remaining state-owned medium and large enterprises were privatized in 1999. USAID, in close partnership with the World Bank, has encouraged the Government of Armenia to take vigorous action in support of the privatization process. As a result, it is now expected that the Government of Armenia will issue a key decree to remove many of the roadblocks to privatization; this measure will also result in over 700 medium to larger enterprises moving into the privatization pipeline in the coming months.
In order to promote transparency in business transactions and reduce opportunities for corruption, USAID has assisted the Government of Armenia and private sector firms to revise their accounting systems to meet international standards. In keeping with expected performance, Armenia will have adopted by the end of CY 1999 the core group of 28 accounting norms, which are in accordance with International Accounting Standards (IAS). By the first quarter of CY 2000, USAID will have provided direct assistance to over 600 enterprises in converting their accounting systems; all Armenian firms are currently scheduled to convert to IAS by the end of CY 2002.
The small and medium enterprise (SME) sector is the most dynamic part of Armenia’s economy, despite being in the early stages of its development. For example, registered private entrepreneurs and enterprises grew by 18.2% and 9.4% respectively in 1998. USAID-funded activities have provided direct assistance to local firms and agribusiness that have been successful in solving business problems, developing growth strategies, introducing new technologies, finding business partners, and improving products and services.
Business and professional associations are emerging as strong advocates for the market-oriented reforms. For example, a number of local USAID-assisted organizations have appeared before National Assembly committees to address legal and budgetary issues impacting on the business community. As another example of USAID’s impact in this area, the Armenian Bankers Association formed an Arbitration Court that will adjudicate business disputes.
Possible Adjustments to plans: In recognition of the dire employment/income situation faced by most Armenians, USAID will conduct a comprehensive assessment of the potential for SME development and Armenia’s comparative advantage in regional and world markets, with the expectation that increased support will be provided for community-based SME activities. USAID will consider supporting a reinvigorated Government of Armenia push in the privatization process by assisting case-by-case privatizations and recently privatized enterprises. In early 2000, USAID will conduct an assessment of its portfolio supporting private sector growth; adjustments in USAID assistance will be based on the findings of this review.
Other Donor Programs: Conditionality for World Bank loans is closely linked to progress in privatization. The European Union’s technical assistance program (EU/TACIS) has a small program providing training in accounting reform that is complementary to USAID's broader program. Various non-USAID credit programs target particular niche. For instance: EU/TACIS and the U.S. Department of Agriculture target the agricultural sector; the World Bank and Lincy Foundation provide larger loans ($100,000 - $1,000,000).
Principal Contractors, Grantees or Agencies: Current grantees and contractors include: 1) the Eurasia Foundation, Shorebank, Foundation for International Community Assistance, and World Vision International (credit and technical assistance for micro, small and medium enterprises); 2) International Executive Service Corps and Agricultural Cooperative Development International/Volunteers in Overseas Cooperative Assistance (technical assistance to firms and farmers); 3) Sibley International (accounting reform); 4) International Business and Technical Consultants, Incorporated (privatization); and 5) Academy for Educational Development/AED (training).
Selected Performance Measures:
Baseline Actual
(1998)Target
(1999)Target
(2000)Target
(2001)Private sector share of GDP (%) 60 (1997) 70 75 80 82.5 Private Sector Exports ($millions) 162 (1995) 300 330 360 400 Euromoney's Country Risk Index (0 - 100)
28 (1995)
32.7 40 42.5 45
ACTIVITY DATA SHEET
PROGRAM: ARMENIA
TITLE AND NUMBER: Investment Increased, 111-014
PLANNED FY 2000 OBLIGATION AND FUNDING SOURCE: $8,000,000 FSA
PROPOSED FY 2001 OBLIGATION AND FUNDING SOURCE: $10,000,000 FSA
STATUS: Continuing
INITIAL OBLIGATION: FY 1999 ESTIMATED COMPLETION DATE: FY 2003Summary: The mobilization of greater levels of financial capital from domestic resources and foreign investors is essential to Armenia’s sustainable long-term growth. The purpose of this strategic objective is to increase gross fixed investment to 24% of GDP (from a 1997 baseline of 17%) and to realize an annual flow of foreign direct investment of $160 million (from a 1997 baseline of $51 million) by 2003. USAID has been financing activities designed to promote investment in the Armenian economy since 1995, but a comprehensive approach did not begin until late 1998. During the spring of 1999 strategic planning exercise, this objective was redefined to include fiscal reform activities.
