## 1. Key Results of Poverty Reduction Strategy Paper (PRSP-1) Implementation and ## Source details **Canonical URL:** [1. Key Results of Poverty Reduction Strategy Paper (PRSP-1) Implementation and](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08376.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08376.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08376.pdf.json) --- ### PRSP implementation: high‑level findings and numeric outcomes (2003–2006) - Rapid growth and social spending - Economic growth (2003-2006), %, average annual: 6.2 12.9 106.7 - Inflation (2003-2006) %, annual average: 3.0 3.8 2.6 - Average monthly salary, thousand drams: 38.3 64.3 68.0 2013 - Average monthly pension, thousand drams: 10.1 11.5 13.4 2007 - Social expenditures total, billion drams: 207.5 242.8 17.0 2008 - Social expenditures % of GDP: 10.8 9.1 -15.4 - Poverty and inequality outcomes (selected) - Number of poor, % of population*: 41.0 34.5 -15.8 2007 - Number of extreme poor, % of population *: 14.2 5.5 -61.3 2014 - Gini coefficient of income concentration,%*: 0.4910.359 -26.9 2015** - Poverty decreased to 29.8% in 2005 and to 26.5% in 2006 (new methodology) - Extreme poverty decreased to 4.6% in 2005 and to 4.1% in 2006 (new methodology) - Fiscal outcomes - Total revenues and grants, billion drams: 422.9 540.3 27.8 2008 - Total expenditures, billion drams: 461.5 574.7 24.5 2008 - Total expenditures, % of GDP: 24.1 21.6 -10.4 - Residual (addition), % of GDP: -2.1 -1.3 -38.1 - Sectoral distribution of consolidated budget expenditure growth in 2003-2006 - Social sector monetary growth by year: 21.9 29.8 39.9 41.0 132.6 - Education and science (2003-2006 growth): 6.0 13.6 14.0 12.5 46.0 - Health (2003-2006 growth): 3.6 5.1 6.4 8.4 23.5 - Social protection and insurance: 12.3 11.2 19.5 20.1 63.1 *Notes: poverty/inequality indicators estimated in 2005 on HS basis using an old methodology presented for comparison; ** indicator surpasses the level of 2015.* --- ### Participatory process in PRSP revision — objectives, outreach and inputs - Legal/administrative basis and timeline - PRSP approved August 8, 2003 (decree No 994-N); required revision once in two years. - PRSP revision launched 2006; principles approved May 19, 2006. - PRSP revision process lasted about 2 years; broad participatory engagement. - Institutions and documents - Partnership agreement signed October 30, 2004 (validity expired in 2007); parties: RA Government, communities, Armenian Apostolic Church, trade unions, Union of Manufacturers and Businessmen and five NGO groups. - Institutional entities: Steering Committee, Working Group and Open Forum. - PRSP Social Partnership Concept and PRSP Social Partnership Agreement draft produced and approved after wide public discussion. - Outreach, surveys and meetings (selected figures) - Social survey to identify PRSP revision priorities: 207 active participants. - Top PRSP revision priorities: “Business and investment environment” — 18%; “Public governance” — 15%; “Health” — 15%; “Pension security” — 14%. - Separate web survey (Analytical-information center of economic reforms) gathered 500 respondents. - Nationwide discussions: 20 (16 professional, 4 public) including Yerevan, Tsakhkadzor and Dilijan. - Marz-level discussions: 18 marz discussions with more than a thousand participants. - 700 copies of edited PRSP published; workshops engaged 200 (Jan 13, 2008) and over 600 in eight marzes (from Jan 15, 2008). - Stakeholder feedback as of March 2008 - State-governance bodies: 26 comments/recommendations. - NGO sector: 14 comments/recommendations. - Donor community: 6 comments/recommendations. --- ### Main content changes introduced in the revised PRSP → rationale for renaming to SDP - Macroeconomic and demographic revisions - Macroeconomic and fiscal framework completely revised taking into account 2007 outcomes and 2008 tendencies (projected increase of consumption prices and GDP deflator; higher nominal GDP; stable currency exchange rate foreseen). - Demographic projections revised (see SDP demographic section). - Paper revised using 2006 household survey results; poverty line, MCB, minimum and average salary rates, pension and benefit rates revised. - Sectoral and structural additions - New or expanded chapters: regional development; e-governance; maintaining public order; infrastructures as separate sections; youth issues in a special section; urban development chapter added. - Social security: transition to accumulative pension system principles highlighted; target related to basic pension added; pension reforms and disability issues revised. - Economic development chapter incorporated financial system development, economic structure changes and institutional modernization; business environment improvement benchmarks revised. - Renaming and governance - PRSP revised document approved September 10, 2008 and renamed Sustainable Development Program (SDP) to reflect broader content and inclusivity. - SDP Participatory Management architecture: two levels — SDP Steering Committee and SDP Working Group; creation of SDP Civil Cooperation Network (Negotiation Groups; Secretariat; Steering Committee). --- ### SDP strategic priorities and targets (core directions and material poverty goals) - Three core strategic directions - Ensure sustainable and rapid economic growth. - Implement targeted social and income policies focused on active and vulnerable groups. - Modernize public administration, increase governance efficiency and expand resource package. - Material poverty reduction numeric targets (national) - Armenia poor, % of population: - 2006: 26.0% → 2012: 14.0% → 2015: 10.1% → 2018: 8.4% → 2021: 6.8% - Armenia extreme poor, % of population: - 2006: 4.2% → 2012: 2.1% → 2015: 1.6% → 2018: 1.4% → 2021: 1.2% - Poverty threshold, per month, dram: - 2006: 21 555 → 2012: 28 707 → 2015: 31 366 → 2018: 34 280 → 2021: 37 455 - Extreme poverty threshold, monthly dram: - 2006: 14 300 → 2012: 19 045 → 2015: 20 809 → 2018: 22 742 → 2021: 24 848 - SDP poverty targets by area (examples) - Yerevan poor, % of population: 2006: 19.6 → 2012: 8.7 → 2015: 5.4 → 2021: 3.2 - Other towns poor, %: 2006: 34.0 → 2012: 18.5 → 2015: 13.1 → 2021: 8.1 - Rural areas poor, %: 2006: 26.6 → 2012: 14.9 → 2015: 11.6 → 2021: 9.1 - MCB (Minimal Consumption Basket) context and targets - 2006: poverty threshold = 21 555 dram; MCB = 31 961 dram (148% of poverty threshold) - Poverty level in 2006 using MCB: 39.8%; extreme poverty (MCB) 6.2% - PRSP-2 envisages poverty threshold equal to MCB by 2018 at the latest. - Poverty by MCB basis in 2021: 11.4% poor; extreme poverty 1.9% --- ### Macroeconomic framework and projections (selected SDP forecasts) - Long-run growth assumptions and selected indicators (Table 4.1 highlights) - Real GDP, % change: - 2007 actual 13.8; 2008 forecast 10.4; 2009 forecast 9.2; 2010 forecast 8.5; 2011 forecast 8.0; 2015 forecast 6.3; 2018 forecast 5.7; 2021 forecast 5.1 - GDP, billion dram: - 2007 actual 3,148.7; 2008 forecast 3,671.7; 2009 4,169.3; 2010 4,703.2; 2011 5,280.7; 2015 7,837.7; 2018 10,228.3; 2021 13,114.6 - CPI (average), % change: - 2007 actual 4.4; 2008 forecast 8.9; 2009 forecast 6.1; 2010 forecast 3.8; 2011 forecast 3.4; 2015 forecast 3.0; 2018 forecast 3.0; 2021 forecast 3.0 - Exchange rate (average), dram/US dollar: 2007 actual 342.0; forecasts 2008–2021: 305.4 (constant entries) - Investments (share of GDP): 2007 actual 37.2; 2008 forecast 37.6; 2009 forecast 38.2; 2015 forecast 34.2; 2021 forecast 29.1 - Consolidated budget: total incomes and grants (share of GDP): 2007 actual 22.4; 2015 forecast 24.2; 2018 forecast 25.7; 2021 forecast 26.7 - Consolidated budget total expenditure (% of GDP): 2007 actual 23.9; 2015 forecast 26.8; 2021 forecast 29.2 - Balance (including cumulative system), % of GDP: 2007 actual -1.5; 2008 forecast -2.4; 2015 forecast -2.4; 2021 forecast -2.5 - Public debt (total debt % of GDP): 2007 actual 17.8; 2008 forecast 16.0; 2015 forecast 17.0; 2018 forecast 19.8; 2021 forecast 21.9 - SDP growth benchmarks (footnote averages) - Average annual economic growth for 2008-2021 envisaged at 6.9% - Average annual growth for 2008-2015: 7.9% - Average annual growth rate for 2016-2021: 5.6% --- ### Employment, labor markets and productivity — outcomes and policy priorities - Employment and unemployment (selected outcomes and targets) - Real (self-reported) unemployment in 2006: 27% (reduced by 7% vs 2002) - Official (registered) unemployment in 2006: 7% or less than 4% compared with 2002 - Long-term (12+ months) unemployed share: 51.3% in 2002; 39.7% in 2006 - SDP real unemployment mid-term target: 15% by 2015; long-term perspective target: not more than 10% - Labor incomes, working poor and formalization - In 2005 around 24% of employed people and their family members were poor; target: by 2015 employed poor ≤ 5%; by 2021 problem solved via minimum earning equal to poverty line - Formality of non-agricultural employment: program envisages formality degree growth by 2-3% per annum to reach 85% in 2021 - Number of social insurance contributors (figure): 360 (2002), 418 (2003), 408 (2004), 459 (2005), 471 (2006) ... 934 (2021) (chart sequence preserved) - Labor productivity and elasticity - Labor productivity index (2002=100): SDP notes strong productivity growth in 2002-2006; productivity is a key growth driver - Employment elasticity (2002-2006): 0.2% (1% economic growth expands employment by 0.2%) - Policy levers and recommendations (summarized) - Maintain present potential level of labor taxation; increase efficiency of labor taxation via formalization - Liberalize employment protection rules to reduce rigidity and lower youth unemployment - Active employment policies focused on tailored measures, capacity building of State Employment Service, and vocational training aligned with employers - Promote social enterprises (disabled employment) and local employment strategies --- ### Social protection: PFBS, family benefits and pension policy (findings, projections, design) - Poverty Family Benefit System (PFBS) impact and coverage (2005 IHS) - PFBS reduced poverty by 1.8 percentage point and extreme poverty by 2.5 percentage point (2005 IHS) - PFBS helped 35.9 percent of pre-benefit “net” extremely poor population overcome extreme (food) poverty; 5.8 percent of pre-benefit “net” poor overcame general poverty due to PFBS - Number of families registered in PFBS (selected years): 1999 = 520,009 → 2007 = 172,484 - Family benefit recipient families: 1999 = 211,555 → 2007 = 124,689 - Average monthly allowance per family member, AMD: 2006 = 3,751; 2007 = 4,375 (projection) - PFBS targeting and addressness (2005) - Addressness: funds to poorest deciles increased; poorest 10% received 33.0% of family benefit funds (Table 2.20 format) - Coverage gaps: significant share of poorest not registered or not applying due to disbelief, lack of information, or document difficulties - SDP family benefit projections and design (2008–2021) - Public expenditures allocated for family benefits, AMD million: 2008 = 29,761 → 2012 = 46,967 → 2015 = 62,702 → 2018 = 81,827 → 2021 = 85,245 - Number of benefit recipient families (planned): 2008 = 116,204; 2012 = 114,000; 2021 = 97,666 - Number of poor families (WB methodology): 2008 = 159,631 → 2012 = 114,702 → 2021 = 57,469 - Ratio benefit recipient / poor families (WB): 2008 = 0.7 → 2012 = 1.0 → 2021 = 1.7 - Number of poor families (MCB): 2008 = 291,712 → 2012 = 205,216 → 2021 = 97,392; ratio benefit recip./MCB-poor: 2008 = 0.4 → 2021 = 1.0 - Fiscal note: public allocations for family benefits should increase by 1.8 times by 2012 and by three times by 2021 vs 2007 - Average monthly family benefit projections (Table 11.9) - Amount of average monthly benefit per family, AMD: - 2008: 21,090; 2009: 23,658; 2010: 26,695; 2011: 29,558; 2012: 33,921; 2015: 45,285; 2018: 59,097; 2021: 71,862 - Index, Year 2007 = 100: 2008: 120.5 → 2021: 410.7 - Ratios to thresholds (per capita): - Per capita family benefit / extreme poverty threshold, %: 2008: 46.0 → 2021: 102.6 - Per capita family benefit / poverty threshold, %: 2008: 30.5 → 2021: 68.0 - Per capita family benefit / MCB, %: 2008: 14.5 → 2021: 32.3 - Design rules: keep per capita family benefit ≈ 18–20% of minimum salary and ≈ 6–7% of average salary - Child and family programs (selected projections) - One-off childbirth benefit (first and second child): 2008 = 35,000 → 2009 = 50,000 → 2012 = 64,000 → 2015 = 81,000 → 2021 = 97,000 - Child care benefit for children under 2 (amount, drams/monthly): 2007: 3,000 → 2009: 18,000 → 2012: 27,240 → 2021: 52,980 - Benefit to families taking care of Group I disabled persons and "disabled children": 2012: 25,500 → 2015: 32,600 → 2018: 40,700 → 2021: 55,500 (ratios to MCB: 2012: 60.0% → 2021: 100.0%) - Pension policy and reforms (targets and fiscal implications) - Average retirement insurance pension at end-2006: AMD 12,059 (90% of 2005 extreme poverty line) - SDP targets for insurance pensions: - By 2012 average pension = 100% of MCB - By 2018 average pension = 150% of MCB, maintained thereafter - Public pension spending targets and projections: - Bring pensions to 5.8% of GDP by 2021 (from 3% in 2007) - Launch cumulative pension system in 2010 (additional fiscal burden estimated 0.2-0.4% of GDP financed from consolidated budget revenues) - Programmatic pension indicators (selected): - Pensioners poor: 2005 = 30.0 → 2008 = 26.5 → 2012 SDP = 4.6 → 2015 forecast = 3.2 --- ### Agriculture and rural development — outcomes, targets and priorities - Sector performance and structure (1996–2006 and SDP projections) - Agriculture average annual growth 2003-2007: 8.0% (planned 2.4%) - Per capita GDP in 2007 (US$): 2,853 (against $740 in 2002) - Share of agriculture in GDP declined (1996–2006); in 2006 agricultural value added = 495 bln AMD (18.7% of GDP) - Rural poverty dynamics and determinants - Rural poverty by altitude (2006): less than 1300m 22.1 / 2.6; 1300–1700m 19.0 / 2.9; more than 1700m 21.6 / 1.7; Total rural 21.0 / 2.4 - Credits to agriculture as % of agricultural value added: 2006 = 2.97% - SDP agriculture targets (Table 7.4 selected) - Total Value Added, AMD billion: 2006: 495 → 2010: 697 → 2015: 982 → 2021: 1,379 - % of GDP (agriculture): 2006: 18.7 → 2010: 14.8 → 2015: 12.5 → 2021: 10.5 - Number of employed (agriculture): 2006: 504.3 → 2010: 504.3 → 2015: 504.3 → 2021: 504.3 - Labor productivity, AMD thousand: 2006: 948.4 → 2010: 1,383.1 → 2015: 1,946.0 → 2021: 2,734.3 - Export of agricultural products, USD million: 2006: 26.8 → 2010: 56.8 → 2015: 177.3 → 2021: 498.5 - Credits to agriculture, % of agricultural value added: 2006: 2.97 → 2010: 6 → 2015: 11 → 2021: 18 - Policy priorities for agriculture - Expand irrigation, rural roads and infrastructure; public investment for irrigation ~0.2% of GDP (2008–2021) - Support commercialization (increase weight of large commercial farms from 2.4% in 2006 to 11.4% in 2021) - Promote export, import substitution and processing; increase financial intermediation to agriculture (credits to agriculture to reach 18% of ag value added by 2021) - Introduce zonal specialization, land market mechanisms, farm insurance, and risk mitigation infrastructures --- ### Infrastructure development: water, irrigation, transport, energy (selected targets) - Overall investment and priorities - Estimated annual investment demand (telecom excluded): 3 to 5 percent of GDP - SDP public investment framework: average about 4.6 percent of GDP annually; 50–60% to industrial infrastructure - Drinking water (selected targets and indicators) - Average supply duration (hour/day): 2006 = 12.1 → 2012 target = 16 → 2015 = 20 → 2021 = 22 - Public investment level for drinking water, % of GDP (annual average previous 3 years): 2007: 0.25% → 2012: 0.4% → 2015: 0.4% → 2021: 0.3% - Medium-term public investment: sector ~0.3% of GDP; affordability benchmarks and tariff reform envisaged - Irrigation (selected targets) - Irrigable areas Thousand ha: 2006 = 123 → 2012 = 160 → 2015 = 180 → 2021 = 180 - Current cost-recovery level %: 2006 = 40% → 2012 = 75% → 2015 = 85% → 2018 = 100% → 2021 = 120% - Public investment level, % of GDP: 2007 = 0.05% → 2012 = 0.2% → 2015 = 0.2% → 2021 = 0.2% - Transport (selected targets) - Communities with at least one adequate road connecting them to a regional centre, %: baseline 3% → 2012: 20% → 2015: 40% → 2021: 80% - Public investment, % of GDP (annual avg 3 previous years): 2007 = 0.8% → 2012 = 1.0% → 2015 = 1.2% → 2018 = 1.5% → 2021 = 1.5% - Energy (selected targets and projects) - Reform index EBRD Transition indicators: 2007 = 3.33 → 2012 = 4.00 → 2018 = 4.00 → 2021 = 4.33 - Public investment, % of GDP (annual avg 3 previous years): 2007 = 0.5% → 2012 = 0.3% → 2015 = 0.2% → 2021 = 0.2% - Measures: completion of Iran-Armenia pipeline sections, enlarge underground gas reservoirs, HPPs, transmission network upgrades, promote renewables and energy efficiency --- ### Business environment, second‑generation reforms and governance benchmarks - Business environment assessments and targets (Doing Business and BEEPS) - Doing Business 2006 overall place: Armenia 39th (among 178 countries) - Government target: by 2010 be among top 10 countries with most favorable business environment; detailed place targets for 2010/2015/2021 across sub-indicators (Table 5.5) - “Second generation” reforms (EBRD benchmarks, Table 5.3) - Aggregate reforms (values): 2006 — 2.88; 2010 — 3.26; 2015 — 3.69; 2021 — 4.09 - Sectoral benchmarks (examples): Competition policy 2006 — 2.33 → 2021 — 3.67; Banking reforms 2006 — 2.67 → 2021 — 4.00; Water and water removal 2006 — 2.00 → 2021 — 4.00 - Public governance, anti‑corruption and judiciary targets (selected) - Tax revenues to GDP target: 25.6% (long term; SDP reference) - Consolidated budget deficit target: within 2 - 2.5% of GDP - Governance indicators (Table 10.5 planned): - Control of Corruption: 2006 = 35.0 → 2010 = 47.1 → 2015 = 68.9 → 2021 = 90.2 - Rule of Law: 2006 = 38.1 → 2010 = 45.1 → 2015 = 63.4 → 2021 = 90.0 - Government Effectiveness: 2006 = 51.2 → 2010 = 58.1 → 2015 = 71.5 → 2021 = 90.0 - Anti‑corruption institutional measures and indicators - Institutional actions: anti‑corruption council chaired by PM; anti‑corruption division in General Prosecutor’s Office; anti‑corruption units in Police and NSS - Outcome indicators in new anti‑corruption strategy: Transparency International CPI 2006 = 2.9 → 2009 = 3.3 → 2011 = 4.0; World Bank Control of Corruption 2006 = 33.5 → 2009 = 40.5 → 2011 = 55 --- ### Public administration, judicial reform and e‑governance - Public administration reforms (key directions) - Structural/functional reforms; civil service introduction; financial management reforms (MTEF/program budgeting) - Quantitative outcomes: layoffs >750 government employees; number of ministries reduced from 21 to 16 - Civil service and remuneration targets - Average monthly salaries for employees of public administration system (AMD ’000): - 2007: 114.9 → 2010: 162.8 → 2015: 300.0 → 2021: 624.5 - Civil servants salaries: 2007: 104.9 → 2012: 208.5 → 2021: 626.5 - E‑governance objectives and implementation - Target: by 2012 Armenia to reach EU average for e‑governance services to business; program and action plan to be developed by end of 2010 - Initial target: 20 public services benchmarked (EU five‑level classification) - Infrastructure options: dedicated e‑governance backbone vs national telecommunication backbone with government capacity; compatibility framework (organizational, semantic, technical) to be adopted - Judicial reforms and financing - Judicial Code adoption and institutional changes: new first instance specialized courts, Council of Justice, Judicial Training School - Average monthly salaries in judiciary (AMD ’000): - Judicial system (2007): 107.8 → 2012: 184.2 → 2021: 553.4 - Prosecutorial system (2007): 119.9 → 2012: 400.0 → 2021: 1,201.4 --- ### Financial sector, credit deepening and equity markets — targets and benchmarks - Financial sector size and loan growth (2001–2007) - Banking system assets, bln drams: 2001: 188.7 → 2007: 764.4 (% to GDP 16.1 → 24.3) - Total loan investments, bln drams: 2001: 86.6 → 2007: 464.9 - Loans to population share: 2001: 21.3% → 2007: 53.3% - Domestic loan/GDP ratio (actual): 2007: 13.48% - SDP banking benchmarks (Table 5.19 / 5.21 highlights) - Domestic loan/GDP ratio targets: 2012: 25.3% → 2021: 50.6% (Table entries) - Interest rate spread (SDP): 2007: 10.8 → 2010: 8.4 → 2021: 6.7 - Bank capital/bank assets ratio: 2007: 22.5 → 2010: 11.1 → 2021: 9.3 - Equity market and insurance - Equity market capitalisation, bln drams (SDP targets): 2010: 237.3 → 2015: 725.7 → 2021: 2,176.5 - Equity market capitalisation/GDP ratio, %: 2010: 5.0 → 2015: 9.3 → 2021: 16.6 - Insurance sector (2007): premiums = 4.8 bln drams (0.15% of GDP); 2010 projection after mandatory motor insurance ≈ 30 bln drams (0.65% of GDP); 2015 target ≥ 1.25% of GDP; 2021 target 2.5% of GDP - Policy measures (summarized) - Deepen financial mediation; expand loans in drams and mortgage instruments; develop credit registries and collateral frameworks; attract reputable foreign banks; create borrower protection mechanisms; develop equity market infrastructure and corporate governance; modernize insurance market (mandatory motor insurance, voluntary medical insurance pilots) --- ### Infrastructure, urban development, housing and disaster risk (priorities and public funding) - Urban development priorities and public funding (2009–2012) - Public funding for urban development sector, SDP framework, 2009–2012 TOTAL: 9,672 (AMD mln) broken down: - Spatial development and planning total: 1,802 - Earthquake resistant construction and design total: 1,065 (technical documentation packages for 10,000 buildings: 1,060) - Reduced impact of geological hazards total: 960 - Improvement of housing conditions total: 5,845 (including measures for management, conservation and maintenance of housing stock: 5,775) - Housing and maintenance - Survey 2007: 65.6% of apartment blocks managed by condominiums (7,812 buildings); 34.4% (4,098) managed by communities - Need for apartment block technical documentation packages for 10,000 buildings in 2008–2012 (AMD 1,060 mln) - Homeless households in need: about 43,000 households (26,000 homeless) - Disaster and seismic risk - Seismic hazard: >80% territory in 7+ magnitude zone; most apartment blocks built before 1990 and require renovation - Landslide inventory (JICA 2004): Number of landslides = 2,504; total area = 1,216 km2; settlements in landslide areas = 233 - Implementation approach - Co-financing model: central government → local administrations → management bodies; community poverty level a priority determinant for support allocation --- ### Monitoring, evaluation and review: institutionalization and indicator framework - PRSP monitoring baseline and needs - PRSP monitoring indicator system: total indicators 177 (target indicators 36; intermediate 141) - Data gaps (2001–2004): information missing on 40 indicators; incomplete quality on >30 indicators; monitoring system functioned for ≈60% of indicators - SDP monitoring and evaluation plan (requirements) - Create SDP monitoring & evaluation framework including: - System of indicators and targets; standard methodology for monitoring/evaluation and gender components - Reporting formats and submission procedures; institutional responsibilities and capacity building - Inclusion of donor program monitoring and participatory monitoring with civil society - Review cycle: program review every two years based on developments, implementation progress and stakeholder feedback --- *Source: _cr08376 - 1. Key Results of Poverty Reduction Strategy Paper (PRSP-1) Implementation and (extracted content unit).* ### 1. Key Results of Poverty Reduction Strategy Paper (PRSP-1) Implementation and ### 1. Key Results of Poverty Reduction Strategy Paper (PRSP-1) Implementation and Justification of Strategy Paper Revision ### PRSP structure and timeline - Contains a structured table of contents covering PRSP-1 implementation, poverty diagnostics, sectoral strategies, and budget framework. - Time horizons and review periods explicitly referenced: 1999-2006, 2003-2006, 2003-2007, and 2008-2021. - Page anchors and section start pages included: e.g., main section 1 begins on page 23; program budget framework on page 295; RA Public Debt on page 300. ### Key thematic sections (high-level inventory) - Section 1: Key Results of PRSP-1 implementation and justification for PRSP revision - 1.1. Key target indicators and strategic priorities of PRSP (page 23) - 1.2. Key outcomes of PRSP implementation in 2003-2006 (page 25) - 1.3. Justification of the PRSP Revision Necessity and major priorities of Sustainable Development Program (page 28) - 1.4. Goals and strategic priorities of Sustainable Development Program (page 31) - Section 2: Overview of Poverty and inequality in Armenia and the PRSP Goals - Subsections covering economic growth and material poverty in 1999-2005; regional, gender, age, social group breakdowns for 1999-2006; rural poverty; social policy; employment; and alternative poverty estimates (pages 37–66 range referenced). - Section 3: Material Poverty Reduction goals under the SDP (page 68) - Section 4: Macroeconomic framework - 4.1. Main macroeconomic developments in 2003-2007 (real sector, prices, external sector, public finances) (page 71–73) - 4.2. 2008-2021 macroeconomic framework projections (page 73) - Section 5: Economic Development Strategy - Priorities including economic reforms, competition policy, business and investment environment, monetary policy, tax policy, institutional modernization (pages 80–120 range). - Section 6: Employment, unemployment, labor productivity, population income and poverty reduction - Detailed subtopics including employment–poverty correlation, labor market structure, agricultural and non-agricultural employment, formal/informal employment, labor productivity (2002-2006), emigration, labor market institutions (pages 122–134). - Section 7: Agriculture and Rural Development (page 138) - Section 8: Infrastructure Development - Drinking Water (page 149), Irrigation (page 154), Transport (page 155), Energy (page 156). - Section 9: Regional Development (page 160) - Section 10: Public Administration and Judicial System Reforms - Public administration reforms, civil service, financial management, governance indicators; judicial system reforms and public security; anti-corruption policy (pages 169–202, with detailed sub-subsections). - Section 11: Social Protection System - Social assistance system (family benefits; childbirth one-off benefit; child care benefit for children under 2 years old; benefits to families taking care of persons with Group I disability and “Disabled Children”; other social assistance programs) and Pension System (pages 206–226+, with specific program pages 209, 219, 221, 222, 223 referenced). - Section 12: Human Development and Human Poverty Reduction - Health (overview 2003-2006; priorities; programming budget; access to medicines), Education (accessibility, goals, program indicators for public expenditures), Culture concept for poverty reduction, Youth Policy, Environmental Protection, Urban Development (pages 232–291 range). - Section 13: Program for Sustainable Development Budget Framework - Key fiscal developments 2003-2006, 2008-2021 budget framework projections, RA Public Debt (pages 295–300). ### Explicit timeframes and numeric references preserved from source - 1999-2006 - 1999-2005 - 2002-2006 - 2003-2006 - 2003-2007 - 2008-2021 - Page references such as 23, 25, 28, 31, 37, 46, 49, 53, 56, 62, 66, 68, 71, 72, 73, 80, 84, 86, 93, 107, 119, 120, 122, 124, 125, 128, 130, 131, 133, 134, 138, 148, 149, 154, 155, 156, 160, 169, 171, 182, 184, 188, 192, 198, 202, 206, 208, 209, 219, 221, 222, 223, 226, 232, 237, 238, 239, 240, 242, 244, 254, 256, 261, 263, 264, 270, 271, 274, 275, 277, 278, 279, 286, 287, 289, 290, 291, 295, 297, 300. *Source: _cr08376 - 1. Key Results of Poverty Reduction Strategy Paper (PRSP-1) Implementation and* ### 14. Program Monitoring, Evaluation and Review.............................................................. 304 ### 14. Program Monitoring, Evaluation and Review ### List of Tables (selected entries) - Table 1.1. Main Results of PRSP Implementation, 2006 - Table 1.2. Distribution of consolidated budget expenditure growth in 2003-2006 (billion drams, in current prices) - Table 2.1. Key indicators of economic growth and poverty as compared with PRSP-1 target indicators - Table 2.2. Income dynamics of poor and very poor population of Armenia in 1999-2005 (in current prices, dram and percentage as compared with general incomes) - Table 2.3. Monetary income flexibility of poor, very poor and non-poor population income in 1999-2005 (in current prices) - Table 2.4. Income dynamics of non-poor population in Armenia in 1999-2005 (in current prices, dram and percentage as compared with general incomes) - Table 2.5. Number of poor and very poor population and economic development dynamics by marzes and in the rural-urban context, 1999-2006* - Table 2.6. Poor and very poor population in 1999-2006 and the dynamics of economic development in 1999-2006 by marzes and village-city ratio* - Table 2.7. Average territorial elasticity of poverty reduction and economic growth in 1999-2005 (in current prices) - Table 2.8. Dynamics of economic development and regional differences of poverty in 1999-2005 - Table 2.9. Dynamics of poverty levels by gender and age groups, 1999-2006 - Table 2.10. Dynamics of poverty level by household size, 1999-2005 - Table 2.11. Dynamics of poverty level by the number of children and elderly in a household, 1999-2005* - Table 2.12. Dynamics of poverty level depending on employment status and education level (for the population above 16) in 1999-2006 - Table 2.13. Dynamics of poverty level for the most needy groups of the population in 1999-2006 - Table 2.14. Dependence of the level of the rural poverty on the altitude above sea level, 1999-2006 - Table 2.15. Dependence of the level of rural poverty on the size of the owned land, 1999-2006 - Table 2.16. Borrowing capacity of farms and poverty level in 2002-2006 - Table 2.17. Impact of social payments on the levels of poverty and extreme poverty in 1999-2006 - Table 2.18 Impact of social payments on the levels of poverty and extreme poverty in 2005, by regions - Table 2.19. Per capita distribution of social payments by income deciles in 1999-2005* - Table 2.20. Distribution of family benefits by decile groups formed on the basis of consumption aggregate in 2005* - Table 2.21 Population employment and per capita monthly incomes in 1999- 2004 (in current prices, dram)* - Table 2.22. Monthly income growth per employee in 2004 (in percentage as compared with 1999, Index=100) - Table 2.23. Employment and unemployment level or population in 1999- 2004 - Table 2.24. Alternative estimates of poverty in 1999- 2005 - Table 3.1 The PRSP main target indicators for poverty reduction - *by the average prices for the third quarter - Table 3.2. The PRSP main target indicators for poverty reduction by particular groups of population - Table 4.1. SDP macroeconomic framework: forecast of key indicators - Table 4.2. Projections of key indicators for the development of economy sectors - Table 5.1. EBRD transitional status assessments in 2001 and 2006 - Table 5.2. EBRD assessments of “first” and “second” generations of reforms in 2001 and 2006. - Table 5.3. “First” and “second” generations reforms implementation benchmarks - Table 5.4. Assessment of the quality of Armenia’s business environment in comparison with the assessments of other transition countries’ business environment in 2006 - Table 5.5. The quality benchmarks for business environment - Table 5.6. Summary investment environment assessment in ECA countries, 2005 - Table 5.7. Target indicators characterizing the infrastructure quality, enterprise funding and labor market 2005-2021 - Table 5.8. Target indicators characterizing the quality of public administration, the situation with corruption, the quality of the judicial system and the influence of crime, 2005-2021 - Table 5.9. Target indicators characterizing the innovation and technologies, and foreign commerce, 2005-2021 - Table 5.10. Investments in 2005-2021 (in prices of respective years) - Table 5.14. Dynamics of main indicators characterizing the monetary policy in Armenia in 2001-2007 - Table 5.15. Gross foreign reserves and monetary aggregates forecasts for 2010-2021 (in current prices) - Table 5.16. Armenia’s financial system assets in 2001-2007 (bln drams in current prices) - Table 5.17 Structure of loan investments in 2001-2007, bln. drams - Table 5.18 Actual and rated values of domestic loan/GDP ratio in 2001-2007 - Table 5.19. Domestic loan/GDP ratio benchmarks envisaged for 2007-2021 - Table 5.20. Actual and rated values of bank spread and bank capital/bank assets ratio 2001-2007 - Table 5.21 Benchmarks for Interest rate spread and bank capital/bank assets ratio envisaged for banking system in Armenia in 2007-2021 - Table 5.22. Benchmarks defining equity market volumes (in current prices) and capitalization in 2010-2021 - Table 7.1: Main Indicators of Agricultural Development, 1996-2006 - Table 7.2: Export and Import of Agricultural Products, 1996-2006 - Table 7.3: Main Indicators Characterizing the Activities of Farms, 1996-2006 - Table 7.4: Main Indicators for Development of Agriculture, 2006-2021 - Table 7.5: Target Indicators for Development of Agriculture, 2005-2021 - Table 7.6: Target Indicators for Development of Agriculture, 2006-2021 (Year 2005 = 100) - Table 8.1. Armenia. Household access to drinking water, comparison between 1998/99 and 2004- 2006 (% of the population) - Table 8.2. Main target indicators for drinking water supply - Table 8.3. Main target indicators for irrigation sector - Table 8.4. Main target indicators for transport sector - Table 8.5. Main target indicators for energy sector - Table 9.1.GDP in Armenia. Regional distribution, 1999-2006 (AMD bln, current prices) - Table 9.2. GDP per capita in Yerevan, Marzes, Rural and Urban Areas, 1999-2006 - Table 9.3 Distribution of investments across Armenia, 2001-2006, by regions - Table 9.4. Regional development (GDP growth) average annual rate, 2008-2021 - Table 9.5. SDP regional distribution of planned investments - Table 9.6. GDP per capita indicators, by regions - Table 10.1: The Indicators of the ROA Governance System (percentage rating, 0-100,1998-2006) - Table 10.2: The Indicators of Governance System of the CIS and Eastern Europe Countries, 2007 (percentage rating, 0-100) - Table 10.3. Public E-Services Subjected to Benchmarking by EU and ensuring them in Armenia by 2021 - Table 10.4: Average Monthly Salaries for Employees of Public Administration System in 2007-2021 (AMD ’000) - Table 10.5: Planned Indicators for the ROA Governance System, (percentage rating, 0-100, 2006 - 2021) - Table 10.6: Specific Weight of Total Judiciary Expenditures in the ROA and Several Other Countries (2002) - Table 10.7: Per Capita Expenses of Judiciary in the ROA and Several CIS and Eastern Europe Countries (2004) - Table 10.8: Average Monthly Salaries in the Judiciary, 2008-2021 (AMD ’000) - Table10.9. Average monthly salaries of police staff in RA, and a number of EU and CIS countries (2007) - Table 10.10. Average monthly salaries of RA Police officers in 2008-2021 - Table11.1. 2008-2021 projections for main indicators of social protection system funding - Table 11.2. 