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Political Overview

Following the collapse of the Soviet Union and the re-emergence of the Republic of Armenia in 1991, a significant out-migration from Armenia took place, due principally to reduced economic opportunity, the continuing effects of the devastating 1988 earthquake, and dislocations caused directly and indirectly by the war with Azerbaijan over the enclave of Nagorno-Karabakh. Armenia also experienced a serious energy shortage in 1992-94. The out-migration continued through the end of the decade, although slowing to a lower level. According to preliminary figures from the census conducted in October 2001--the first census since Soviet times--three million de facto permanent residents live within the Republic?s borders, with a few hundred thousand migrating seasonally between Armenia and Russia and Armenia and Ukraine in search of work. In an effort to resolve the conflict over Nagorno-Karabakh, the Minsk Group of the Organization for Security and Cooperation in Europe (OSCE) has supported periodic meetings of the Armenian and Azerbaijani Presidents, so far without a final resolution of the conflict. Although only a cease-fire remains in place, negotiations continue, and occasional confidence-building measures, such as exchanges of prisoners of war, have occurred. Armenia has a defense agreement with Russia that allows Russia to station troops and equipment outside Yerevan and Gyumri, as well as border guards to protect Armenia?s borders with Turkey and Iran.

Armenia?s foreign policy seeks regional integration, membership in the World Trade Organization (WTO), which approved Armenia's accession in December 2002, and cooperation with Euro-Atlantic organizations, including the North Atlantic Treaty Organization (NATO). Within the NATO framework, Armenia participates in the Partnership for Peace (PfP) and the Planning and Review Process (PARP) programs. Armenia became a member of the Council of Europe (COE) in May 2001. However, the country still faces many challenges in fulfilling its commitment to become a democratic, free-market state. The October 1999 assassinations of the prime minister, National Assembly speaker and six other officials, who had been elected only six months earlier in fair but flawed elections, led to a political crisis that lasted into mid-2000 before stability was restored. The current cabinet, chosen in May 2000, appears durable and capable of marshaling a working majority in the National Assembly despite challenges to government policies from individuals both inside and outside the government. Local elections in October 2002 were categorized by outside observers as an improvement over previous elections, although problem areas remained. Presidential and legislative elections are scheduled in February and May 2003, respectively, and the latter may be accompanied by a referendum on proposed constitutional amendments that would transfer some powers from the executive to the legislative branch. The press is free, although self-censorship is practiced with respect to topics deemed to involve ?national security.? Freedom of association, especially for some religious groups, is sometimes hampered by burdensome registration requirements. One of Armenia?s most pressing human-rights needs, along with a revised criminal code to replace the Soviet-era code still in place, is the development of a fully independent judiciary capable of reliably protecting citizens from abuse by police and prosecutors.

Economic Overview

Over the past few years, Armenia has implemented a comprehensive stabilization and structural reform program. Some of the program?s main achievements include price liberalization; privatization of small, medium-sized and large enterprises; and near-completion of the WTO accession process (finalization is likely in early 2003). In 2002, the management of Zvartnots International Airport was transferred to private hands for 30 years, and the ArmElNet electricity distribution network was privatized. Armenia has established modern regulatory and supervisory frameworks for banking, but the sector remains weak, and the ongoing consolidation process will likely lead to numerous bank closures in the next few years. Armenia?s steady macroeconomic progress has earned it support from international institutions. The International Monetary Fund (IMF), World Bank, European Bank for Reconstruction and Development (EBRD), other financial institutions, and foreign countries have extended considerable grants and loans?total loans since 1993 exceed $900 million. These loans are targeted at reducing the budget deficit; stabilizing the local currency; developing private businesses; energy; the agriculture, food processing, transportation, and health and education sectors; as well as ongoing rehabilitation work in the region damaged by the 1988 earthquake. Significant work remains to be done in combating corruption and establishing a predictable business and investment climate, particularly in the day-to-day administration of such areas as tax and customs policy. The oversized civil service requires major downsizing and restructuring, which the government has recognized but not yet undertaken on a significant scale. Furthermore, the benefits of growth and reform have yet to reach the broad majority of the Armenian population. Both unemployment and under-employment remain a significant problem. Most estimates place over half the population below the poverty line, although official figures indicate a drop in poverty from 55 to 51 percent in 2001. The preliminary population figure of three million, which probably reflects an accurate measure of the information given to census takers by respondents, represents a decrease from the previous official figure of 3.8 million and therefore raises the gross domestic product (GDP) per capita figure for 2001 from $558 to $706.

Armenia?s long-term prosperity will depend on the continuation and extension of the country?s reform program. Positive political developments, particularly the end of the border closures imposed by two of Armenia?s four neighboring countries?Turkey and Azerbaijan?as a consequence of the ongoing Nagorno-Karabakh dispute, will also play a key role. Most of Armenia's macroeconomic figures show steady progress, however. According to official figures, in the first nine months of 2002, Armenia's economy posted an unprecedented 11.1 percent growth in GDP compared to the same period in 2001. The consumer price index (CPI) decreased by 4.2 percent over the same period. Resulting Central Bank monetary policy, which seeks to expand money supply, has therefore contributed to the continuing devaluation of Armenia?s national currency (the dram) against the dollar in recent years; from 1998 through the end of FY 2002, the exchange rate gradually rose from 505 to 585 drams to the dollar. Official unemployment has continued to decrease, from 11.9 percent in 1999, 10.9 in 2000, and 10.1 in 2001 to 9.5 percent in 2002, although these figures are widely thought to underestimate the actual level. The external debt-to-GDP ratio stood at 44.9 percent in 2000 and fell to 42.7 percent in 2001. A possible debt-for-equity swap with Russia, proposed for 2003, would reduce that figure still further. The external trade deficit fell from $585 million in 2000 to $531 million in 2001; the four largest trading partners were the European Union (25.8 percent), Russia (17.6 percent), United States (15.2 percent) and Iran (9.5 percent). The Government of Armenia improved its revenue collection performance in FY 2002, meeting its budgetary targets and thereby convincing the IMF to deliver the second, $26 million tranche of its Poverty Reduction and Growth Facility, which revenue collection difficulties had delayed for over a year. Revenues as a percentage of GDP remain very low at 14.8 percent, although they have improved over the 14.1 percent collected in 2001.

U.S.-Armenia Task Force for Economic Development

The fourth meeting of the U.S.-Armenia Task Force (USATF) took place in Yerevan in January 2002, after being delayed due to September 11. In September 2002, the fifth meeting of the USATF took place in Washington. This semi-annual forum allows the U.S. and Armenian governments to evaluate the U.S.-Government funded assistance program in Armenia in depth. Well-attended by high-level officials from the U.S. and Armenian governments, the meetings resulted in a number of cooperative efforts in the areas of macroeconomic policy, business climate, energy and environment, counter-terrorism, and trafficking in persons. Following the September USATF, an Action Plan was formulated to help maintain progress on specific issues, which will be reviewed bilaterally before the next formal USATF meeting. The USATF is proving to be an extremely beneficial forum for assessing Armenia's long-term development strategy and the U.S. Government's appropriate contribution to that strategy. An important element of that strategy is the Government of Armenia's Poverty Reduction Strategy Paper (PRSP). Both governments agreed that this overall plan, once adopted by the Armenian Government, would serve as the basic roadmap for Armenia's future development, and help guide U.S. assistance programs. The primary goal of this strategy will be to reduce the widespread poverty in Armenia. Similarly, once the Government of Armenia adopts an overall anti-corruption strategy, the U.S. Government will consider how it can best contribute to that strategy. The U.S. Government is already commenting to the Government of Armenia on the developing anti-corruption strategy in concert with other international donors in a working group chaired by the OSCE. The next USATF meeting is planned for spring 2003 in Yerevan.

Overview of U.S. Government Assistance

In FY 2002, the U.S. Government provided an estimated $124.97 million in assistance to Armenia:

• $92.20 million in FREEDOM Support Act (FSA) assistance, including $89.05 million in FY 2002 funds and $3.15 million in prior-year funds;

• $7.80 million in U.S. Department of Agriculture (USDA) food assistance;

• $4.00 million in Foreign Military Financing (FMF);

• $10.78 million in other U.S. Government assistance; and

• privately donated and U.S. Defense Department excess humanitarian commodities valued at $10.19 million.

The U.S. Government has three broad goals for its assistance to Armenia: an open and pluralistic civil society; a functioning, law-based market economy; and a stable political environment in the region. The main priorities of U.S. Government assistance in FY 2002 were private-sector development, economic and energy-sector reform, democracy and good governance, anti-corruption, assistance to the earthquake zone, social-sector reform, regional integration and cooperation, education and training, agriculture, and improved security regimes in such areas as border control and internal demining. The program continued to focus on increasing the demonstrable benefit of U.S. Government-funded assistance to average Armenian citizens and to their standard of living. This focus helps build and sustain popular and political support for the implementation of democratic and economic reform measures needed to pursue the three larger goals. At the same time, the U.S. Government has been decreasing the amount of humanitarian assistance it provides to Armenia, replacing it with an increased amount of development assistance and private-sector support programs. This shift in relative priorities is designed to help Armenia make an efficient transition to a free-market economy, in part by creating real jobs in new enterprises. In FY 2002, humanitarian assistance accounted for eight percent of U.S. Government assistance to Armenia, as compared to 15 percent in FY 2001. U.S. security assistance cooperation with Armenia continued to expand in FY 2002 in several targeted areas. The waiver of Section 907 of the FSA (which prohibits certain kinds of assistance to the Government of Azerbaijan) has enabled the U.S. Government to engage in a productive relationship with the militaries of both Armenia and Azerbaijan and promote their integration into Western military structures.

Training, Exchange and Educational Reform Programs

Since FY 1993, U.S. Government-funded exchange programs have brought over 3,500 Armenian citizens to the United States for short-term professional or long-term academic training, including over 570 in FY 2002 alone. These programs give participants an opportunity to develop their skills and establish valuable contacts with U.S. counterparts.

U.S. Department of State ? Public Diplomacy Exchanges: Over 370 Armenians traveled to the United States in FY 2002 under academic and professional exchange programs administered by the U.S Embassy's Public Affairs Section (PAS) in collaboration with the Bureau of Educational and Cultural Affairs (ECA). These programs are designed to expose Armenia's next generation of leaders to Western concepts of democracy and market economics. (See also Partnership Programs section below.)