USAID assistance addresses a series of structural, policy and institutional constraints, relating closely to activities under the previous objective ("Growth of the Competitive Private Sector") —with the common ultimate goal of increasing employment and income opportunities. The most significant constraints to investment in Armenia are: a legal and regulatory framework that is not investor friendly; a dilapidated stock of fixed assets and obsolete production techniques; an under-developed banking sector, absence of capital markets, and high interest rates; inadequate tax and fiscal systems; and insecure land ownership. In addressing these issues, USAID programs will directly benefit private sector actors by enabling them to expand business activity and make rational investment decisions, and the Government of Armenia agencies overseeing the emerging market framework. Ultimately, all Armenians will benefit from increased employment/income opportunities and economic stability. This objective directly supports the U.S. Mission goal of economic prosperity by helping to create the policy and institutional environment conducive to private investment and open markets.
Key Results: USAID has identified two results to pursue under this objective: (1) business laws and regulations are equitable and administered effectively; and (2) increased access to financial capital. USAID’s support for banking, accounting and land registration reforms, as well as other restructuring efforts, can be linked to the recent growth of savings, private sector credit and foreign direct investment levels in Armenia. It is hoped that the 50%-100% increase that is expected in each of these areas between 1997 and the end of 1999 will be the precursor to longer-term positive trends.
Performance and Prospects: USAID, in coordination with other U.S. and donor agencies, is working with the Government of Armenia and the private sector on a variety of initiatives to attract investment. USAID technical assistance and training are instrumental in creating a commercially viable, systemically sound, open and fair capital market that will allow the purchase and sale of securities to form long-term savings. In conjunction with U.S. Treasury advisors, USAID is helping to reform the tax system and improve Armenia’s budgetary and payments systems in ways that meet the needs of a market economy. Both of these efforts will contribute to increased government revenues. In the banking sector, USAID technical advice and training are strengthening the Central Bank’s capacity to oversee the banking sector through on-site and off-site supervision. Policy reform is helping to make commercial loans more affordable by reducing interest rates to their true market levels. Efforts to support land titling and registration ensure the comprehensive and secure right to private urban and rural land ownership, enabling individuals to buy or sell property or use it as collateral to obtain loans. In coordination with USAID’s democracy program, technical assistance and training contribute to the development of critical commercial laws, while enhancing the independence of the judiciary and its capacity to enforce those laws. Many of these activities have the collateral impact of reducing opportunities for corruption.
In some instances, performance in 1998 exceeded expectations. Armenia has had success in attracting foreign direct investment (FDI), mainly as a result of large-scale privatization involving the telephone utility, the cognac factory, and two hotels. The estimated $218 million net inflow between January 1998 and September 1999 far exceeded the combined total for the four previous years ($95 million). While the privatization process has slowed, USAID continues to support reform efforts to address key investment constraints, such as incomplete legal and regulatory reforms and a lack of transparency and predictability in the business environment. In FY 1999, USAID assisted in the drafting of new securities market legislation, which includes provisions for an independent securities commission and provides the framework for market development and regulation. Progress also was made in the development of an independent registry of share-holding companies and training securities brokers and dealers. However, further movement and future USAID assistance in this area are contingent on the Government of Armenia’s political will to pass the Securities Law, which is pending the National Assembly’s approval.
Since late 1998, the Armenia -- with USAID and U.S. Treasury assistance -- has moved rapidly toward implementation of comprehensive and modernized tax administration, and performance is considered on track with expectations. Transparent and efficient practices--including the automation of records, provision of taxpayer services and criteria for audit selection--have been established in two Tax Inspectorate offices in Yerevan. Early indications are that collections by the pilot offices have increased substantially; rollout of the new systems is scheduled to take place shortly in the remaining 18 Yerevan-area offices. Extensive technical assistance has been provided to the Government of Armenia in the drafting of a new Customs Code that will comply with World Trade Organization norms. As a result of USAID technical advice, Armenia is now developing modern revenue and expenditure forecasting models, market-based valuations, and program-based budgeting techniques for the 2000 cycle, with a focus on the Health and Education Ministries.
USAID assistance was critical to upgrading the technical skills of Central Bank of Armenia staff, resulting in the establishment of improved bank supervision practices. Deposit mobilization appears to be growing, but public confidence in banks remains low. USAID is addressing this issue by facilitating the conversion of banks to international accounting systems and the development/installation of an electronic payment system; the latter will allow for the issuance and processing of international credit and debit cards by commercial banks.