2008-2021 Projections for Main Indicators of Social Assistance System Funding. - Table 11.3: Dynamics for Number of the PFBS Registered and Beneficiary Families in 1999-2007 - Table 11.4: Dynamics of Public Expenditures Allocated for Family Benefits in 2000-2007 - Table 11.5: PFBS Impact Assessments - Table 11.6: Distribution of Family Benefit Recipient Population by Pre-Benefit Living Standard, % - Table 11.7: Family Benefit Recipient Population in Pre-Benefit Consumption Deciles and Funds Allocated for Benefits - Table 11.8: Family Benefits and Poverty in 2008-2021 - Table 11.9: The Amount of Average Monthly Benefit per Benefit Recipient Family and Its Ratio to Poverty Thresholds and MCB in 2008-2021 - Table 11.10: Ratio of Family Benefits to Minimum and Average Salaries in 2008-2021 - Table 11.11. The number of individuals who received one-off benefits for childbirth in 2001-2007 - Table 11.12. One-off childbirth benefit amount projections for 2008-2021 - Table 11.13. Number of Beneficiaries of the Child Care Benefit for children under 2 over 1999-2006 - Table 11.14. Projections of the child care benefit for children under two over the period 2008-2021 - Table 11.15. 2010-2021 projections for the benefit amount for families taking care of Group I disabled person and disabled child - Table 11.16: Programmatic Indicators for Poverty Level of Pensioners - Table 12.1. Population Health Indicators and International Comparisons - Table 12.2 Program Indicators of Consolidated Budget Expenditure - Table 12.3 Targets for Maternal and Child Mortality - Table 12.4: Dynamics of Public Expenditures in Education Sector in 2000-2006, percentage of GDP - Table 12.5: The Structure of Public Expenditures in Education Sector in 2000-2006 - Table 12.6: Public Expenditures per School Student and Student in 2000-2006 - Table 12.7: Program Indicators of the Consolidated Budget Expenditures in Education Sector - Table 12.8. Intra-Sectoral Structure of Expenditures in Education Sector, % * - Table 12.9. Per Student Public Expenditures in Elementary, Secondary and High Schools - Table 12.10: Intra-Sectoral Structure of Public Expenditures in Professional Programs, % - Table12.11: Structure of Public Expenditures in General Education, % - Table 12.12. State Budget Funding of Key Components of the Culture Sector, 2006-2021 - Table 12.13Public funding estimates for urban development sector, SDP framework, 2009 – 2012 (AMD mln) - Table 13.1. Consolidated Budget Framework 2002-2007 - Table 13.2. 2003-2007 Consolidated Budget Expenditure by aggregated budget components (functional classification) (% of GDP) - Table 13.3 2008-2021 Projections on Consolidated Budget Key Indicators - Table 13.5 2008-2021 Consolidated Budget Deficit and Funding Projections (% of GDP) - Table 13.6. Public Debt in 2002-2007 (% of GDP) - Table 13.7. Domestic Debt Transactions, 2002-2006, AMD million - Table 13.8. RA External debt indicator projections ### List of Figures (selected entries) - Figure 1.1. Social sector expenditures of the consolidated budget in 2003-2006 (% as of 2002- left axis) and their ratios to GDP and total public expenditures (%, right axis) - Figure 2.1. Economic growth and poverty reduction in Armenia in 1999-2005 (cumulative percentage change to 1999) - Figure 2.2. Economic growth and poverty reduction in Yerevan in 1999-2005 (cumulative percentage change to 1999) - Figure 2.3. Economic growth and poverty reduction in other towns in 1999-2005 (cumulative percentage change to 1999) - Figure 2.4. Economic growth and poverty reduction in rural areas in 1999-2005 - Figure 2.5. Dynamics of the population incomes in Armenia in 1999-2005 (in percentage as compared with 1999, in current prices) - Figure 2.6. Impact of economic growth and social transfers on the poverty and extreme poverty reduction in 1999-2005, % - Figure 2.7. Distribution of the family benefits among poor and non-poor population in 2001-2005, % (as by income deciles) - Figure 2.8. Number of the households registered in the family benefit system in 2005 (by poverty level) - Figure 2.9. Major reasons for exclusion from the family benefits system by poverty levels - Figure 2.10. Comparison of income growth due to economic growth and poverty line, 1999 and 2004 - Figure 5.1. General estimate for the quality of the investment environment for 2005-2021 - Figure 5.2 Estimates of infrastructure quality, enterprise financing and labor markets for 2005-2021 - Figure 5.3. Estimates for the quality and corruption of public administration and judiciary and crimes for 2005-2021 - Figure 5.4. Estimates for innovation and technologies and external trade for 2005-2021 - Figure 6.1. The level of economic activity by age groups in 2002 and 2006, % of the relevant population group - Figure 6.2. Projections of the number of economically active population (assuming constant economic activity level at 65%) - Figure 6.3. Structure of population income in 1999-2006, % of toal income - Figure 6.4 Dynamics of registered and real (self-reported) unemployment rates in 2002-2006 - Figure 6.5. Level of the real (self-reported) unemployment by age groups in 2002-2006 - Figure 6.6. Non-agriculture employment trends by sector in 2002-2006 - Figure 6.7. Indicators of informal employment (% in the employment structure) - Figure 6.8 Number of social insurance contributors in case of expected scenario of formality degree in 2002-2021 - Figure 6.10. Labor productivity index(2002=100), constant 2000 PPP US dollars - Figure 6.11. Migration balance in Armenia in 2000-2006, persons - Figure 6.12. Labor taxation in Armenia and OECD member countries - Figure 6.13. Employment regidity index in Armenia and a range of EU member Eastern European countries in 2005, WB - Figure 6.14. Minimum wage in 2002-2021 - Figure 7.1. GDP, Dynamic of Value Added in Agricultural and Non-Agricultural Sectors, 1996-2006 (index, 1995=100) - Figure 8.1. Dynamics of water supply duration, 2004-2007 - Figure 8.2. Average daily water supply duration in Armenia’s towns, 2007 - Figure 8.3. Drinking water affordable and cost-recovery tariff projections, 2007-2021 - Figure 8.4. Drinking water affordability projections, average consumption 1st and 2nd deciles - Figure 9.1. Yerevan share in national GDP, 1999-2006, % of the total - Figure 9.2. Average annual growth rate between 1999-2006, by regions - Figure 9.3. Yerevan’s share in the total value added produced in the country, 1999-2006, % - Figure 9.4. Baseline and SDP regional development scenarios, 2006-2021 - Figure 11.1: Pre-Benefit “Net” Poverty Rate and Actual Poverty Rate after the Impact of PFBS for Yerevan, Urban and Rural Areas, 2005 - Figure 11.2: Poor and Benefit Recipient Population against the General Poverty Threshold and MCB in 2008-2021 - Figure 11.3: Assessments of PFBS Impact on Poverty Reduction (according to the general poverty threshold) in 2005-2015 - Figure 11.4: Projections of dependency ratio and “effective” dependency ratio for 2008-2050 - Figure 11.5: Average monthly insurance pension PRSP targets: average pension relative to poverty line, minimum consumption basket and average wage - Figure 11.6: Estimates of Fiscal Indicators for Insurance Pensions - Figure 12.1. Child and Maternal Mortality in 2006, actual indicators vs. PRSP targets - Figure 12.2. Utilization of ambulatory-outpatient and hospital care services - Figure 12.3. Frequency of referrals to healthcare institutions, by consumption quintiles (% of the population with health problems) - Figure 12.4. Referrals to healthcare institutions by population groups with different income levels, by service providers (percent) - Figure 12.5. State Budget Expenditure in Healthcare Sector, 2003-2006, actual vs. PRSP targets - Figure 12.6. Health sector expenditure in Armenia and CIS, EU and OECD member states, 2004 (% of GDP) - Figure 12.7: Enrolment of the 3-29 Year Old in the Educational System by Age, percentage - Figure 12.8: Gross Enrolments in Different Levels of Education System by Consumption Quintiles, % - Figure 12.9. State Budget Funding of Youth Programmes, 2003 – 2007, AMD mln - Figure 12.10. Youth programmes and events, trends in 2003-2007 - Figure 12.11. Dynamics of Environmental Fee Collection, 2002-2007, AMD million - Figure 13.1. Armenia’s External Debt Indicators, 1999-2005 ### Acknowledgement (concise) - The Government of the Republic of Armenia thanks contributors to the PRSP revision and Sustainable Development Program. - Key named contributors and groups: - PRSP Steering Committee headed by the Prime Minister of Armenia Tigran Sargsyan - PRSP Working Group headed by the Deputy Minister if Finance Souren Karayan (Head of the PRSP Working Group) - Structural units of public administration and participating specialists - Technical and financial supporters: World Bank, IMF, DFID, the Government of Netherlands and the GTZ - Additional supporting organizations: European Union, Council of Europe and USAID - NGOs, private sector representatives, local self-governance bodies, representatives of political parties, experts, members of the National Assembly - Local experts for the Sustainable Development Program, including “AVAG” Solutions Ltd representatives Vahram Avanesyan, Melik Gasparyan PhDs in Economics Levon Barkhoudaryan, Armen Yerghiazaryan, and Nairouhi Jrbashyan ### List of Abbreviations (selected entries) - AIDS — Acquired Immunodeficiency Syndrome - bln. — Billion - CBA — Central Bank of Armenia - CIS — Commonwealth of Independent States - CPI — Consumption Price Index - DFID — Department for International Development - EBRD — European bank for Reconstruction and Development - ECA — Europe and Central Asia - ENP — European Neighborhood Policy - EU — European Union - GDP — Gross Domestic Product - GFS — Government Financial Statistics - HDI — Human Development Index - HIV — Human Immunodeficiency Virus - ILO — International Labor Organization - ISLC — Integrated Survey Labor Conditions - IMF — International Monetary Fund - km — Kilometer - LFS — Labor Force Survey - MCA — Millennium Challenge Account - MDG — Millennium Development Goals - MTEF — Midterm Expenditure Framework - mln. — Million - MCB — Minimal consumption basket - NGO — Non Governmental Organization - NPV — Net Present Value - NSS — National Statistical Service - OECD — Organization for - PPP — Purchasing Power Parity - SDP — Sustainable Development Program - PRSP — Poverty Reduction Strategy Paper - RA — Republic of Armenia - SME — Small Medium Entrepreneurship - SPA — Social Partnership Agreement - UNDP — United Nations Development Program - UN — United Nations - USA — United States of America - USAID — United States Agency for International Development - USSR — Union of Soviet Socialist Republics - VAT — Value Added Tax - WB — World bank - WHO — World Health Organization ### Participatory Process in the PRSP Review - Establishment of partnership in the PRSP implementation process *Source: _cr08376 - 14. Program Monitoring, Evaluation and Review (PDF chapter).* ### 1. The objectives and mechanisms to ensure the public participation and partnership ### 1. The objectives and mechanisms to ensure the public participation and partnership ### Partnership structure, objectives and legal basis - PRSP implementation partnership agreement signed on October 30, 2004; validity period expired in 2007. - Parties to the agreement: RA Government, communities, Armenian Apostolic Church, trade unions, Union of Manufacturers and Businessmen and five groups of NGOs. - Institutional entities established by the agreement: Steering Committee, Working Group and Open Forum. - The agreement stipulated: key objectives of the partnership; the rights and obligations of the parties; and the institutional entities ensuring the partnership. ### Progress and identified needs - Considerable progress in perceiving each other’s position and in launching an efficient dialogue between various public parties (paragraph 2). - Significant remaining opportunities for further development and improvement of the partnership (paragraph 3). - Discussions on July 12-13, 2007 summarized experience and challenges; surveys by independent experts were presented and all factions and parties of the RA National Assembly actively participated (paragraph 4). - Working Group session on September 14, 2007 formed an expert group that produced: - PRSP Social Partnership Concept; and - PRSP Social Partnership Agreement draft, which after wide public discussion and amendments was approved by the PRSP Working Group and PRSP Steering Committee (paragraph 5). ### PRSP review participatory process: objectives and principles - Legal/administrative basis: “Poverty Reduction Strategy Paper (PRSP)” approved by the RA Government on August 8, 2003 (decree No 994-N ) requires the program document to be revised once in two years based on monitoring and evaluation and stakeholder recommendations (paragraph 6). - PRSP revision launched in 2006; principles for organization and implementation approved on May 19, 2006 at PRSP Steering Committee (paragraph 7). - Key objective of the revision participatory process: to ensure real and targeted public participation so public recommendations and approaches are reflected in the revised PRSP (paragraph 7). - Conceptual approaches stipulated for organizing the participatory process (paragraph 8): - PRSP revision process should be anchored on the “bottom-up” principle. - Entities responsible for PRSP revision shall maximally support the participatory process and ensure environment for discussions and negotiations between civil society and public governance bodies. - Focus on institutionalizing PRSP monitoring and evaluation system, taking into account capacity building of governmental and non-governmental organizations. ### Scope and duration of participatory engagement - PRSP revision process lasted about 2 years and ensured broad participatory engagement of all stakeholders of Armenian society (paragraph 9). ### Social surveys: objectives and key results - A social survey was conducted to identify PRSP revision priorities; 207 active participants were included in that survey (paragraph 10). - Objective: to get a classified range of PRSP revision priorities (paragraph 11). - Top PRSP revision priorities from that survey (paragraph 11): - “Business and investment environment” — 18%. - “Public governance” — 15%. - “Health” — 15%. - “Pension security” — 14%. - “Education” — (ranked after the above; percentage not specified in source text). - A separate social survey conducted in 2006 by the “Analytical-information center of economic reforms” used the PRSP site and gathered 500 respondents from various marzes and communities and the capital representing different social groups (specialists, scholars, civil servants, pensioners, employers and the unemployed) (paragraphs 25–26). ### Meetings and discussions: nationwide and marz levels - Nationwide discussions: 20 organized, of which 16 were professional and 4 were public; locations included Yerevan, Tsakhkadzor and Dilijan (paragraph 13). - Professional discussion topics included (selected list from paragraph 13): - Objectives of key indicators: macroeconomic; tax and budgetary; income and human poverty; demographic and regional disproportions. - Opportunities to include gender equality approaches in PRSP policies. - Poverty line: registration and targeting issues; inequality issues. - Qualitative indicators to evaluate the efficiency of general education. - Pre-school education system. - Guaranteed state order of medical aid. - Effective management of water resources (rehabilitation of environmental balance of the Lake Sevan, issues of stream water cleaning). - Present situation with Armenian forests, illegal logging, targeted use of environmental fees. - Environmental situation in big Armenian cities (Yerevan). - Public service accessibility. - Demographic issues within PRSP. - Pension system reforms. - Increase of employment policy efficiency. - Increase of family benefits system efficiency. - Proportional regional development and local self-governance. - Development of public participation mechanisms and partnership. - Public discussions included topics such as healthcare service quality and economic accessibility of medication; judicial reforms; issues of population with special needs within PRSP; public governance reforms. - Marz-level discussions: - Organized only in public format and involved all stakeholders in each marz (paragraph 14). - More than a thousand people participated in 18 marz discussions (paragraph 16). - Business environment and small and medium entrepreneurship discussions were organized in all 10 marzes (Tavush, Kotayk, Syunik, Vayots Dzor, Shirak, Lori, Armavir, Aragatsotn, Ararat, Gegharkunik) with topics including: - “Opportunities and challenges for non-agricultural employment in rural areas: access to financial resources”. - “Issues and perspectives for the development of small and medium entrepreneurship”. - “Targeting and efficiency of employment projects” (paragraph 17). - Health sector discussions in Shirak, Syunik and Tavush marzes: “Ensuring physical accessibility of health services” (paragraph 18). - Education sector discussions in 5 marzes (Shirak, Tavush, Syunik, Gegharkunik, Lori): “Activities related to the school management systems” (paragraph 19). - Marz discussions focused on acute local problems including employment, small and medium entrepreneurship, education and health service development programs; an objective was to mitigate regional disparities between marzes and Yerevan (paragraph 15). - Recommendations from nationwide and marz discussions were submitted to PRSP Working Group and experts for inclusion in the PRSP revised version (paragraph 20). ### Public awareness and media outreach - During the first phase of public awareness activities, more than 20 articles, analyses and interviews concerning PRSP revision appeared in media with participation of PRSP Working Group members and experts; head of the Working Group participated in the “Direct phone line” of “Iravunk” paper (paragraph 21). - Publications produced (paragraph 22): - “PRSP revision process: results, alarms and progress trends” booklet summarizing media coverage, issues and recommendations