• Academic Exchanges: In FY 2002, over 100 young Armenians traveled to the United States under the ECA Bureau's academic exchange programs. Of this total, 34 were enrolled in U.S. master's degree programs under the Edmund Muskie/ FREEDOM Support Act Fellowship Program, 50 were secondary school students participating in the Future Leaders' Exchange (FLEX) Program, and 19 were participants in the Undergraduate Exchange Program. In addition, four Armenian scholars were awarded grants under the ECA Bureau's Regional Scholars' Exchange Program (RSEP); another eight participated in the Contemporary Issues (CI) Program; five received training under the Junior Faculty Development Program (JFDP); six teachers received Teaching Excellence Awards (TEA); 10 teachers were sent to the United States under the Partners in Education (PiE) program; two teachers and nine students were sent to the United States under the Secondary School Excellence Program; two scholars received Fulbright scholarships; and two participants in the fields of finance/banking and business administration were affiliated with Boston University and Michigan State University for the 2002-2003 academic year under the Hubert H. Humphrey Fellowship Program.

• Professional Exchanges: A total of 61 Armenians participated in professional exchanges under the International Visitor (IV) Program, receiving U.S.-based training in such areas as ecology and environment, tourism promotion, local government, agricultural entrepreneurship, privatization, accountability in government and business, aviation, television and print news reporting, cultural preservation, and educational technologies. In addition, under the Community Connections Program, 70 Armenians traveled to the United States for community-based internships in the fields of business development, business development in tourism (nationwide), public health and sanitation, and agribusiness.

U.S. Department of State ? Curriculum Development Programs: With funding from the Bureau of Educational and Cultural Affairs (ECA),.the International Research and Exchanges Board (IREX) administered a curriculum project emphasizing the development of elementary mathematics, language arts, and science curriculum materials. A team of curriculum writers worked with U.S. specialists to draft, pilot, and publish a handbook on elementary teaching methodology, curriculum models for each subject area, and a specialized guide for applying theories on how children learn in Armenian classrooms. Over 600 Armenian teachers and educators have participated in training on the use of the curriculum. Five training and resource centers have been established in the cities of Yerevan, Vanadzor, Gyumri, Sissian and Goris. A total of 4,000 copies of the curriculum materials have been published, and an electronic library containing training materials has been established.

USAID Training Programs: Through its Global Training for Development (GTD) and Strategic Technical Assistance for Results with Training (START) projects, USAID trained more than 1,470 Armenians, approximately 48 percent of whom were women, through 120 U.S.-based, in-country, and third-country training programs in FY 2002. Training focused on economic reform, business development, anti-corruption, public health, water sector reform, and good governance and other issues. Ten programs were conducted in leadership skill development for political parties, youth groups, and non-governmental organizations (NGOs). Approximately 50 programs were developed for social service case workers and managers. Assistance provided to the Association of Accountants and Auditors of Armenia included staff development, curriculum development, the training of instructors, and the translation of texts and workbooks. Participants in a study tour used their training to develop recommendations (four of which were accepted) on banking supervision for the Central Bank of Armenia. The acceptance of the new regulations also spurred the Armenia?s National Assembly to pass legislation to support the new supervision practices. A participant in a training program on government transparency successfully advocated for substantial improvements in government procurement and conducted training programs to share his knowledge. A participant in a training program on democratic leadership worked to build issue-based coalitions by using sampling methods to divide his community into small units representing specific geographic areas with common problems. The same participant also established a television station that airs a program in which citizens discuss their problems and concerns one week, and the following week, the mayor reports on the steps taken to address their concerns. Another participant used scenario planning to contribute to his city?s budget preparation and a three-year city construction project, and helped organize a meeting with government officials and the media to discuss these issues. As a result, the budget was publicly discussed before approval, and comments from the community were considered for the first time.

USDA Agricultural Marketing Assistance Project (MAP): A total of 90 U.S. university advisors traveled 450,000 kilometers in rural Armenia in FY 2002, together with their Armenian counterparts, working side-by-side ?in the barn and on the field? to help rural Armenians improve their standard of living. USDA also sponsored 35 Armenian agricultural professionals to travel to the United States for training on practical management and problem solving. USDA requires students to work on summer internships with client agribusinesses and encourages faculty participation outside the classroom. USDA supports five cooperative agreements with U.S. universities to foster institutional linkages. For example, Texas A&M University developed a special short course for five Armenian Agricultural University officials on leadership and strategic management development in agricultural higher education. (For additional details on MAP activities, please see Economic Development Programs section below.)

U.S. Department of Agriculture (USDA) ? Cochran Fellowship Program: In FY 2002, the Cochran Program trained 11 participants in ethnic food marketing, agribusiness education, and cheese production and processing. These programs were aimed at strengthening the agricultural business systems in the country, and were closely coordinated with MAP.

U.S. Department of Commerce ? Special American Business Internship Training (SABIT) Program: Eight interns were trained from Armenia, participating in the technology commercialization program in the software development and plastics industries, and the oil/gas and information technologies sessions under the SABIT Standards Program. In addition, over 25 SABIT alumni participated in an alumni event in Yerevan in June 2002.

Democracy Programs

U.S. Department of State ? School Connectivity Program: The Armenia School Connectivity Program, which is implemented by Project Harmony through a grant from the Bureau of Educational and Cultural Affairs (ECA), promotes civic education and free access to information by providing secondary schools with computer classrooms with access to the Internet, computer training, linkages with U.S. schools, and cooperative curriculum development through the Internet. As of October 2002, the program had 88 operating facilities, with plans to increase the network to 100 schools by the end of 2002. A two-year, $5 million program expansion begun in FY 2002 will provide the resources, Internet access and training for a network of 300 participating schools in communities across all 11 of Armenia?s regions. Project Harmony provides the educational leadership, technical equipment, and support to ensure that Internet resources are integrated into the academic program of participating schools in a way that strengthens democracy, civil society and cultural understanding throughout Armenia. The program has also made curriculum resources developed by the Open Society Institute available to Armenian teachers. Armenian educators and school directors also participate in professional U.S.-based training in technology, community development, civic education, and educational reform. In March 2002, the program organized its first program-wide conference, which focused on educating the next generation of active citizens in a digital culture. Under its Civic Education Training Initiative (CETI), Project Harmony hosted four U.S. educators who conducted workshops in Yerevan and in four regions of Armenia: Lori, Shirak, Syunik, and Vayots Dzor. In addition, a CETI civics resource development conference resulted in the Armenian teachers creating six Armenian-language resources based on the civics curriculum. Over 450 participants attended these sessions, including secondary-school teachers of history, civics education, social studies, languages and other subjects; faculty members from institutions of higher learning; and representatives from the Armenian Ministry of Education and Science, the Center for Education Reforms, Junior Achievement Armenia, the U.S. Embassy. Project Harmony also conducted a website competition aimed to serve as a new stage for promoting the development of online educational resources in the Armenian language and the promotion of Armenian schools and communities. Open to all 88 schools involved in the Armenia Connectivity 2000 Network, the competition awarded prizes to the best seven websites out of a total of 57 entrants.

U.S. Department of State ? Internet Access and Training Program: IATP, which is sponsored by the Bureau of Educational and Cultural Affairs (ECA) and administered by the International Research and Exchanges Board (IREX), provides Internet training for targeted audiences and provides small grants for website development and training activities. FY 2002 funding provided for the expansion of the IATP network to include 11 open-access Internet facilities in seven cities in Armenia.

U.S Department of State ? Civic Education Grants: With support from an FSA-funded ECA Bureau Civic Education grant, the University of Iowa assisted the Ministry of Education to develop a civic education course for use in seventh-grade classrooms in Armenia. Under this project, over 200 school administrators and teachers have participated in training seminars; 3,000 copies of the seventh-grade curriculum were published; 1,500 copies of a civic education journal were distributed to secondary schools; and a website on civic education was established. Also with an FSA-funded grant from the ECA Bureau, the U.S.-based Institute for Training and Development is administering a civic education curriculum development project for Armenia. Six Armenian educators are working with U.S. curriculum and social science specialists to draft a civic education course for the eighth and ninth grades and to conduct training programs for high school teachers in Armenia. It is anticipated that 5,000 copies of the curriculum materials will be published and disseminated in schools throughout Armenia.

U.S Department of State ? Democracy Funds Small Grants Program: In FY 2003, 34 grants totaling approximately $340,000 were awarded to Armenian NGOs and media outlets under the U.S. Embassy?s Democracy Commission Small Grants Program. Democracy Commission grants funded projects to promote women?s and human rights, inform the public about election issues, facilitate the free flow of information, and support independent mass media.

USAID Democracy and Good-Governance Programs: Although the October 1999 assassinations and the subsequent instability within the Armenian Government slowed the country?s democratic development throughout 2000-2001, some progress was once again made in 2002, particularly in the development of NGOs and legal associations. Armenia became a member of the Council of Europe (COE) in January 2001, and as such, made a commitment to adhere to the rule of law and the other democratic constitutional principles mandated by COE membership. In comparison with FY 2001, Armenia's NGO sector and independent media increased their involvement in decision-making processes and increasingly advocated for their interests. At the same time, the Armenian Government increased its efforts to engage NGOs and media in open dialogue as it developed key legislation. However, Armenia?s overall political environment continued to be defined by public perceptions of corruption and citizens? disengagement from decision-making processes. USAID?s democracy and good-governance programs achieved the following results in FY 2002:

• Conflict Resolution Training: USAID provided conflict resolution training to 128 Armenian political party representatives and civic education teachers. Twenty-six of these participants in the political party training were then selected for additional conflict management, communication and leadership training in Cambridge, Massachusetts. The Mayor of Ijevan commented that he used skills learned at the training to organize and lead a community development advisory committee consisting of government officials, NGOs and business leaders. This committee developed Armenia's first municipal economic development plan.

• NGO Development Programs: In FY 2002, Armenia?s NGOs continued to improve their ability to engage citizens and work with the government, although the NGO sector?s financial viability remained weak. USAID?s NGO strengthening program focuses on supporting the advocacy efforts of well-developed NGOs throughout Armenia and on developing the capacities of nascent NGOs in regions outside of Yerevan. NGOs have become increasingly involved in advocacy and have formed issue-based coalitions on various topics, including anti-corruption, domestic violence, and integration of handicapped children into the public school system. Many advocacy projects have resulted in changes to legislation and policies, including amendments to the Law on Social Welfare of the Disabled and changes in admission regulations for institutions of higher education. In FY 2002, partnerships between local authorities and NGOs have multiplied, validating the role of NGOs as service providers. Meanwhile, nascent NGOs outside of Yerevan benefited from seed grants that enabled them to carry out a wide variety of programs. A conference of more than 300 NGOs held in FY 2002 demonstrated the growing ability of civil society organizations to organize and articulate their concerns outside of government channels.

