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Following is a Web version of a document from USAID's 1997 Congressional Presentation. Please note that some formatting may have been lost in the automated conversion of the original file. This document is also available for download in its original WordPerfect 5.1 format.

ARMENIA

FY 1997 Assistance to the NIS Request: $55,000,000

Introduction.

Armenia is a strategically important republic in the Caucasus which is in the early stages of a transition to achieve a democratic market-oriented economy. Its long-term political stability and economic development is inextricably linked to its success as a market economy. Armenia is important to the United States' interests because the economic and political transition taking place offers real prospects that it will emerge as a western-oriented democratic participant in world markets -- a model for other NIS and Eastern European states. With a settlement of the Nagorno-Karabakh conflict, Armenia could also provide leadership to promote regional economic integration and political cooperation within the Caucasus.

The Development Challenge.

Armenia is a landlocked country with a small, homogeneous population (3.4 million), few natural resources, and a mountainous terrain which limits the area suitable for agriculture. Like other countries of the former Soviet Union, Armenia's economic development has been constrained by the legacy of Soviet central planning. The country still experiences severe economic difficulties arising from the breakdown of the former Soviet trade, payments, and financial systems. Conflict over the predominantly Armenia-populated Nagorno-Karabakh region of Azerbaijan led to a trade and transport embargo of Armenia by Azerbaijan and the closure of the Turkish border since 1991. Although a cease-fire has held since May 1994, the borders are unlikely to open until a permanent peace settlement is negotiated. Successful resolution of the conflict would: (a) allow Armenia to reopen its main historic trade routes - railways, in particular - to the east through Azerbaijan and to the west through Turkey; and, in turn, (b) make Armenia more attractive to investors; and (c) significantly reduce hardships which currently require massive humanitarian assistance from foreign donors.

Despite these hardships, Armenia's resources are not insignificant: a skilled and educated workforce, with strong national identity, and strong support from a large international diaspora and the international community.

Between 1992-1995, USAID primarily focused its resources on humanitarian assistance. Humanitarian assistance will still be required for several more years, but at diminishing levels. Greater emphasis - and a greater proportion of USAID funding - will now be directed to the restructuring of the energy and financial sectors; creating a legal, regulatory, and policy framework for broad-based competition and economic growth; and promoting a democratic transition through better-informed citizen participation in political and economic decision-making.

With donor assistance and Government of Armenia (GOA) commitment, Armenia is the first former Soviet republic to register real economic growth (albeit from a very low base) in 1994 (5%); growth in 1995 was 5.2% and a higher growth rate is expected in 1996. Inflation has come down from 30% a month in 1994, and is expected to average 3% per month during 1996. Foreign reserves have increased, and the exchange rate has remained stable through 1995. Armenia has a relatively low level of indebtedness with a long-term debt to export ration of 68.9% in 1994. Much of Armenia's $200 million debt is attributable to energy imports from Russia and Turkmenistan. VAT exemptions of key foodstuffs were eliminated, taxpayer identification was developed and progress made on tax rationalization. Government expenditures have been reduced sharply; prices of most commodities have been liberalized and most state subsidies eliminated. Privatization on a broad scale has just begun; work on new criminal and civil codes is underway.

Armenia held parliamentary elections and approved a new constitution in 1995. Presidential and local elections are scheduled for Fall of 1996. USAID has initiated projects to encourage democratization and an open political process.

USAID assistance to date has been approximately 70% humanitarian, predominantly foodstuffs and heating fuel, with significant impact. Over the past three years, the Winter Warmth programs resulted in the delivery of 120,000 kerosene heaters and 76,000 metric tons of kerosene distributed to 250,000 households and to 1,100 schools. Theschool heating program allowed schools to remain open in winter, increasing school attendance by 54% during the 1994/1995 winter. Since 1993, out of a total population of 3.4 million, there have been over 1.5 million recipients of USAID-funded food assistance through grants to CARE and sub-grants to U.S. PVOs under Save The Children Federation. Pharmaceuticals were provided to approximately 400,000 women and children.

USAID-provided bulk wheat, together with U.S. Department of Agriculture and European Union shipments, played a key role in averting starvation and in promoting political stability. More recently, wheat has been monetized, assisting in broader development goals as well.

USAID also supported humanitarian assistance through international organizations, including UNICEF to control diphtheria through the provision of vaccines to immunize the population at risk, including children and adults. USAID- funded assistance, through the International Committee of the Red Cross, supported internally displaced persons and victims of conflict in the Nagorno-Karabakh region. Also, the Caucasus Logistics Advisory Unit (CLAU - under the World Food Programme) managed the rail, port, and communications network throughout the Caucasus and made the difference between the efficient delivery of humanitarian assistance and chaos. The CLAU operation, U.S. Center for Disease Control, and PVO programs - all financed by USAID - helped to build Government of Armenia (GOA) and local NGO capacity to manage and respond to human crises and emergencies on their own.

