II. Country Assessments and Performance Measures - Armenia

U.S. Government Assistance to and Cooperative Activities with Eurasia
Bureau of European and Eurasian Affairs
January 2004
Report

Map of ArmeniaArea: approx.18,520 sq. miles, slightly smaller than Maryland
Population: 3,326,448 (2003 est.)
Annual Inflation: 1.1% (2002 est.)
Population Growth Rate: - 0.07% (2003 est.)
Gross Domestic Product (GDP): $12.13 billion (purchasing power parity, 2002 est.)
Life Expectancy: male - 62.41 years, female - 71.17 years (2003 est.)
GDP Per Capita: $3,600 (purchasing power parity, 2002 est.)
Infant Mortality: 40.86 deaths/1,000 live births (2003 est.)
Real Annual GDP Growth: 12.9% (2002 est.)

U.S. STRATEGIC INTERESTS

Strong relations with a stable and democratic Armenia allow the U.S. Government (USG) to pursue its policy goal of regional stability in the Caucasus. Given its proximity to the Middle East and the energy-rich countries of the Caspian Basin, Armenia is an important ally in the war against terrorism. Resolution of the Nagorno-Karabagh conflict with neighboring Azerbaijan and better relations with Turkey will enhance the movement of goods and people throughout the region and create a better trading and investment environment. Armenia's progress on democratic and social reforms could offer a positive example to neighboring Iran and Iraq to the south.

OVERVIEW OF U.S. GOVERNMENT ASSISTANCE

In FY 2003, the U.S. Government provided an estimated $122.14 million* in assistance to Armenia:

  • $22.40 million in democratic reform programs (including Public Diplomacy exchange programs)
  • $48.13 million in economic and social-sector reform programs;
  • $18.18 million in security, regional stability and law enforcement programs;
  • $6.96 million in humanitarian programs;
  • $12.05 million in cross-sectoral and other programs; and
  • privately donated and U.S. Defense Department excess humanitarian commodities valued at $14.42 million.

(*This total includes $1.56 million in FY 2002 FREEDOM Support Act (FSA) funds allocated during 2003.)

In FY 2003, some 570 Armenians traveled to the United States on USG-funded training and exchange programs implemented by USAID and the U.S. Departments of Agriculture, Commerce and State, bringing the cumulative number of Armenian participants to over 4,070.

U.S. ASSISTANCE PRIORITIES

Democratic Reform Programs: In FY 2003, USG democratic reform assistance focused on anti-corruption, strengthening the legislature, improving local governance, and civic participation. Programs enhanced the ability of the National Assembly to perform economic and legal analysis, conduct constituent outreach and expand its accessibility to the media and citizens. USG assistance during Armenia's 2003 presidential and parliamentary elections was aimed at fostering a free and fair electoral process, and included support for election monitoring efforts led by the Organization for Security and Cooperation in Europe (OSCE). Civic participation programs emphasized women's participation and leadership. Academic exchange programs, professional exchange programs, support for educational reform (especially in the area of civic education) and small grants for non-governmental organizations (NGOs) continued to fortify Armenian civil society.

Economic and Social-Sector Reform Programs: USG assistance programs emphasized job creation, poverty reduction and income generation. Programs stimulated growth and competition in the private sector and increased public and private investment. Public-private partnerships, programs benefiting micro-, small and medium-sized enterprises (SMEs) and the strengthening of employment centers played a major role in U.S. assistance efforts. Programs emphasized business opportunities in the information technology, tourism and agribusiness sectors, as well as agricultural reform. USG social-sector reform programs sought to mitigate the adverse social impacts of the economic transition by helping to strengthen key social and health care systems, while at the same time providing urgently needed services to the most vulnerable sectors of the population.

Security, Regional Stability and Law Enforcement Programs: In FY 2003, USG security-related assistance strengthened Armenia's capacity to control its borders, prevent proliferation of weapons of mass destruction (WMD), and combat trafficking in persons. Military-to-military assistance sought to improve the interoperability of Armenian forces in international peacekeeping operations, and to enhance communications and training capabilities. USG assistance improved the Armenian Government's ability to detect, deter and react to acts of terrorism, and encouraged the adoption of legislation to track, freeze and seize terrorist assets. USG assistance targeted at former weapons scientists enabled them to conduct peaceful research with potential commercial, public health, or other social benefits. Specialized law enforcement assistance was provided at both the national and local levels.