from discussions. - “PRSP revision process: results, alarms and principles” disseminated through 10 marz papers as inserts. - TV programming and audiovisual outreach (paragraph 23): - Programs featuring PRSP Working Group and experts broadcast on H1 (“Dzeragir”); SHANT (“Herankar”); and H2 (“Lraber”). - “Hrazdan” marz TV company ran an extensive program about Tsakhkadzor seminar. - A “PRSP achievements and progress trends” TV movie was produced, broadcast by a number of TV companies and placed on PRSP site. - Web presence: www.prsp.am regularly updated comprehensive information in the “PRSP revision” section (paragraph 24). - A social survey on the participatory process was realized through the PRSP site in 2006 to study public opinion on why the PRSP needs revision, principles and objectives of revision, expected gains for the poor and vulnerable, and indicators to know if PRSP is working in the new reality (paragraph 25). ### Voices of the poor and qualitative inputs - “Voices of the poor” survey(s) within PRSP framework aimed to ensure people’s participation and to elicit people’s own assessment of living conditions, problems and solutions (paragraph 27). - Results yielded sector-specific recommendations to improve education, health, agriculture and social security (paragraph 27). ### Second phase of participatory process, dissemination and stakeholder inputs - Presentation and dissemination (paragraphs 28–31): - PRSP edited version presented to PRSP Steering Committee on December 28, 2007 and then to all stakeholders. - 700 copies of the PRSP edited version were published. - A workshop on January 13, 2008 presented the edited version to 200 participants and mass media. - From January 15, 2008 workshops and meetings in eight marzes engaged over 600 representatives of different organizations. - A “friendly version” of the paper (700 copies) was published for the meetings’ efficiency. - Draft of the PRSP edited version was translated and presented to all international organizations operating in Armenia and posted on the PRSP web page for stakeholder feedback (paragraph 31). - Footnote: Starting form September 16-26 2008, presentation of the PRSP in 9 marzes was organized after its approval by the Steering Committee on September 10, 2008 (footnote in paragraph 30). - Stakeholder feedback as of March 2008 (paragraph 32): - State-governance bodies submitted 26 comments and recommendations. - NGO sector submitted 14 comments and recommendations. - Donor community submitted 6 comments and recommendations. ### Main changes introduced in the revised PRSP based on submissions - Macroeconomic and fiscal framework completely revised taking into account 2007 outcomes, tendencies developed during 2008 and current challenges; projected increase of consumption prices and GDP deflator; higher nominal GDP in terms of unchanged real growth; stable currency exchange rate foreseen for whole program implementation period; the structure of economy reconsidered targeting larger share of industry and service sectors mostly due to reduction of construction (paragraph 33, bullet 1). - Demographic projections underlying the project were revised (paragraph 33, bullet 2). - Paper revised taking into account 2006 household survey results; due to changes in macroeconomic, demographic and fiscal projections the following core projections were revised: poverty line, MCB, minimum and average salary rates, pension and benefit rates (paragraph 33, bullet 3). - Sectoral and content changes (paragraph 33, bullet 4 and subpoints): - a) Paper reflects long-term government intentions to achieve leading positions in business environment, finances, health care and education in the region. - b) Economic development chapter: incorporated development of financial system, changes of economic structure and institutional modernization; business environment improvement benchmarks revised. - c) New chapter of regional development added; sections on introduction of e-governance and Maintaining Public Order; expanded principles related to development of infrastructures presented as separate sections; youth issues highlighted in a special section; urban development chapter added. - d) Social security chapter: principles of transition to accumulative pension system highlighted and presented in detail; a target related to the basic pension was added; main directions of current pension system reforms revised; problems of disabled highlighted and solution approaches identified. - Content and technical changes across all sections were introduced reflecting stakeholder comments and discussion results (paragraph 33, final bullet). ### Approval, finalization and ongoing participation - Revised paper presented to stakeholders in April 2008; a joint outgoing meeting in May 2008 led to further revisions discussed and approved during the outgoing Working Group meeting held from September 1-3, 2008 (paragraph 34). - In the second round of discussions, the same wide set of participants as in the first stage were actively involved: different layers of society, central and local administration representatives, NGOs, Trade Unions, business and donor community representatives (paragraph 35). *Source: _cr08376 - 1. The objectives and mechanisms to ensure the public participation and partnership* ### 36. On September 10, 2008 The PRSP Steering Committee discussed and approved ### _cr08376 - 36. On September 10, 2008 The PRSP Steering Committee discussed and approved ### Renaming and scope change: PRSP → SDP - On September 10, 2008 The PRSP Steering Committee discussed and approved the PRSP revised document and decided to rename the paper into a Sustainable Development Program (SDP). - Rationale: the revised paper differs from the first document by its content and structure, is more inclusive, and can serve as a strategy for social-economic development of the country. ### Participatory management and institutional changes - Renaming implies introduction of certain changes and amendments in the institutions and structure of the program participatory management. - The system will be guided by the principles of exercising the participatory management mechanisms in the implementation process PRSP which is anchored on the ideology of social partnership. - SDP Social Partnership aims to harmonize interests of different public institutions, social groups and layers, consolidate efforts for implementation, monitoring, evaluation, and revision of the paper. - SDP Social Partnership is aimed at: - Assuring equal opportunities for all stakeholders involved in the poverty reduction and development process to present their views and interests - Creating preconditions for increase of program implementation efficiency through the public participation in the decision making, policy development, implementation, monitoring and evaluation processes. - Contributing to the establishment of favorable environment for the civil society. ### SDP participatory management architecture - According to the SDP Social Partnership Agreement the SDP Participatory Management system should consist of two levels: the SDP Steering Committee and the SDP Working Group. - For assuring efficient involvement of the civil society in the SDP elaboration, monitoring and evaluation processes as an equal partner, the SDP social partnership institutes’ organizational system will be developed (SDP Civil Society Network). - SDP Civil Cooperation Network composition: - Negotiation Groups - The SDP Civil Cooperation Network Secretariat - The SDP Civil Cooperation Network Steering Committee - Mechanisms of establishment, structural units, and the framework of rights and obligations are presented in the SDP Social Partnership Agreement. NGO sector representatives signing the Agreement will establish the SDP Civil Cooperation Network, including its charter and regulations. ### PRSP-1: approval, objectives, and strategic directions - PRSP-1 was approved by the RA Government in August 2003 for the 2003-2015 period. - Main objective: substantial reduction of the material poverty. - Specific PRSP-1 numerical targets: - Reduce poverty incidence to 19.7% by 2015 and extreme poverty incidence to 4.1% as compared with 50.9% and 16% in 2001, respectively. - Reduce income inequality from 53.5% in 2001 up to 44.6% in 2015. - Human poverty / human development objectives included: - Maintenance and further development of human potential; reduction of human poverty expressions; improvement of population health, reproduction potential and welfare level; increase accessibility and quality of general education and health services; reduction of infant and maternal mortality rate; improvement of drinking water and other primary services. - Strategic directions of PRSP-1: - a) Ensuring rapid and sustainable economic growth; - b) Implementing an active and targeted social and income policy focused on vulnerable social groups (including the poor and extremely poor); - c) Modernize the country’s government system, including improvement of public governance and expansion of resource package at the disposal of the country. - Policy emphases and targets: - Promotion of self-employment and entrepreneurship via improved business and investment climate, increased lending resources and cost reduction under macroeconomic stability and liberal economic system. - Channeling public investment to eliminate/mitigate infrastructure constraints: rural roads, irrigation modernization, drinking water projects, school reconstruction and modernization. - Targeted social policy: better targeting of family benefits to involve poorest; increase sizes of family benefits to surpass food poverty threshold. - Social insurance reforms: increase efficiency; transfer payment of non-insurance pensions to state budget; increase pension sizes to surpass overall poverty threshold; increase pension differentiation; create preconditions for transfer to accumulative pension system. - Income policy: priority to primary incomes; ensure progressive salary growth for lower-paid salaried employees (budgetary and social infrastructure sectors) so this group should at least twice surpass overall poverty threshold; legally stipulated minimal salary relevant to overall poverty threshold. - Public financing of social services: envisaged increase in budget expenditures in education sector in 2015 by 1.7 percentage points of GDP compared with 2002 to amount to 4% of GDP; increase state budget expenditures in health sector to 2.5% of GDP in 2015 as compared with 1.2% of GDP registered in 2002. - Improve public governance and implement anti-corruption strategy; increase public participation via public awareness, social partnership, social inclusion and social participation. - Enhance financial capacities of the state: envisaged annual increase of tax revenues of 0.3-0.4% of GDP mainly through improvement of tax administration and simplification of tax system while keeping consolidated budget residual within safe limits. ### Key outcomes of PRSP implementation in 2003-2006 (summary and exact figures) - The main results of 4.5 years of PRSP implementation are presented in Table 1.1. As the table shows, the actual indicators of the material poverty and inequality are significantly lower than those envisaged in PRSP. - Rapid economic growth in 2003-2006 more than twice surpassed the PRSP forecasts. Rapid growth drove unprecedented salary increases (in 2006 the actual average salary was 68% higher than that envisaged in PRSP). - Selected exact indicators and reported table entries (as presented): - GDP, billion drams - 1918.42656.2 38.5 2010 - GDP, per capita, thousand drams - 595.0824.6 38.6 2010 - GDP, million US dollars - 3239.46384.5 97.3 2015 - GDP, per capita, US dollars - 1004.81982.1 97.2 2015 - Average monthly salary, thousand drams - 38.364.3 68.0 2013 - Average monthly pension, thousand drams - 10.111.5 13.4 2007 - Average monthly benefit, thousand drams - 4.43.8 -12.8 2005 - Economic growth (2003-2006), %, average annual - 6.212.9 106.7 - Inflation (2003-2006) %, annual average - 3.03.8 2.6 - Exchange rate (1000 drams/1 US dollar - 1.72.4 42.3 - Number of poor, % of population* - 41.034.5 -15.8 2007 - Number of extreme poor, % of population * - 14.25.5 -61.3 2014 - Gini coefficient of income concentration,%* - 0.4910.359 -26.9 2015** - Infant mortality rate (per 1000 live-born) - 14.413.9 -3.5 2007 - Maternal mortality rate (per 100000 live-born) - 22.024.0 8.9 2005 - Total revenues and grants, billion drams - 422.9 540.3 27.8 2008 - Total revenues and grants, % of GDP - 2220.3 7.7 - Total expenditures, billion drams - 461.5574.7 24.5 2008 - Total expenditures, % of GDP - 24.121.6 -10.4 - Residual (addition), % of GDP - -2.1-1.3 -38.1 - Social expenditures total, billion drams - 207.5242.8 17.0 2008 - Social expenditures % of GDP - 10.89.1 -15.4 - Education and science, billion drams - 63.078.4 24.4 2008 - Education and science, % of GDP - 3.33.0 -10.6 - Health, billion drams - 35.539.5 11.2 2007 - Health, % of GDP - 1.91.5 -19.7 - Social protection and insurance, billion drams - 109.0124.9 14.6 2007 - Social protection and insurance, % of GDP - 5.74.7 -17.3 - Notes from the source: - * The poverty and inequality indicators estimated in 2005 on the HS basis with the use of an old methodology are presented in order to compare them with PRSP. - ** The indicator surpasses the level of 2015. - Additional findings and context: - As a result of dram appraisal since 2003 up to the present, nominal GDP (in US dollar) and per capita GDP in 2006 are almost twice more than those envisaged in PRSP and are relevant to the target indicators of 2015. - Financial resources at the state’s disposal in 2003-2006 grew slower than GDP, explained by sector structure of growth and low efficiency of tax and customs administration, which limited expansion of tax base. - In 2003-2006, gross revenues and grants of the consolidated budget increased (in nominal terms) by an average of 15.3% per annum; consolidated budget expenditures GDP by 16% and 18.2 % respectively. - In 2003-2006, 40-75% of economic growth was provided by construction (average annual growth rate of 31.1%), and transport, communication and trade sectors (average annual growth rate of 13.6%); these sectors are characterized by higher degree of shadow economy and lower level of tax collections. - Social expenditures in 2003-2006 grew faster than overall expenditures and GDP: their share in GDP increased by 1.1 percentage points and in the consolidated budget by 7.6 percentage points. - Distribution of consolidated budget expenditure growth in 2003-2006 (Table 1.2 entries): - Social sector monetary growth by year: 21.929.839.941.0 132.6 - Of which Education and science: 6.013.614.012.5 46.0 - Health: 3.65.16.48.4 23.5 - Social protection and insurance: 12.311.219.520.1 63.1 - % as compared with the growth of overall expenditures — Education and science: 11.343.914.715.9 17.9 - Health: 6.916.56.710.7 9.1 - Social protection and insurance: 23.436.220.425.7 24.5 ### Implementation gaps and unmet targets - While most PRSP target indicators in 2003-2006 can be considered surpassed (with the rate varying within the interval of 1-10 years), some targets were not achieved: - Proportion between average pension and average salary in 2006 was 17.9% instead of 26.3% projected by PRSP. - Size of per capita family benefits envisaged by PRSP-1 was not achieved. ### Justification for PRSP revision and major SDP priorities - The analysis of PRSP-1 implementation outcomes confirms relevance of selected key objectives and strategic priorities, particularly the emphasis on sustainable economic growth as major factor contributing to poverty reduction and on redistribution of public resources toward social problems, elimination of extreme poverty and human development. - The transition to SDP reflects the need to adjust content, structure, and institutional arrangements to be more inclusive and better aligned with observed implementation outcomes and new priorities. *Italic source: _cr08376 - 36. On September 10, 2008 The PRSP Steering Committee discussed and approved* ### 61. At the same time, the economic growth rates in 2003-2006 (which were twice ### _cr08376 - 61. At the same time, the economic growth rates in 2003-2006 (which were twice ### Background and rationale for revising PRSP and creating SDP - Economic growth in 2003-2006 was "twice more than those expected", and substantial growth of public expenditure capacities has created a situation where, in medium and long-term perspective, PRSP targets and major indicators "will be substantially surpassed", reducing the realism and continued usefulness of PRSP as the main long-term strategic program. - Need to revise PRSP and elaborate a Sustainable Development Program (SDP) arises from two groups of factors: - Factors conditioning PRSP modernization (methodology and targets, economic growth effects). - Factors conditioning expansion or change of priorities, targets, and policies covered by PRSP. ### Factors requiring PRSP modernization (first group) - Revised methodology measuring material poverty starting from 2004, and raised extreme poverty and poverty thresholds, together with faster-than-expected extreme poverty and poverty reduction in 2003-2005, "condition the need for the development of new and higher targets for the reduction of the material poverty and elimination of extreme poverty." - Economic growth "which was twice higher than expected" has both expanded state financial capacities and "identified the new challenges for economic growth," requiring more precise or revised public policy and expenditure priorities. ### New circumstances requiring expanded priorities (second group) - Long-term economic growth, modernization, and institutional capacity growth will depend on successful execution of "second generation" reforms (restructuring of enterprises, competition promotion policy, financial sector