One of the major constraints limiting the potential borrower pool for banks is the lack of an adequate framework for pledging land or other assets as collateral for loans. A major step forward was taken in 1999 with the adoption of a title registration system for real property, although well-defined procedures to foreclose on pledged assets are still lacking. Current USAID assistance builds on the progress Armenia has made in land privatization, which to date has resulted in the transfer of 75% of agricultural land to private ownership. In November 1998, a new law was enacted which mandates the privatization of the remaining 25% of reserve lands. In coordination with the World Bank and EU/TACIS, USAID has supported the use of a streamlined methodology to survey, register and title urban and rural land throughout the country. Largely as a result of USAID technical support, 100,000 parcels have been surveyed to date.
The activities under this objective are highly interrelated, where the successful outcome of one activity supports the successful completion of another. Reduced funding for this objective would result in significant delays in achieving comprehensive market reform in Armenia.
Possible Adjustments to plans: USAID is considering an expanded program of support in the area of customs reform--perhaps with regional linkages—as a means to increase trade and revenues and decrease the opportunities for corruption. For similar reasons, and based on requests from the Government of Armenia, USAID is considering options to improve public resources management. In early 2000, USAID will conduct an assessment of its portfolio supporting private sector growth; adjustments in USAID assistance will be based on the findings of this review.
Other Donor Programs: The Department for International Development (British), EU and World Bank are providing assistance on civil service reform, which has a potential impact on all of USAID’s market reform efforts. The British also have provided an advisor on customs systems; this work could form part of the basis for a broader USAID initiative in this area. The UN Conference on Trade and Development (UNCTAD) is providing assistance on customs taxes, as is the World Bank. The IMF has a resident advisor for bank supervision. The Government of Armenia will utilize World Bank credit to support its land-titling program.
Principal Contractors, Grantees or Agencies: Current contractors include Price-Waterhouse-Coopers (capital market development); the Barents Group (tax/fiscal reform, bank supervision); RONCO (land registration/titling); Chemonics (commercial law); and the Academy for Educational Development (training).
Selected Performance Measures:
Baseline Actual
(1998)Target
(1999)Target
(2000)Target
(2001)Foreign Direct Investment ($millions) 51(1997) 88 100 130 150 Household Deposits ($ millions) 27 (1997) 41 55 70 80 Loans to Private Enterprises ($millions)
68 (1997)
89 105 120 150
ACTIVITY DATA SHEET
PROGRAM: ARMENIA
TITLE AND NUMBER: Economically/Environmentally Sustainable Energy Sector, 111-015
STATUS: Continuing
PLANNED FY 2000 OBLIGATION AND FUNDING SOURCE: $8,000,000 FSA PROPOSED FY 2001 OBLIGATIONS AND FUNDING SOURCE: $6,500,000 FSA
INITIAL OBLIGATION: FY 1999 ESTIMATED COMPLETION DATE: FY 2003Summary: Energy supply became a critical issue for Armenia in late 1991, when Azerbaijan shut the main pipeline transporting Russian gas to Armenia. This action meant that a smaller pipeline through Georgia, which was subject to disruption, remained the only source of natural gas supplies for electricity generation and heating. The ensuing energy crisis was the major motivation for the Government of Armenia’s controversial 1995 re-opening of the Armenian Nuclear Power Plant (ANPP), which had been shut down after the 1988 earthquake. While this action alleviated the immediate energy shortfall, the Soviet-designed ANPP is considered inherently unsafe by international nuclear regulatory agencies, despite extensive safety improvements made in recent years. Armenia’s continued dependence on Russia as its sole source of natural gas could weaken its commitment to close the ANPP. While Armenia has significant hydroelectric power potential, increased output in this sector has resulted in the reduction of the water level in the country’s largest lake (Sevan) to ecologically dangerous levels.
USAID energy sector assistance began in FY 1992, responding to the emergency situation faced by Armenia in that period (e.g., power outages as the norm, limited winter heating options). This humanitarian-oriented assistance included the provision of fuel oil and spare parts for electricity generation from the thermal power plants, and weatherization of numerous facilities (hospitals, schools, etc.). Since 1995, USAID’s energy sector program has evolved to focus on systemic reform, increasing the efficiency and private-sector participation, and reducing the hazards presented by the nuclear plant. The current strategic objective, which was approved in 1999, is intended to promote the development of an efficient, reliable and financially self-sustaining energy sector that is appropriate for the emerging Armenian market economy. By FY 2003, it is expected that the energy sector in Armenia will be economically and environmentally sustainable, with revenues covering operating costs and depreciation of assets and greater efficiency in the production and consumption of energy. The immediate beneficiaries will be the restructured energy enterprises, regulators and Government of Armenia agencies that will be better equipped to contribute to the development of a rational energy sector. The entire Armenian population will benefit from the economic revitalization and stability engendered by USAID’s energy sector support. Achievement of this objective contributes to U.S. interests in economic prosperity and regional peace and stability.