The balance of USAID assistance has been for economic restructuring, improvements in the energy sector, and exchanges and training. A USAID-financed economic advisor worked closely with Armenia's Ministries of Economy and Finance to help the GOA meet requirements and negotiate with the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD - World Bank) for various stabilization, stand-by, and sector loan programs. Most recent negotiations (in 1996) are for a $150 million Enhanced Structural Adjustment Facility (IMF) and a $65 million Structural Adjustment Credit.

USAID's housing sector reform project has led to the formulation of a legal and policy framework for the continued privatization of housing stock. In January 1996, Armenia was the first of the former Soviet republics to adopt a real estate law which defines basic private property interests and rights. This law and the 1993 law on state and public housing privatization are significant legislative achievements, solidifying fundamental economic reform in Armenia. This project also led to the development of Armenia's first condominium association and private building maintenance cooperative, and new laws for such associations and real estate mortgages.

In energy, USAID funded commodities to improve Armenia's electric transmission and distribution systems. Weatherization materials for hospitals and schools in the three largest cities (Yerevan, Gumri, and Vanadzor) have resulted in energy savings and increased efficiency. The USAID-funded Center for Economic Policy Research and Analysis, located in the American University of Armenia, undertakes economic analysis to develop policy options leading to economic reform and improving the enabling environment for private investment. Advisory assistance at the policy level resulted in: (a) an Executive Decree that will separate electricity generation, transmission, and distribution functions; (b) a restructuring of Armenia's state-owned electric utility, Armenergo, for greater efficiency and clearer alignment of responsibilities; and (c) GOA's drafting a new energy law to establish, among other provisions, an independent regulatory body. To reduce subsidies, the GOA increased electric, gas, and district heating tariffs achieving a uniform rate for both industry and residential consumers.

Economic recovery will depend upon on the ability of commercial banks to serve as financial intermediaries between savers and investors and increasingly mobilize savings. Improvement in Central Bank operations, through USAID- funded training at U.S. Federal Reserve Banks, contributed to reduced inflation and increased trade, both domestic and regional. USAID is also contributing to the formation of a viable banking sector by providing technical assistance, training and commodity support for: (1) establishing a modern electronic payments system to conduct timely financial transactions; (2) adopting a western-oriented internationally-accepted accounting and financial reporting system; (3) training in modern portfolio management and lending procedures; and (4) establishing through the Eurasia Foundation a commercial lending facility for small and medium enterprises. To help stimulate demand for such loans, USAID grantees (VOCA, International Executive Service Corps) are identifying and assisting potential clients to prepare viable investment and business plans to the benefit of both the borrower and lender.

USAID expects that Armenia will have the institutional and other resources to continue its own transition. Current plans are to phaseout Freedom Support Act (FSA) assistance within the next several years.

Other Donors.

Major donors and lending institutions include the International Monetary Fund, the International Bank for Reconstruction and Development, the European Bank for Reconstruction and Development, and the European Union. Bilateral donors include Germany, Great Britain, Italy, and France. The U.S. share of Overseas Development Assistance to Armenia was 45%.

FY 1997 Program.

Strategic Goal: Economic Restructuring

The USAID-funded Center for Economic Policy Research and Analysis (CEPRA) was established to provide technical assistance and training to better enable policy makers (government, parliament and executive branches) to formulate economic policies based on accurate measurement of key macroeconomic indicators and projected impacts of alternative policies. The Center was also tasked to develop plans, policies, and laws and regulations to support the transition to a market economy. Western economists and Armenian counterparts at CEPRA will undertake economic analyses, identify policy options and assist in the formulation of policy in the areas of comparative advantage and export growth potential; provide training in the areas of public project appraisal and development planning; develop new measures for national income and product accounts; and, train Armenians to carry out economic analyses and policy formulation. CEPRA will also provide policy and legal assistance to develop a commercial code (probably as part of civil codes), enabling legislation to support private enterprise, and provide training for lawyers, judges and business persons in adjudication of commercial disputes.

Another USAID-contractor, International City/County Managers Association (ICMA), provides assistance to the GOA to design, test, and develop: (a) a unified system of property registration based on a cadastre system for urban, suburban, and rural areas; and (b) a service to legally register property, convey title and record property values based on market prices. In FY 1997, ICMA will develop procedures to record, analyze, and report sales to facilitate the development of a real estate market based upon supply and demand, titles and their transferability.

Technical assistance in the fiscal sector will enhance national budget and tax administration, property tax, administration and government securities management to improve GOA preparation and administration of national budgets and achieve a more effective and fairly administered system of personal, property, and commercial tax codes. The development of a government securities program will provide a non-inflationary means to finance the national budget, and the banking system with instruments and markets to effectively implement monetary policy. A resident advisor will work with the Ministry of Finance and the Central Bank to develop a comprehensive legal and policy framework for the issuance of government securities; create a debt and cash management system; establish rules to encourage the development of a secondary market for securities; design financial instruments; and develop a detailed database for bond sales.

Assistance in the banking sector will continue in FY 1997 and should result in stronger, market-oriented central bank and commercial bank operations, ensuring that monetary and fiscal policies already in place are implemented effectively.