• Civic Education in Secondary Schools: Under a USAID-financed program carried out in collaboration with Armenia?s Ministry of Education, 1,407 secondary school teachers were trained in the areas of civic education, human rights, and the state and the law (another 1,730 teachers had been trained in FY 2001). As a result, all of Armenia?s secondary schools have teachers trained to teach the three civic education courses required by law.

• Support for Independent Media: In FY 2002, as in previous years, independent television stations receiving USAID-funded technical assistance continued to improve the quality of their news programming, but still faced financial viability problems. USAID provided technical assistance to both print and broadcast media to strengthen the quality of their news coverage and their investigative journalism skills, and provided training on financial management to media outlets to strengthen their long-term viability. During FY 2002, news quantity (measured in hours of news coverage) increased by 53 percent. As a direct result of USAID training, 20 percent of stations started new informational programs; 15 percent of television and radio stations reorganized their newsrooms; and 25 percent of trainees were promoted to positions of more responsibility and editorial control. USAID also provided equipment to independent media to increase their access to information and to improve the quality of their news production.

• Local Government Program: Technical assistance is provided to the city of Yerevan and nine pilot municipalities to reform the legal framework at both the national and municipal levels. This program supports decentralization; establishes effective and transparent municipal management systems; supports the development of local government associations; and strengthens local governments so that they are more accessible to citizens. Types of assistance in FY 2002 included training for municipal officials, provision of equipment, training of professional associations, and community development programs. Information centers established under this project are linked by an intra-network to all of the data entry stations within the district (including the mayor?s office and the budgeting, planning, and program departments). Upon receiving an inquiry from a citizen, a center can access the information directly and provide an appropriate answer. The local government program developed capital improvement plans in each of the pilot cities to serve as the basis for community development. This program successfully linked with Save the Children's public works program to implement capital improvement projects that improved community infrastructure, provided short-term employment, and promoted citizen participation in planning and selecting priorities.

• Rule-of-Law Programs: USAID supported a range of activities to improve Armenia?s legal system. USAID supported development of legislation, including providing input on draft amendments to Armenia's 1995 Constitution. The Court of Cassation and the Association of Judges of the Republic of Armenia published all decisions of the Court of Cassation and selected decisions of the Economic Court, thus making them available to the legal community and the general public. This is a significant step toward increasing the transparency of the judiciary in Armenia. USAID is also working with the Union of Advocates and other lawyers? associations to develop a common code of ethical standards, promote continuing legal education, provide services to their members, and develop legal aid services for vulnerable segments of society. To complement this structural and institutional work, USAID continues to fund training for judges designed to raise their professional confidence and competence.

• Legislative Strengthening: USAID launched a legislative strengthening program to improve the institutional capacity of the National Assembly (NA), increase citizen access to the NA, and encourage greater interaction between the electorate and the legislators. Through USAID assistance, an improved NA website now provides the public with information on the structure and functions of the NA. The NA now posts agendas for NA sessions which include hyperlinks to the texts of the draft laws under consideration. The NA established a nonpartisan Research and Analysis Working Group to coordinate these functions. Key parliamentary representatives recently participated in a firstever inter-departmental roundtable discussion on development of the NA?s budget.

• Domestic Violence: USAID awarded direct grants totaling approximately $475,000 to six local NGOs to implement domestic violence programming in Yerevan, Gyumri and Martuni. With these grants, the NGOs will establish shelters, hot lines, and support groups, and provide counseling and skills training to women affected by domestic violence. One project involves court monitoring of domestic violence cases and legal training for judges and lawyers with regard to such cases.

• Civic Participation: USAID promotes citizen awareness of their rights and responsibilities in a democratic society and their participation in governance through the organization of dialogue and initiative groups, the publication and distribution of materials on important civic issues, and the promotion of the role of women in civil society and governance. USAID civic educators conducted over 800 dialogue groups in eight regions of Armenia. Topics of discussion included the Civil Code, human rights, constitutional amendments, community schools, the Law on Education, the National Assembly, local government, women and community development, and voter education, among others. Similarly, 46 initiative groups were created to channel citizens? public concerns raised in the dialogue groups into advocacy and community involvement. Initiative groups worked on compensation for agricultural losses, residential space management, a local NGO forum, NGO legislation, representation at the National Assembly, the draft media law, and draft condominium legislation. Almost 18,900 citizens were involved in the dialogue and initiative groups in FY 2002, as well as more than 1,300 government officials.

Economic Development Programs

U.S. Department of the Treasury ? Technical Advisors: In prior years, the Treasury Department's budget reform assistance to Armenia focused on assisting the Ministry of Finance and Economy (MOFE) with the transition from the Soviet system of budgeting. The thrust of FY 2002 assistance was on implementing a modern system of program budgeting, which requires a substantial amount of training. There are over 6,000 budgetary units in Armenia, and during the next three to four years, it is anticipated that over 1,000 people will require training in Armenia?s budget process. Once it becomes fully operational in FY 2003, the newly established MOFE Training Center will have the capacity to hold training sessions for up to 60 people. Course material will emphasize budget process, formulation and execution; modern cash management practices; and leadership/management development. Training materials for the courses to be taught at the Center have already been developed and tested by the Treasury Department, and course materials are available in Armenian. The Treasury Department will contribute additional training materials developed by its budget team for other countries, as they become available. As the Center gains more experience and maturity it is planned to broaden the curriculum and expand the scope of training. In addition to his work with the Center, the Treasury Department advisor helped MOFE budget staff prepare and publish the Citizen?s Guide to the Budget, FY 2002, which contains historical, current, and medium term forecast budget data, as well as information on the national debt and the budgetary process, and the goal of which is to promote transparency of the Armenian Government?s fiscal operations and management and to encouraging broad public participation in the country?s governance. This is the first such document to be published in Armenia.

USAID Economic Restructuring and Private-Sector Development Programs: In FY 2002, USAID continued to implement a broad program to support economic restructuring in Armenia. For the past several years, USAID has collaborated with the U.S. Treasury Department to provide technical assistance in the areas of budget policy and tax administration. In recognition of the need to balance its macro-level assistance with direct assistance to the private sector, USAID continued to emphasize support for micro- and small and medium-sized enterprises (SMEs) in an effort to ensure more immediate and tangible benefits to the Armenian population. Enterprise-level assistance to SMEs in key sectors such as tourism, agribusiness, information technology, jewelry/gem production, and shoe and textile production helped targeted firms improve their efficiency and competitiveness. A number of Armenian Government counterparts have benefited from USAID assistance in this area, including the Tax Administration, the Ministry of Finance and Economy, and local land and property offices. Property tax administration, which is a major source of revenue for local governments, has historically been administered by the national government. Improved property tax administration and collection is therefore vital to empowering local government. USAID also provided technical assistance related to Armenia's invitation to accede to the World Trade Organization (WTO). WTO accession is a decisive milestone, marking years of economic liberalization and market reform. The U.S. Government will continue to provide assistance in this area to help integrate Armenia more fully into the world economy. Key accomplishments of USAID?s private-sector programs in FY 2002 are described below:

• Tax/Fiscal and Customs Reform Programs: To help the Government of Armenia increase its revenues, rationalize its resource allocations, and reduce corruption, USAID has been providing assistance to improve Armenia?s tax and customs laws and administration, as well as to enhance the government?s fiscal management (including budgeting) practices, since 1998. USAID helped the Ministry of State Revenues (MSR) to improve its structural organization and automation, including the development and implementation of MSR?s web site, www.taxservice.am. The web site is an important move toward greater transparency, making laws, decisions, and statistical information broadly available.

• Poverty Reduction: USAID assisted the Armenian Government with the drafting of a poverty reduction strategy paper (PSRP). The PRSP is an important step toward alleviating poverty in Armenia, which persists despite strong growth in the country?s gross domestic product (GDP).

• Customs Administration: The State Customs Committee (SCC) received USAID assistance to reorganize and modernize customs administration, and to improve the SCC's ability to administer the Customs Code fairly, efficiently, and professionally. Improved customs administration is especially important for a country as small as Armenia. An SCC website (www.customs.am) is making customs administration more transparent to businesses and individuals involved in foreign trade. USAID also helped to design, develop and deploy a border crossing and exemption control system in Armenia, which allows customs officials to verify travelers' import exemptions at high-volume border crossings. Individuals are allowed limited duty-free imports, and the system allows officials to distinguish between those who make only occasional crossings and are entitled to an exemption, and very frequent travelers, who are likely to be importing goods beyond the exempt amounts. This enhances government revenues and ensures more compliance with the law.

• Partnership for Real Estate Market Development Program: In November 2001, USAID began a program in real estate market development?a partnership between a U.S. professional real estate federation and Armenia?s private real estate sector?with a view to enhancing the latter?s institutional capacity. USAID provides planning, training, and educational resources needed to establish a self-regulating professional brokerage/appraisal association that can provide continuing education and training to its membership, while providing an organization through which members can help effectuate legislative and economic reform. This activity aims to develop a self-sustaining, market oriented professional association of real estate brokers and appraisers and develop a cadre of ethical and trained real estate professionals committed to the protecting the public. Such an association will help create more efficient, honest and equitable real estate markets anchored to private property rights.

• Capital Market Development Programs: USAID has helped the Government of Armenia develop a legal and regulatory infrastructure to support and promote a fair, orderly, efficient and transparent securities market. This infrastructure includes an independent regulatory entity; a mechanism for securities trading; a centralized clearance, settlement and depository system; an independent, centralized share registry system; and trade associations and self-regulatory organizations of professional securities market participants, including brokers and dealers. USAID technical assistance in support of Armenian capital markets, which resumed in early 2002, includes continued support for capacity-building at the country?s traditional capital markets institutions: the Securities Commission of Armenia (SCA), the Armenian Stock Exchange (Armex), and the Central Depository of Armenia (CDA). USAID is also exploring the possibility of providing assistance to capital-markets activities outside those institutions (e.g., for brokers carrying out private placements). Significant progress has been made in creating a non-bank financial intermediary that would provide another vehicle for trade finance in Armenia. Together with support for more effective bank supervision, these efforts help to develop effective financial markets in Armenia.