Key Results: This objective is designed to achieve three key results: (1) increased private sector participation; (2) increased economic efficiency; and (3) replacement power projects developed to facilitate the closure of the Armenian Nuclear Power Plant by 2004. Significant progress against indicators for these macro-level results has not been achieved to date. However, the privatization of distribution companies is imminent, energy prices have been rationalized, metering systems are being installed, collections have increased in areas participating in USAID pilot programs, and safety at the ANPP has been improved—pending its eventual closure.
Performance and Prospects: Ongoing USAID interventions in the area of metering, include technical assistance, training and targeted equipment provision to improve the commercial operation of the Armenian power sector, and help address the non-payments problem. Institutional and policy reforms assistance addresses issues such as restructuring and privatization, pricing and tariff methodologies, and the regulatory framework. Analytical work for new power projects is also provided. To date, USAID assistance has resulted in some critical successes: the passage of an Energy Law; the creation of an Energy Regulatory Commission; restructuring of the electric power sector; and the privatization of 13 mini-hydroelectric plants. Armenergo, the power utility previously responsible for all electricity generation, transmission, and distribution, has been effectively "debundled". USAID, EU and World Bank technical assistance and policy dialogue have led to increased tariffs which now approach full cost recovery. As part of its efforts to identify power projects to replace the ANPP, USAID financed a coal exploration program to assess the possibilities of increased extraction and use of coal in Armenia and is considering the funding of pre-feasibility studies to exploit the country’s wind energy potential. USAID supports the work of the U.S. Department of Energy to improve the operational safety of the ANPP. USAID also funds U.S. Nuclear Regulatory Commission efforts to strengthen the regulatory capability of the Armenian Nuclear Regulatory Authority.
In early 1999, USAID and Armenia reached an agreement outlining planned energy sector assistance and a series of Government of Armenia commitments to facilitate those efforts. While major Government of Armenia actions remain to be taken over the next year, USAID’s technical and commodity support is laying the groundwork for the privatization of power distribution--now scheduled for May 2000--and the later privatization of energy generation. Systems have been developed for the regular collection and analysis of financial data. Through technical assistance and the ongoing provision of equipment, transmission and distribution metering capacities are being upgraded. In two pilot areas, collections have increased by as much as 35%. Nationwide metering of the transmission system and distribution sub-stations will be completed by the end of 2000, thereby reducing commercial and technical losses and making the wholesale power market more attractive to private sector investors. Technical assistance developed and implemented the conversion of energy sector agencies to International Accounting Standards. A strategy has been developed for the self-financing of the Armenian Energy Regulatory Commission. USAID advisors have reviewed Armenia’s least-cost generation plan and suggested improvements; and conducted an operations and maintenance cost study. They also drafted the tendering documents for privatizing the electrical distribution companies in support of World Bank and IMF loan conditionality; and developed market rules for energy sales which are expected to form the basis of future commercial operations.
While substantial progress has been made under this objective, a cut in funding would disrupt the privatization of power distribution and prematurely cutoff efforts to build transboundary energy linkages in the Caucasus region.
Possible Adjustments to plans: A USAID-funded needs assessment of transboundary energy linkages in the Caucasus is expected to generate recommendations for a regional energy initiative. Consistent with improving the energy security of Armenia, Georgia and Azerbaijan, this initiative will support the re-integration of the Caucasus regional power grid to increase regional energy trade, stabilize the three national energy systems, and facilitate least-cost power generation, transmission and distribution.
Other Donor Programs: USAID’s energy sector initiatives are coordinated closely with World Bank programs, which support the rehabilitation and strengthening of the power transmission and distribution infrastructure. The European Union assists the Ministry of Energy in developing energy efficiency policies and legislation, as well as billing and collection systems.
Principal Contractors, Grantees or Agencies: Current contractors include Hagler Bailly (restructuring and privatization) and the Academy for Educational Development (training). Partnerships have been established with the U.S. Energy Association and U.S. National Association of Utility Regulatory Commissioners (exchanges and training). USAID also provides funding to other U.S. agencies for energy sector programs in Armenia including: the U.S. Department of Energy; and the U.S. Nuclear Regulatory Commission (for operational safety at the ANPP).