A key to financial sector reform will be the adoption of a western-oriented, internationally accepted accounting and financial reporting system. USAID will provide technical assistance to the Central Bank and Ministry of Finance to establish a new national accounting system based on their extensive testing of internationally-accepted accounting standards and practices that are appropriate for Armenia, including: an accounting practices law or decree, and modernized operating practices for an automated system. The new accounting system will be implemented in commercial banks and selected enterprises, both state-owned and private. Laws establishing internationally accepted accounting procedures and policies for the Central and Commercial Banks, Ministries of Finance and Economy, State Tax Inspectorate and industry will be enacted by the GOA. Reference and training materials will be developed; accounting trainers and advisors to be involved in the conversion to the new accounting system will be trained.

After the accounting conversion is underway USAID will embark upon a program to train bankers. The focus of this training will be portfolio management including savings mobilization, debt management, strengthening of prudentialrelationships between the Central Bank and commercial banking sector, plus the development of sound lending procedures and systems of loan recovery.

To facilitate the creation of capital markets, USAID has funded the establishment of a commercial lending facility for small and medium enterprises (SMEs), through a competitively selected local bank. Personnel from the lending bank receive training from Western bankers and other technical experts in banking operations, accounting and lending procedures. One or more additional local banks will receive training and initiate a second phase of the lending program. To help stimulate the demand for such loans, USAID grantees and contractors (e.g. Farmer-To-Farmer programs, PVOs) will identify and assist potential clients to prepare viable investment and business plans to the benefit of both the borrower and lender. Horticulture exports will receive particular financial and technical assistance attention.

Additional financing for the new Trans-Caucasus Enterprise Fund will also contribute to USAID's goal of a competitive market economy. As commercial laws and regulations are developed and private banks and financial restructuring take hold, we anticipate our strategic emphasis will shift from support for the financial sector to greater emphasis on development and export-driven growth, with the Trans-Caucasus Fund making a significant contribution.

Assistance in the area of legislative and regulatory reform will continue, as will assistance to draft and promulgate energy laws that support restructuring and commercial energy market development, while addressing environmental concerns. Working in collaboration with the World Bank and the European Union (EU), USAID will help the GOA develop options for mobilizing long-term project financing. USAID will provide resources to promote indigenous fuel production, notably the financing of technical and pre-loan studies complementing an EU-funded activity to attract U.S. and European investors.

  • Strategic Objective Increased soundness of fiscal policies and fiscal management practices

  • Strategic Objective: Accelerated development and growth of private enterprises

  • Strategic Objective: A more competitive and market-responsive private financial sector

  • Strategic Objective: A more economically sound and environmentally sustainable energy system

    Strategic Goal: Democratic Transition

    In FY 1997, USAID will finance activities for the following: (a) drafting of implementing legislation for the new constitution based on international democratic norms, including civil, commercial and criminal codes, as well as human rights legal safeguards; (b) retraining and strengthening of Armenia's judiciary, including a program of court reform; (c) retraining and strengthening of Armenia's private legal profession, and support of legal advocacy groups; (d) technical and training support for newly independent media; (e) training for political parties and members of parliament to enable pluralistic society, and within parliament (National Assembly) itself; and (f) support for capacity- building of indigenous non-governmental organizations working toward democratic legal and social reform.

  • Strategic Objective: Increased, better-informed citizens' participation in political and economic decision-making

  • Strategic Objective Legal systems that better support democratic processes and market reforms

    Strategic Goal: Social Stabilization

    Through technical assistance, training, and limited commodities, USAID will encourage the transformation of Armenia's system of family allowances and benefits so that only the most vulnerable receive humanitarian assistance. The program will also continue to promote civic action and NGO capacity building, permitting domestic organizations to begin to provide social services and thereby gradually decrease dependency on external aid.

    More than 120,000 people affected by the 1988 earthquake and the economic blockade remain without permanent homes. A slow transition to a market economy further constrains economic recovery. Unemployment remains highand most of those employed do not earn adequate wages. Until economic conditions improve, generating significant employment and household income, the most vulnerable population will not decline significantly. For improvement in the social sector to occur, a significant supply response from agriculture and the manufacturing sectors is required, supported by an aggressive program of privatization of state-owned enterprises. Additionally another major factor for ensuring Armenia's successful social and economic transition remains a peaceful and permanent resolution to its political problems with its neighbors.