• Technical Assistance to the Central Bank of Armenia (CBA): For the past three years, USAID has provided technical assistance to the CBA in the area of bank supervision. The objective of this program is to help the CBA?s Bank Supervision Department (BSD) to build the primary components of prudential regulation. This includes on-site inspection methodology, off-site analytic tools, problem-bank resolution, and an underlying strategy that outlines policies and procedures. FY 2002 saw substantial progress. An assessment of Armenia?s banking system for compliance with the Basle Core Principles was completed. Armenian banks made substantial progress toward meeting these international-banking standards. With USAID support, the CBA completed a written plan for implementing risk-based supervision, an important move toward an internationally accepted banking system. USAID also supported a comprehensive assessment of the BSD?s organization, strategy, policies and procedures, which will support development of more effective and efficient bank supervision. In addition, USAID project advisors assisted in designing a public outreach program and campaign for the CBA and assisted in redesigning the internal reporting system. Public outreach by the CBA is an important development that will both increase public awareness of banking reforms, and contribute to focusing CBA activities toward those that will benefit the public.

• Tourism Industry Support Programs: To help Armenia increase its revenues and attract foreign investment, USAID provides assistance to the Armenian Tourism Development Agency (ATDA) in priority areas that the ATDA has identified for developing the country?s tourist industry. USAID is helping Armenia to marketing itself as a tourist destination, creating and supporting visitor services, providing technical assistance to various tour/travel agencies and associations, facilitating participation in trade shows, conducting familiarization trips for foreign tour operators and members of the press, and improving signage at important historical sites. USAID works with local tourism associations and travel agencies to strengthen their capacity to serve clients. A visitor information center, established with USAID support, allows a wide range of local businesses to more efficiently communicate their product and service information to tourists. Other projects have helped local tour operators develop relationships that will bring tourists to Armenia.

• Credit Programs: Support for credit programs is necessary until Armenia's financial institutions are sufficiently developed to provide credit services. Assisting small businesses provides earning opportunities for Armenian families with very low incomes and builds support for further private development. USAID supports credit programs that provide loans to micro-enterprises and SMEs ranging in size from several hundred dollars to $75,000. In FY 2002, more than 5,000 micro-entrepreneurs received loans totaling over $5 million, and 35 SMEs received loans totaling approximately $1.4 million. The bank mentoring and training program enhanced the professional capacity of participating banks.

• Information and Communications Technology (ICT) Development Programs: USAID continued its support for ICT development in Armenia in FY 2002. In cooperation with the World Bank, USAID worked with the Government of Armenia on an ICT master strategy to support an industry that promotes the wide use and application of information technology by Armenian citizens, businesses and government officials. USAID provided support to the executive secretariat of the council responsible for implementing the master strategy. USAID also helped strengthen the Armenia Card (ArCa) debit card to provide better services for banks, merchants and individual users. The ArCa project provided an internationally acceptable payment mechanism, and it also contributes to greater transparency in commercial and financial activities. Additional USAID activities included supporting computer learning centers at three major local universities, national ICT branding, and providing support to the Ministry of Justice for reform in telecommunications and in the State Registry System.

• Accounting Reform Programs: In May 2002, USAID began a new Partnership for Accounting Reform and Development (PARD), which is focused on strengthening the Association of Accountants and Auditors of Armenia (AAAA). PARD builds on USAID?s earlier successful efforts in this area. Armenia's early adoption of International Accounting Standards shows its recognition of the importance of attracting international investors. PARD assisted in developing a new certification program, which has been approved by the AAAA Education and Training Committee and by the Ministry of Finance and Economy. PARD is also supporting curriculum development by representatives of AAAA, Yerevan State University, and the Institute of National Economy.

• Agricultural Small and Medium-Sized Enterprise (SME) Development Programs: In recognition of the important role that agriculture plays in Armenia?s economy and the growing needs of populations in the country?s rural areas and secondary cities, USAID initiated an agribusiness SME (ASME) market development program in September 2000. In its initial phase, ASME laid the groundwork for sustainable growth of targeted agribusiness SMEs, including marketing opportunity studies and sector-specific analyses, monitoring and evaluation systems, and regional policy workshops and seminars. In FY 2002 ASME provided technical assistance to over 100 Armenian agribusiness firms. ASME also stimulated over 150 agribusiness SMEs to participate in policy discussions. The program supported capacity building for 27 business service providers (BSPs), with seminars and training workshops. These BSPs are expected to provide SMEs with better services in business planning, marketing, accounting, and other management tools.

• Farmer-to-Farmer (FTF) Program: FTF volunteers continued to provide technical assistance to small agro-processing and farm entities in developing local markets and expanding export capacities. In FY 2002, 37 FTF volunteer assignments were implemented with 45 host institutions. USAID complemented its technical assistance with projects used to test technologies in Armenia to demonstrate the impact of tested technologies and to encourage farmers and agribusiness owners to adopt new technologies. FTF collaborated with other donors, including USDA, to implement activities such as introducing Hazard Analysis and Critical Control Point activity in the food-processing sector. FTF continued to help strengthening producer associations to facilitate dissemination and adoption of modern technologies, and to better link producers to market outlets.

USDA Agricultural Marketing Assistance Project (MAP): MAP worked directly with 55 agribusinesses and 25 farmer associations in all eleven regions of Armenia in FY 2002. These agribusinesses employ about 3,000 people and buy raw products from over 18,000 farmers. MAP?s core mission is achieving economic development through agricultural and human capital development - to assist Armenian farmers and agribusinesses in producing, marketing and exporting food and related products. The approach is focused on technical, financial and marketing assistance to agribusinesses and farmer marketing associations. The major components of this program are capital equipment procurement, improved product quality, better food safety and processing, enhanced packaging and nutritional labeling, new product development, local export market development, and commercial management skills and growth. USDA seeks to link U.S. technical assistance with targeted financial assistance aimed at providing entrepreneurs with a marketing assistance package that allows them to produce a quality product that they can sell domestically and internationally.

• Dairy Industry Development: The dairy industry is the largest sector in the Armenian agricultural economy. USDA technical advisors worked side-by-side with Armenian Research and Extension experts to deliver technical assistance and information directly to dairy producers through sanitation workshops, feed trials and genetic improvement, new product development, technical seminars, new equipment leasing, laboratory testing, marketing associations, labeling and packaging, and trade missions abroad.

• Cheese Development: USDA worked with 12 dairy processors that have produced 700 tons of 12 different kinds of cheese, of which 90 tons have already been sold to export markets. As a result, about 2,000 farmers who are organized into 17 different milk collection centers, now receive cash for the milk they produce if they can meet the quality standards set up by the associations. A leasing company has imported 53 bulk cooling tanks that make possible the handling of perishable dairy products.

USDA also is also working in other commodities such as fresh and dried fruit, processed meats and fish, canned vegetables, fruit juices, herbal teas, wines, food ingredients, and some specialty products. More detailed information on USDA activities in Armenia can be found at http://www.usda.am/activities.html.

U.S. Department of Commerce ? Good Governance Program (GGP): In FY 2002, the GGP developed a business ethics initiative in Armenia to promote a rule of law based business environment. This initiative included discussions on the role of ethics in building a better business environment for Armenian groups visiting the U.S. through the Commerce Department?s Special American Business Internship Training (SABIT) Program and Business Information Service for the NIS (BISNIS), and the State Department?s International Visitors (IV) programs. In April 2002, GGP conducted a one-day business ethics workshop in Kellogg, Iowa for a group of Armenian entrepreneurs participating in a program coordinated by the State Department?s Community Connections Program and Iowa Resources for International Service, Inc. In July and August 2002, the GGP sponsored two Armenian professionals for its 2002 business ethics ?train-the-trainer? program, which instructed trainees on how to develop and implement business ethics programs and codes of conduct for their businesses and organizations as well as train others. Upon completion of the program, alumni gave business ethics presentations to the management of their businesses as a first step in developing an ethics program. Also in 2002, the GGP reached an agreement with the American Chamber of Commerce in Armenia to conduct two to three workshops on business ethics with the assistance of GGP alumni.

Trade and Investment Programs

Overseas Private Investment Corporation (OPIC): OPIC's major project in Armenia is the financing of the Marriott International/Hotel Armenia project, to which it committed to provide $15.3 million in insurance. The first half of the renovation was completed and opened in November 2002. OPIC has also provided political risk insurance to a U.S. travel agency. Other proposed projects that could benefit from OPIC political risk insurance or financing include the development of a tourist hotel chain, a retail shopping center, and the expansion of a local Internet service provider.

U.S. Trade and Development Agency (TDA): TDA has devoted considerable energy to the exploration of potential projects in Armenia and to the promotion of Armenia's overall development. In May 2002, TDA sponsored a regional tourism infrastructure conference, "Destination Eurasia," in Istanbul, Turkey, and sponsored one Armenian company's participation. TDA also continues to follow-up projects proposed at its May 2001 trade and investment conference for Armenia in New York City. TDA was also considering a number of specific proposals to evaluate the potential for U.S. exports in local development projects.

U.S. Department of Commerce ? Business Information Service for the NIS (BISNIS): BISNIS leads developed in Armenia in FY 2001 facilitated three new partnerships in FY 2002: two in construction and one in dairy products. The dollar value of related sales exceeded $1.7 million. BISNIS also provided significant outreach to Armenia?s provinces, helping local individuals access U.S. Government resources that support economic development. Together with Peace Corps volunteers working in the Tavush Province, BISNIS helped to develop leads from provincial businesspeople.

Energy and Environmental Programs

U.S. Department of Energy (DOE) ? Nuclear Reactor Safety Program: The Armenia Nuclear Power Plant (ANPP) provides a significant source of secure electric power for Armenia. DOE?s National Nuclear Security Administration (NNSA) continues to work to improve the safety of Unit 2 to reduce the chance of an accident. In FY 2002, significant progress was made on the design for the new control room computer information and warning system to help ensure that plant parameters and warning signals are accurately transmitted to the operators. Two reliable motor-generators were provided for installation in FY 2003 to ensure that battery power is available to operate critical safety systems. Bearing seals were replaced in one turbine generator shaft to prevent the risk of hydrogen/oil fires and explosions. Emergency diesel generator upgrades are in progress, with start-up oil supply pumps delivered for installation in FY 2003. Training courses are being developed and implemented to improve the capability of training plant operators. The electrical operations shift supervisor course was completed in FY 2002, along with 18 simulator exercise guides. Progress was made on improving a set of operational procedures. In the area of safety analysis and documentation, a plant safety analysis report is being prepared to clarify safety status and needs and to strengthen the regulatory process. With assistance from Slovakian experts, substantial work was completed in verifying the accuracy of plant drawings and in developing an initial set of system descriptions. In the area of reactor security, physical security upgrades were completed for the nuclear service water system. A plan was developed for additional plant-wide upgrades to be implemented in FY 2003.

