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Economic Growth

Armenia continues to face critical economic challenges despite significant progress in macro-economic and structural reforms. The country’s economic growth, as measured by gross domestic product (GDP), has been strong; however, export competitiveness, employment, gross national income (GNI) per capita, and energy security are all lower than the regional norm. Many aspects of economic development that are necessary for ensuring the sustainability of economic growth, such as the business enabling environment, private sector capacity, and the creation of productive employment opportunities and poverty reduction, have not adequately progressed. Widening disparities in wealth and income have also led to a serious socioeconomic divide on several levels, most notably between rural and urban areas.

In terms of rural economic development, farm and rural non-farm incomes are low and labor is underutilized. While over 40% of the labor force is employed in agriculture, it only contributes to 20% of GDP due to low productivity. The lack of market access in some rural areas not only hinders normal economic activity, but also prevents new entrepreneurs from entering the market. Poverty remains a serious problem and it is estimated that 25-50% of the rural population lives at or below the national poverty line. Social hardships and insufficient employment opportunities, particularly outside the capital, Yerevan, have triggered outmigration. Thirty to forty thousand Armenians emigrate each year, severely impacting the population in rural areas.

 

CURRENT PROGRAM

PRIVATE SECTOR

USAID works to enhance more inclusive growth in Armenia by supporting activities that can develop new and sustainable value chains, create new jobs, increase access to markets and finance, and incentivize Armenians to stay and work in their communities. USAID has been supporting the Government of Armenia to advance civil aviation liberalization reform to make Armenia a more desirable tourism destination. USAID’s cultural and rural tourism activities seek to create new opportunities for Armenia’s small and medium businesses to grow and generate income while alleviating rural isolation. USAID is also helping Armenia to develop its human capital endowment and its ability to advance in one of the world’s most competitive sectors – Information Technologies. As a direct result of USAID’s engagement, large multinational corporations such as Microsoft, National Instruments, and IBM have made substantial investments in Armenia through public-private partnerships.

USAID activities in agribusiness and hospitality management will bolster rural development across the country, including some of the most marginalized communities. USAID will work to increase rural employment by tackling community competitiveness, workforce development, and small scale infrastructure renovation. Activities will also promote rural entrepreneurship, facilitate trade, and better access to local and regional markets for rural businesses, as well as address the needs of rural entrepreneurs through partnerships with regional, community, and non-governmental organizations. Within selected value chains and rural areas, USAID’s efforts will improve small and medium enterprises’ (SMEs) financial management, business planning capacity, and awareness of different financing and investment options. Recognizing that women entrepreneurs play an important role in SMEs, USAID will ensure that access to finance for women is also facilitated.


The Establishment of Innovative Solutions and Technologies Center public private partnership with IBM helps develop and strengthen the educational capabilities of Armenian higher educational institutions and enhance their research potential.

The My Armenia cultural tourism activity in partnership with the Smithsonian Institution supports Armenia’s tourism sector through a unique combination of research, creative product development, capacity building, and a strong focus on fresh approaches in the industry. The project leverages Armenia’s existing historical and cultural sites with its intangible cultural heritage with appeal to a broad international market and a potential to bring more visitors to Armenia. ‡‡‡  

The Partnership for Rural Prosperity (PRP) program promotes rural economic development in Armenia. PRP helps rural communities to identify local economic growth opportunities, expand employment prospects for women, youth and vulnerable groups, facilitates infrastructure upgrades, and improves access to finance and markets. ‡‡  

The Advanced Rural Development Initiative (ARDI) develops competitive rural value chains to increase incomes and improve livelihoods of 48 rural communities in Syunik, Shirak and Lori marzes of Armenia. ARDI also builds the capacity of rural entrepreneurs–specifically youth and women–to increase their sales and/or revenues and create jobs for community members.  ‡‡‡  

Through the Support for the Armenian Agricultural Census project, USAID provides technical assistance to Armenia to conduct the first National Agricultural Census in over hundred years. The census will help the Armenian Government to collect data on agricultural development and food security, and better plan and support the sector’s development.  ‡‡‡  