  • Strategic Objective: Reduced human suffering and crisis impact

  • Strategic Objective: Improved sustainability of social benefits and services


    ARMENIA

    FY 1997 PROGRAM SUMMARY



    Strategic Objectives
    Economic Restructuring Democratic
    Transition
    Social Stabilization Cross-cutting / Special Initiatives Total
    Privatization
    Fiscal Reform 5,700,000 5,700,000
    Private Enterprise 10,000,000 10,000,000
    Financial Reform 5,500,000 5,500,000
    Energy 8,000,000 8,000,000
    Citizens' Participation 4,100,000 4,100,000
    Legal Systems 1,000,000 1,000,000
    Local Government
    Crises 18,700,000 18,700,000
    Social Benefits 2,000,000 2,000,000
    Environmental Health
    Cross-cutting / Special Initiatives
    TOTAL 29,200,000 5,100,000 20,700,000 55,000,000

    USAID Representative: Fred Winch


    ACTIVITY DATA SHEET

    PROGRAM: ARMENIA
    TITLE: Fiscal Reform, 110-S001.2
    STATUS: Continuing
    PROPOSED OBLIGATION AND FUNDING SOURCE:
    FY 1997: $5,700,000 Freedom Support Act
    INITIAL OBLIGATION:
    FY 1995; ESTIMATED COMPLETION DATE: FY 1999

    Purpose: Increased soundness of fiscal policies and fiscal management practices.

    Background: Beginning in late 1994 substantial progress was achieved to improve public expenditures as evidenced by reduced deficit spending and the removal of many cross-subsidies. This effort must be matched with efforts to improve tax codes and administration for functions like collections and the restructuring of the budgetary system with new financial management systems, and elimination of remaining ineffective subsidies. The lack of an internationally- accepted market-oriented national budget law and treasury functions are a major impediment to fiscal reform. Assistance to the Government is needed to develop new financial functions for accounting, treasury operations and executive budget formulation, execution and control. The next step will be to assist the Government develop a computerized financial management system (FMS) that incorporates the new executive budget and treasury functions.

    USAID Role and Achievements to Date: USAID will assist the Ministry of Finance (MOF), the State Tax Inspectorate (STI), and will coordinate with the Ministry of Economy and the Central Bank of Armenia (CBA) to develop fiscal reforms which lead to an internationally-accepted and market-oriented system of national budgeting, tax codes and administration and accounting systems which encourage private enterprise and investment.

    Description: Short and long-term technical assistance is being provided to the MOF to improve the methodology for the preparation and administration of the national budget, beginning with the drafting of a new national budget law. Assistance will be given to the STI to achieve a cost-effective and fairly administered system of personal, property and commercial tax codes. USAID's property registration activities will assist to establish market-valued methods of property assessment which in turn will expand the municipal revenue base to finance legitimate community services and infrastructure projects. USAID will assist the MOF to develop a government securities program to provide a non- inflationary means to finance the national budget which will provide the banking system with instruments and markets to effectively implement monetary policy.

    Host Country and Other Donors: The U.S. Treasury advisors for budget, government securities and tax administration coordinate their activities with the IMF, the IBRD, EU/TACIS and bilateral donors. USAID coordinates its activities in cadastral reform with the IBRD's Institutional Building Loan. USAID through the International City/County Management Association and the World Bank will likely collaborate to develop a "demonstration cadastral program" to develop the government and private sectors’ capabilities to survey and map property and government’s capability to register legally property titles in a computerized management information system. USAID will provide the technical assistance; the IBRD will fund the commodities; the government will provide offices and staff.

    Beneficiaries: The national budgeting law and the government securities program will benefit all Armenians by reducing inflation and by helping establish a more efficient revenue system. The demonstration property registration system will benefit 100,000 home and apartment owners and 50,000 farm owners.


    Principal Contractors, Grantees or Agencies: US Treasury; International City/County Managers Association.

    Major Results Indicators:*

    Amount of budget deficits
    Amount of government budgetary transfers to state-owned enterprises
    Amount of revenues available from cost efficient tax administration

    *These are illustrative indicators. ENI missions are in the midst of the complex process of developing measurable country-specific indicators and targets, which will be completed by June 1996.


    ACTIVITY DATA SHEET

    PROGRAM:
    ARMENIA
    TITLE: Private Enterprise, 110-S001.3
    STATUS: Continuing
    PROPOSED OBLIGATION AND FUNDING SOURCE:
    FY 1997: $10,000,000 Freedom Support Act
    INITIAL OBLIGATION:
    FY 1993; ESTIMATED COMPLETION DATE: FY 1999

    Purpose: Accelerated development and growth of private enterprise.

    Background: Armenia's current macroeconomic policies, legal-regulatory framework, and corresponding institutions are inadequate to fully support the transition to a market economy. Light manufacturing, agribusiness, housing construction, services and high technology have strong development potential, but to attract investment the government must proceed with privatization and formulate economic policies that promote business enterprise and opportunity. Western oriented laws and regulations governing property rights, contracts, banks and commercial transactions are needed to allay the doubts of prospective domestic and foreign investors and to support the transition to a market economy.

    USAID Role and Achievements to Date: With USAID assistance the Ministry of Economy and Parliament enacted the first market-oriented real estate law and the first condominium association law in the former Soviet Union. USAID also assisted with the drafting of bankruptcy and mortgage laws. These laws are important to develop real estate markets, ensure legal property rights and create market values for taxing real property. USAID is now helping the GOA to join the World Trade Organization.