SECTORAL ASSESSMENTS

Democratic Reform

During FY 2003, the USG supported democratic change in Armenia through a broad program of assistance to the NGO sector, independent media, local and municipal governments, the legislature, and through legal training programs. Armenia's transition toward democracy had mixed results in FY 2003. Progress was made in the NGO sector, local government, and the legislature. The passage of a Freedom of Information Act gave anyone, regardless of citizenship, the right to demand information from state and local bodies. These achievements were overshadowed, however, by elections that failed to meet international standards, manipulation of the media, corruption, and weak rule of law. International and domestic observers for the 2003 elections noted numerous electoral violations and concluded that the presidential and parliamentary elections did not meet the international standards to which Armenia had committed itself as a member of the OSCE. During the election process, independent media faced considerable pressure from authorities. The arbitrary arrest and detention of opposition activists raised questions about Armenia's commitment to the rule of law.

Executive dominance of the political system continued to pose a significant challenge to Armenia's transition to democracy, resulting in reduced political and economic competition and providing little recourse for citizens to challenge the use of public office for personal gain. The OSCE/Office of Democratic Institutions and Human Rights (ODIHR) report on the 2003 elections noted extensive use of state administrative resources to further the campaign efforts of favored candidates and parties, and several instances of intimidation of voters and opposition parties.

Lack of transparency and accountability, along with the country's relatively weak economy, have created an environment in which corruption can flourish. Entrenched state and business interests have little will or incentive to change the status quo. Corruption in Armenia includes bribery, illegitimate acquisition of assets, clientism, as well as political corruption and conflicts of interest in the judicial and law enforcement sectors. Unequal enforcement of the law remained one of the most detrimental forms of corruption in FY 2003. Irregularities in the rule of law seriously constrained the business and investment climate. For example, laws related to fair business competition were unevenly applied, contracts were not consistently enforced, and bureaucratic requirements were used selectively to harass disfavored businesses. The Government of Armenia has yet to demonstrate a genuine commitment to combating corruption effectively. Implementing the government's new anti-corruption strategy will test the Government of Armenia's commitment and ability to fight corruption.

In FY 2003, USG-funded democratic reform assistance helped improve democratic governance by expanding civic participation and strengthening institutions of governance. With the help of USG assistance, 12,000 people attended 220 town hall meetings to discuss citizens' concerns with community leaders. In over 1,300 dialogue groups held around the country, citizens discussed changes in the laws on local self-government and condominiums, health and pension reform, and proposed constitutional amendments. The impact of these programs was reflected by an increase in citizen satisfaction with local government. In a recent survey, 65 percent of respondents—up from 60 percent in 2002—agreed with the statement, "The local self-governing body is very interested and pays attention to what people like me think." USG-funded programs also supported government decentralization by providing recommendations on laws including the Apartment Building Management Law, the Condominium Law, and amendments to the Civil Code.

USG programs helped targeted government institutions, especially local governments, to improve internal management systems, implement transition reforms, strengthen oversight and fiscal responsibilities and increase public accessibility and accountability. A USG-funded local government program improved the capacity to implement capital improvement plans and local budgets, and assisted local governments with planning and civic management. This program introduced municipal governments to the concepts of performance management, assessment management inventories and training, and development of local economic development strategies.The USG helped the National Assembly's Control Chamber to improve legislative oversight of the national budget, and helped the government publish its budget. USG-funded assistance also helped elected representatives research and write better laws. A two-year effort by three USG-assisted NGOs, working with members of parliament and international experts, resulted in the passage of the above-mentioned Freedom of Information Act. A coalition of NGOs will continue to work with the National Assembly to implement the law.

USG technical assistance helped independent (non-state-owned) media outlets improve their business acumen, address marketing concerns, and improve the objectivity of their reporting. As a result, local newspapers are now utilizing free classified advertisements, thereby increasing demand and circulation and attracting more paid advertisements. Commercial revenues of six television stations receiving USG technical assistance increased by 70 percent, and independent news content increased by 22 percent in these same media outlets. The USG will continue to work with local media organizations on improving the current draft of a new media law.

USG grants and technical assistance to advocacy NGOs continued to foster citizen participation at the grassroots level. The USG supported public awareness campaigns to address the societal costs of corruption and the shared responsibility for combating it.