USAID Energy-Sector Reform Programs: In FY 2002, USAID continued to help Armenia develop the framework for a restructured, reformed, market-driven energy sector. The inherited Soviet institutions were not designed to accommodate market discipline, and the physical infrastructure is generally inefficient in energy use. Development of a market for electricity requires physical devices for metering electricity as it is generated, distributed, and used, and institutions for pricing the electricity and collecting charges for electricity used. USAID provided technical assistance and equipment to support the ongoing process of privatizing the electricity distribution companies (EDC), to facilitate the development of a strategy for generation companies to be privatized, to strengthen the independent Energy Regulatory Commission, and to improve energy efficiency and to analyze alternate sources of energy. The EDC privatization process continued to be fraught with delays and political controversy after the second failed tender for sale in December 2001. After following parallel paths for either a private management contract or a sale through the summer of 2002, the now-consolidated EDC was sold in fall 2002 to Midland Resources Holding. Although this tender and sale process did not meet USAID and other donor standards for openness and transparency, the purchaser has demonstrated reasonably strong commercial behavior in closing the sale, and the terms of the share purchase agreement and license issued are substantially the same as those recommended by USAID. Further privatization of generation assets was complicated by the pending completion of the transfer of the Hrazdan Thermal Power Plant Units 1 through 4 to the Government of Russia as part of the debt-for-asset swap to settle Armenia?s current debt. In FY 2002, USAID continued to provide key support to privatization efforts and to a variety of related energy-sector initiatives, including the following:

• Completed and handed over to ArmEnergo the Data Acquisition System (DAS), which collects data on over 10,000 meters and transformers supplied by the $15 million Power Sector Metering Project. After initial operation of the new DAS, transmission losses were cut by roughly 25 percent, which would save the system over $2 million per year;
  
  
• Helped the Government of Armenia to complete the transfer of all 110kV substations to the EDC, to consolidate the four existing DC?s into a single entity, and to prepare the draft management contracts for the EDC;
  
  
• Helped the Armenia Energy Regulatory Commission (AERC) to develop a new power market structure, including licenses, tariffs, contracts, rules and procedures, e.g. on financial models and methodologies, benchmarking, and asset valuation;
  
  
• Provided support to the Settlements Center, the Contracting Center, and the National Dispatch Center, key power market service providers that are parts of ArmEnergo, to help them develop functional independence;
  
  
• Conducted intensive training on Least Cost Planning for sector personnel from ArmEnergo, the AERC, the EDC, and ArmTrans; the trained participants are now drafting a revised 2002 Electricity Sector Least-Cost Plan;
  
  
• Developed a pipeline of nearly 20 energy efficiency projects designed to: expand knowledge and experience in Armenia of the benefits and technologies available to increase energy efficiency, access renewable energy supplies, and support development of a local energy service industry and energy service companies;
  
  
• Completed collection of wind-monitoring data to develop the Armenia Wind Atlas and presented a wind-resources assessment workshop;
  
  
• Helped senior U.S. energy industry personnel to assist Armenian energy entities to improve their performance at the Energy Regulatory Commission (AERC), YerevanGas, ArmEnergoNaladka, Association of Small Hydro Producers, and Armenia Chapter of Association of Energy Engineers;
  
  
• Supported Armenian communities to participate in the Municipal Energy Efficiency Network (MUNEE), which develops local political institutions as it improves energy efficiency; and
  
  
• Supported Armenia?s participation in a series of regional power market conferences in Georgia on the status of development of each country?s power market.

USAID Water-Sector Programs: In FY 2001, USAID began implementing two water-sector projects. The first is a three-year project focusing on sustainable water resources management for enhanced environmental quality. It emphasizes strengthening the national policy and institutional framework for integrated water resources management, improving capacity for water quality and quantity monitoring, and supporting local participation in water management through public awareness and grant-supported pilot projects. Key accomplishments in FY 2002 included the following:

• USAID assisted in the passage of a Water Code that provides for a modern, coherent system for regulating sustainable water management, protection and use. The code lays the foundation for clear institutional roles and responsibilities for water management and protection, independent regulation of tariffs, and management of water facilities. In addition, key elements in the Water Code's development and passage set a valuable precedent for public participation and transparency in the processes of governance. After publication of an initial draft Water Code, the working group managing the revisions put into place a process for conducting a Strategic Environmental Impact Assessment (SEIA) of the Code. Armenian law on environmental protection requires this process, but it had not previously been implemented. Two open public hearings held in spring 2002 and attended by over 70 participants, including civil society and media, were significant in involving the public in the legislative process. These meetings and public comment contributed to the final draft SEIA for the Code. This represented the first major example of the government of Armenia fulfilling its commitments for public participation and access to information that it had undertaken through its accession to the United Nations? Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters (the Aarhus Convention).
  
  
• Three independent water management institutions with clearly defined roles and responsibilities were established in three areas: water management and protection; independent regulation of tariffs, quality of service for municipal water supply, wastewater facilities and irrigation water; and management of water-use facilities.
  
  
• In the areas of water quantity and quality monitoring and capacity strengthening, USAID, through its partner the Association for Rural Development (ARD), developed a water resources monitoring strategy for the Sevan-Hrazdan Basin, which includes upgrades of water quantity and quality monitoring stations, as a key national priority.
  
  
• For strengthening local capacities in water resources management, small grants to basin pilot projects were awarded for the following activities: (1) public awareness and Lake Sevan clean-up; (2) a small-scale wastewater treatment system for a model industrial tannery; (3) alternative water facility and bio-gas regeneration for a model livestock operation, located near Lake Sevan; and (4) enhancing women's participation in water resource management for irrigation water use.

USAID?s second project is the South Caucasus Water Management Initiative, a two-year activity to strengthen regional sustainable water management. In FY 2002, the USAID Mission in Armenia and USAID?s Caucasus Regional Mission completed implementation of a regional program to promote dialogue and cooperation among Armenia, Azerbaijan and Georgia on trans-boundary river basin management. The program addressed pilot watershed programs on two sub-basins of the Kura and Aras Rivers and mobilized community stakeholder groups in developing basin-wide water resource development plans. This project has resulted in improved water monitoring in the three Caucasus countries and renewed cooperation between the countries to coordinate management of shared water resources. Please see the USAID Regional Programs section in Part III of this report for more information on this project.

U.S. Nuclear Regulatory Commission (NRC): NRC regulatory assistance activities with the Armenian Nuclear Regulatory Authority (ANRA) began in 1994. Since then, NRC has provided training for ANRA personnel in fire protection, radiation embrittlement of metals, radioactive waste and spent fuel management, seismic issues, and decommissioning of nuclear power plants. NRC has also supported ANRA in developing its safety analysis review capability. Specific accomplishments achieved in Armenia during FY 2002 include completion of changes to Armenian laws and decrees transferring regulatory responsibility for the use of radioactive sources to ANRA. ANRA also created a new technical support organization, the Nuclear and Radiation Safety Center.

U.S. Environmental Protection Agency (EPA): With funding provided by the EPA, the Caucasus Regional Environmental Center (REC-Caucasus) awarded about $150,000 to NGOs for environmental education and awareness, water quality, mountain ecosystems, and desertification problems, as well as for NGO strengthening and registration. In 2002, the REC developed a water initiative, entitled ?Public Participation in Transboundary Water Management Issues in the South Caucasus.? Under this initiative, grants were issued on water quality and a database of international and local water activities was developed. Also, the REC organized a regional conference on desertification, with participation by government authorities at the ministerial and parliamentary levels from all three countries in the region.

Security, Regional Stability and Law Enforcement Programs

U.S. Department of Defense (DoD) ? Cooperative Threat Reduction/Defense and Military Contacts: These programs seek to promote our counterproliferation, demilitarization, and defense reform objectives by fostering dialogue and cooperation with Armenia. FY 2002 events in Armenia included Bilateral Defense Consultations, defense reform, NCO Corps development, peacekeeping operations seminar, and defense decision-making exchanges.

U.S. Department of Defense (DoD) ? Counter-Proliferation Programs: In FY 2002, the DoD/FBI Counterproliferation Program provided approximately $395,000 in training to Armenia. In addition, under the DoD/USCS Counter-Proliferation Program, training continued with the participation of one training team visit to Armenia. The Armenian Border Guards have been very receptive to this assistance; Armenian customs authorities, while initially unresponsive, were more cooperative in FY 2002.

U.S. Department of State ? International Military Education and Training (IMET) and Foreign Military Financing (FMF): U.S. cooperation with the Armenian Ministry of Defense increased in FY 2002, due to the President?s waiving of Section 907 of the FREEDOM Support Act, which restricted certain types of assistance to the Government of Azerbaijan. Under the U.S. Government?s policy of evenhandedness towards Armenia and Azerbaijan, this enabled the U.S. Government to initiate IMET and FMF programs with the Armenian Government. For FY 2002, the U.S. Government budgeted $4 million for FMF and $400,000 for IMET in Armenia. These programs focus on professional military education, the establishment of a peacekeeping capability in the Armenian military (first in the area of interoperable communications), and modernization of the Armenian military communications structures to enhance air-space management and safe response. Armenian defense officials also participated in training courses at DoD?s Marshall Center in Germany.

U.S. Department of State ? Export Control and Related Border Security (EXBS) Program: The Government of Armenia has continued to demonstrate its commitment to cooperate with the United States in preventing the proliferation of weapons of mass destruction and other types of weapons and related technology. The EXBS Program for Armenia was funded at $2 million in FY 2000, $1.5 million in FY 2001, and $1.6 million in FY 2002 with both FREEDOM Support Act (FSA) and Nonproliferation, Anti-terrorism, Demining and Related Activities (NADR) funds. Under EXBS, the U.S. has provided equipment and training to Armenia to enhance its capabilities and infrastructure to deter, detect and interdict weapons proliferation. EXBS assistance has helped Armenia establish a high-level interagency export control coordinating commission, reflecting Armenia's increased commitment to export controls. The Armenian Border Guards have led this effort, with assistance from the Department of Civil Aviation and the Armenian Nuclear Regulatory Authority. After a short gap in coverage, a new permanent EXBS Program Advisor was deployed to Armenia in September 2002 to oversee the bilateral cooperative program. In addition to delivering over $1 million in detection, interdiction and enforcement support equipment, the EXBS Program also provided training through an executive exchange program and organized a parliamentary forum. The U.S. Government also provided four X-ray units for detection of illicit trafficking, and the U.S. Department of Energy provided U.S.-based training for Armenian personnel in the detection of nuclear, chemical and biological weapons delivery systems. An Armenian delegation recently attended a Commerce Department-implemented National Control List Workshop in Washington. In addition, a recent U.S. Customs Service assessment of Armenia?s southern border with Iran has yielded several suggestions for activities on that frontier.