    Description: The USAID-funded Center for Economic Policy Research and Analysis (CEPRA) was established to provide technical assistance and training to better enable policy-makers (Government, Parliament and Executive branches) to formulate market oriented economic policies based on accurate measurement of key macroeconomic indicators and projected impacts of alternative policies. CEPRA is also engaged in the development of plans, policies, and laws and regulations that support the transition to a market economy. CEPRA will also provide policy and legal assistance to develop a commercial code to support private enterprise and will provide training for lawyers, judges and business persons in adjudication of commercial disputes. USAID will assist the Government to design, test and develop a unified system of property registration based on legal descriptions contained in the real estate law; and a service to legally register property, convey title and record property values based on market prices. USAID will also assist the Government and municipal authorities to develop unified urban planning and development policies (e.g., zoning ordinances), building ordinances, public property auctions. A new horticultural export development program will help private agribusiness create new markets for Armenian fruits and vegetables. The new Trans- Caucasus Enterprise Fund will be established to support private sector development.

    Host Country and Other Donors: CEPRA coordinates its economic policy analysis and legal and regulatory reform of commercial laws with the IBRD, IMF, the European Union, and the Ministries of Economy and Finance. CEPRA assists the American University of Armenia conduct economic education activities. USAID works with the IBRD as it develops a program to develop a unified land and property cadastre system.

    Beneficiaries: Reformed economic policies and institutions will set the stage for foreign investment and the rapid import of new technology to put its skilled labor force back to work. Home owners and land owners will possess guaranteed rights to the use of property. Banks will increase lending because they can collateralize loans and foreclose. Government will increasingly generate revenues from property taxes based on a system of tax laws and procedures that are applied fairly. To support real estate and other markets, commercial laws will guide the way business is conducted.

    Principal Contractors, Grantees or Agencies: University of Maryland/IRIS; KPMG/Barents Group (for CEPRA). International City/County Managers Association (ICMA) is responsible for housing privatization, housing law and property registration.

    Major Results Indicators: *

    Number of laws implemented to expand private sector
    Number of regulatory procedures necessary to strengthen competitiveness in key economic sectors
    Commercial tax system in place that is considered equitable and transparent

    *These are illustrative indicators. ENI missions are in the midst of the complex process of developing measurable country-specific indicators and targets, which will be completed by June 1996.


    ACTIVITY DATA SHEET

    PROGRAM: ARMENIA
    TITLE:
    Financial Reform, 110-S001.4
    STATUS:
    Continuing
    PROPOSED OBLIGATION AND FUNDING SOURCE:
    FY 1997: $5,500,000 Freedom Support Act
    INITIAL OBLIGATION:
    FY 1995; ESTIMATED COMPLETION DATE: FY 1999

    Purpose: A more competitive and market-responsive private financial sector.

    Background: USAID will focus on the financial sector because it is primary to the development of internal and external markets and is a basic service which business and citizens need urgently. New business development for internal markets is impeded by a lack of western oriented commercial banks, better supervised by a stronger, market-oriented central bank. Bank managers and staff require training in international lending procedures and other banking services like commercial paper and financial markets. Outmoded accounting procedures are commonplace in the banks, industry and government ministries, limiting prudent asset management, loan decisions and affecting the accuracy of financial statements for internal and external financial transactions. Finally, capital markets are needed to finance new business investment and government spending.

    USAID Role and Achievements to Date: USAID, IMF, World Bank and EU are collaborating to establish a strong, market-oriented Central Bank. This began with the establishment of the electronic payments system (EPS) in 1996. USAID contributed to the opening of Armenia's first commercial lending facility which is lending at affordable market rates to small and medium-sized enterprises.

    Description: USAID is providing technical assistance to the Central Bank and Ministry of Finance to establish a new national accounting system based on internationally-accepted accounting standards and practices that are appropriate for Armenia, including: an accounting practices law or decree, and modernized operating practices for an automated system. After the accounting conversion is well underway, USAID will launch a program to train bankers. The focus of bankers’ training will be portfolio management including savings mobilization, debt management, strengthening of prudential relationships between the Central Bank and commercial banking sector, plus the development of sound lending procedures and systems of loan recovery. To facilitate the creation of capital markets USAID has funded the Eurasia Foundation to establish a commercial lending facility for small and medium enterprises (SMEs), through competitively-selected local banks. To help stimulate the demand for such loans, USAID grantees (VOCA, IESC and Peace Corps) will identify and assist potential clients to prepare viable investment and business plans to the benefit of both the borrower and lender.

    Host Country and Other Donors: The installation of the EPS is a joint undertaking with the IMF, the European Union (EU), and the IBRD. USAID assistance for accounting conversion is coordinated with the IMF' s Accounting Advisor to the Central Bank who is assisting with the installation of the IMF Chart of Accounts. EU short-term accounting advisors coordinate with USAID for accounting conversion.

    Beneficiaries: USAID, IMF, World Bank and EU assistance will establish a strong, market-oriented Central Bank. Savings deposits will increase and collateralized-lending will expand as banks compete. Offshore funds will begin to flow into banks, increasing capital for new business ventures. Savers and borrowers will benefit as both are served by a more rational, efficient and market-oriented banking system.