reforms, infrastructure sector reforms). The PRSP did not duly reflect these priorities; including them requires substantial enlargement of economic policy coverage and measures. - Government positions: - SDP should become the main long-term strategic development document and the basis for sector strategic programs. - SDP must include areas missing in PRSP-1: fostering economic competition and limiting/eliminating existing monopolies; increasing involvement in the global economy; promoting export; ensuring institutional capacity growth; modernizing economic, social, and administrative institutions; creating and developing a new, knowledge-based economy. - Territorial development: double-digit growth plus substantial decrease of poverty led to rapidly deepening territorial disproportions; an active territorial policy within SDP to mitigate disproportions and accelerate underdeveloped regions is a main strategic priority. - Demographics: current "zero" reproduction risks long-term problems. If the total fertility rate remains at the existing (low) level, projections include considerable ageing, decrease in labor force volume, and increase (up to 40%) in the number of people requiring potential care (0-15-year-old population and those at age 60 and above) in upcoming decades. Improvement of demographic situation and polices to increase fertility and support young families were not considered in PRSP and should become Government priorities. - Footnote figures in source: "At present it makes 1.4; according to forecasts, in 2025 this indicator will reach 1.6. However, the total fertility rate should make 2.1 and more to ensure simple reproduction." - UN forecast referenced: "the share of the population at the age of 60 and above will make 22.6% in 2025 (as compared with 14.4% in 2007)." ### SDP goals and strategic priorities - Poverty outcomes achieved under PRSP: - Poverty decreased to 29.8% in 2005 and to 26.5% in 2006. - Extreme poverty decreased to 4.6% in 2005 and to 4.1% in 2006 (calculated according to the new poverty assessment methodology applied since 2004). - SDP poverty targets: - Reduce material poverty to 8% in 2012. - Reduce extreme poverty to 1.2% in 2012. - Territorial differentiation of targets (capital, other towns, rural areas) to reduce territorial differences in poverty. - PRSP-2 envisages that by 2018 at the latest the poverty threshold will be equal to the minimal consumption basket (MCB). - Program goals: poverty level assessed on MCB basis in 2021 will be 11.4%, with extreme poverty at 1.9%. - Territorial 2021 targets (source's expectations): Yerevan: 3.2% poverty and 0.4% extreme poverty; other towns: 8.1% and 1.5%; rural areas: 9.1% and 1.6%. (2005 comparative indicators: Yerevan 23.9% and 3.6%; other towns 37.8% and 7.2%; rural areas 28.3% and 3.2R%.) - MCB context and 2006 statistics: In 2006 the poverty threshold was 21555 dram (per an adult per month), MCB was 31961 dram or 148% of poverty threshold (for the third quarter). Poverty level in 2006 using MCB as threshold was 39.8% and extreme poverty level was 6.2% (using MCB as extreme poverty line). MCB is calculated by NSS on the basis of a list/structure/nutritiousness of food products developed by MOH; life-supporting minimum budget to be equivalent to MCB once legally defined. - Human development targets: - SDP aims to move Armenia from "middle level of human development" to "high level of human development" in 3-4 years. - Long-term objective: HDI in 2021 in the range of 0.86-0.87. - Reference: in 2004 HDI value for Armenia was 0.768. - Territorial growth disparities: - SDP goal to restrain deepening of economic growth disproportions via targeted territorial policy ensuring accelerated development of weak regions. - Yerevan share in GDP: from 42.1% in 1999 to 57.2% in 2006 (annual 4.3%). SDP forecasts Yerevan share will continue to grow at lower speed (around 0.5% percentage point) – reaching 63.2 percent, after which it will stabilize and in the long-term go down. ### SDP strategic and expenditure priorities - Core strategy composed of three main priority directions: - Ensure sustainable and rapid economic growth. - Implement targeted social and income policies aimed at active and vulnerable (including the poor) social groups. - Modernize the country's administration system, increase efficiency of public governance, and provide advanced growth of the resources package available to the country. - Parallel measures to tackle environmental protection and effective natural resource management. - Major expansion of policy measures aimed to ensure lasting economic growth compared with PRSP-1. ### PRSP-2 economic policy priorities (listed) - Targeted territorial policy – mitigate territorial development disproportions. - Intensive policy of the "second" generation reforms – ensure modernization and rapprochement to developed-country standards. - Policy to ensure free economic competition and monopoly limitation. - Policy to increase competitiveness: promote output growth; ensure competitive levels of unit labor force value; promote new, higher value added forming jobs. - Export promotion and increased involvement in global economy, including intensification of EU integration within ENP, establishment of free trade regime with EU and unilateral elimination of visa regime. - Intensive adaptation of economic institutions and legislation to EU requirements and standards. - Establishment and development of new and knowledge-based economy key elements and institutions. ### Targeted social policy and social protection measures - Social assistance area: - Increase sizes and targeting of family benefits and maximize involvement of poor population in system. - By 2012 the number of beneficiary families to equal the number of poor families; by 2021 to equal number of poor families estimated by MCB. - Increase sizes of family benefits so that in 2020-2021 they might make 70% of the poverty threshold. - In 2010 family benefit targeting rate is expected to reach 78%; from 2015 it should make 90% and keep that level in the future. - In 2006 the average family benefit made 25.2% of poverty threshold. - Targeting rate definition note: calculated as the share of family benefits received by population in first three income deciles in overall volume of family benefits. In 2001 it was 27% and in 2005 - 40.1%. - Family benefit policy focus shifts from extreme poverty reduction (PRSP) to helping vulnerable social groups exit poverty given steep decrease of extreme poverty and higher state financial capacity. - Social insurance area: - Steep increase of pensions: in 2012 the average pension to be equal to minimal consumer basket; in 2018 it will make 150% of MCB, maintaining that proportion thereafter. - These pension increases will enable supplementation of existing pension system with an accumulative pension system. ### Employment, revenue, and human development priorities - Employment policy priorities: - Sustainable and continuous improvement of labor force competitiveness. - Mitigation of imbalance between labor demand and supply. - Creation of job opportunities for young people, especially in rural areas. - Expansion of programs for employment opportunities for noncompetitive groups (particularly disabled). - Build social cooperation and partnership. - Improve quality of statistical methods and reliability of statistical data; use unemployment indicators to help target the problem. - Revenue policy priorities: - Continue PRSP priority of giving preference to primary revenues, in particular increase of salary of budgetary and social infrastructure employees. - Starting from 2015 such salaries will at least 1.4 times surpass per capita GDP indicator. - Minimal salary to be stipulated so that persons with minimal salary and their family members are able to be saved from poverty, eliminating "the working poor". - Human development (education and health): - Advanced development of fundamental social services through increased efficiency and accessibility. - Continuous complex reforms, prioritizing general education and primary health care. - Increase of public financing deemed main device for developing social infrastructure. - Public expenditures targets (compared with 2006): - Education public expenditures to increase by 1.8-percentage point and by 2021 reach 4.5% of GDP. - Health public expenditures planned to make 3.5% of GDP in 2021 instead of 1.5% in 2006. *Source: _cr08376 - 61. At the same time, the economic growth rates in 2003-2006 (which were twice — content unit provided.* ### 78. The third main strategic priority of SDP is the increase of public governance ### _cr08376 - 78. The third main strategic priority of SDP is the increase of public governance ### Public governance, anti-corruption and participation - The third main strategic priority of SDP is the increase of public governance efficiency at all the levels of governance, including: - substantial updating and consistent implementation of anti-corruption strategy. - enhancement of public participation in the decision making process by means of increasing public awareness and assuring gender equality. - promotion of social partnership, social inclusion and social participation. - intensive introduction of e-governance systems. - The RA Government will be developing a new anti-corruption strategy (See The GoA Program, Yerevan, April 2008). ### State financing, tax revenues, and fiscal targets - Next priority: increase of the state financing capacities mainly ensured by tax revenues. - Target: getting tax revenues to GDP 25.6% (reference year comparison: 8.2% GDP growth19 — as compared with 2006). - Required: ensuring average annual growth of tax revenues not less than 0.3-0.4% of GDP. - SDP stance: does not envisage the increase of tax burden; tax and customs reforms aimed to simplify and make transparent tax collection processes and procedures. - Priority actions: ensure tax and customs administration improvement and tax and customs authorities institutional capacities growth. - Consolidated budget deficit target: within 2 - 2.5% of GDP. - The sate resource package20 in 2021 will make 29.2 % of GDP and as compared with 2006 it will grow by 6.6% percentage points. - Public expenditure policy: increase the values and shares of social expenditures in public expenditures; ensure distributional and maximum technical efficiency of expenditures. - Budgeting reforms and timing: - completion of preparatory activities necessary for the transition to program budgeting during the period of 2012-2015. - adoption of the three-year budgeting principle during 2018-2021. ### Planning tools, action plans, and indicator framework - SDP will use annual government action plans to schedule and efficiently manage distribution of limited resources across priorities; action plans will: - be based on adopted strategies or sectoral peculiarities (time to achieve outcomes; measure types: one-time, regular or permanent; resources required). - include respective SDP indicators which serve as annually registered outcomes. - be developed and approved every year based on scrupulous revision and evaluation of previous results. - Indicator types to be used: - Target indicators (directly related to Government policy and reflect it). - Settlement indicators (volumetric, forecast and indicative, show directions of possible development; results not used to evaluate program implementation dynamics). - Performance benchmarks (directly related to Government policy, reflect it). - Performance benchmarks will be built using internationally accepted evaluation systems, including: - World Bank assessments of business environment quality; investment climate and governance quality indicators. - EBRD assessments on transition to market economy. - Corruption prevalence indicators21. - UNDP Human Development Index. - Note: corruption prevalence indicators published by “Transparency International”. ### Overview: economic growth, poverty and inequality in Armenia (1999-2005) - Household surveys (HS) regularly implemented since 1998 show inequality and the number of poor, including very poor population, gradually decrease. - PRSP-observed relationship: economic growth remains the main factor contributing to poverty reduction. - 2003-2005 average annual growth rates of GDP were 12.8% instead of envisaged 6.3% by PRSP. - One percent of economic growth in 1999-2005 resulted in an increase of non-poor population by 0.547 percentage points, reducing poverty incidence from 55.1% to 34.5%. - Regional poverty reduction highlights: - Yerevan: poverty reduced from 54.7% in 1999 to 27.3% in 2005 (by old methodology). Using new methodology: poverty in Yerevan was 23.9% in 2005 and 21.0% in 2006 instead of 58.4% in 1999. - Faster economic growth in Yerevan compared with marzes; however, each percent of economic growth in Yerevan resulted in increase of non-poor population share by 0.431 percentage points (versus 0.547 percentage points in Armenia). - Other towns: average annual growth 1999-2005 was 7.7% (Yerevan 16.4%, rural areas 5.2%, Armenia average 11.1%); degree of poverty-reduction-oriented growth in other towns was 0.906 percentage points per 1% economic growth. - Rural areas: poverty-reduction trend degree was 0.709 percentage points per 1% economic growth. - Absolute and relative dynamics: - In absolute figures, poverty reduction in rural areas is the lowest compared with Yerevan and other towns; trend degree higher than Yerevan but lower than other towns. - Channels of impact on poverty reduction: - Labor income increases for the poor (employment, self-employment, sales of agricultural products). - External influence via foreign remittances and their distribution among income groups. - Public social policy via increases in social payments (pensions, benefits including family benefits) and their distribution across income groups. ### Income dynamics and distributional impacts (1999-2005) - Labor incomes of the poor and very poor grew faster than their overall monetary incomes, which in turn grew faster than overall population monetary incomes in nominal terms: - Growth figures reported: 352.6% and 630.8% as compared with 231.4% and 352.6% of general incomes and 231.4% of populations’ average monetary incomes (as presented in the text). - Per capita incomes of poor27 and very poor28 population conditioned by internal economic growth (labor and agricultural sales) grew faster than average monetary incomes, maintaining the growth–poverty reduction linkage from 1999-2001 into 2003-2005. - Table 2.2 (selected values, all figures in current prices, dram): - Poor overall monetary income, Armenia 2005: 6542.5; Yerevan 9855.7; Other towns 5894.7; Rural areas 4901.3; 1999 Armenia: 2270.4; 1999 Yerevan: 3368.4; 1999 Other towns: 1908.1; 1999 Rural areas: 1809.7. - Poor labor incomes, Armenia 2005: 2881.3; Yerevan 6236.6; Other towns 2620.5; Rural areas 1139.7; 1999 Armenia labor incomes: 622.7; Yerevan 1281.2; Other towns 406.7; Rural areas 345.5. - Very poor overall monetary income, Armenia 2005: 3241.8; Yerevan 5361.6; Other towns 2526.4; Rural areas 2724.9; 1999 Armenia: 783.8; Yerevan 1286.1; Other towns 542.9; Rural areas 624.5. - Very poor labor incomes, Armenia 2005: 683.7; Yerevan 1915.2; Other towns 521.8; Rural areas 283.0; 1999 Armenia: 110.9; Yerevan 254.3; Other towns 35.1; Rural areas 70.2. - Poor social payments, Armenia 2005: 2096.0; Yerevan 2276.0; Other towns 2074.2; Rural areas 1850.3; 1999 Armenia: 816.0; Yerevan 954.8; Other towns 869.9; Rural areas 689.4. - Income composition (percentages of overall incomes, selected): - Poor: labor incomes % 44.0 (Armenia), 63.3 (Yerevan), 44.5 (Other towns), 23.3 (Rural areas). - Very poor: social payments 46.9% (Armenia), 39.9% (Yerevan), 50.2% (Other towns), 40.6% (Rural areas). - Income growth comparison (1999-2005): - Incomes of poor and very poor grew faster than incomes of non-poor, indicating reduction of income inequality between non-poor, poor and very poor; labor incomes of all groups grew faster than overall incomes, reducing dependence on social and unofficial payments. - Monetary income flexibility (Table 2.3, 1999-2005, values preserved exactly): - Poor population, overall monetary income elasticity: 1.48 (Armenia), 0.96 (Yerevan), 3.04 (Other towns), 2.81 (Rural areas). - Poor population, conditioned by economic growth: 2.09 (Armenia), 1.92 (Yerevan), 3.93 (Other towns), 3.72 (Rural areas). - Poor population, conditioned by external economic growth: 18.09 (Armenia), 11.79 (Yerevan), 44.48 (Other towns), 29.39 (Rural areas). - Very poor population, overall monetary income: 2.47 (Armenia), 1.58 (Yerevan), 5.31 (Other towns), 5.53 (Rural areas). - Very poor population, conditioned by economic growth: 3.86 (Armenia), 3.25 (Yerevan), 7.31 (Other towns), 9.26 (Rural areas). - Very poor population, conditioned by external economic growth: 115.82 (Armenia), 61.73 (Yerevan), 6773.4 (Other towns), 41.07 (Rural areas). - Non-poor population, overall monetary income: 0.27 (Armenia), 0.30 (Yerevan), 0.51 (Other towns), 0.06 (Rural areas). - Monetary incomes of the population: 1.02 (Armenia), 0.77 (Yerevan), 1.37 (Other towns), 1.44 (Rural areas). - Memo items (preserved exactly): - Per capita GDP growth in current prices, %: 226.8 (Armenia), 301.1 (Yerevan), 168.7 (Other towns), 160.8 (Rural areas). - Social expenditures growth, %: 175.0. - Global economy growth, %: 126.1. - Growth of population’s monetary income, %: 234.1. *Italic: Extracted from the supplied IMF content unit _cr08376 - 78. The third main strategic priority of SDP is the increase of public governance* ### 97. The economic growth and social policy had poverty reduction orientation in ### _cr08376 - 97. The economic growth and social policy had poverty reduction orientation in ### Economic growth and social policy orientation (1999-2005) - Economic growth and social policy were both oriented toward poverty reduction in