U.S. Department of State ? Support for Science Centers: Armenia is an active member of the State Department-supported International Science and Technology Center (ISTC), a Moscow-based multilateral organization that provides opportunities for former Soviet weapons of mass destruction (WMD) scientists and engineers to compete for civilian research grants. In FY 2002, the Department of State provided $1 million in funding for peaceful research proposed by former WMD scientists throughout Armenia. This includes projects on laser epitaxy for semiconductor technology; a new type of natural melanin; chromosome aberrations caused by anti-tumor preparations; and environmental effects of nuclear power plants.

U.S. Department of State / U.S. Department of Health and Human Services (HHS) ? Biotechnology Engagement Program (BTEP): BTEP efforts in Armenia continue to redirect the efforts of former Soviet biological weapons experts to address public health concerns such as hepatitis and malaria.

U.S. Department of State ? Support for the Civilian Research and Development Foundation (CRDF): In FY 2002, the U.S. Government budgeted an estimated $1.6 million for CRDF activities in Armenia. The CRDF activated nine Cooperative Grants Programs awards to Armenian scientists, totaling $503,000. Six of these projects involve former weapons scientists. The CRDF received seven proposals from U.S.-Armenian teams as part of its special competition for research on minimizing the effects of terrorist acts on civilian populations. Five new Travel Grants were awarded to Armenian scientists in 2002, enabling them to make contact with U.S. companies and participate in U.S. scientific conferences. To date, over 30 researchers from Armenia have received CRDF travel grants. The CRDF continued to provide assistance to develop an indigenous capacity at the National Foundation of Science and Advanced Technologies (NFSAT) for funding science through USAID-supported merit-based competitions. In July 2002, CRDF and NFSAT announced the results of the third Armenian-U.S. Bilateral Grants Program. Twenty-eight of the record 102 proposals received will be funded for a total of $1 million. Of these, 56 percent include weapons scientists, all of them include young scientists and 72 percent include female researchers. While most of the awards average $30,000, four of the successful projects were funded at an average of $80,000 to permit acquisition of research equipment by the Armenian teams. This infusion of modern scientific equipment is essential for Armenian scientists seeking to actively participate in the international scientific community.

U.S. Department of State ? Programs to Combat Trafficking in Persons: In January 2002, the U.S. Government designated Armenia as having ?Tier 3? status for its failure to combat trafficking in persons. If a state is categorized in Tier 3 for more than two years, it risks losing almost all U.S. assistance. Specifically, the 2002 Trafficking in Persons Report stated that several hundred Armenian women and girls were being trafficked annually to the Persian Gulf states, Turkey and Europe as part of white slavery operations. The Armenian Government immediately expressed concern and began responding, asking for help from the United States, the European Union and international NGOs to train personnel and increase public awareness of the problem. A public awareness campaign supported by U.S. assistance included presentation of a video about trafficking in women and girls to police departments, women?s groups; and signature of the United Nations Protocol on Trafficking in Persons, which is now before Armenia?s National Assembly for ratification. Assistance planned for FY 2003 includes expansion of public awareness programming and assistance in addressing the legal issues involved in human trafficking.

U.S. Department of State ? Anti-Crime Training and Technical Assistance (ACTTA) Program: In FY 2002, the U.S. budgeted an estimated $1.3 million for ACTTA programs for Armenia. In 2001, the Bureau of International Narcotics and Law Enforcement Affairs (INL) signed a letter of agreement (LOA) on narcotics control and law enforcement assistance with the Government of Armenia. The LOA was the first step to full implementation of the ACTTA program in Armenia, making it possible for the INL Bureau to offer not only training but also equipment to Armenian law enforcement agencies, including the Ministry of Internal Affairs and the Office of the Prosecutor General. In close coordination with the various U.S. law enforcement agencies that carry out INL-funded programs, Armenian law enforcement agencies, the U.S. Embassy in Yerevan and the INL Bureau developed a training program comprised of four projects: (1) a law enforcement agency development program aimed at enhancing and modernizing Armenia?s Police Academy and Ministry of Internal Affairs In-Service Training Center; (2) a judicial transparency program, which will further develop the abilities of the instructor cadre and training materials of the new Prosecutorial Research and Training Center (under the Soviet system, all prosecutorial training for Armenia was conducted in Russia or Ukraine); (3) a forensic institute development program aimed at creating transparency and quality assurance in the area of forensics and providing modern methods and equipment, as well as a broad training program that includes instruction in human resources, laboratory management, quality assurance, evidence collection, preservation and analysis; and (4) a law enforcement Internet program, which is still under development but is intended to connect law enforcement agencies and the judiciary to facilitate information exchange, database management, and research, as well as to create connections between U.S. and Armenian law enforcement agencies. In FY 2002, the INL Bureau continued work in law enforcement agency development. Training courses were conducted by U.S. Government agencies, including the FBI, the Justice Department?s International Criminal Investigative Training Assistance Program (DOJ/ICITAP) and the Federal Law Enforcement Training Center (FLETC). INL equipped classrooms at the Ministry of Interior Police and in-service training academies and at the Prosecutor General Academy to facilitate the use of various educational media by academy instructors and to provide a venue for U.S. Government training programs. An ICITAP police advisor worked with the training academies' staffs in developing curricula to address new law enforcement areas of concern, including money laundering, intellectual property rights and trafficking in persons. The Forensic Lab Development Project moved forward with the identification of a suitable building to house the lab and the decision to put the lab under the auspices of the Armenian Academy of Sciences. Lab benches donated by the U.S. Drug Enforcement Administration (DEA) have been delivered to Armenia for installation in the lab. Lab management selection is under way, as is the beginning of the lab design process. The INL Bureau has approved the use of FY 2002 funding to create computer classrooms at the training academies and to improve the safety conditions at the firing ranges used for training. An International Organization for Migration (IOM) project to combat trafficking in women and minors and a legal socialization program for Armenian schools have also been approved. A DOJ/OPDAT Legal Advisor worked with judges and prosecutors on anti-crime legislation for four months in FY 2002. In addition, a supplemental LOA is being negotiated to allow expansion of law enforcement assistance programs. Activities anticipated for FY 2003 include acceleration of the forensic lab development project and training of the laboratory staff. Curricula development will continue at the law enforcement academies and academy faculty will be trained in delivering the new curricula. An INL regional coordinator will be assigned to the U.S. Embassy in Yerevan to coordinate law enforcement assistance in Armenia, Azerbaijan and Georgia.

U.S. Department of State ? Anti-Terrorism Assistance (ATA): FY 2002 was the first year that law enforcement and security officials participated in ATA training. With a budget of an estimated $1.2 million, over 120 participants were provided training in the following six course subjects: vital installation security; senior crisis management; explosive incident countermeasures; mail security; crisis response team; and critical incident management. The Government of Armenia welcomes the opportunity for additional training.

U.S. Department of Justice ? Overseas Prosecutorial Development and Training (OPDAT): OPDAT assigned a four-month Intermittent Legal Advisor (ILA) to provide assistance and support in criminal justice reform. The ILA conducted several informal roundtables and a workshop on Council of Europe (COE), Financial Action Task Force (FATF) and United Nations standards in the money laundering area. OPDAT also furnished materials on international standards for anti-money laundering/terrorist financing regimes and model legislation. The ILA provided expertise and materials on effective investigation techniques and prosecution strategies for public corruption cases, contributed to the draft Armenian Criminal Code (which has been forwarded to the COE and the Venice Commission for their review), led a series of trial advocacy seminars for Armenian prosecutors, and developed the accompanying curriculum with the goal of institutionalizing an in-service training program for new and current prosecutors. This series of practical training programs culminated in the first trial advocacy training for Armenian prosecutors and defense attorneys. OPDAT organized and conducted a two-week U.S.-based training program for four senior-level law enforcement officials on transnational judicial assistance. The American Bar Association?s Central European and Eurasian Law Initiative (CEELI) continued to post a Criminal Law Liaison (CLL) in Armenia in FY 2002. The CLL organized a series of regional roundtables aimed at involving the public in the fight against corruption, arranged a series of anti-money laundering educational programs and provided expert input on a draft action plan, which is now before the government for adoption. In addition, CEELI organized a series of initiatives aimed at enhancing the skills of young advocates, and coordinated the drafting and implementation of legislation creating a public defender system.

U.S. Department of Energy (DOE) ? Nuclear Material Protection, Control & Accounting (MPC&A) Program: The MPC&A Program is helping the Metsamor Nuclear Power Plant in Yerevan to upgrade its former nuclear facilities anti-sabotage safeguards in accordance with the International Atomic Energy Agency?s (IAEA) revised 1999 guidelines, as well as completing prior upgrades to meet IAEA?s earlier standards.

Social-Sector Programs

USAID Census Support: USAID-funded technical assistance provided through the U.S. Bureau of the Census in early FY 2002 helped ensure that the population census conducted by the Government of Armenia in October 2001 was concluded effectively. The assistance will also ensure that the census provides meaningful data and census derivative products critical to effective planning, resource management, and implementation of reforms. The 2001 census was the first Armenian census since the country's independence and is the first modern census to be conducted by any country in the South Caucasus region since the collapse of the Soviet Union. In FY 2002, technical assistance focused on planning and preparing for the tabulation of the census data, including beginning data entry operations, establishing procedures for editing data, assisting with data checks and edits, preparations for producing data tables, review of planned publication tables, and preparation of documentation for these tables.

USAID/Ani and Narad Memorial Fund ? Child Immunization Endowment: In FY 2001, USAID partnered with the Ani and Narad Memorial Fund to establish the Armenian Immunization 2000 Program (AI2K), whose goal is to develop an endowment to ensure a constant source of financing to provide vaccines for children immunized through Armenia's National Immunization Program. USAID?s challenge grant of $400,000 is expected to result in extensive leveraging of private funds to meet the $1.6 million level necessary to sustain the program.