    Principal Contractors, Grantees or Agencies: Motorola, Lotus, Sprint and the Federal Reserve Bank of Richmond (Electronic payments system). Eurasia Foundation established the Small and Medium-Size Enterprise Loan Fund in Armenian commercial banks. KPMG/Barents is implementing the accounting conversion program. Volunteers in Overseas Cooperative Assistance (VOCA) and the International Executive Service Corps (IESC) assist entrepreneurs qualify for loans.

    Major Results Indicators: *

    Number of licensed viable private commercial banks
    Amount of funds for equity/credit provided to small and medium-sized businesses from private commercial banks

    *These are illustrative indicators. ENI missions are in the midst of the complex process of developing measurable country-specific indicators and targets, which will be completed by June 1996.


    ACTIVITY DATA SHEET

    PROGRAM: ARMENIA
    TITLE: Energy, 110-S001.5
    STATUS: Continuing
    PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $8,000,000 Freedom Support Act
    INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 1997

    Purpose: A more economically sound and environmentally sustainable energy system.

    Background: As a result of the breakup of the Soviet Union, an economic blockade by Turkey and Azerbaijan, and extensive damage to infrastructure caused by the 1988 earthquake, a significant portion of the country's fuel supply and electric generating capacity has been severely impaired. The shortage of power has been a major cause of economic decline. It causes great hardship, impedes the transition to a market economy, endangers public health, and could threaten political stability unless addressed.

    USAID Role and Achievements to Date: USAID's emphasis is two-fold: (a) through technical assistance, training, and limited commodity support, to increase energy efficiency and reduce waste in power generation, transmission, and distribution; and (b) to assist in the development of an institutional framework, including policy reform, to achieve planned restructuring. With respect to progress made to date, the Ministry of Energy has begun restructuring the energy sector. Armenergo, the state-owned electric utility, has been divided into generation, transmission, and distribution companies. The Government of Armenia (GOA) expects that these new companies will eventually be partially or fully divested. Plans are also underway to restructure Armgas, the national gas utility, into two state enterprises to be engaged separately in the transmission and distribution of natural gas. The restructuring process is on-going with plans to spin-off non-power production enterprises into private joint stock companies.

    Description: USAID focuses on four activity areas: improvement of energy efficiency; improving the institutional framework to promote market reform; indigenous fuel promotion; and regulatory nuclear safety. Assistance is channeled through three institutional contractors (Hagler Bailly, Burns and Roe, and the U.S. Energy Association) and with the U.S. Geological Survey (USGS). Areas of focus of respective contractors are as follows: 1) Hagler Bailly is responsible for providing technical assistance to support development of an institutional framework conducive to restructuring and eventual divestiture of state firms to private sector ownership; 2) Burns and Roe is providing technical assistance and limited commodity support to improve energy efficiency of the generating system and will also focus on the development and implementation of an energy supply and demand plan to facilitate the closure of the Medzamor nuclear plant by 2002; and 3) the U.S. Energy Association is providing short-term training in all activity areas. The USGS is providing assistance to the Ministry of Environmental and Internal Resources to implement a modern and more effective coal exploration program.

    Host Country and Other Donors: The World Bank is currently processing a $14 million loan for power maintenance and rehabilitation, plus a $35 million loan to fund the rehabilitation of the electrical transmission and distribution network. The Japanese may provide a $600,000 grant through the World Bank for technical assistance to the Ministry of Energy. Technical assistance from the European Union is currently being provided to support the formulation of energy efficiency policies and legislation. The European Union is also assisting Armenergo in the development of a centralized new billing and collection systems, while USAID is developing the systems for the transmission, generation, and distribution utilities.

    Beneficiaries: Approximately 850,000 residential and commercial consumers of electricity.

    Principal Contractors, Grantees, or Agencies: Three U.S.-based institutional contractors: Hagler Bailly (technical Assistance), Burns and Roe (technical assistance and commodities), and the U.S. Energy Association (training). The U.S. Geological Survey is also providing assistance (technical assistance, training and commodities) .

    Major Results Indicators: *

    Percent of heat and power plants with energy conservation measures
    Percent of total volume of electricity and heating produced and distributed by privatized sources

    *These are illustrative indicators. ENI missions are in the midst of the complex process of developing meaningful, measurable country-specific indicators and targets, which will be completed by June 1996.


    ACTIVITY DATA SHEET

    PROGRAM: ARMENIA
    TITLE: Citizens' Participation, 110-S002.1
    STATUS: Continuing
    PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $4,100,000 Freedom Support Act
    INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 2000

    Purpose: Increased better-informed citizens' participation in political and economic decision-making.

    Background: Like other countries emerging from the shadow of communist rule, Armenia is struggling to consolidate nascent democratic governance. Civic society is weak and fragmented: solid democratic pluralism, independent media, and nascent private voluntary organizations need to be developed and strengthened for democracy to survive, and for a market economy to flourish. There is little tradition of spontaneous popular organizations established outside the previous government-inspired context. Freedom to make wide-ranging personal economic and political choices are a new and largely untried phenomenon.

