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Armenia
The Development Challenge
Armenia is politically and economically isolated, with Azerbaijan and Turkey maintaining an economic blockade against it as a result of the Nagorno-Karabakh (NK) conflict. The blockade has a large negative impact on Armenia's economy and its prospects for growth, though some highway and rail traffic continues across the borders with Iran to the south and Georgia to the north and a small amount continues with Turkey through Georgia. The dominance of the executive branch of government has reduced competition in Armenia's political and economic spheres. As a result, rule of law is problematic, political parties are weak and the media are not truly independent. Corruption is undermining Armenia's economic, political and social reform process. Despite high rates of economic growth, poverty in Armenia remains persistent. Basic poverty indicators demonstrate little progress during the last few years.
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U.S. Interests and Goals. Since its independence, Armenia has emerged as a strategically important country in the Caucasus. U.S. ties to Armenia are many and varied, from the cultural bond of the large Armenian-American diaspora to diverse personal connections, commercial interests, and broader political relationships. U.S. national interests in Armenia, and in the larger Caucasus region, revolve around security, conflict resolution, internal reform and energy security. Armenia's progress towards becoming a stable, Western-oriented and democratic country with a transparent, market-based economy is important to U.S. security and economic interests in the region. USAID contributes to USG policy priorities in Armenia through its support for reforms advancing democratic governance and a market economy, integrated into the community of nations.
The USAID Program: The USAID/Armenia Program covers seven
strategic objectives for which USAID is requesting FY 2004
and FY 2005 funds. These seven programs concentrate on technical
assistance and training to support institutional changes that
support growth in small and medium enterprises (SMEs), the
economic segment most likely in the near term to create jobs;
companion public investment in a healthy and appropriately
society; a climate of governance conducive to those public
and private investments; and, the presence of transparent,
accountable institutions that respond to the needs and demands
of the Armenian society. FY 2004 funds will be used to implement
ongoing programs in economic restructuring, energy sector
reform, democracy and governance, primary health care, and
social assistance, including earthquake zone recovery. The
specific activities to be funded by FY 2004 and FY 2005 appropriations
are described in more detail in the following Program Data
Sheets.
Other Program Elements: The USAID Farmer-to-Farmer Program strengthens the capacity of host organizations at three levels: the firm level, agricultural support organizations, and financial institutions.
Other Donors: The United States is the largest bilateral donor in Armenia. The second largest bilateral donor is Germany (private sector, small and medium enterprise development, export promotion, infrastructure development, public administration, and education). Other bilateral donors include France (education, health sector, and culture), United Kingdom (public sector reform, civil society, and support for the national census), the Netherlands (agribusiness), Japan (private sector development and technical assistance), Sweden (social and health sectors, poverty reduction, environment, governance and civil society, and education), Switzerland (housing, social sector, health, and elections), Belgium (health) and Italy (health and culture).
The largest multilateral donor in Armenia is the World Bank (WB) (natural resource management and poverty reduction, foreign investment and export promotion, information technologies, infrastructure, education, health, social sector, agricultural reform, municipal development, transport, and judicial reform). Armenia joined the WB in 1992 and the International Development Association (IDA) in 1993. IDA lending has helped finance infrastructure rehabilitation, including support for earthquake reconstruction, irrigation, power, road maintenance, and municipal water. IDA credits supporting the social safety net and improving access to services have included operations in health, education, and a social investment fund aimed at improving basic social and economic infrastructure. WB and USAID activities complement each other's efforts in most sectors, particularly social, health, and information technology development.
Donors to Armenia have established formal mechanisms to coordinate their assistance, supplementing frequent informal consultations. Most donors participate in formal monthly donor meetings, co-chaired by the World Bank (WB), United Nations Development Programme (UNDP) and USAID. Theme groups meet periodically as well, reporting critical technical and policy information to the donor coordination group.
Other multilateral donors include the European Union (energy, legal reform, environment, macroeconomic policy, governance, education, transport, SME development, and information technology), the International Monetary Fund (macroeconomic policy), the United Nations network of agencies, e.g. United Nations Development Program (poverty reduction, democracy and governance, post-crisis management, infrastructure, and information technology), United Nations High Commission for Refugees (refugee support), United Nations Children's Fund (health, education, and social sector), World Food Program, World Health Organization, and the OSCE (anticorruption and elections).
Several Armenian diaspora donors are active as well, the largest of which is the Lincy Foundation (road network, Yerevan public works restoration and improvements, SME development, tourism and earthquake recovery). In addition to Armenian diaspora, private foundations such as the Open Society Institute, are also active in Armenia (civil society, education, public health, culture, media, and judicial reform).
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