The embassy-based Democracy Commission Small Grants Program provided 32 small grants in FY 2003 to NGOs and independent media outlets that work to strengthen democratic institutions in Armenia and promote civil society. These programs significantly expanded the Internet presence of Armenian media outlets. With the help of Democracy Commission grants, NGOs and independent media addressed issues such as citizen legal rights and universal human rights for the first time through talk show programs, human rights libraries, and new curricula in primary and secondary schools. Community development assistance implemented through the Peace Corps Small Project Assistance Program increased during FY 2003, focusing on multi-sectoral capacity building in small cities and villages. Projects included infrastructure rehabilitation, HIV/AIDS awareness, educational resource and community centers, information technology, youth, regional media, NGO, and small business development.

In FY 2003, USG-funded educational reform programs, exchange programs and activities for exchange program alumni reflected an increased focus on Armenia's next generation of leaders. Teaching and school leadership programs concentrated on enhanced civic education programs for early and mid-level education, resulting in the nationwide implementation of new curricula and teaching methodologies. The Armenia School Connectivity network has expanded to over 250 schools that have been provided with Internet computer classrooms, providing students, educators and community members with free access to outside information and computer training. Exchange programs continued to expose Armenians to American democracy and civil society, and gave hundreds of Armenians a first-hand look at civil society in the United States. The alumni of USG exchange programs have formed highly effective NGOs for addressing social issues in Armenia, such as Youth for Armenia, which focuses on citizen participation in education, and the first Armenian branch of Transparency International.

In FY 2004, USG democracy programs will continue to focus on strengthening the capacity of local governments, combating corruption, and strengthening grassroots citizen participation. Support for effective advocacy NGOs and independent media will be the central focus of USG democracy assistance in FY 2004.

Economic and Social-Sector Reform

Armenia boasted notable achievements in this area in FY 2003. Real GDP growth reached 14.8% in the first half of 2003. Virtually all Armenians are literate, with approximately 80% having completed high school. School attendance and completion rates among primary to middle school-aged children are high in both urban and rural areas, and there are no significant differences by gender. Approximately 26% of urban women and 29% of urban men have a university education.

Despite these successes, economic growth is not yet broadly based, nor is it evident that this growth will be sustained. In 2001, 51% of the total population lived in poverty, with the extremely poor constituting 16% of the population. Basic poverty indicators have demonstrated little progress during the last few years, and jobs are not being created. Small- and medium-sized towns continued to fare the worst in this regard. While Armenia's literacy rates are impressive, the quality of education received and its relevance to Armenia's current economic and political development is a serious concern. Armenian schools have undertaken some reforms, but the overall approach to education has not changed substantially since the Soviet era.

Armenia's private sector grew significantly in FY 2003, and some progress was made in formalizing the informal economy. The number of active, legally registered entrepreneurs rose by more than 9% in 2003 (to approximately 124,000), and the private sector share of GDP rose from 70% in 2002 to 80% in 2003. Although tax revenues as a percentage of GDP fell from 16.1% to 15.2%, this can be explained in part by the sources of GDP growth, which included an especially large amount of non-taxable construction funded by private donors such as the Lincy Foundation. Another contributing factor to low tax revenue was the disappointing level of the profits tax collections.

However, there were also some improvements in government administrative performance. The average time to clear customs fell from 2.5 hours in 2002 to approximately two hours in 2003. The Government of Armenia adopted a Poverty Reduction Strategy Paper (PRSP) drafted by independent experts, which is now considered to be the country's overarching economic development strategy.

Armenia has a small internal market; exports therefore play a crucial role in economic development. As a result of the Nagorno-Karabakh conflict, Armenia's borders with Azerbaijan and Turkey were closed, and Armenia's imports and exports flowed largely through Georgia. High transportation costs increased the cost of both imports and exports and biased Armenian exports towards high-value, low-volume products, such as cut diamonds and niche information technology production. Since 1991, a small pipeline through Georgia has been the only source of natural gas supply for electricity generation and heating, leading to occasional disruptions in supply. This situation led to the re-opening of the Armenian Nuclear Power Plant in November 1995. Uncertain energy supplies continued to place barriers on industrial output.