Yerevan, other towns and rural areas. - Degree of economic growth orientation towards poverty reduction: - Lowest in Yerevan and highest in other towns. - Rapid poverty reduction in Yerevan was conditioned by approximately two times faster economic growth rate. - Growth of the average monetary income of the population in Armenia was substantially lower than the income growth of poor and especially very poor population, implying both poverty reduction and real reduction of inequality. ### Income dynamics of non-poor vs poor and very poor (summary findings) - The income growth of non-poor population significantly yields to the income growth of poor and very poor population. - Volume of unofficial remittances reduced in Yerevan and other towns for non-poor population. - Household Survey (HS) data on non-poor incomes may not be fully reliable; however, HS and other data indicate that in 1999-2005 incomes of poor and very poor (including labor incomes and unofficial remittances) grew faster than incomes of non-poor population. - Conclusion: ongoing poverty-reduction orientation of economic growth during 1999-2005. ### Regional dimension of material poverty (1999-2006) - Poverty incidence higher in: - Marzes affected by the earthquake - Bordering regions - Regions with unfavorable conditions for agriculture (especially small share of irrigated land) - Marzes with predominantly urban population - Selected 2006 / 2005 / 1999 indicators (Table 2.5 / Table 2.6 / Table 2.8): - Armenia per-capita GDP (average, thousand dram, current prices): 2005 = 697.1; 2004 = 593.6; 1999 = 305.8. - Number of poor — average % to total population: 2005 = 29.8; 2004 = 34.6; 1999 = 56.1. - Number of very poor — average % to total population: 2005 = 4.6; 2004 = 6.4; 1999 = 21.0. - Average quintile deviation of per capita GDP: 2005 = 314.8; 2004 = 223.5; 1999 = 59.0. - Average quintile deviation of number of poor: 2005 = 6.1; 2004 = 5.8; 1999 = 13.3. - Average quintile deviation of number of very poor: 2005 = 2.0; 2004 = 2.1; 1999 = 8.2. ### Territorial elasticity and heterogeneity of growth-poverty link (Table 2.7) - National and regional GDP growth rates, poverty reduction rates, and elasticity (1999-2005, current prices): - Armenia: GDP growth rate = 126.8; Poverty reduction rate = 88.3; Elasticity = 0.70. - Yerevan: GDP growth rate = 201.1; Poverty reduction rate = 144.4; Elasticity = 0.72. - Armenia (without Yerevan): GDP growth rate = 73.2; Poverty reduction rate = 69.1; Elasticity = 0.94. - Aragatsotn: GDP growth rate = 27.5; Poverty reduction rate = 87.3; Elasticity = 3.18. - Ararat: GDP growth rate = 63.5; Poverty reduction rate = 69.3; Elasticity = 1.09. - Armavir: GDP growth rate = 25.2; Poverty reduction rate = 32.0; Elasticity = 1.27. - Gegharkunik: GDP growth rate = 70.6; Poverty reduction rate = 35.6; Elasticity = 0.50. - Lori: GDP growth rate = 77.4; Poverty reduction rate = 117.4; Elasticity = 1.52. - Kotayk: GDP growth rate = 64.7; Poverty reduction rate = 78.8; Elasticity = 1.22. - Shirak: GDP growth rate = 41.6; Poverty reduction rate = 78.4; Elasticity = 1.88. - Syunik: GDP growth rate = 276.7; Poverty reduction rate = 83.7; Elasticity = 0.30. - Vayots Dzor: GDP growth rate = 123.1; Poverty reduction rate = 80.7; Elasticity = 0.66. - Tavush: GDP growth rate = 65.3; Poverty reduction rate = 13.6; Elasticity = 0.21. - Other towns: GDP growth rate = 77.1; Poverty reduction rate = 73.3; Elasticity = 0.95. - Rural areas: GDP growth rate = 62.5; Poverty reduction rate = 70.3; Elasticity = 1.13. - Interpretation: - Link between economic growth and poverty reduction is nonlinear. - Higher economic development rate tends to correspond to lower elasticity (holding other conditions equal). - In 1999-2005, marzes with above-average poverty experienced relatively faster poverty reduction (elasticity > 1); marzes with below-average poverty had slower reduction (elasticity < 1), leading to convergence of poverty levels. ### Trends and forecasts - Despite growing absolute differences in marz economic development (average quintile deviation of per capita GDP grew almost 5 times during 1999-2005), marz differences of poverty and extreme poverty (absolute terms) were reduced 2 and 4 times respectively. - Explanation: nonlinear growth-poverty link and application of a unified constant poverty line not varying with economic development or marz differences. - SDP forecasts: the two phenomena (economic development differences combined with poverty reduction and equalization under a constant poverty line) will continue to combine during forthcoming 10-15 years; with the same poverty line the marz levels of poverty will become equal. ### Poverty dynamics by gender, age and social groups (Table 2.9) - Average in Armenia (selected years): - 1999: Poor = 56.1; Very poor = 21. - 2004: Poor = 34.6; Very poor = 6.4. - 2005: Poor = 29.8; Very poor = 4.6. - 2006: Poor = 26.5; Very poor = 4.1. - Reduction (2006/1999)*: Poor = 52.8; Very poor = 80.5. - By gender: - Women: 1999 Poor = 56.3; Very poor = 21.1. 2006 Poor = 26.6; Very poor = 4.2. 2006/1999* reduction: Poor = 52.8; Very poor = 80.1. - Men: 1999 Poor = 55.9; Very poor = 20.9. 2006 Poor = 26.3; Very poor = 4.0. 2006/1999* reduction: Poor = 53.0; Very poor = 80.9. - By age groups (selected lines): - Children 0-5 years old: 1999 Poor = 63.3; Very poor = 24.1. 2006 Poor = 35.3; Very poor = 5.6. 2006/1999* reduction: Poor = 44.7; Very poor = 77.2. - Children 6-14 years old: 1999 Poor = 51.6; Very poor = 17.1. 2006 Poor = 26.5; Very poor = 4.3. 2006/1999* reduction: Poor = 48.6; Very poor = 74.9. - Adults 18-25 years old: 1999 Poor = 59.7; Very poor = 25.8. 2006 Poor = 27.0; Very poor = 3.7. 2006/1999* reduction: Poor = 54.8; Very poor = 85.7. - Aged population: 1999 Poor = 58.3; Very poor = 22.5. 2006 Poor = 24.6; Very poor = 4.1. 2006/1999* reduction: Poor = 57.8; Very poor = 81.8. - Average quintile deviation trends for poverty and very poor show substantial reduction between 1999 and 2006 (examples in Table 2.9): - Average quintile deviation (poor): 1999 = 3.5; 2004 = 3.4; 2005 = 2.3; 2006 = 3.3. - Average quintile deviation (very poor): 1999 = 2.7; 2004 = 0.8; 2005 = 0.6; 2006 = 0.7. *Calculated based on the official statistics, in contrast to the incomes of poor and very poor population, which are calculated based on HS results.* *Source: _cr08376 - 97. The economic growth and social policy had poverty reduction orientation in* ### 107. Table 2.10 shows that the picture is different when the level of poverty depends ### _cr08376 - 107. Table 2.10 shows that the picture is different when the level of poverty depends ### Household size and poverty dynamics (1999-2006) - During 1999-2005, poverty reduction in households with 1-4 members was faster than the national average in Armenia. - Relative reductions (1999-2005) by household size: - 1 member: poverty reduction rate higher almost 1.3 times than the national average. - 2 members: higher about 1.2 times. - 3 members: around 1.3 times. - 4 members: 1.1 times. - 5 and more members: poverty reduction lower than the national average. - Widening gap by 2006: - In 2006 poverty risk in households with 7 and more members was around 2.5 times higher than in households with 1 member. - Around 2 times higher than in households with 2-3 members. - Around 1.6 times higher than in households with 4 members. - Comparable 1999 indicators: 1.46, 1.28, 1.3 and 1.27, respectively. - Selected detailed household-size indicators (percentage poor / very poor): - 1999: 1 member 43.7 / 6.8; 2 members 49.8 / 16.5; 3 members 49.0 / 14.8; 4 members 50.1 / 17.0; 5 members 54.1 / 17.7; 6 members 63.1 / 26.3; 7 and more 63.8 / 29.0. Average in Armenia 56.1 / 21.0. - 2004: 1 member 13.2 / 1.6; 2 members 20.3 / 3.9; 3 members 25.3 / 3.8; 4 members 28.5 / 5.3; 5 members 36.3 / 5.2; 6 members 39.7 / 7.7; 7 and more 52.8 / 11.9. Average in Armenia 34.6 / 6.4. - 2005: 1 member 15.7 / 1.9; 2 members 18.7 / 2.1; 3 members 18.9 / 3.2; 4 members 25.0 / 4.0; 5 members 34.8 / 4.7; 6 members 34.0 / 6.1; 7 and more 46.8 / 7.2. Average in Armenia 29.8 / 4.6. - 2006: 1 member 14.1 / 4.1; 2 members 18.5 / 2.6; 3 members 17.1 / 2.0; 4 members 22.1 / 2.7; 5 members 29.9 / 3.6; 6 members 32.1 / 5.2; 7 and more 36.1 / 7.9. Average in Armenia 26.5 / 4.1. - 2006/1999* (shows amount of reduction of poor and very poor in percentage points compared with 1999): 1 member 67.7 / 39.7; 2 members 62.9 / 84.2; 3 members 65.1 / 86.5; 4 members 55.9 / 84.1; 5 members 44.7 / 79.7; 6 members 49.1 / 80.2; 7 and more 43.4 / 72.8. Average in Armenia 52.8 / 80.5. ### Targeting of social assistance and family benefits - Aiming social assistance at multi-member households reduced the number of very poor multi-member households around 4 times, consistent with the average nationwide rate of poverty reduction. - Policy recommendation noted: further increase of purposefulness of the family benefit system and orientation towards multi-member families, and introduction of elements for family reinforcement policy (currently missing), will be required during the upcoming 10-15 years to reduce poverty for small and multi-member households. ### Poverty dynamics by number of children and elderly (1999-2005) - 1999: poverty levels approximately the same across most family types, except households headed by women with children had the highest poverty risk. - 2004-2005: divergence increased substantially. - 2005 poverty risk relative to families without children: - Families with 4 and more children: around 2 times higher. - Families with 3 children: around 1.7 times higher. - Women-headed families with children: around 1.8 times higher. - Comparable 1999 relative differences: 1.04, 0.99 and 1.12, respectively. - Selected detailed indicators (percentage poor / very poor): - Without child: 1999 54.2 / 20; 2004 24.0 / 4.0; 2005 22.2 / 2.9. - Woman household head without child: 1999 58.3 / 20.5; 2004 23.5 / 5.6; 2005 24.8 / 3.8. - Woman household head with child: 1999 63.2 / 21.6; 2004 41.3 / 8.3; 2005 40.3 / 6.5. - 1 child: 1999 55.6 / 23.6; 2004 34.5 / 5.5; 2005 29.6 / 4.5. - 2 children: 1999 56.9 / 20; 2004 36.2 / 7.4; 2005 32.1 / 5.4. - 3 children: 1999 55.8 / 21.2; 2004 41.1 / 5.9; 2005 37.4 / 4.9. - 4 children and more: 1999 58.5 / 21.4; 2004 53.1 / 14.7; 2005 43.9 / 8.3. - Number of elders: single elders 1999 50.7 / 12.2; 2004 19.0 / 2.5; 2005 19.4 / 2.0. - Average in Armenia: 1999 56.1 / 21.0; 2004 34.6 / 6.4; 2005 29.8 / 4.6. - Note: 2006 comparability is limited because 2006 statistical data uses a new methodology. ### Employment status and education level (population over 16) — poverty dynamics (1999-2006) - Unemployment is the greatest poverty risk: - 2006: unemployment poverty risk was 1.6 times higher than the average (compared with 1.23 in 1999). - Fast reduction in poverty for retired and other unemployed during 1999-2005 reduced their poverty risk to near-average by 2006. - Education-related changes (1999-2006): - People with higher education: poverty risk reduced around 3 times. - Middle vocational education: around 3 times reduction. - Vocational education: around 1.7 times reduction. - People with elementary and incomplete secondary education: poverty risk 1.4 times higher than the average. - Selected employment-status indicators (percentage poor / very poor): - Employee: 1999 48.7 / 15.0; 2004 27.5 / 4.4; 2005 22.7 / 3.0; 2006 21.3 / 2.2. - Self-employed: 1999 48.6 / 13.4; 2004 31.0 / 4.3; 2005 27.3 / 3.2; 2006 23.9 / 2.8. - Unemployed: 1999 69.5 / 35.1; 2004 45.9 / 11.4; 2005 46.9 / 10.0; 2006 41.2 / 8.7. - Retired: 1999 64.0 / 25.4; 2004 33.2 / 6.2; 2005 30.0 / 3.9; 2006 26.5 / 4.6. - Students: 1999 49.1 / 15.1; 2004 22.8 / 3.1; 2005 14.8 / 2.1; 2006 14.8 / 3.0. - Other unemployed: 1999 60.3 / 27.4; 2004 40.6 / 8.2; 2005 29.9 / 4.7; 2006 26.1 / 3.4. - Selected education-level indicators (percentage poor / very poor): - Elementary and lower: 1999 62.3 / 23.7; 2004 37.4 / 7.2; 2005 29.9 / 4.6; 2006 37.3 / 8.6. - Incomplete secondary: 1999 63.3 / 27.8; 2004 42.6 / 8.7; 2005 37.0 / 6.7; 2006 36.4 / 8.3. - Secondary general: 1999 58.9 / 24.0; 2004 38.2 / 7.2; 2005 34.4 / 5.3; 2006 29.9 / 4.4. - Secondary vocational: 1999 55.6 / 19.4; 2004 31.9 / 5.6; 2005 26.1 / 3.8; 2006 22.3 / 2.4. - Higher: 1999 44.9 / 13.4; 2004 19.5 / 2.6; 2005 15.4 / 1.9; 2006 14.3 / 1.9. - Average (population over 16): 1999 56.5 / 21.7; 2004 33.5 / 6.1; 2005 28.9 / 3.8; 2006 25.6 / 4.1. ### Most needy groups (1999-2006) — dynamics and relative risk - Table 2.13 identifies groups most subjected to poverty risk; economic growth and social policy have been less effective for them, increasing differences between these groups and others during 1999-2006. - Selected indicators (percentage poor / very poor and % as compared with average poverty level): - Families with 7 and more members: 1999 63.8 / 29.0; 2005 46.8 / 7.2; 2006 36.1 / 7.9. % as compared with average poverty level: 1999 113.7 / 138.1; 2005 157.0 / 156.5; 2006 136.2 / 192.7. - Headed by women – with child: 1999 63.2 / 21.6; 2005 40.3 / 6.5; 2006 32.4 / 4.0. % vs average: 1999 112.7 / 102.9; 2005 135.2 / 141.3; 2006 122.3 / 97.6. - Families with 3 children: 1999 55.8 / 21.2; 2005 37.4 / 4.9; 2006 32.1 / 6.5. % vs average: 1999 99.5 / 101.0; 2005 125.5 / 106.5; 2006 121.1 / 158.5. - Families with 4 children: 1999 58.5 / 21.4; 2005 43.9 / 8.3; 2006 30.2 / 7.2. % vs average: 1999 104.3 / 101.9; 2005 147.3 / 180.4; 2006 114.0 / 175.6. - Unemployed*: 1999 69.5 / 35.1; 2005 46.9 / 10.0; 2006 41.2 / 8.7. % vs average: 1999 123.2 / 161.8; 2005 162.3 / 227.3; 2006 155.5 / 212.2. - Persons with incomplete secondary education*: 1999 63.3 / 27.8; 2005 37.0 / 6.7; 2006 36.4 / 8.3. % vs average: 1999 112.2 / 128.1; 2005 128.0 / 152.3; 2006 137.4 / 202.4. - Note: unemployment rate calculated for population over 16. ### Rural poverty determinants, dynamics and lending (1999-2006) - Agriculture conditions (proxied by altitude above sea level) condition rural poverty differences. - Altitude trends (poor / very poor): - 1999: less than 1300m 39.9 / 8.4; 1300–1700m 55 / 21.9; more than 1700m 53.7 / 16.3. Total 48.2 / 14.1. - 2005: less than 1300m 26.9 / 4.3; 1300–1700m 26.7 / 4.2; more than 1700m 30.3 / 1.3. Total 28.3 / 3.2. - 2006: less than 1300m 22.1 / 2.6; 1300–1700m 19.0 / 2.9; more than 1700m 21.6 / 1.7. Total 21.0 / 2.4. - Average quintile deviation: 1999 8.37 / 6.78; 2005 2.02 / 1.70; 2006 1.66 / 0.62. - Effect: in 2005 poorer rural populations gained more from economic growth—particularly settlements at 1300–1700m and more than 1700m above sea level—leading to considerable approximation of poverty levels across altitudes. - Land ownership and poverty (poor / very poor): - 1999, 2005, 2006 snapshots indicate poverty generally lower for households with managed land than for those with no land. - Examples (selected): No land 1999 65.4 / 39.1; 2005 33.0 / 11.2; 2006 41.9 / 4.8; Up to 0.2 ha 1999 55.7 / 23.3; 2005 35.0 / 6.0; 2006 24.9 / 3.7; 0.2–0.5 ha 1999 21.9 / 11.9; 2005 28.3 / 1.5; 2006 18.4 / 1.5. - Total rural: 1999 48.2 / 14.1; 2005 28.3 / 3.2; 2006 23.4 / 2.4. - Average quintile deviation indicators presented (e.g., 1999 9.0 / 1.3; 2005 4.0 / 4.0; 2006 4.0 / 9.3). - Non-agricultural activities contributed: share of non-agricultural activities in added value in rural areas in 2005 was 32.5% compared with 27.6% in 1999 — increasing 1.86 times in absolute magnitude while agriculture value added grew 1.58 times. - Rural borrowing capacity (2002-2006): - Increase in formal lending to rural households, though still limited. - Number of farms borrowing from formal sources in 2005 compared with 2002 grew by 2.9 times (non-poor farms 4.2 times; poor farms around 5.4 times). - Selected indicators (percentage): - Total, 2006: We did not borrow 90.30; We borrowed 9.70; From formal sources 5.83; From informal sources 3.87. - Non-poor, 2006: We did not borrow 91.1; We borrowed 8.9; From formal sources 5.9; From informal sources 3.0. - Poor, 2006: We did not borrow 93.2; We borrowed 6.8; From formal sources 2.8; From informal sources 4.0. - Very poor, 2006: We did not borrow 95.3; We borrowed 4.7; From formal sources 2.61; From informal sources 2.08. - Other indicators (2002–2006 series where provided): Average size of bank lending, thousand drams: ... 786.34 26.6 1,507.8 1,163.3; Volumes of rural lending, million drams: ... 11,304 8,611 8,152 7,787; Number of farms, thousands: ... 339.2 338.5 337.9 334.7; Number of entities borrowed from formal sources, thousand drams: ... 14.4 20.2 5.4 6.7. - Conclusion on rural poverty: under economic growth and a constant poverty line the differences in rural poverty conditioned by rural peculiarities tended to reduce during 1999-2006; the problem of extreme poverty in rural areas can be considered basically solved and medium- and long-term rural poverty reduction targets will not substantially differ from urban targets. ### Social payments and their impact on poverty and extreme poverty (1999-2006) - Social payments (pensions and benefits; family benefit system introduced in 1999) have high impact on reducing extreme poverty but smaller impact on overall poverty reduction. - 1999-2005 annual average rates: - Extreme poverty reduction annual average rate: 34.8%, with 65.2% attributed to economic growth. - Overall poverty reduction: share attributed to social payments was only 13.4% (of which social pensions 10.8% and social assistance including annual poverty benefits 2.6%), with 86.6% attributed to economic growth. - Explanation: very poor participate less in economic life, limiting labor and other non-payment incomes; family benefit system targeted mainly to lift people out of extreme poverty, and present benefit sizes often do not allow many beneficiaries to cross the overall poverty line. - Selected impact indicators (post-payment vs without payments, percentages): - Poor — Post-payment level of poverty: 1999 56.1; 2004 34.6; 2005 29.8; 2006 26.5. Poverty level without social payments: 1999 69.1; 2004 44.8; 2005 39.8; 2006 32.8. Poverty level without pensions: 1999 64.2; 2004 42.7; 2005 38.1; 2006 31.0. Poverty level without social assistance: 1999 59; 2004 37.2; 2005 31.9; 2006 28.0. - Very poor — Post-payment level of poverty: 1999 21.0; 2004 6.4; 2005 4.6; 2006 4.1. Poverty level without social payments: 1999 38.2; 2004 15.4; 2005 13.6; 2006 12.1. Poverty level without pensions: 1999 31.0; 2004 12.3; 2005 10.6; 2006 8.2. Poverty level without social assistance: 1999 28.2; 2004 8.7; 2005 7.4; 2006 7.2. - Figure 2.6 summary (1999-2005): contributions to poor and extreme poor population reduction are attributed to economic growth, increased pensions, and social assistance (visualized shares reported in source). *Italic: Extracted from the IMF content unit titled "_cr08376 - 107. Table 2.10 shows that the picture is different when the level of poverty depends" (source PDF content provided).