Selected Performance Measures:
Baseline Actual
(1998)Target
(1999)Target
(2000)Target
(2001)Percentage of privatization process completed for:
--Distribution enterprises
0(1997) 0 35 100 N/A --Generation enterprises 3 (1997) 3 3 10 25 Collections from end-users ($millions)
66 (1997)
80 85 90 95
ACTIVITY DATA SHEET
PROGRAM: ARMENIA
TITLE AND NUMBER: Increased Citizen Participation in Political, Social and Economic Decision-Making Processes, 111-021
PLANNED FY 2000 OBLIGATION AND FUNDING SOURCE: $8,000,000 FSA
PROPOSED FY 2001 OBLIGATION AND FUNDING SOURCE: $6,500,000 FSA
STATUS: Continuing
INITIAL OBLIGATION: FY 1999 ESTIMATED COMPLETION DATE: FY 2003Summary: USAID has been providing support in this area since 1994, focusing on political party development, improved elections administration, NGO development, civic education, and strengthening independent media. This objective was then redefined and approved in spring 1999, as part of the USAID strategic planning process. In general, Armenia’s transition to democracy can be characterized as incrementally positive, although progress has proceeded at an uneven pace. While elections have become the norm within the political culture, early presidential and parliamentary elections were marked by numerous allegations of fraud. Public opinion polls show a high degree of cynicism and apathy in the democratic process, which has been reflected in low voter turnout in recent elections. There continues to be a widespread public perception of powerlessness, largely as a result of economic hardship and endemic corruption. While many of the institutions required for a democracy are now in place, processes are not fully matured and citizen involvement is too low to ensure government accountability and responsiveness to citizen needs. The revised objective focuses on encouraging and enabling citizens to engage elected officials and their appointees (at both national and local levels) in meaningful dialogue. All citizens of Armenia benefit from this program through increased awareness of their rights and responsibilities in a democracy and through the development of more responsive political institutions. Achievement of this objective supports U.S. Mission goals in democratic practices and human rights.
Key Results: This objective is designed to achieve four key results: (1) strengthened political process; (2) increased citizen advocacy; (3) enhanced circulation of information and (4) increased government accountability and responsiveness to citizens, primarily at the local level. In 1999, progress towards strengthening the political process was particularly noteworthy. International and domestic observers reported improved performance in parliamentary and local elections. Citizen advocacy also improved as NGOs became more active and institutionally more mature.
Performance and Prospects: USAID support to political party development and election administration has helped citizens become increasingly familiar with their rights, roles and responsibilities in a democracy. In turn, citizens have begun using various mechanisms to participate in the political process. The continued development of independent media and NGOs is also encouraging. In early 1999, the Government of Armenia passed a new Universal Electoral Code addressing the problems identified in earlier elections, providing for a more transparent electoral process, and establishing mechanisms for election observation by domestic monitors. USAID played a key role in ensuring that domestic observation was included in this new law. USAID also provided funding and training for the largest group of domestic observers in the country, ensuring that observers were located in almost every precinct. As a result of this USAID support, as well as assistance from UNDP and encouragement from the Council of Europe, parliamentary and local elections held in 1999 received relatively positive reports from most domestic and international observers, with few of the gross violations that marred earlier elections.
Progress in citizen advocacy was significant, although slow, due to the nascent stage of NGOs. In the coming years, USAID will expand its support for general NGO strengthening, emphasizing increased NGO advocacy and constituency-building skills and developing the more nascent NGO community outside Yerevan. USAID will also work with local governments to increase their receptiveness and outreach to NGOs and citizens. In addition to making public sector entities more accessible to citizens, USAID’s new program will improve national policies to provide more autonomy and responsibility to local government, strengthen local government-related professional organizations, and modernize local government management systems. To increase citizens’ understanding of democratic political systems, USAID has also financed the training of teachers in over 270 secondary schools to conduct civic education classes.
Journalists, production staff, and managers from independent television stations across the country continue to benefit from professional technical and journalistic training, regularly contributing objective news reports for programs in Armenia and in the southern Caucasus region. A new activity focusing on developing the skills and financial viability of the print media is underway; plans also call for a special emphasis in the coming year on investigative journalism for both television and print media reporters.
Possible Adjustments to Plans: The revised objective approved in spring 1999 calls for new programs with the print media and for local government strengthening. No other major adjustments are planned at this time, although USAID may consider assistance to the legislative branch to help increase government accountability and responsiveness to citizens. USAID will continue to review its program and the results that are achieved, and make changes as needed.
Other Donor Programs: USAID is the lead donor in democratic development in Armenia. Other donors, including The Open Society Institute and the European Union, provide limited assistance to media and NGO development. International organizations such as the Organization for Security and Cooperation in Europe (OSCE), the Council of Europe, and UNDP provide special election-related assistance with USAID and UNDP providing ongoing assistance for general election administration and preparation.