Basic social protection programs disintegrated with the break-up of the Soviet Union, followed by an almost complete collapse in the Armenian economy. Armenian Government assistance to the most vulnerable segments of the population was severely reduced, including pensions for the elderly, welfare assistance for the most needy, assistance for the mentally and physically challenged, subsidized housing and unemployment benefits.


In FY 2003, USG-funded economic reform assistance focused on three areas: developing micro-, small and medium-sized enterprises (SMEs), improving the regulatory and institutional framework (including tax, fiscal and customs reform, banking supervision and accounting reform), and developing banking and capital markets. The positive impact of USG economic assistance was most evident in the area of SME development. More than 2,000 jobs resulted from USG-supported programs in the agriculture sector in FY 2003. The number of full-time-equivalent employees resulting from USAID-supported programs increased from 2,008 in 2002 to 2,574 in 2003. The total value of exports by USAID-assisted SMEs increased from $1.7 million in 2002 to $2.4 million in 2003. USG assistance also had a measurable impact on the post-privatization performance of the electrical sector. Electrical sector collections rose to 92% in 2003 (from 70% in 2001) as a result of the installation of USG-provided electricity meters and data acquisition systems. Financial losses in this sector fell by approximately 70%, from $49 million in 2002 to $15 million in 2003. With the help of USG assistance, the first financial leasing company was organized in Armenia in FY 2003. The program, utilizing Development Credit Authority (DCA), will work through three commercial banks, which will provide business loans based on partial loan guarantees. A fourth DCA loan guaranty program was also established with non-bank financial institutions that will supply working capital and export finance to SMEs throughout Armenia.

The U.S. Department of Agriculture's (USDA) Marketing Assistance Project (MAP) continued to provide technical, financial and marketing assistance to Armenian small and medium-sized agribusinesses in FY 2003, including wineries, fruit and vegetable processors, cheese makers, water bottlers, meat processors, seed and feed producers, and food packaging enterprises. Technical assistance was provided for irrigation and water management, integrated pest management, dairy herd health, nutrition and breeding, improved sanitation procedures and in-house labs, new product development (often for import substitution), increased fruit and vegetable, dairy, and meat production. Agricultural sector seminars facilitated knowledge and technology transfers to local agribusinesses. Financial assistance to Armenia's agricultural sector in FY 2003 was offered through direct client grants, micro enterprise and strategic loans to agribusinesses, as well as production credit clubs formed around farmer groups. Marketing assistance includes label design, food container/packing procurement, market research, product promotion export certification and compliance documentation, exhibitions and tradeshows to launch Armenian products into current and new markets, foreign buyer identification, and export market development. USG assistance helped open new and successful export channels for locally produced products in FY 2003. Several high-end Armenian grocery stores, as well as markets in Russia, Europe and the United States, are now carrying Armenian sausages, juices and cheese.

With USG support, Armenia made great strides in social insurance systems management in FY 2003. USG social sector assistance concentrated on establishing the legal and institutional foundation for sustainable social insurance systems, improving the efficiency and effectiveness with which the Armenian Government provides social assistance and primary health care, developing NGO and private-sector capacity to provide urgent primary health care and related social services (focusing on nutrition and shelter), and increasing citizens' capacity to meet their own needs through small-scale community infrastructure projects. USG assistance helped Armenia adopt critical legislation, such as the Law on Social Security Cards, the Personal Privacy Protection Law, and the Pension Law, and supported efforts to make existing social security systems operational. In addition, USG assistance promoted better family medicine by helping with the development of a new financing and patient enrollment system. Three polyclinic pilot sites were launched in 2003 with USG assistance. In July 2003, the Ministry of Health approved the USG-supported Unified Family Medicine Curriculum, which will strengthen post-graduate and undergraduate educational institutions by providing better family medicine training.

Activities in the health sector in FY 2004 will focus on strengthening Armenia's social assistance and insurance programs. Health care reform will continue to focus on family medicine, and vocational training programs will target unemployed adults and out-of-school youth. Assistance efforts will attack poverty from both ends by contributing to the overall reduction of extreme poverty while increasing the number of Armenian participating in the labor market.

Security, Regional Stability, and Law Enforcement

Preventing the spread of WMD, as well as related expertise and delivery systems, remained one of the highest USG foreign policy and national security priorities in FY 2003. The USG has been working with the Government of Armenia to develop a strategy to address the need for strong export control laws and regulations, and in 2003 the USG continued to support the Armenian Government's efforts to implement regulations that bolster its recently passed Export Control Law.