* ### 123. As regards the territorial aspect of the impact of social payments on the poverty ### _cr08376 - 123. As regards the territorial aspect of the impact of social payments on the poverty ### Territorial impact of social payments (2005) - The territorial picture for poor population is "actually the same" in 2005; current social policy is "quite efficient" and "in case of fast poverty reduction its further territorial differentiation is not appropriate." - Table 2.18 — Impact of social payments on the levels of poverty and extreme poverty in 2005, by regions (percentages preserved exactly): - Poverty level percentage - Total: Armenia 29.8; Yerevan 23.9; Other towns 37.8; Rural areas 28.3 - Without benefits: Armenia 31.9; Yerevan 25.0; Other towns 40.4; Rural areas 30.2 - Without pensions: Armenia 38.1; Yerevan 30.6; Other towns 46.0; Rural areas 38.1 - Without social payments: Armenia 39.8; Yerevan 31.7; Other towns 48.6; Rural areas 40.0 - Extreme poverty level percentage - Total: Armenia 4.6; Yerevan 3.6; Other towns 7.2; Rural areas 3.2 - Without benefits: Armenia 7.4; Yerevan 5.2; Other towns 12.9; Rural areas 5.5 - Without pensions: Armenia 10.6; Yerevan 8.4; Other towns 15.8; Rural areas 8.4 - Without social payments: Armenia 13.6; Yerevan 10.0; Other towns 21.5; Rural areas 10.7 - Poverty level % as compared with poverty level (index where Total = 100) - Total: Armenia 100; Yerevan 100; Other towns 100; Rural areas 100 - Without benefits: Armenia 107.0; Yerevan 104.6; Other towns 106.9; Rural areas 106.7 - Without pensions: Armenia 127.9; Yerevan 128.0; Other towns 121.7; Rural areas 134.6 - Without social payments: Armenia 133.6; Yerevan 132.6; Other towns 128.6; Rural areas 141.3 - Extreme poverty level % as compared with extreme poverty level (index where Total = 100) - Total: Armenia 100; Yerevan 100; Other towns 100; Rural areas 100 - Without benefits: Armenia 160.9; Yerevan 144.4; Other towns 179.2; Rural areas 171.9 - Without pensions: Armenia 230.4; Yerevan 233.3; Other towns 219.4; Rural areas 262.5 - Without social payments: Armenia 295.7; Yerevan 277.8; Other towns 298.6; Rural areas 334.4 - Interpretation from text: - Termination of social payments would lead to steep increases in very poor populations in Yerevan and other towns; growth would be higher in rural areas. - During 1999-2005 social payments "have considerably contributed to the reduction of extreme poverty," while contribution to overall poverty reduction was "more modest." - Under conditions of very fast reduction of extreme poverty in the medium-term, the major aim of social transfers will shift to reduction of general poverty. ### Distribution and purposefulness of social assistance and family benefits (1999–2005) - Degree of purposefulness substantially grew in 1999-2005 (Table 2.19 summary statements): - Volume of benefits to the poorest 10% grew 5.66 times. - Volume of benefits to the poor population (income 2-4 deciles) grew 2.23 times. - Volume of benefits to the non-poor (income 5-10 deciles) grew 1.77 times. - In 2005 as compared with 2001, volumes of family benefits allocated to non-poor population reduced by 31.1%. - Share of poor and very poor population (income first 4 deciles) in the system of family benefit grew from 35.6% up to 54.4% (the degree of purposefulness grew "around 1.5 times"). - Nevertheless, 45.6% of family benefits in 2005 were channeled to non-poor part of population. - Per capita distribution of social payments by income deciles in 1999-2005 (selected exact figures from Table 2.19 in current prices, dram, monthly): - Very poor (1st income decile), Total (2005 Armenia): 1,519.0 - Very poor (1st decile), Pensions (2005 Armenia): 1,051.6 - Very poor (1st decile), Benefits (2005 Armenia): 467.3 - Pot (2-4 income deciles), Total (2005 Armenia): 2,288.3 - Pot (2-4), Pensions (2005 Armenia): 1,638.9 - Pot (2-4), Benefits (2005 Armenia): 649.4 - Non-poor (5-10 deciles), Total (2005 Armenia): 2,321.5 - Non-poor (5-10), Pensions (2005 Armenia): 1,987.2 - Non-poor (5-10), Benefits (2005 Armenia): 334.4 - Average, Total (2005 Armenia): 2,231.3 - Average, Pensions (2005 Armenia): 1,789.1 - Average, Benefits (2005 Armenia): 442.2 - Percentage to average (2005, selected): - Very poor (1st decile), Total: 68.1 - Poor (2-4 deciles), Total: 102.6 - Non-poor (5-10 deciles), Total: 104.0 - Very poor, Benefits: 105.7 - Poor, Benefits: 146.9 - Non-poor, Benefits: 75.6 - Regional differences in 2005: - "In 2005, the level of purposefulness of family benefits and consequently, their efficiency was the highest in Yerevan." - Share of top 6 deciles in Yerevan in 2005: 35.3% (national average 45.9%). - Purposefulness substantially lower in other towns and rural areas than in Yerevan. - Figure 2.7 distribution highlights (2001 vs 2005 percentages by poverty group as by income deciles, exact plotted values shown in figure): - Total: 2001 -> The poorest (1st decile) 6.7; Poor (2nd-4th deciles) 26.6; Non-poor (6th-10th deciles) 64.4 - Total: 2005 -> The poorest (1st decile) 10.4; Poor (2nd-4th deciles) 41.6; Non-poor (6th-10th deciles) 45.6 - Yerevan: 2001 -> The poorest 5.9; Poor 42.1; Non-poor 52.0 (chart labels) - Yerevan: 2005 -> The poorest 4.4; Poor 64.4; Non-poor 35.3 (chart labels) - Other towns and Rural area values are shown in the figure (preserve figure numeric labels above). ### Distribution by consumption-based deciles and registration in the benefits system (2005) - Table 2.20 — Distribution of family benefits by decile groups formed on the basis of consumption aggregate in 2005* (exact values): - Armenia (as compared with population, % / as compared with total beneficiaries, % / Amount of benefit, million drams / % as compared with total) - Very poor (1 income decile): 42.0 / 31.7 / 490.5 / 33.0 - Poor (2-4 income deciles): 16.5 / 36.2 / 511.1 / 34.4 - Non-poor (5-10 income deciles): 7.3 / 32.1 / 484.1 / 32.6 - Yerevan - Very poor (1 income decile): 26.3 / 36.6 / 107.4 / 41.7 - Poor (2-4 income deciles): 16.2 / 40.2 / 90.9 / 35.3 - Non-poor (5-10 income deciles): 2.8 / 23.2 / 59.0 / 22.9 - Other towns - Very poor: 55.5 / 30.4 / 203.7 / 31.4 - Poor: 17.4 / 38.1 / 241.2 / 37.2 - Non-poor: 9.6 / 31.5 / 203.0 / 31.3 - Rural areas - Very poor: 44.5 / 29.8 / 179.4 / 30.9 - Poor: 16.2 / 32.5 / 178.9 / 30.8 - Non-poor: 9.4 / 37.7 / 222.2 / 38.3 - Note: "* First, the population is being classified according to consumption aggregate sizes of adult equivalent, and then the respective incomes are being considered." - Registration statistics and take-up (2005): - Expediency of the benefit system calculated from being registered in the system: - Very poor families (before they received benefits): 91.6% - Poor families: 79.9% - Non-poor families: 67.2% - In 2005 the benefits system involved: - 60.7% of very poor families - 39.1% of poor families - 18.8% of non-poor families - Figure 2.8 (Number of households registered in family benefit system in 2005 by poverty level) — plotted values shown: - Total Registered: FB recipients 615.3; Registered non-FB recipients 478.8; Non-registered 136.5 (chart labels; breakdown by non-poor/poor/extreme poor shown with specific numeric labels in figure) - Major reasons for exclusion from family benefits system by poverty levels (Figure 2.9 — exact plotted percentages by reason and poverty group): - Consider themselves well provided: Total 21.1; Non-poor 22.8; Poor 15.0; Extreme poor 17.7 - Are not informed about FBP: Total 57.4; Non-poor 56.5; Poor 60.8; Extreme poor 53.5 - Thought that in any case will not be included: Total 5.0; Non-poor 4.6; Poor 6.3; Extreme poor 6.7 - Non-adequate behavior of social workers and Difficulties of getting references and Other reasons are shown in the figure with exact percentages by poverty group. ### Policy implications and priorities (stemming from findings) - Two major issues for further development of family benefit system: - The targeted transition from extreme poor population to poor population as a major goal of the benefit system. - Increase the system’s purposefulness degree through improvement of social services and involvement of non-registered poor and very poor families in the system. ### Employment and reduction of poverty (1999–2004) - Labor income is decisive for household welfare and poverty reduction; two factors contributed to poverty reduction in 1999-2004 (HS data). - Employment change (HS-based) between 1999 and 2004: - Number of employees in Armenia grew by 117.8 or 13.4%. - Employment increases by region: - Yerevan: 30.9% - Other towns: 52.1% - Rural areas: employment decreased by 21.7% - Note: Official statistics report employment went down by 16.8 thousand or 16.7% in 1999-2004; differences explained by methodology. - Employment patterns by decile and region (Table 2.21 excerpts, percent and counts preserved): - Adult population employment, % as compared with the general (1999 vs 2004, selected) - Very poor (1 decile): 1999 Armenia 45.5; Yerevan 18.3; Other towns 23.7; Rural areas 64.3. 2004 Armenia 42.8; Yerevan 10.5; Other towns 22.4; Rural areas 61.8 - Poor (2-4 deciles): 1999 Armenia 40.8; Yerevan 19.5; Other towns 26.3; Rural areas 64.3. 2004 Armenia 44.5; Yerevan 21.0; Other towns 29.5; Rural areas 64.9 - Non poor (5-10 deciles): 1999 Armenia 45.7; Yerevan 29.7; Other towns 26.3; Rural areas 71.6. 2004 Armenia 50.9; Yerevan 41.3; Other towns 45.7; Rural areas 69.6 - Total: 1999 Armenia 44.3; Yerevan 27.8; Other towns 28.9; Rural areas 68.2. 2004 Armenia 32.2; Yerevan 38.5; Other towns 67.4 (table alignment indicates totals and region cells; preserve exact table values shown) - Per employee monthly incomes conditioned by economic growth (dram) — selected exact values: - Very poor (1 decile): 1999 Armenia 565.3; Yerevan 2,234.1; Other towns 463.6; Rural areas 259.7. 2004 Armenia 1,843.5; Yerevan 21,963.7; Other towns 3,468.4; Rural areas 984.9 - Poor (2-4 deciles): 1999 Armenia 3,623.0; Yerevan 13,461.6; Other towns 7,525.0; Rural areas 2,233.5. 2004 Armenia 10,865.6; Yerevan 53,504.5; Other towns 16,210.9; Rural areas 4,567.8 - Non poor (5-10 deciles): 1999 Armenia 33,533.3; Yerevan 35,610.9; Other towns 35,765.7; Rural areas 30,661.9. 2004 Armenia 44,815.9; Yerevan 63,436.1; Other towns 37,610.2; Rural areas 24,853.0 - Total: 1999 Armenia 21,263.4; Yerevan 25,628.4; Other towns 24,003.2; Rural areas 19,093.1. 2004 Armenia 30,333.6; Yerevan 59,144.1; Other towns 30,354.5; Rural areas 14,942.4 - Number of employed, thousand people (1999 vs 2004, selected): - Very poor (1 decile): 1999 Armenia 90.7; Yerevan 12.6; Other towns 14.3; Rural areas 63.9. 2004 Armenia 88.9; Yerevan 7.5; Other towns 13.9; Rural areas 67.5 - Poor (2-4 deciles): 1999 Armenia 244.2; Yerevan 40.1; Other towns 47.5; Rural areas 156.5. 2004 Armenia 277.3; Yerevan 44.9; Other towns 54.9; Rural areas 177.4 - Non poor (5-10 deciles): 1999 Armenia 547.1; Yerevan 122.3; Other towns 95.1; Rural areas 329.6. 2004 Armenia 633.6; Yerevan 176.5; Other towns 169.9; Rural areas 287.2 - Total employed: 1999 Armenia 882.0; Yerevan 175.0; Other towns 157.0; Rural areas 550.1. 2004 Armenia 999.8; Yerevan 229.0; Other towns 238.7; Rural areas 532.1 - Interpretation from text: - In rural areas, due to small farm sizes, prevalence of natural economy, and low productivity, employment degree does not have a significant impact on poverty level. - In urban areas, a substantial negative link exists between poverty and employment level: employment level of the poor is substantially lower than that of the non-poor. - Despite employment increases among poor population in 1999-2004, employment of non-poor grew faster; the breach in employment levels between poor and non-poor increased as employment of very poor decreased in Yerevan and other towns. *Calculated by deciles formed on the basis of HS monetary income data.* *Italic attribution line below.* *Source: _cr08376 - 123. As regards the territorial aspect of the impact of social payments on the poverty* ### 132. The employment increase reduced the unemployment level both in Yerevan and ### 132. The employment increase reduced the unemployment level both in Yerevan and ### Employment and unemployment outcomes - Employment increase reduced the unemployment level both in Yerevan and other towns; the breach between the unemployment levels calculated on HS data and officially registered reduced. - The unemployment level in the rural areas is the lowest due to the peculiarities of the rural life. - Table 2.23 highlights changes between 1999 and 2004: - Economically active population, % to total population: - 1999 Armenia: 63.0; Yerevan: 55.0; Other towns: 57.6; Rural areas: 72.7 - 2004 Armenia: 61.4; Yerevan: 52.9; Other towns: 53.8; Rural areas: 72.0 - Employed population % to economically active population (Total): - 1999 Armenia: 44.3; Yerevan: 27.8; Other towns: 28.9; Rural areas: 68.2 - 2004 Armenia: 48.2; Yerevan: 32.2; Other towns: 38.5; Rural areas: 67.4 - Unemployment level according to HS, % to economically active population (Total): - 1999 Armenia: 18.7; Yerevan: 27.2; Other towns: 28.7; Rural areas: 4.5 - 2004 Armenia: 13.2; Yerevan: 20.7; Other towns: 15.3; Rural areas: 4.6 - Number of officially registered unemployed, % to economically active population: - 1999 Armenia: 11.2; Yerevan: 11.0; Other towns: 31.9; Rural areas: 1.6 - 2004 Armenia: 9.6; Yerevan: 8.7; Other towns: 24.0; Rural areas: 1.3 ### Labor incomes, working poor, and regional patterns - Fast growth of labor incomes occurred alongside job creation; incomes of poor and very poor grew faster. - Reduction of working poor: - Substantial in Yerevan; lower degree in other towns. - In rural areas, monetary incomes of employees grew slower than in urban areas due to less prevalence of financial relations. - Table 2.22 — Monthly income growth per employee in 2004 (in percentage as compared with 1999, Index=100): - Indicators (Index=100) — Armenia / Yerevan / Other towns / Rural areas: - Very poor (1 decile): 98.0 / 59.7 / 97.4 / 105.6 - Poor (2-4 deciles): 113.6 / 112.1 / 115.5 / 113.3 - Non poor (5-10 deciles): 115.8 / 144.3 / 178.5 / 87.1 - Total: 113.4 / 130.9 / 152.1 / 96.7 - Per one employee incomes conditioned by the economic growth in Armenia (labor and sales of agriculture products), dram: - Very poor (1 decile): 326.1 / 983.1 / 748.1 / 379.3 - Poor (2-4 deciles): 299.9 / 397.5 / 215.4 / 204.5 - Non poor (5-10 deciles): 133.6 / 178.1 / 105.2 / 81.1 - Total: 142.7 / 230.8 / 126.5 / 78.3 - Figure 2.10 and text findings for Yerevan (1999 vs 2004): - Income of one employee in very poor group constituted 113% of poverty line in 2004 instead of 13% in 1999. - Income of employees in the poor group made 276% of poverty line in 2004 instead of 76% in 1999. - Other towns: - Problem of “working poor” not solved in 2004. - Income of employee belonging to poor group in 2004 made 84% of poverty line (almost 2 times more than in 1999). - High percentage of registered unemployed in other towns compared with Yerevan helps explain persistent poverty. - Rural areas: - Major remaining issues: increase of productivity and increased opportunities for non-agricultural employment. - Monetary income patterns from HS may show anomalies: income reduction of rural non-poor population per HS data is conditioned by steep decrease of income from sale of agricultural products in highest deciles and most likely does not comply with reality (note in text). ### Regional concentration and implications for policy - Economic life is becoming more concentrated in the capital: - In 1999 the difference of employees’ incomes between Yerevan and other towns was 6.8%; in 2004 it was around 2 times more. - Per capita GDP proportion of Yerevan to other towns was around 250%. - Policy implications drawn in the text: - Yerevan: major reason for poverty is unemployment (level about 3.6 times higher for very poor and around 2.7 times higher for poor than that of non-poor); policy should be channeled towards creation of new jobs and ensuring more favorable conditions. - Other towns: unemployment is accompanied by low working incomes; policy should promote not merely jobs, but jobs ensuring high value added production. - Rural areas: policy should aim at raising productivity and increasing opportunities for non-agricultural employment. ### Alternative estimates of poverty (1999–2005) - Table 2.24 — Alternative estimates of poverty in 1999-2005 (% to number of existing population): - Less than 1$ per day: 1999*: 7.54; 2001*: 3.4; 2004: 0.1; 2005: 0.0 - Less than 2.15$ per day: 1999*: 43.5; 2001*: 36.1; 2004: 1.8; 2005: 0.8 - Less than 4.30$ per day: 1999*: 86.2; 2001*: 81.8; 2004: 34.4; 2005: 23.2 - Less than 11$ per day: 2005: 85.6 - Less than minimal food basket: 2005: 6.9 - Less than minimal consumption basket: 2005: 41.2 - Memorandum articles (selected): - Purchasing parity of 1$: 1999: 3.26; 2001: 3.38; 2004: 3.61; 2005: 3.08 - National food poverty line in $ - per capita a day: 1999: 2.27; 2001: 2.27; 2004: 2.81; 2005: 2.98 - National poverty line in $ - per capita