USAID Social-Sector Reform Programs: USAID?s social-sector transition program is designed to help Armenia establish a framework for sustainable social insurance systems (e.g., health, pension, disability and unemployment), support improvements in the effectiveness and efficiency in the delivery of social assistance and primary health care, and provide urgent social and health care services and information to the most vulnerable sectors of the population. The program integrates the existing USAID-sponsored health partnership program, reproductive health activities, and strategies for addressing infectious diseases, including sexually transmitted infections such as HIV/AIDS. To complement this effort to improve the social welfare of local communities, USAID is helping to finance and implement small-scale public works projects in targeted regions that provide income to the vulnerable while improving community infrastructure. FY 2002 results include the following:

• Social Assistance: The USAID-supported poverty family benefit system (PFB), which is operated by the Ministry of Social Security, is providing cash payments to nearly 200,000 families in Armenia that are otherwise unable to meet their basic subsistence needs. USAID is working to improve the system to ensure better targeting to the most vulnerable populations and more efficient, fair and professional administration of the program within the network of Regional Social Security Centers operating throughout the country. With USAID assistance, the PFB targeting used by the Ministry has been adjusted to better focus on the most vulnerable families, particularly in light of the March 2002 PFB-related budget reductions by the Armenian Government. By focusing more closely on the truly needy, benefits to eligible families were increased even as the total spending on the program was decreased.
  
  
• Integrated Social Service Centers (ISSC) will make social services more available to citizens by integrating the administration of otherwise separate programs, and will also develop the capacity of local governments to develop innovative delivery mechanisms. With USAID assistance, the first ISSC will begin operating in October 2002 in Vanadzor (Lori Marz).
  
  
• Social Insurance: Following the adoption of the Armenian Government?s concept for pension reform, USAID helped the Armenian Government draft and implement legal reforms to reduce the economic burden and inequities of the current privileged-pension system. These changes will allow for personified reporting of future pension contributions, and protection of privacy in the government?s management of personal information. By the end of FY 2002, two landmark pieces of legislation?the Personal Code Law and the Personal Privacy Protection Law?had been signed into law. Also, the Pension Reform Law had passed two out of the three required readings in the National Assembly. The Personal Code Law automated management systems, which are linked to reforms in social insurance, social assistance, and health care finance and case management, have been developed and pilot tested in Kotayk Marz, and the Armenian Government is planning for a national rollout. The personified reporting pension software has been developed and is ready for pilot testing.
  
  
• Health-Care Reform: Working closely with the World Bank, USAID launched a comprehensive effort to establish a health information system (HIS) in Armenia that will serve as the backbone of health finance reform and health policy formation and implementation. With USAID support, the HIS system has been designed and will be implemented upon the arrival of World Bank-procured computers. A revised curriculum for primary care medicine is essential to reform the Soviet-legacy health education system. Under the inherited system, diagnostic training is focused on organ systems rather than patient systems, and physicians are admitted to practice in a specialty only. USAID is supporting the development of a unified curriculum for family medicine in Armenia. The new curriculum will support patient-centered primary care delivered through clinics rather than hospitals. USAID provided the design expertise for a new National Family Medicine Clinical Training Center located at Yerevan Polyclinic No. 17, which will begin operation once World Bank-funded renovations of the physical facility are completed. Experience gained from this pilot effort will be applied in replication projects throughout Armenia. With USAID assistance, the Ministry of Health has fully redrafted a Mandatory Health Insurance Law, which ensures that prerequisite institutional capacity exists within the Government of Armenia before full implementation of the insurance system is undertaken.
  
  
• Health and Social Information: USAID supported a demographic and health survey in FY 2002 whose preliminary data have already been made available. USAID is helping the National Statistical Service institutionalize its annual household income and expenditure survey, which had previously been undertaken only sporadically with international financing. This effort included a wide variety of technical assistance and training in data management and statistical analysis. The survey is the most relevant mechanism currently available to determine the poverty profile in the country and is critical to effective monitoring of the Poverty Reduction Strategy Program, which is to be implemented by the Government of Armenia.
  
  
• Other Social-Sector Activities: Through a series of agreements with international and U.S.-based NGOs, USAID implemented a number of assistance programs to provide medical and nutritional support directly to vulnerable populations in Armenia. Each of these programs emphasized the need to establish sustainable approaches toward service delivery. Activities included visits by mobile medical teams and outreach to rural populations, school-feeding programs relying on parent councils to assume a leadership role in program management, feeding programs for the elderly, and targeted food distribution. USAID also implemented a public works program to provide short-term income opportunities for long-term unemployed through projects to improve the community in which they live. In addition, NGO training and grant programs were implemented to engage civil society more effectively in the reform process and in the delivery of needed services.

Earthquake-Zone Recovery Programs: The USAID-funded Housing Certificate Pilot Program in the city of Gyumri has enabled over 300 families who had lost their homes in the 1988 earthquake to purchase decent, permanent apartments while their temporary shelters were removed. A playground and park were established on the site of their temporary shelters. This successful pilot program led to the three-year, $31 million USAID Earthquake Zone Recovery Program, under which over 6,000 families in the Lori and Shirak regions will be re-housed through the issuance of housing certificates and housing improvement grants. This program is a key element in the Armenian Government's initiative to coordinate the projects of international donors and its own resources in order to house some 12,000 families and accelerate the reconstruction and economic redevelopment of this hard-hit region of the country. The Earthquake Zone Recovery Programs will be ending in FY 2004.

Humanitarian Programs

In FY 2002, humanitarian assistance accounted for only eight percent of U.S. Government assistance to Armenia?a reduction from 15 percent in FY 2001 and 19 percent in FY 2000. This decrease reflects the U.S. Government?s goal of reducing humanitarian assistance in favor of development assistance and private-sector job creation?a goal shared by the Armenian Government?and an increased emphasis on social-sector reform. Over the past three years, the Armenian Government has demonstrated an improved ability and desire to identify and target assistance towards vulnerable groups; however, the government continues to face severe budget constraints that limit its ability to assume more responsibility for maintaining and strengthening the social safety net for the most vulnerable segments of the population. Moreover, excess rain and hail plagued agricultural areas of Armenia in FY 2002, with the hardest-hit areas being in the north, particularly in Lori Marz (Province). In response to this urgent need, the U.S. Government provided 175 tons of wheat seed.

U.S. Department of Agriculture (USDA) ? Food Assistance: USDA donated 18,200 metric tons of commodities valued at $ 7.81 million to Armenia in FY 2002. As part of this assistance, USDA donated 12,500 metric tons of wheat to the Armenian Technology Group (ATG) Foundation for use in Armenia under the Food for Progress Program. ATG sold the wheat and used the proceeds to fund training activities for local farmers aimed at developing a self-sustaining private sector seed industry in Armenia. Farmers received training in seed production techniques and preparing seed for sale to other farmers. USDA also gave 2,700 tons of vegetable oil and 500 tons of nonfat dry milk to the private voluntary organization (PVO) United Methodist Committee on Relief (UMCOR). Proceeds from the sale of these commodities funded food distribution, agricultural development and micro-credit activities in Armenia.

U.S. Department of Defense ? U.S. European Command (EUCOM) Humanitarian Assistance: In FY 2002, EUCOM provided technical assistance supporting the reconstruction of buildings housing the Armenian Emergency Management Agency.

U.S. Department of State ? Coordinator?s Office Humanitarian Assistance: In FY 2002, the Humanitarian Programs Division of the Office of the Coordinator of U.S. Assistance to Europe and Eurasia transported an estimated $10.19 million in privately donated humanitarian commodities-primarily medicines, medical supplies and food-to Armenia at a cost of $1.88 million to the U.S. Government. These commodities were distributed through U.S. PVOs, including the UMCOR, Counterpart International, International Relief and Development, World Council of Hellenes, and the Women's Health Care Association.

U.S. Department of State ? Humanitarian Demining Programs: In FY 2002, the Department of State initiated a humanitarian demining program for Armenia. In 2002, training was provided to support development of one demining company and staff. In September 2002, the first humanitarian demining of a live minefield by State Department-trained Armenian soldiers took place. Demining training is being conducted by Ronco under contract with the Office of Humanitarian Demining Programs of the State Department?s Bureau of Political-Military Affairs. The U.S. Department of Defense (DoD) assisted this effort by training part of the demining company and staff. DoD also trained Armenian explosive ordnance disposal teams.

Partnership Programs

USAID Health Care Partnerships: USAID continued to support several health care partnerships between the following U.S. and Armenian organizations in FY 2002: (1) the University of California-Los Angeles Medical Center and the Lori Regional Healthcare Administration; (2) CARE New England/Lifespan Health Systems and the Gegharkunik Regional Healthcare Management Department; (3) the University of Texas at Galveston Medical Branch with the Armavir Regional Healthcare Administration; and (4) the Armenian-American Wellness Center in Yerevan and the Armenian-American Cultural Association in Washington, D.C. During the past year, partnership activities were focused on screening and treating hypertension, patient education, training in cardiovascular disease/stroke, breast cancer, diabetes, and disaster preparedness, improving community-based primary health care through the development of clinical practice guidelines for asthma and diabetes, and developing educational resource centers. The partners held three health fairs in FY 2002, offering a wide range of clinical and educational services in primary health care and information on disease prevention and health promotion. A full disaster preparedness drill was also held in Armavir Marz.

U.S. Department of State ? University Partnerships: The Public Affairs Section of the U.S. Embassy and the Bureau of Educational and Cultural Affairs sponsor five university partnerships in Armenia: (1) the Yerevan State Institute of National Economics and Florida State University; (2) the Journalism Department of Yerevan State University and Middlesex Community College in cooperation with Northeastern University and the Cambridge-Yerevan Sister City Association; (3) the Economics/Business Department of Yerevan State University and the University of California-Fresno; (4) the American University of Armenia and Miami University of Ohio in the field of public finance; and (5) Grambling State University and the State Engineering University of Armenia in business. These partnership programs continue to support exchanges of faculty and administrators for a combination of teaching, lecturing, faculty and curriculum development, collaborative research, and outreach programs.