Principal Contractors, Grantees, or Agencies: Current USAID funded activities are implemented by the following grantees: Internews (independent media), the Eurasia Foundation (small grants for citizen participation and media development), the National Democratic Institute (political party development), the International Foundation for Electoral Systems (election support), the Armenian Assembly of America's NGO Training and Resource Center, Junior Achievement of Armenia, and International Research and Exchanges Board (training and exchanges). Training support is also provided under contract with the Academy for Educational Development.
Selected Performance Measures:
Baseline
(1998)Target
(1999)Target
(2000)Target
(2001)Improved evaluation of elections by observers
Flawed Improved NA* NA* Improved advocacy score from the Regional NGO Sustainability Index 6 5 5 4 Number of commercially viable media outlets 0 0 1 1
* There are no targets for the years 2000 and 2001 because there are currently no scheduled elections. The next scheduled elections are in 2003. The target for 2003 is free and fair elections.
ACTIVITY DATA SHEET
PROGRAM: ARMENIA
TITLE AND NUMBER: Laws are Enforced and Adjudicated Impartially, 111-022
PLANNED FY 2000 OBLIGATION AND FUNDING SOURCE: $1,500,000 FSA
PROPOSED FY 2001 OBLIGATIONS AND FUNDING SOURCE: $2,500,000 FSA
STATUS: Continuing
INITIAL OBLIGATION: FY 1999 ESTIMATED COMPLETION DATE: FY 2003Summary: Although this objective was redefined and approved in 1999, USAID has provided limited support since 1996 for initiatives designed to promote the rule of law in Armenia. In 1995, Armenia adopted a new constitution, which establishes the legal basis for the national government. According to opinion surveys, however, citizens still do not trust the judicial system. The Armenian legal system is widely considered to be ineffective at its main task of dispensing justice. Public perception remains that judges are influenced by politics and money, that advocates are ineffectual, and that regulatory agencies are swayed much more by bribes than by their own regulations. The purpose of this revised objective is to help develop a properly functioning, impartial legal system in Armenia that provides justice according to the rule of law. With USAID assistance, much of the legislation required to promote a free-market democracy is already in place. Therefore, USAID is now focusing its efforts on ensuring the fair and transparent adjudication of the law. The direct beneficiaries are judges and court personnel, advocates, regulatory agencies, and law students; ultimately, a properly functioning, impartial legal system will benefit all Armenians. Achievement of this objective supports U.S. Mission goals in economic prosperity (through fair and transparent application of commercial laws), increased democratic practices (more independent, effective and efficient judicial system), and human rights (impartial judicial rulings).
Key Results: There are four key results being sought under this objective: (1) regulatory agencies administer laws impartially; (2) the judicial system effectively applies the law; (3) an effective court system; and (4) impartial and efficient enforcement of court judgments . Two key indicators of success in this area are the passage of an Administrative Procedures Act and passage of a mandatory of code of judicial ethics. Through USAID assistance, a concept paper on a new Administrative Procedures Act was developed. USAID also worked with the judges association to develop and adopt a voluntary judicial code of ethics.
Performance and Prospects: Progress under this objective has been steady and has generally met expectations this past year. Previously, USAID’s rule-of-law efforts focused on assisting the Government of Armenia in the drafting of legislation to promote a free-market democracy, with the development of many key laws in 1998—including a new Civil Code. Performance over the past year has been on track with expectations. Of the eleven laws and regulations that USAID targeted for passage in 1998, seven have been adopted. Passage of this body of legislation marks a significant step along the road to a fair and impartial legal system. However, actions must now be taken to ensure that the laws are applied and adjudicated fairly and consistently. Accordingly, USAID has moved its focus to helping Armenia establish the mechanisms to ensure the fair and transparent implementation of the law.
Changes in the structure of the legal system were especially notable in 1999. USAID-funded technical assistance has helped make the system much more adversarial. The passage of the Law on the Judiciary has allowed for the restructuring and greater independence of the judiciary. Although still influenced by the executive branch, judges are now more independent of the Ministry of Justice. New judges for the trial and appellate courts were appointed in 1999, based on a testing and re-certification process. While the judicial examination process went well, the overall plan for the exam was seriously flawed and the selection of judges from a pool of qualified candidates was not transparent. A related problem exists due to the often-inappropriate role of the executive branch, which overwhelmingly controlled the selection of judges and also has influence over judicial discipline. To increase judicial independence, USAID is working toward adoption of a mandatory ethics code and transfer of the discipline function to an independent body.