U.S. military assistance focused on fostering military cooperation between the United States and Armenia, enhancing regional stability, and increasing the interoperability of Armenian equipment and systems with those of NATO forces. Armenia supported the Global War on Terror by granting overflight rights and offering forces in support of ongoing operations. Armenia has also demonstrated a willingness to participate in selected international peacekeeping activities. To promote such participation, the USG provided the Armenian Ministry of Defense with Foreign Military Financing (FMF) grants, which were primarily used to improve the Armenian Military's communications infrastructure. The USG also supported Armenia's increased participation in Partnership for Peace (PfP) activities, such as the Exercise "Cooperative Best Effort," which was hosted by Armenia in June 2003. The USG continued to support increased Armenian involvement in the International Military Education and Training (IMET) Program, which funded professional military courses and English language training for Armenian military personnel in the United States. In addition, Armenian officers participated in programs at the George C. Marshall European Center for Strategic Studies focusing on civilian control of the military.

The Government of Armenia committed to justice sector reform when it acceded to the Council of Europe in 2002. After more than five years of work, the Government of Armenia finally adopted a new Criminal Code in April 2003, which entered into effect in August 2003. For the first time, terrorist acts are defined by law, and a number of offenses, such as trafficking in persons, are criminalized. Nevertheless, Armenia still falls short of having a comprehensive legal framework to effectively combat serious crime. Armenia does not have a comprehensive anti-money laundering regime, and while mechanisms are in place to identify and freeze terrorist assets, there is no law directly addressing the issue of terrorist financing or fundraising. Armenia is currently a party to only eight of the twelve international counter-terrorism conventions. Assistance efforts in FY 2004 will complement policy initiatives that encourage Armenia's signing and ratification of these conventions. In FY 2003, the USG provided technical assistance to Armenia's Customs Committee and Border Guard, enabling them to interdict shipments of WMD and their components.

The U.S. State Department's 2001 Global Trafficking in Persons Report identified Armenia as a country of origin for trafficking victims. The report further determined that the Government of Armenia did not fully comply with minimum standards for the elimination of trafficking and was not making significant efforts to do so, ranking Armenia a "Tier 3" country. The USG fully engaged the Government of Armenia through targeted assistance programs and encouraged the Government of Armenia to work aggressively to combat trafficking. Assistance efforts resulted in marked progress toward preventing and combating trafficking in persons, including research into the causes and extent of the trafficking problem, the return and reintegration of victims, legislative analysis and strengthening, public awareness, and victim identification/consular assistance. As a direct result of USG advocacy and assistance, Armenia established a National Plan of Action to Combat Trafficking in Persons, passed legislation criminalizing trafficking in persons, and began to investigate aggressively trafficking-related cases. As a result, Armenia moved from Tier 3 to Tier 2 in the 2002 Global Trafficking in Persons Report.

In FY 2004, USG assistance will continue to promote nuclear reactor safety, establish emergency response procedures, and secure nuclear material against dangerous use. Assistance to former weapons scientists will encourage their transition to sustainable peaceful research activities and their cooperation with partners throughout the Caucasus region. The USG will intensify work with Armenia's law enforcement agencies, particularly in the areas of trafficking in persons, money laundering, transnational organized crime, forensics analysis and communications.

Humanitarian Assistance

While the emphasis of USG assistance has shifted towards sustainable development programs in the last few years, humanitarian support still plays an important role in USG assistance efforts. Many Armenians still lack basic essentials such as adequate food, shelter, and access to health care services. High unemployment rates exacerbate the lingering impacts of the 1988 earthquake and the economic dislocation that accompanied the collapse of the Soviet Union. A substantial portion of the country's rural population lives in poverty and cannot afford or easily locate food, clothing, pharmaceuticals or hygienic supplies.