    USAID Role and Achievements to Date: USAID-funded activities in the area of independent media development have led to the establishment of the first independent television network in Armenia. Additionally, USAID activities supported the nascent development of the country's first domestic election monitoring non-government organization, and continue to support the strengthening of this indigenous organization.

    Description: USAID contractors and grantees are currently working with independent television stations, political parties, parliamentarians, and indigenous non-government organizations to foster the growth of civil society and grass-roots democratic reform efforts in Armenia. These activities will be expanded in FY 1996 and 1997.

    Host Country and Other Donors: These programs are being coordinated with other USAID activities, such as the USAID-funded Armenian Assembly of America-sponsored NGO Center (for private voluntary organizations), and the Eurasia Foundation, as well as with the U.S. Information Service (USIS). Additionally, USAID's efforts are being coordinated with international donors working in these areas, including the United Nations Development Program and the European Union.

    Beneficiaries: These efforts seek to benefit approximately 6,000 individuals and organizations actively involved in civic participation and democratic reform efforts, as well as the general population over time, in encouraging further and deeper citizen participation during the country's difficult transition to a democratic market-oriented state.

    Principal Contractors, Grantees, or Agencies: Current grantees include Internews, National Democratic Institute (NDI), and International Foundation for Electoral Systems (IFES). Additional grants and contracts will be established with other private US firms for expanded assistance in this area.

    Major Results Indicators: *

    Number of NGOs brought into the legislative process
    Percent of news coverage expressing opposing views

    *These are illustrative indicators. ENI missions are in the midst of the complex process of developing measurable country-specific indicators and targets, which will be completed by June 1996.


    ACTIVITY DATA SHEET

    PROGRAM: ARMENIA
    TITLE: Legal Systems, 110-S002.2
    STATUS: Continuing
    PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $1,000,000 Freedom Support Act
    INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2000

    Purpose: Legal systems that better support democratic processes and market reforms.

    Background: Armenia inherited a Soviet legal infrastructure that presents substantial obstacles in the country's evolution toward a market-oriented society based on the rule of law. Armenia's legislative infrastructure, judicial structure, and legal society as a whole all require assistance in reform, reconstruction and retraining. The former Soviet model was designed to protect certain restrictive legal concepts not consonant with Western civil and constitutional rights for individuals and non-official associations and groups.

    USAID Role and Achievements to Date: USAID funded a judicial conference in July 1995, which brought U.S. Supreme Court Justice Scalia to Armenia to discuss issues such as judicial independence and ethics with members of the Armenian judiciary and government. Additionally, USAID has funded Armenia's drafters of the country's Civil Code to travel to the Netherlands to participate in USAID-funded conferences which provided European and U.S. drafting expertise to Newly Independent States (NIS) drafters working on a model civil code.

    Description: USAID contractors and grantees will begin work in FY 1996 and FY 1997with legal institutions, such as the National Assembly, Constitutional Court, Ministry of Justice, Procuracy and Executive offices, on legislative and institutional reform and restructuring. Additionally, USAID will sponsor assistance in the retraining of the country's judges, lawyers and parliamentarians in international legal norms, as well as work on the grass-roots level with indigenous bar associations and legal advocacy non-government organizations, and the dissemination of legal information to the general population.

    Host Country and Other Donors: These programs will be coordinated with other USAID-funded activities, particularly in the area of commercial law reform, with USAID-funded Center for Economic Policy Research and Analysis (CEPRA) and the Center for Institutional Reform and the Informal Sector (IRIS) activities. These efforts will be coordinated with international donors, including the United Nations, the European Union, and French and German legal consultants.

    Beneficiaries: These efforts will benefit Armenia's legal institutions and legal advocates in the transition to a governmental system based on the rule of law and market principles, and thus will benefit the three million Armenians who rely on these institutions, both governmental and non-governmental, to support and protect their individual and property rights in accordance with the constitution and internationally recognized human rights statutes.

    Principal Contractors, Grantees, or Agencies: Private US firms will be contracted to carry out these activities.

    Major Results Indicators: *

    Percent of population knowing/understanding specific rights

    *These are illustrative indicators. ENI missions are in the midst of the complex process of developing measurable country-specific indicators and targets, which will be completed by June 1996.


    ACTIVITY DATA SHEET

    PROGRAM: ARMENIA
    TITLE: Social Benefits, 110-S003.2
    STATUS: Continuing
    PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $2,000,000 Freedom Support Act
    INITIAL OBLIGATION: FY 1994; ESTIMATED COMPLETION DATE: FY 1998

    Purpose: Improved sustainability of social benefits and services.

    Background: Following the break-up of the Soviet Union, Armenia experienced total disruption of existing social services, which were quite comprehensive under the old socialist regime. The government and USAID have determined that it is not useful or productive to rely on the old Soviet system of social categories for the distribution of humanitarian assistance or the provision of social services, as these categories are inadequate for identifying real vulnerability. What is required is the verification of poverty among identifiable households. At the same time, public and civic organizations have an important role in identifying social needs and activities to benefit vulnerable groups. However, both local non-governmental organizations (NGOs) and communities themselves presently lack the experience and capacity to perform this role.