Although the Law on Advocates is still weak, defense attorneys have been given much more influence, while some authority has been taken away from prosecutors. These structural and legislative changes have done much to help set the stage for a fair system of justice. However, it may be some time before the judiciary, the prosecution, and advocates all understand their new roles. The prosecution will likely still be able to exert considerable, if informal, influence and pressure on the judicial system. USAID, therefore, will work closely with judges and advocates to ensure that they understand their new authorities and effectively apply them.
As part of its new strategic approach, USAID will place an increasing emphasis on: 1) improving the overall impartiality of regulatory administration; 2) improving the effectiveness of the court system (through training for judges, lawyers and students, availability of affordable and accessible legal services and more transparent and efficient court operations); and 3) encouraging impartiality and efficient enforcement of court judgements (through improvements to the Service for the Execution of Court Decisions). In addition, USAID will continue to promote greater judicial independence, including consideration of a Constitutional amendment to formally eliminate executive branch influence over the judiciary.
Achievement of this objective is key to several other objectives of the Armenia program. A fair, transparent and effective judicial system is critical to fighting corruption and guaranteeing the economic and political rights of citizens. Reduced funding for this objective would delay the enforcement and impartial adjudication of laws relevant to a market democracy and, thus, negatively impact progress in other parts of the USAID program.
Possible Adjustments to Plans: USAID will coordinate with the World Bank and the German assistance program (GTZ) on planned support for the execution of court decisions and court administration to ensure complementarity in the respective programs. In addition, USAID is currently reviewing the possibility of supporting explicit anti-corruption activities.
Other donor programs: USAID coordinates closely with the World Bank, which is in the planning stages of a broad judicial reform program. USAID programs also relate to those carried out by EU/TACIS, which plans to fund a Judicial Training Institute. The GTZ, the Open Society Institute, and the Netherlands also have provided limited judicial sector support.
Principal Contractors, Grantees, or Agencies: The American Bar Association's Central and East European Law Initiative (ABA/CEELI) and Chemonics International are USAID’s principal implementing organizations. Training support is provided under contract with the Academy for Educational Development.
Selected Performance Measures:
Baseline
(1998)Target
(1999)Target
(2000)Target
(2001)Administrative Procedures Act
None Concept Paper Developed Act Drafted Act Adopted Judicial Code of Ethics None Voluntary Code Adopted Mandatory Code Adopted ---- Number of institutions providing free legal services 1 5 7 7
ACTIVITY DATA SHEET
PROGRAM: ARMENIA
TITLE: Strengthened Social Safety Net, 111-034
PLANNED FY 2000 OBLIGATION AND FUNDING SOURCE: $24,300,000 FSA
PROPOSED FY 2001 OBLIGATION AND FUNDING SOURCE: $9,500,000 FSA
STATUS: New
INITIAL OBLIGATION: FY 1999 ESTIMATED COMPLETION DATE: FY 2003Summary: Armenia, with the help of international donors, is attempting to improve its social protection and primary health care systems, which deteriorated significantly after independence. However, the current economic environment is creating an increasingly large number of vulnerable people who require assistance and for whom adequate and/or appropriate social protection systems do not yet exist. Since 1992, USAID programs in this area have focused primarily on providing humanitarian assistance. Activities under this new strategic objective will focus on developing sustainable public and private sector systems that can meet the population’s immediate as well as longer-term social and primary health care needs. While providing assistance to establish the institutional foundation for sustainable social insurance and health systems, USAID also will address the short-term health, nutrition, income and shelter needs of vulnerable groups. As a collateral impact of such a program, it is hoped that public support for economic and democratic reforms will be enhanced. Direct beneficiaries will include those targeted populations receiving improved services in the short-term, as well as governmental and non-governmental organizations involved in the management and provision of social insurance, social assistance, and health care. Ultimately, all Armenians will benefit from the institutional changes supported by USAID. Improved health and social well being contributes to Armenia’s domestic stability and enhances economic productivity. This new objective directly supports the fourth goal of the U.S. Mission’s Performance Plan that identifies social sector restructuring in Armenia as a necessary element of sustaining reform and promoting broad economic growth.
Key Results: The key results expected under this program are: (1) establishment of the necessary legal, institutional and information bases for the development of sound social insurance systems; (2) increased efficiency and effectiveness of the government in planning for, providing and supervising social assistance and primary health care; and (3) the development of alternative mechanisms to meet the urgent social and health care needs of the most vulnerable. Since this is a new objective, with few pre-cursor activities, there are no key results to report at this time. Two indicators of future success will be increases in the Government of Armenia budget allocation to social sector expenditures and increased value of family benefits.