U.S. Department of State ? Secondary School Partnerships: A total of 20 participants traveled to the United States with the Cambridge (Massachusetts)-Yerevan Sister City Association (CYSCA) in their ECA Bureau-funded Secondary School Partnership to Promote Civil Society program, and 20 U.S. participants traveling to Armenia. This program developed civic projects; promoted democracy, citizenry, and community building skills; taught desk top publishing skills, resulting in school newsletter development and publication; conducted a two-week daily conflict resolution workshop for students, educators, and directors; implemented a park and recreation program to utilize school buildings and yards for community and neighborhood activities; organized a summer school with specialized courses in computer training and critical thinking using English literature; and a five-day conflict resolution workshop. Community service projects in two partner schools resulted in the development of monthly volunteer programs in a school for the hearing-impaired, a school for the blind, and an orphanage. In collaboration with Peace Corps Volunteers, the students organized the registration of the orphanage to participate in the Special Olympics. CYSCA also sponsored Makur Yerevan, a student volunteer organization to clean downtown city streets with monthly partner school participation. U.S. students and teachers from participating partner schools collected encyclopedias, ethnically diverse children?s stories, and popular Scholastic Books, which were shipped to Armenia to develop free English language lending libraries in their respective Armenian partner schools. Armenian students sent 121 book reports via the Internet to a U.S. volunteer educator, who continued the dialogue to further develop critical thinking and logic skills.

Cross-Sectoral Programs

Eurasia Foundation: In FY 2002, the Eurasia Foundation awarded 59 grants totaling approximately $1.2 million to NGOs in Armenia. These grants supported projects to strengthen Armenian business associations, increase citizens? legal awareness and participation in decision-making, improve access to information technologies, and develop tourism. A number of grants were made to strengthen the protection of an individual's constitutional right of access to information: a grant to the Association of Investigative Journalists supported the creation of the Armenian Center of Freedom of Information, which provides consultation and training to concerned citizens, including how to request information from government ministries. The Foundation?s Izmirlian-Eurasia Small Business Loan Program (SBLP), which provides capital to the private sector and intensive, hands-on training to participant bank lenders in credit analysis and collection methodology, approved 31 loans totaling approximately $1.3 million and creating some 317 jobs. The Foundation has also undertaken a number of regional initiatives and grants in the Caucasus countries to build cross-border cooperation. Under its South Caucasus Cooperation Program (SCCP), which was initiated to facilitate greater contact and cooperation among leading organizations in Armenia, Georgia, and Azerbaijan, and to help to overcome the political and economic obstacles to regional integration, the Foundation awarded 68 grants in FY 2002 totaling over $1 million to fund projects in the areas of civil society, public administration and policy, and private enterprise development. The Foundation is also working with the Carnegie Corporation of New York to create a network of resource centers?one each in Baku, Tbilisi, and Yerevan?to strengthen efforts by social scientists researching topics relevant to contemporary public policy formation. An example of the Foundation?s regional grant making activities in FY 2002 was a grant to a partnership between the three national associations of professional accountants and auditors in Armenia, Azerbaijan and Georgia to encourage the harmonization of national accounting systems and financial reporting practices with International Accounting Standards.

U.S. Peace Corps: Over the past ten years, Peace Corps has placed more than 335 volunteers (PCVs) in Armenia as community development workers with core assignments in three areas: teaching English as a foreign language, business education and community development, and community health education. At the close of FY 2002, more than 70 PCVs were serving in Armenia. PCVs collaborated with several U.S. NGOs, including Project Harmony, United Methodist Committee on Relief, Save the Children, World Learning, Catholic Relief Services, World Vision, the Latter-Day Saints, the Adventist Development and Relief Agency, the Academy for Educational Development, the International Executive Service Corps, the Foundation for International Community Assistance, the Armenian English Language Teachers? Association, the Eurasia Foundation, the Soros-funded Open Society Institute, and many several others. Peace Corps also works with USDA, the U.S. Embassy?s Public Affairs Section and USAID on development activities. Several PCVs who have completed their service have remained in or returned to Armenia and provide expertise and cultural understanding in their work with development organizations, including the American University of Armenia , World Bank, IESC, UMCOR, USDA, World Vision, Project Harmony, Habitat for Humanity, the Future Leaders Exchange Program and the International Research and Exchanges Board.

• Business Education and Community Development: PCVs taught accounting, business management, marketing and economics in technical institutes and universities. The PCVs worked with entrepreneurs, local NGOs, and development organizations to strengthen their management skills and help them implement their programs. Volunteers helped Armenian communities and organizations develop their tourism potential by assisting with the development of marketing materials and trade shows.
  
  
• Teaching English as a Foreign Language (TEFL): PCVs taught English and conducted teacher training in primary and secondary schools and universities. PCVs also introduced critical thinking in classroom work and conducted in-service training, co-teaching and co-planning. In collaboration with the U.S. Embassy?s Public Affairs Section and the Armenian English Language Teachers? Association, PCVs and Armenian teachers organized traveling teachers? workshops throughout the country.
  
  
• Community Health Education: PCVs worked with schools, polyclinics, medical colleges, mental health centers, child/maternal health clinics, local NGOs, development organizations, and Armenia?s Ministry of Health. Volunteers trained teachers and parents on nutrition, child nutrition (breastfeeding), and basic hygiene and gave seminars on women?s health issues. PCVs have worked with communities and local organizations to identify physically and mentally disabled populations and to create opportunities for vocation training and community integration.

In addition to its three core programs, Peace Corps implemented six cross-sectoral development initiatives in Armenia in FY 2002:

• The Village Outreach Initiative places PCVs in village schools to teach English and basic, preventative health education. Volunteers placed in regional centers conducted village outreach activities in English, business and health education. Volunteers helped villages gain access to the resources of development organizations and in-country donors.
  
  
• The Information Technology Initiative integrates information technology training and applications in all Peace Corps projects and has helped Armenian NGOs develop websites. Volunteers have established computer and language information centers throughout the country. America Online has provided Internet connectivity and computer equipment to four Peace Pack projects in Goris, Kapan, Stepanavan and Alaverdi.
  
  
• The Gender and Development Initiative promotes better understanding of gender issues in the development process. PCVs conducted girls? leadership summer camps and career resource workshops to help girls build self-esteem, confidence, and understanding of their career choices and opportunities. Volunteers established mentoring groups bringing together professional women and adolescent girls.
  
  
• The Community Development Initiative facilitates community cooperation in small community projects. PCVs have helped establish language and resource centers and upgrade school facilities; organize community events to foster cooperation; organize book and resource donations from churches and other donors; and worked with orphanages and the disabled. They have worked with NGOs to strengthen management, focus missions and assist in linking to resources. Volunteers and Peace Corps staff worked with the Special Olympics organization to enhance its organizational structure and promote the program throughout Armenia.
  
  
• The Environmental Awareness Initiative Pilot Project was launched in FY 2001 to expand Peace Corps? work in the environmental sector. PCVs organized a series of ecology camps that provided more than 120 young Armenians with interactive training on conservation, water and air quality, deforestation, and basic ecological concepts. Eco-camps were organized in three regions of Armenia in collaboration with Armenians interested in the environment, youth, Catholic Relief Services (CRS) and USDA. PCVs developed an environmental curriculum guide in English and Armenian for these activities.
  
  
• Youth Development has been part of PCV activities for several years. Volunteers organized youth sports teams and acquired sports equipment through the Sporting Goods Equipment Manufacturers? Association in the U.S. Armenian youth represent a great resource for development work in Armenia. Youth are the focus of Peace Corps work in environment, gender and development, and information technologies. Volunteers have organized career development seminars to help Armenian youth build confidence and self-esteem, and to develop skills in resume writing and networking.

Peace Corps ? Small Project Assistance (SPA) Program: Twenty grants were awarded in support of PCV-facilitated projects in the areas of small enterprise development, education, environment, health and water sanitation, and youth development. A business-related SPA grant focused on strengthening the infrastructure capability of a resource center, using information technology to market local crafts. In education, SPA grants were awarded to repair and renovate classroom and living quarters at schools as well as assistance for curriculum development and teacher training. One of the health-related activities provided materials and in-service training for nurses.

Programs Promoting the Objectives of the Silk Road Strategy Act (SRSA) of 1999

In FY 2002, a number of U.S. Government-funded assistance programs contributed to the objectives laid out in the SRSA: promoting reconciliation and recovery from regional conflicts; fostering economic growth and development; promoting infrastructure development; increasing border control capabilities; and promoting democracy, tolerance, and the development of civil society. Please see the above sections for numerous examples of programs that contributed to one or more of these objectives.

Preview of FY 2003 Programs

In FY 2003, the U.S. Government will continue to focus on increasing the demonstrable benefit of U.S. Government-funded assistance to average Armenian citizens. Broadly distributed benefits are necessary to build and sustain popular and political support for the implementation of democratic and economic reforms. In addition, the U.S. Government will focus on the long-term sustainability of assistance projects. The U.S. Government will seek to accomplish this goal by designing and/or implementing the following types of assistance programs:

• Programs that stimulate growth and competition in the private sector and increase investment by both the private and public sectors, with a special focus on job creation in a market economy and combating corruption. Particular emphasis will be given to developing and supporting business opportunities in the agribusiness, information technology, and tourism sectors.

• Technical assistance to the Armenian Government bodies responsible for competition policy, and the supervision and regulation of banking, telecommunications, and insurance. Continued activities intended to improve the legal and regulatory environment that promotes private sector activity.

• Programs to enhance Armenia's energy security by developing a safe and sustainable energy sector, including improved energy efficiency and alternate sources of energy.

• Programs to enhance the ability of the National Assembly to perform economic and legislative analysis, conduct constituent outreach; and enhance its accessibility to the media and citizens.

• Programs that promote greater community activism and involvement and citizen participation in governance, with a special emphasis on women?s participation and leadership.

• Programs to improve investor confidence and business development, and promote democracy and the rule of law by supporting a vigorous anti-corruption effort in coordination with the Government of Armenia and the international donor community, including the Armenian Diaspora.

• Programs to strengthen public support for continuation of economic reforms by bolstering the social-sector safety net.

• Programs to enhance foreign investor confidence in regional security and stability by stimulating regional integration and cooperation.

• Education programs, including partnerships, curriculum development, and U.S.-based degree programs for Armenians. The School Internet Connectivity Program will continue its expansion.

• Integrated pest management programs and applied research trials to address the serious disease problems plaguing tomatoes grown for processing.

• Programs to enhance Armenia's capabilities to control its borders to prevent illicit trafficking in persons and weapons of mass destruction and to promote legitimate commerce.

• Technical assistance with the development of a television studio, a radio broadcast studio and other equipment for the Armenian Government?s soon-to-be-established Emergency Broadcast Center, which will give the Armenian Government the ability to develop its own public awareness programs as they relate to public conduct during a natural or man-made disaster.

• Implementation of military-to-military assistance in Armenia, including funding for enhanced communications capabilities and advanced training.

FY 2002 FUNDS BUDGETED FOR U.S. GOVERNMENT ASSISTANCE TO ARMENIA
(millions of dollars, rounded to the nearest $10,000, as of 12/31/02)