    USAID Role and Achievements to Date: USAID funds a program designed to improve the targeting and delivery of humanitarian and government assistance to vulnerable households. To date approximately 700,000 households have been registered and entered into a national data base. Major USAID- and other donor humanitarian assistance programs have begun to use beneficiary lists generated from this computer database, thus increasing the likelihood that assistance is reaching the most vulnerable portion of the population. USAID funds an NGO training and resource center, which has identified over 150 viable indigenous NGOs, trained over 50 NGO representatives in principles of management and leadership, and facilitated the creation of a cohesive, active NGO sector. Many of the strongest NGOs who have benefited from the NGO Center's services have already begun implementing programs in humanitarian assistance and social services.

    Description: USAID focuses on two activity areas: creation of a computer database of registered households ranked according to social vulnerability; and capacity building of local NGOs and civic action groups to provide or revitalize social services inadequately covered by the public sector. A USAID-funded U.S. private voluntary organization is refining the database of registered households by increasing the number registered to include the entire population and improving the criteria used to calculate the vulnerability ranking of each household. Under this program, government social workers are being trained to manage the database, verify vulnerability status of individual households and design interventions for the most vulnerable households. USAID funding to U.S. and local NGOs will be used to provide management training, technical assistance and grants to local non-governmental organizations and civic action groups in order to increase local NGO and civic action group capacity to assess community needs and provide humanitarian and social services.

    Host Country and Other Donors: The European Union conducts capacity building within the Ministry of Social Welfare. United Nations High Commission for Refugees (UNHCR) and United Nations Development Program (UNDP) have provided funding to some local NGOs for humanitarian assistance projects. The World Bank has provided major funding for social infrastructure rehabilitation.

    Beneficiaries: These activities are intended to provide improved targeting of humanitarian assistance and social benefits to the most vulnerable parts of the population, which may number as high as 250,000 families.

    Principle Contractors, Grantees, or Agencies: USAID implements activities through U.S. and local organizations including most prominently Save the Children Federation, Fund for Democracy and Development, CARE, and Fund for Armenian Relief, among others.

    Major Results Indicators: *

    Number of services privatized
    Change in numbers of public/private partnerships

    *These are illustrative indicators. ENI missions are in the midst of the complex process of developing measurable country-specific indicators and targets, which will be completed by June 1996.


    ACTIVITY DATA SHEET

    PROGRAM: ARMENIA
    TITLE: Crises, 110-S003.1
    STATUS: Continuing
    PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $18,700,000 Freedom Support Act
    INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 1998

    Purpose: Reduced human suffering and crisis impact.

    Background: Armenia remains in a state of crisis. The earthquake, the collapse of the Soviet Union and the economic blockade by neighboring countries have led to the creation of a large vulnerable population that lives below the poverty level. Until economic conditions improve, generating significant employment and household income, the vulnerable population will not decline significantly.

    USAID Role and Achievements to Date: Since 1993 USAID has provided humanitarian assistance through U.S. non- governmental organizations (NGOs) and international organizations to assist Armenia's vulnerable population. This assistance met critical and immediate needs over the past three years for supplemental food, fuel and stoves for heating homes and schools, pharmaceuticals, non-food household items, improvement of shelters, weatherization of schools and the provision of wheat seed for planting.

    Description: Through funding to U.S. private organizations and international organizations, USAID provides humanitarian assistance in the form of food, kerosene, wheat for flour, wheat and alfalfa seed, pharmaceuticals, non- food commodities such as candles and blankets, and winterization of schools and hospitals. Most of this assistance is designed to meet critical needs during the harsh winter months. Some of the assistance, such as weatherization, is non-recurring, i.e. once performed does not need to be repeated the following year.

    Host Country and Other Donors: Significant levels of humanitarian assistance are provided by and through the European Union, bilateral donors including Germany and France, and U.N. organizations such as U.N. High Commission for Refugees (UNHCR). Armenian diaspora groups from various countries (primarily the U.S. and France) also fund some humanitarian activities.

    Beneficiaries: Kerosene is provided to more than 175,000 households, 35,000 shelters and 1,100 schools. Food assistance is provided to over 70,000 pregnant and lactating women and children under five. Pharmaceutical assistance provides coverage for 268,000 adults in Yerevan and for all children under 15 nationwide. Wheat seed donated for wheat production is intended to cover the entire country. Winterization is being performed for most primary and secondary schools nationwide.

    Principle Contractors, Grantees, or Agencies: USAID funds humanitarian assistance through U.S. non-governmental organizations and international multilateral organizations, including most prominently Save the Children Federation, Fund for Democracy and Development, CARE, World Rehabilitation Fund, Fund for Armenian Relief, among others.

    Major Results Indicators: *

    Amount of temporary assistance appropriately targeted
    Numbers of people with reduced suffering because of access to food, shelter, clean water, etc.

    *These are illustrative indicators. ENI missions are in the midst of the complex process of developing measurable country-specific indicators and targets, which will be completed by June 1996.