Millennium Challenge Corporation Board Approves Armenia Compact but Expresses Concern Regarding Irregularities in the November Referendum

Washington, D.C. —The Millennium Challenge Corporation has approved a five-year $235.65 million Compact with the Republic of Armenia. Today, over one million Armenians, about 35% of the population, live in rural areas and are dependent on semi-subsistence agriculture. Despite good recent economic performance by Armenia and a steady decline in urban poverty, the rural poverty rate remains consistently high: 41% in 2004. Farmers are operating on small plots of land and are constrained by poor roads, inadequate irrigation and an under-developed market economy.

To overcome these constraints, Armenia's Millennium Challenge Compact aims to reduce rural poverty through a sustainable increase in the economic performance of the agricultural sector. The Compact consists of two investments: a Rural Road Rehabilitation Project and an Irrigated Agriculture Project. The program will directly impact 75% of the rural population and is expected to increase annual incomes by $36 million in 2010 and over $113 million in 2015.

“Congratulations to the people and Government of Armenia for this great achievement,” said MCC CEO Ambassador John Danilovich. “They have developed an integrated, results-oriented program that will provide rural residents better access to jobs, social services, and markets and increase the productivity of farmers.”

Addressing reports of irregularities in the referendum on reforms to the Armenian constitution held in November, Ambassador Danilovich continued, “MCC is concerned about the government's lack of transparency and commitment to open and fair elections in the recent referendum. I have expressed those concerns to President Kocharyan and look forward to working with the government to protect Armenians' ability to participate fully in the electoral process. MCC was designed to reward and work with nations that take the hard steps necessary to create a policy framework to spur economic growth and reduce poverty. Consequently, Armenia's continued participation in the Millennium Challenge Program depends on its good performance in ruling justly, investing in people, and encouraging economic freedom. MCC will continue to monitor Armenia's policy performance in these three categories throughout the life of the Compact.”

Ambassador Danilovich has written a letter to Armenian President Robert Kocharyan indicating that MCC expects the Government of Armenia to take additional steps that demonstrate its commitment to the fundamental principles underlying Millennium Challenge Account-eligibility. A failure to take such concrete actions could result in a suspension or termination of the Compact pursuant to MCC policy.

Since its establishment last year, MCC has signed Compacts totaling more than $900 million with five nations, Madagascar,Honduras,Cape Verde,Nicaragua,and Georgia. MCC is also actively engaging with other MCA-eligible countries in Compact negotiations.

Launched by President Bush, the MCA is a different approach to development assistance that recognizes sound policies and good governance are critical to poverty reduction and economic growth in developing countries.

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Millennium Challenge Corporation (MCC), a U.S. government corporation designed to work with some of the poorest countries in the world, is based on the principle that aid is most effective when it reinforces good governance, economic freedom, and investments in people that promote economic growth and elimination of extreme poverty.