Performance and Prospects: USAID considers the prospects for achievement of this new objective to be very positive. With USAID technical support, Armenia has taken a number of steps required to support the development of a strengthened social safety net. These include increasing the retirement age, consolidating government-financed benefits, developing a system for targeting family benefit payments to the most needy (with USAID support), drafting key legislation related to compulsory social insurance, and endorsing an increased emphasis on primary and preventive health care. The Government of Armenia recognizes that the former "cradle-to-grave" social protection system is unsustainable and has expressed its enthusiasm for the reforms envisioned in USAID’s new program. By the end of the strategy period in FY 2003, it is expected that each Armenian citizen will have a unique identification number for pension system use. This identification system will also allow the Government of Armenia to track all social insurance contributions and benefits for each individual over time. In addition, based on USAID assistance, it is expected that the foundation will be in place for the implementation of sustainable and effective social insurance systems, covering health, pension, unemployment and disability.
Another focus of USAID support will be improving the implementation of the family benefit system and increasing access to other types of social services and support. USAID will identify and test options for the cost-effective delivery of social services to the most needy through non-governmental organizations or private providers. To complement the provision of services described above, USAID will also support public works in targeted areas to develop needed small-scale community infrastructure and provide immediate employment opportunities. As part of its ongoing efforts to provide support to vulnerable groups, USAID also plans to focus efforts on the earthquake zone, where the World Bank and USAID have conducted assessments and determined options for moving vulnerable populations out of sub-standard, temporary housing. In FY 2000, USAID will conduct a pilot certificate program allowing individual families to purchase adequate housing. At the same time, USAID will assess options for promoting the recovery and economic reconstruction in the regions most severely affected by the 1988 earthquake. Future support in the earthquake zone could include an expansion of the housing certificate program, other shelter initiatives, income generating activities and/or delivery of social services.
Another focus of USAID support will be improving the implementation of the family benefit system and increasing access to other types of social services and support. USAID will identify and test options for the cost-effective delivery of social services to the most needy through non-governmental organizations or private providers. To complement the provision of services, USAID will also support public works to develop needed small-scale community infrastructure and provide immediate employment.
In the health sector, USAID expects that the health care system will be restructured and rationalized. An emphasis will be placed on primary health care--as opposed to hospital-based approaches, and the government’s provision of basic health benefits will be targeted to reach the most vulnerable groups. USAID will also expand its reproductive health efforts in order to address the negative health impacts associated with high abortion rates, by providing better access to family health information and range of services. Finally, pilot activities in the health sector are expected to demonstrate greater efficiencies and effectiveness in increasing access to higher quality primary health care at the community level, allowing for their replication on a more widespread basis. A USAID-financed demographic and health survey, to be conducted in 2000, will support the planning, design and implementation of USAID’s activities—as well as those of other donors, NGOs and the Government of Armenia.
Possible Adjustments to Plans: While plans at the current time do not include assistance for the implementation of new social/health insurance systems, USAID will continue to monitor the situation to assess whether this type of support will be required in the future.
Other Donor Programs: In developing this new objective, USAID has coordinated closely with the range of other donors active in the social sectors. The World Bank is supporting programs for social infrastructure rehabilitation, primary health care, and general social sector reform. Armenian Diaspora contributions to charitable organizations (e.g., schools, orphanages, health clinics and hospitals) are significant. The European Union has worked with Armenia to design a social security numbering system, but does not plan to fund the actual development and implementation of this system. Various UN programs also involved in aspects of primary health care provision, and the World Health Organization is focusing on pharmaceutical reform.
Principle Contractors, Grantees, or Agencies: In the health sector, the American International Health Alliance (AIHA) is supporting primary health care partnerships between Armenian and American health institutions that seek to better serve beneficiaries in regions outside of the capital. With Johns Hopkins University/Population Communication Services (JHU/PCS), USAID is implementing a nationwide Information, Education, and Communication (IEC) campaign in reproductive health. Save the Children, ADRA, and Cooperative for Assistance and Relief Everywhere, Inc (CARE) are currently designing a program to develop a local network of NGOs to improve the availability of reproductive health information and services. In non-health social areas, USAID contributes to the multi-donor efforts of the World Food Program. Training support is provided under contract with the Academy for Educational Development (AED). Additional implementing partners will be identified once the social transition program moves to the implementation phase.
Selected Performance Measures:
Baseline
Target
(1999)Target
(2000)Target
(2001)
Percentage of national budget allocated to social sector expenditures
10 (1998) 12 12 12
Value of the family benefits divided by the standard market basket needed to meet minimum needs (%)
N/A (1998) 22.5 25 27
Note: Other indicators, especially those relate d to the provision of health services and possible employment initiatives, will be developed as activities are designed.
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Last Updated on: February 01, 2001 |