The most visible USG humanitarian contribution in FY 2003 was assistance provided under the Earthquake Zone Recovery (EQZ) Program, which assisted urban planning and redevelopment in northwest Armenia, which was devastated by a major earthquake in 1988. The EQZ Program helped the Government of Armenia meet its obligation to compensate families who lost housing in the earthquake and who still live in temporary shelters. By the end of FY 2003, the program had assisted approximately 7,000 families in Lori, Shirak and Aragatsotn Provinces through the issuance of housing certificates and grants for completion or repair of homes in rural and urban areas. The largest city in the region and the site of the most extensive program effort, Gyumri, continued to receive the bulk of this assistance. In urban areas, certificates were issued to beneficiary families on sites selected for their importance to the urban planning and redevelopment process. The EQZ program will be completed in FY 2004.

In FY 2003, approximately $8.8 million worth of pharmaceuticals and medical supplies were provided to health care facilities all over Armenia, benefiting about 200,000 individuals. Non-pharmaceutical medical supplies, medical equipment, clothing, hygiene and school kits donations by the USG totaled $3.8 million, benefiting at least 360,000 Armenians. School furniture and training material, estimated at $290,000, were donated to educational institutions serving approximately 24,000 children in rural areas. Department of Defense humanitarian assistance included $250,000 for the refurbishment of a hospital in the town of Talin. Soup kitchens for the elderly and school feeding programs helped to alleviate hunger for some of Armenia's most vulnerable populations. In FY 2003, more than 20,000 people benefited from USG-funded nutritional assistance programs. Mobile medical teams, which offer basic health services to rural communities, provided more than 8,000 individuals with basic health services such as screening for diabetes and breast cancer, maternal and child health services, health information, referrals and core medicines.

The USG-funded Public Works Program helped over 2,700 individuals find short-term employment in FY 2003, while simultaneously mobilizing communities to identify key infrastructure needs and engaging them in the development and construction or rehabilitation process. This program refurbished schools, built water pipelines and designed or reconstructed parks. The USG also continued to provide considerable humanitarian assistance funding with an eye toward regional stability, including training and financial support for the Armenian National Humanitarian Demining Center. Ground water wells were drilled in 100 communities, providing drinking and irrigation water to an additional 65,000 people.

The USG will continue to incorporate humanitarian assistance into development assistance programs as needed in FY 2004. Direct humanitarian assistance will address the most urgent needs of Armenia's healthcare system, including provision of pharmaceutical and medical supplies.

COUNTRY PERFORMANCE MEASURES

Armenia registered strong growth in real GDP and private sector activity in FY 2003, although GDP growth may not be sustainable as it was driven primarily by large donor inflows. Economic opportunity is not broadly based, and poverty remains a serious problem. Some progress in democratic reform in FY 2003 was overshadowed by government manipulation of the media and elections that failed to meet international standards. Weak rule of law, corruption and executive government dominance in the political arena remain serious challenges to further reform.

Economic Policy Reforms and Democratic Reforms in Armenia, 1991-2002

Economic Policy Reforms and Democratic Reforms in Armenia, 1991-2002

Democratic Reforms

Ratings of democratic freedoms are from Freedom House, Nations in Transit 2003 (2003) and cover events through December 2002. Economic policy reform ratings are from EBRD, Transition Report 2002 (November 2002), and cover events through September 2002. Economic policy reforms include price liberalization, trade and foreign exchange, privatization, legal, banking and capital markets, enterprise restructuring (credit and subsidy policy), and infrastructure reforms. Democratic freedoms include political rights (free and fair elections; openness of the political system to competing political parties and to minority group representation; governance and public administration) and civil liberties (free media and judiciary; freedom to develop NGOs and trade unions; equality of opportunity and freedom from corruption). Ratings are based on a scale of 1 to 5, with 5 representing the most advanced.

Progress in formalizing the informal sector contributed to significant growth of the private sector in FY 2003, although economic growth is still not broad-based. Despite virtually universal literacy, poverty levels remained high, constant and concentrated in small and medium-sized towns.

Economic Structure and Human Development in Armenia, 1991-2002

Economic Structure and Human Development in Armenia, 1991-2002

Human Development Index

The Human Development Index (HDI) is based on three indicators using 2001 data: longevity, as measured by life expectancy; educational attainment, as measured by a combination of adult literacy and combined primary, secondary and tertiary enrollment ratios; and standard of living, as measured by real per capita GDP ($PPP). The HDI ranges from 0 to 1, with higher values representing greater human development. UNDP, Human Development Report 2003 (July 2003). Private-sector share of GDP is from EBRD, Transition Report Update (May 2003).