The Support to the Agribusiness Teaching Center (ATC) project assists the ATC and the International Center of Agribusiness Research and Education (ICARE) in building their capacity to serve as a leading educational and research institution and center of excellence in agriculture and agribusiness in Armenia and in the region.  ‡‡‡  

The Tax Reform Project (TRP) works to increase business competitiveness in Armenia through reducing tax compliance burden for individuals and businesses. The project assists the State Revenue Committee and the Ministry of Finance to improve tax policies and tax administration procedures, as well as strengthen their human and institutional capacity to provide better and more efficient taxpayer services. TRP also supports the development of an institutionalized and effective public-private dialogue between the tax authorities and taxpayers. 
 


 

ENERGY AND WATER MANAGEMENT

Energy and water resources are critical to a strong business climate, sustainable economic growth, and regional stability. USAID has helped Armenia to achieve measurable progress in the energy and water sectors. Physical infrastructure upgrades have been accompanied by institutional and regulatory reforms that have increased transparency, accountability, and self-reliance. However, Armenia still faces challenges in sourcing and managing both its energy and water, and its energy efficiency is below the global average. The country is among the most dependent on energy imports relative to usage in Europe and Eurasia, including oil as well as gas and uranium used by the nuclear and thermal power plants.

The primary drivers of Armenia’s energy insecurity are price increases of natural gas imports, weak diversification in terms of source and supplier, and substantial risks associated with the aging infrastructure, including the Metsamor nuclear power plant that generates 42% of the country’s electricity.

In recent years, USAID has provided technical assistance to the Armenian government in conducting long-term strategic analyses and plans, identifying optimal energy and water investments, and improving nuclear safety in accordance with Western standards. 

Going forward, USAID will continue to support Armenia to consolidate and advance reforms in energy and water management in order to make them sustainable and efficient. USAID will assist in strengthening cooperation and energy integration with neighboring Georgia and the region. Assistance will also target energy market reforms in Armenia and development of renewables to improve the country’s energy resilience.


The Advanced Science and Partnerships for Integrated Resource Development (ASPIRED) project supports sustainable water resource management and sustainable practices of water use through the use of science, technology, innovation and partnerships (STIP) approaches. The goal is to reduce the rate of groundwater extraction in the Ararat Valley to sustainable levels.  ‡‡‡   

Building Groundwater Management Capacity for Armenia’s Ararat Valley – The project analyzes and identifies critical gaps in the hydro-geological framework of the Ararat Valley to help develop sustainable groundwater management strategies.  ‡‡‡

The Enhancing Capacities for Low Emission Development Strategies (EC-LEDS) project promotes the integration of regional energy systems; helps develop regional energy markets; supports increased production from renewable sources; and improves efficiency and transparency within the sector.  ‡‡‡

Safety Analysis of Civilian Nuclear Use and Support for Critical Human Capacity Building at the Nuclear and Radiation Center (NRSC) - The goal of the project is to help NRSC strengthen its human and institutional capacity by providing advice and consultations that will assist with safety analysis of civilian nuclear use. The analysis will help the Armenian Nuclear Regulatory Authority to assess safety issues related to the existing Metsamor nuclear power plant. The safety features are also intended to address lessons learned from the March 2011 accident at Fukushima Daiichi nuclear power plant in Japan.  ‡‡‡

Support to National and Regional Energy Planning, and Capacity Building at the Scientific Research Institute of Energy (SRIE) - The goal of the project is to provide technical assistance to the SRIE to strengthen its human and institutional capacity in order to develop and analyze the least cost generation plan (LCGP), and conduct national and regional power transmission planning studies based on existing national models as well as the Black Sea Transmission Planning (BSTP) regional models. The project will seek to develop SRIE’s capacities to perform as an electric transmission center of excellence for the region.  ‡‡‡

Last updated: May 02, 2017

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