SECTORAL PERFORMANCE MEASURES

DEMOCRATIC REFORM

Performance Indicator: USAID NGO Sustainability Index (1 = highest; 7 = lowest)

FY 2002 Baseline
FY 2003 Target
FY 2003 Actual
4.2
4.0
4.0

FY 2003 Results: The NGO Sustainability Index 2003 overall score for Armenia improved this year, from 4.2 to 4. Progress was noted in organizational capacity, advocacy, and infrastructure. Even with this progress, improvement remains possible in virtually all areas and is most urgent in the legal arena. The legal treatment of charitable contributions and the status of volunteer workers is an area of particular concern. Improved constituency relations would also benefit a large sector of NGOs and their clients.

Performance Indicator: Freedom House Nations in Transit Corruption rating
(1= highest, 7 = lowest; data based on previous calendar year)

FY 2002 Baseline
FY 2003 Target
FY 2003 Actual
5.75
6.0
5.75

FY 2003 Results: Rampant government corruption remains a major obstacle to Armenia's transformation to accountable democratic governance and economic development. During the report period, corrupt practices continued despite the efforts of the international donor community and government pledges to reduce their scale. Several laws addressing the problem did not markedly change the situation on the ground.

ECONOMIC AND SOCIAL REFORM

Performance Indicator: Increase in the number of active businesses (legal entities and entrepreneurs) Source: BearingPoint (USAID implementing partner), citing Armenia State Tax Service.

FY 2002 Baseline
FY 2003 Target
FY 2003 Actual
9% (104,385)
5%
9.7% (114,516)

FY 2003 Results: The USG assisted with structural reforms and provided firm-level assistance in Armenia to help increase the number of active businesses. As a result of major inflows of donor financing, especially private funds dedicated to rebuilding infrastructure along with a moderately improved business climate, GDP growth has been robust over recent years. While double-digit growth in the economy is not sustainable, USG assistance continues to support an improved business climate, one that encourages entrepreneurs to enter into the formal economy.

Performance Indicator: Key elements of social insurance legislation related to pensions, health services disability, survivor insurance, personified reporting, and unemployment are modified, adopted and enacted.

FY 2002 Baseline
FY 2003 Target
FY 2003 Actual
49
64
68

FY 2003 Results: This indicator tracks steps taken on eight major laws and five decrees (from drafting through implementation) keyed to USG policy goals in the social sector during FY 2003. The indicator score of 68 shows that all expected laws passed and are in the process of implementation. The additional four steps reflect amendments and additional laws/decrees that were drafted and/or passed.


Performance Indicator:
Percentage of population below poverty line (Source: PADCO, USAID implementing partner).

FY 2002 Baseline
FY 2003 Target
FY 2003 Expected
50.9
50.0
49.0

FY 2003 Results: Despite robust economic growth, poverty alleviation has been slow in Armenia. Preliminary data shows gains during 2003, which can be attributed to an increase in monthly pension payments, improved access to basic preventative health services, and a 15% growth in GDP thanks to short-term employment opportunities in the construction sector. USG assistance had an active role in promoting growth in these areas during 2003.

SECURITY, REGIONAL STABILITY AND LAW ENFORCEMENT

Performance Indicator: Armenia's ranking according to the U.S. State Department Global Trafficking in Persons Report.

FY 2002 Baseline
FY 2003 Target
FY 2003 Actual
Tier 3
Tier 2
Tier 2

FY 2003 Results: Significant efforts were made by the Government of Armenia to address the problem of trafficking in persons (TIP) in FY 2003, bringing Armenia from Tier 3 to Tier 2 on the annual Global Trafficking in Persons Report.After Article 132 (which criminalizes TIP) came into effect, there were seven cases of trafficking that resulted in criminal investigations in Armenia. Two Uzbek victims were returned to Uzbekistan by IOM in cooperation with the Armenian Government's Anti-TIP Commission. Of the seven cases, three (two victims from Vanadzor and one from Central Asia) were uncovered through a letter to the Anti-TIP Commission requesting assistance. The Commission ratified a concept paper and national plan of action. The NPA has been vetted through relevant ministries and submitted by the Ministry of Foreign Affairs to the Ministry of Justice for review. The final versions will then be sent to the Cabinet for approval. The NPA will provide the basis for the Armenian Government's anti-TIP efforts. Ongoing USG assistance programs in this area were designed to address specific goals in the draft national plan of action.

Performance Indicator: Armenia creates comprehensive export control legislation and an implementation strategy.

FY 2002 Baseline
FY 2003 Target
FY 2003 Actual
Number of laws that address export control = 0
Number of export control laws including "catch-all" and dual-use provisions and an implementation strategy = 1
Number of ratified export control laws = 1

FY 2003 Results: With USG assistance, Armenia ratified an export control law in FY 2003. The USG engaged the Armenian Government on developing necessary regulations and implementation mechanisms. Because the legislation is so new, there is only limited information on its implementation and impact on Armenia's ability to interdict weapons of mass destruction and dual-use goods. The USG will continue to monitor the Armenian Government's efforts in this area to maintain the current momentum and ensure follow-through.

FY 2003 FUNDS BUDGETED FOR U.S. GOVERNMENT ASSISTANCE TO ARMENIA

TOTAL USG FUNDS BUDGETED:  $106.16
VALUE OF DONATED HUMANITARIAN COMMODITIES:  $14.42
TOTAL FY 2003 USG ASSISTANCE:  $120.58

(IN MILLIONS, AS OF 12/31/03)

FSA FUNDS BUDGETED:  $89.42

USAID - Democratic Reform - $7.73 
USAID - Energy-Sector Reform - $7.70 
USAID - Environmental Management - $2.60 
USAID - Parking Fine Withholding - $0.00  
USAID - Private-Sector Initiatives - $16.78  
USAID - Social-Sector Reform - $11.36  
USAID - Special/Cross Cutting Initiatives - $7.53  
USAID - x Eurasia Foundation - $1.99
USAID TOTAL - $55.69

Dept. of Agriculture (USDA) - Agr. Marketing Asst. Project (MAP) - $7.00  
Dept. of Agriculture (USDA) - Cochran Fellowship Program - $0.10
DEPT. OF AGRICULTURE (USDA) TOTAL
- $7.10

Dept. of Commerce - BISNIS Business Info. Service - $0.10
Dept. of Commerce - SABIT Business Internships/Training - $0.20
DEPT. OF COMMERCE TOTAL
- $0.30

Dept. of State - ECA Public Diplomacy Exchanges - $11.73  
Dept. of State - EUR Democracy Programs (incl. Dem. Comms. & NED) - $0.40 
Dept. of State - EUR/ACE Humanitarian Transport - $1.00 
Dept. of State - Export Control & Related Border Security (EXBS) - $0.50 
Dept. of State - INL Law Enforcement - $2.20 
Dept. of State - International Information Programs (IIP) - $0.04 
Dept. of State - Performance Funds - $2.60
DEPT. OF STATE TOTAL
- $18.47

Dept. of the Treasury - Technical Advisors - $0.99
DEPT. OF THE TREASURY TOTAL
- $0.99

Dept. of Energy - Nuclear Reactor Safety - $4.47 
DEPT. OF ENERGY TOTAL - $4.47

NSF - Civilian R&D Foundation (CRDF) - $1.59 
Nuclear Regulatory Commission (NRC) - Nuclear Reactor Safety - $0.80

OTHER FUNDS BUDGETED:  $16.74

USAID - P.L. 480, Title II Food Assistance - $3.99
USAID TOTAL
- $3.99

Dept. of State - ECA Public Diplomacy Exchanges - $0.49
Dept. of State - Export Control & Related Border Security (EXBS) - $1.01
Dept. of State - Foreign Military Financing (FMF) - $5.00
Dept. of State - International Information Programs (IIP) - $0.02
Dept. of State - Internatl. Military Educ. & Training (IMET) - $0.66
Dept. of State - NADR - Demining - $0.75
Dept. of State - PRM Humanitarian Assistance - $0.12
Dept. of State - Science Centers - $1.00
DEPT. OF STATE TOTAL
- $9.05

Dept. of Defense - International Counterproliferation - $0.30
Dept. of Defense - ODHACA - Demining - $1.10
DEPT. OF DEFENSE TOTAL
- $1.40

Dept. of Energy - Materials Protection, Control & Acct. (MPC&A) - $0.60
DEPT. OF ENERGY TOTAL - $0.60

Peace Corps - Volunteers - $1.70