a day: 1999: 3.58; 2001: 3.58; 2004: 4.36; 2005: 4.56 - Minimal consumption food basket, dram per month (2005): 17,870 - Minimal consumption basket, dram per month (2005): 29,843 - Interpretations: - Armenia eliminated extreme poverty measured by 1$ and 2.15$ per day during 1999-2005. - Applying an 11$ per day poverty line in 2005 (monthly 48 972 dram per capita) would yield poverty level 85.6%. - In 2005, extreme poverty level was 7.2% with the minimal food basket used as food poverty line; poverty level was 41.2% with the minimal consumption basket used as general poverty line. - Fast reduction of poverty (including extreme poverty) is forecast to continue in the medium term, allowing use of minimal food and minimal consumption baskets as extreme and general poverty lines during SDP implementation. ### SDP (PRSP) material poverty reduction goals and targets - Overall SDP targets for share of poor population (instead of 26.0% in 2006): - 2012: 14.0% - 2015: 10.1% - 2021: 6.8% - Poverty will be substantially reduced in all marzes: both in urban and rural areas. - Regional targets (selected): - Yerevan poor, % of population: - 2006: 19.6% -> 2012: 8.7% -> 2015: 5.4% -> 2021: 3.2% - Extreme poor, % of population: 2006: 2.7% -> 2012: 1.1% -> 2015: 0.8% -> 2021: 0.4% - Other towns poor, % of population: - 2006: 34.0% -> 2012: 18.5% -> 2015: 13.1% -> 2021: 8.1% - Extreme poor, % of population: 2006: 6.4% -> 2012: 2.9% -> 2015: 2.2% -> 2021: 1.5% - Rural areas poor, % of population: - 2006: 26.6% -> 2012: 14.9% -> 2015: 11.6% -> 2021: 9.1% - Extreme poor, % of population: 2006: 3.0% -> 2012: 2.3% -> 2015: 1.8% -> 2021: 1.6% - National targets and thresholds (Table 3.1): - Armenia poor, % of population: 2006: 26.0% -> 2012: 14.0% -> 2015: 10.1% -> 2018: 8.4% -> 2021: 6.8% - Armenia extreme poor, % of population: 2006: 4.2% -> 2012: 2.1% -> 2015: 1.6% -> 2018: 1.4% -> 2021: 1.2% - Poverty threshold, per month, dram: - 2006: 21 555; 2012: 28 707; 2015: 31 366; 2018: 34 280; 2021: 37 455 - Extreme poverty threshold, monthly dram: - 2006: 14 300; 2012: 19 045; 2015: 20 809; 2018: 22 742; 2021: 24 848 - Poverty calculated by MCB: - Poor, % of population: 2006: 39.8% -> 2012: 24.8% -> 2015: 19.3% -> 2018: 15.3% -> 2021: 11.4% - Minimal consumption basket, monthly dram: 2006: 31 961; 2012: 42 566; 2015: 46 509; 2018: 50 829; 2021: 55 537 - Additional SDP targets by population groups (Table 3.2) — examples: - Children aged 5-16 (Poor / Very poor): - 2005 Actual: 33.1 / 5.2 - 2006: 26.5 / 4.3 - 2012: 12.6 / 1.8 - 2015: 8.7 / 1.4 - 2021: 6.8 / 1.1 - Retired (Poor / Very poor): - 2005 Actual: 30.0 / 3.9 - 2006: 26.5 / 4.6 - 2012: 5.8 / 0.6 - 2015: 3.2 / 0.3 - 2021: 1.0 / 0.1 - Employees (Poor / Very poor): - 2005 Actual: 22.7 / 3.0 - 2006: 21.3 / 2.2 - 2012: 3.6 / 0.3 - 2015: 2.4 / 0.2 - 2021: 1.5 / 0.1 - Policy drivers for SDP targets: - Progressive growth of poor population’s labor incomes and employment level. - Progressive growth of pensions and increased purposefulness of the benefit system. - From 2018 SDP envisages switching to the minimal consumption basket as new poverty threshold and to the minimal food basket as new extreme poverty threshold. - Social policy emphasis: - Elimination of extreme poverty by 2015 (SDP forecast average 1.6% in 2015; Yerevan 0.8%; other towns 2.2%; rural areas 1.8% versus 2006 average 4.2%). - Substantial impact of progressive pension growth on poverty reduction for pensioners and disabled, including probable elimination of poverty among sole pensioners since 2015. ### Macroeconomic framework — real sector developments (2003–2007) - General: - Economic growth recorded in Armenia in 2003-2007 was 13.1% on average instead of 6.2% envisaged by PRSP. - Growth was demand driven with increased role of non-export sectors. - Sectoral growth (2003-2007 averages and highlights): - Construction: - Average annual growth: 28.5% (planned 9.9%). - Share of sector in GDP in 2007: 24.7% (planned 15.7%). - Annual growth rates: 2003: 45.5%; 2004: 15.3%; 2005: 27.9%; 2006: 37.7%; 2007: 18.6%. - Growth driven mostly by private investments, housing growth, foreign remittances, and higher savings. - Services: - Average growth rate 2003-2007: 13.5% (envisaged 7%). - Share of sector in GDP in 2007: 33.2%. - Industry: - Average growth 2003-2007: 4.6% (expected 6.6%). - Sector growth affected by decline in 2006 (by 2.5% compared to 2005) driven by reductions in chemical industry, diamond cutting, and tobacco industry. - Industry growth rates: 2003: 15.6%; 2004: 2.2%; 2005: 5.6%; 2007: 3.1%. - Growth supported by increased volumes of metal raw material production and metal processing since 2002-2003, and by substantial foreign investments boosting overall investment levels. *Source: _cr08376 - 132. The employment increase reduced the unemployment level both in Yerevan and* ### 160. The agriculture growth was mainly conditioned by the favorable climate ### _cr08376 - 160. The agriculture growth was mainly conditioned by the favorable climate ### Agriculture growth and sectoral contribution - The agriculture growth was mainly conditioned by the favorable climate conditions and increase of arable land. - In 2003-2007, the average annual growth of the sector was 8.0% instead of the planned 2.4%, with the main deviation recorded in 2004-2005, when the actual growth constituted respectively 14.2% and 11.2%. - Progressive growth of the construction sector and high start-up share of the service sector in GDP led to the reduction of industry and agriculture share in GDP. - Per capita GDP: in 2007 per capita GDP in dollar denomination was $2.853 against $740 in 2002. ### Investment, savings, and demand composition - In 2003-2007, a considerable part of increased national savings bypassed the financial sector and turned into investments, especially private investments in housing construction. - Share of investments in GDP in 2007 was around 16.3 percent point higher than envisaged — making it 37.3%. - Share of national savings in 2007 was 32% — surpassing the envisaged level by 16 percentage points. - The share of investments in GDP during forthcoming 14 years is envisaged to remain at a high level — 29-37%. - In 2008-2012 the share of investments in GDP is envisaged at 37.8%; starting from 2010 the share will tend to decrease, and in 2021 it will make 29.1%. - In the investment structure over time: non-industrial capital construction (especially housing) will dominate in medium term; gradual increase of industrial capital investments and gradual decrease of state participation in capital construction thereafter. ### Prices and inflation - Growth of consumption prices in 2003-2007 was on average annual 4.4% instead of envisaged 3.0%. - In 2003 inflation was 8.6%, mostly conditioned by unprecedented price increase of grain products, impacted by more than 30% international price increase of grain. - In 2007 prices in Armenia increased by 6.6% (as compared with 2006), of which 5.2 percentage points were conditioned by unprecedented increase in global market prices. - Inflation targeting: long-term price increase targeting will comprise annual average 3+/-1.5%. - The RA CB reconsidered the price increase targets in 2007 fixing it for 4% (+/-1.5%) instead of 3% initially fixed (+/-1.5%). ### External sector developments (2004-2007 and outlook) - 2004-2007: deterioration trends in trade and current account balances due to decrease in export growth rates and more rapid growth of import capacities; nominal currency appreciation starting from Q3 2003 contributed. - Higher-than-expected incomes and official transfers: in 2004-2007 the average annual actual growth constituted 40.7%. - Average growth rate in 2003-2007 was 13.1% instead of the planned 6.2%. - Current account (negative balance as % of GDP) trended from 0.55% in 2004 to 6.4% in 2007. Average value during the mentioned period constituted 2.5% instead of planned 5.4%. - Forecasted external openness (goods and services circulation in GDP) will grow from the envisaged 58.3% in 2007 up to 101% in 2021. - Goods and services balance (as % of GDP) is expected to deepen up to 2009 by around 5% points from 2007 and make 25% (as of 2009). In 2012-2021 the indicator will improve to 13.5% in 2021. - Current account/GDP ratio forecast: up to 2009 will worsen and in 2009 will make 9.6% of GDP; then continuously improve to constitute 4.4% of GDP in 2021. ### Public finances and fiscal sector - Consolidated budget indicators grew in absolute terms in 2003-2007 but were inferior to GDP growth rate. - Average ratio of 2003-2007 actual incomes/GDP decreased by 1.6% compared with 2002; average ratio actual expenditures/GDP reduced by 1% making 20.8% and 22.3% instead of envisaged 22.2% and 24.4% respectively. - The lion share of budget incomes was provided by tax incomes; social sector expenditures increased within budgetary expenditures. - Tax-GDP ratio in 2003-2007 was 17.8% on average — by 0.2 percentage points almost unchanged compared to 2002 and by 1.5 percentage points inferior to PRSP envisaged indicator for that period. - Reasons for tax revenue underperformance: GDP grew twice as fast as projected, taxing capacities could not immediately adapt; significant part of growth from construction which is partially tax-free or hard to tax. - Policy emphasis: in medium term one of the most important sources of tax revenues will become sustainable and continuous improvement of tax administration. - Budget balance improvements: deficit/GDP ratio reduced from 2.6% in 2002 to around 1.5% in 2007; in 2003-2007 it varied within 3-1.8%. ### 2008-2021 macroeconomic framework projections and scenarios - Projection premise: takes into account government policy directions and targets (including pension system improvement); indicators unified with 2009-2011 MTEF. - Major precondition for poverty reduction and income distribution: provision of long-term economic growth mediated by employment increase and increased income basis of state budget. - Long-run growth assumption: during forthcoming fifteen years Armenian economy will continue to grow at sustainable rate — with average 7% percent of annual growth. - Historical growth context: since 1994 average annual growth almost 9.7%; last five years average annual growth 13.1%. - Projection: in 2008-2012 GDP growth expected to be less than recent five years but remain high; 2012-2021 growth rates relatively stable around 6%. - Short-term (to 2011): GDP growth will reduce compared with 2007 but continue to remain high making average 9% per annum. - Structural evolution: 2008-2011 growth driven by demand — capital construction and service sectors dominant; starting from 2012, driving force to shift gradually to sectors based on increase of capital and scientific potential (high productivity sectors). - CPI outlook: in upcoming years price increase will exceed the RA CB 4+/-1.5% target due to world market developments; long-term annual average target 3+/-1.5%. - Monetization and payments: anticipated increase in financial mediation, slowing money circulation, increased monetization level; share of cash flow in monetary supply to reduce to 17% in 2021; monetization indicator to reach 52.8% in 2021. - Fiscal benchmark: need to keep inflation around 3+/-1.5% and meet money demand from other sectors; moderate fiscal and credit policy to avoid fueling demand-driven inflation. ### Key forecast indicators (selected exact figures from Table 4.1) - Real GDP, % change: - 2007 actual 13.8 - 2008 forecast 10.4 - 2009 forecast 9.2 - 2010 forecast 8.5 - 2011 forecast 8.0 - 2015 forecast 6.3 - 2018 forecast 5.7 - 2021 forecast 5.1 - GDP, billion dram: - 2007 actual 3,148.7 - 2008 forecast 3,671.7 - 2009 forecast 4,169.3 - 2010 forecast 4,703.2 - 2011 forecast 5,280.7 - 2015 forecast 7,837.7 - 2018 forecast 10,228.3 - 2021 forecast 13,114.6 - GDP million US dollar: - 2007 actual 920 - 2008 forecast 4,120 - 2009 forecast 2,213 - 2010 forecast 6,511 - 2011 forecast 1,5399 - 2015 forecast 17,290 - 2018 forecast 25,662 - 2021 forecast 33,490 - 2021 later entry 42,939 - Per capita GDP, US dollar: - 2007 actual 2,853 - 2008 forecast 3,3718.0 - 2009 forecast 4,210.0 - 2010 forecast 4,734.6 - 2011 forecast 5,297.2 - 2015 forecast 7,724.9 - 2018 forecast 9,944.9 - 2021 forecast 12,618.1 - CPI (average), % change: - 2007 actual 4.4 - 2008 forecast 8.9 - 2009 forecast 6.1 - 2010 forecast 3.8 - 2011 forecast 3.4 - 2015 forecast 3.0 - 2018 forecast 3.0 - 2021 forecast 3.0 - Exchange rate (average), dram/US dollar: - 2007 actual 342.0 - 2008 forecast 305.4 - 2009 forecast 305.4 - 2010 forecast 305.4 - 2011 forecast 305.4 - 2015 forecast 305.4 - 2018 forecast 305.4 - Investments (share of GDP): - 2007 actual 37.2 - 2008 forecast 37.6 - 2009 forecast 38.2 - 2010 forecast 37.9 - 2011 forecast 37.5 - 2015 forecast 34.2 - 2018 forecast 31.4 - 2021 forecast 29.1 - National savings (share of GDP): - 2007 actual 32.0 - 2008 forecast 30.1 - 2009 forecast 30.4 - 2010 forecast 31.2 - 2011 forecast 32.3 - 2015 forecast 30.1 - 2018 forecast 27.1 - 2021 forecast 24.7 - Consolidated budget: total incomes and grants (share of GDP): - 2007 actual 22.4 - 2008 forecast 21.6 - 2009 forecast 22.1 - 2010 forecast 22.1 - 2011 forecast 22.4 - 2015 forecast 24.2 - 2018 forecast 25.7 - 2021 forecast 26.7 - Of which tax revenues (share of GDP): - 2007 actual 19.3 - 2008 forecast 20.8 - 2009 forecast 20.8 - 2010 forecast 21.2 - 2011 forecast 21.6 - 2015 forecast 23.5 - 2018 forecast 24.6 - 2021 forecast 25.6 - Total expenditure (consolidated budget, % of GDP): - 2007 actual 23.9 - 2008 forecast 24.1 - 2009 forecast 24.2 - 2010 forecast 24.4 - 2011 forecast 24.7 - 2015 forecast 26.8 - 2018 forecast 28.2 - 2021 forecast 29.2 - Balance (including cumulative system), % of GDP: - 2007 actual -1.5 - 2008 forecast -2.4 - 2009 forecast -1.9 - 2010 forecast -2.3 - 2011 forecast -2.3 - 2015 forecast -2.4 - 2018 forecast -2.5 - 2021 forecast -2.5 - Public debt (total debt % of GDP): - 2007 actual 17.8 - 2008 forecast 16.0 - 2009 forecast 15.9 - 2015 forecast 17.0 - 2018 forecast 19.8 - 2021 forecast 21.9 and later 23.9 (table entries) - External sector (share of GDP): - Export: 2007 actual 19.3; forecasts 2008 15.9, 2015 27.0, 2018 35.6, 2021 43.8 - Import: 2007 actual 39.0; forecasts 2008 38.4, 2015 48.9, 2018 53.3, 2021 57.3 - Current account: 2007 actual -6.4; forecasts 2008 -9.0, 2009 -9.6, 2010 -9.3, 2011 -8.8, 2015 -7.0, 2018 -5.9, 2021 -4.4 *Source: _cr08376 - 160. The agriculture growth was mainly conditioned by the favorable climate* ### 174. In 2011-2021 the aforementioned trends will somehow change conditioned by a ### _cr08376 - 174. In 2011-2021 the aforementioned trends will somehow change conditioned by a ### Structural factors shaping 2011-2021 projections - High growth in construction and services will be constrained by limited productivity growth in those sectors. - Growth in construction and services is expected to raise salary levels in Armenia, potentially prompting return of seasonal workers. 30.6% of persons transferring money to Armenia are seasonal workers. - Capital investments of industrial significance made in previous years will gradually recuperate costs through productivity growth, contributing to accelerated development of industry and capital sectors. - Demand-driven complexity and development of services will sustain a high rate of value added in services. - Productivity in industry is projected to be more progressive than in other sectors and "will make around 10.4%." ### Sectoral projections and key numerical outcomes (2008-2021) - Industry - 2008-2011: average growth rate of value added will be quite low - 6.9% per annum. - The share of industry value added in GDP will remain at the level of 13.5% in the near term. - 2011-2021: growth of the sector will accelerate and will surpass the average annual GDP growth. - Productivity growth in industry: "will make around 10.4%." - Agriculture - Given sector peculiarities, high growth is not expected. - 2008-2021: the value added of the sector will constitute annually 3.3% on average. - Construction - 2008-2011: value added growth will be around 11% per annum. - The share of construction in GDP will be around 27% (near term). - 2011-2015: growth rate will substantially slow down to an average of 2.8%. - Starting in 2015: the sector will have almost zero growth rate. - The share of the sector in GDP in 2021 will constitute around 16%. - Services - 2008-2021: value added of services will continue growing at high rate, about annual 9% on average. - As a result, the share of services in GDP in 2021 as compared with 2008 will grow by around 13% points and will make around 43.9%. ### Macroeconomic growth benchmarks (footnote-based averages) - According to SDP forecasts (footnote 56): - Average annual economic growth for 2008-2021 is envisaged at 6.9%. - Average annual economic growth rate for 2008-2015 should be 7.9%. - Average annual economic growth rate for 2016-2021 should make 5.6%. ### Required structural and institutional measures - Maintenance of high economic growth rate must be conditioned by structural measures aimed at reinforcing institutional basis and fundamental quality, including: - Improvement of business environment. - Efficiency increase of investment policy. - Actions aimed at productivity increase in export sectors and competitiveness. - Institutional developments to increase education and science potential. - Introduction of “knowledge” based economy structures, promotion of information and communication technologies, and vocational education. ### Reform progress and international assessments - EBRD-related observations - One precondition for 1994-2007 and especially 2001-2007 fast growth was successful implementation of “first generation” reforms. - Distances between Armenia and European countries grew from 0.29 in 2001 to 0.37 in 2006, explained by a slower rate of “second generation” reforms in 2001-2006. - Table-based findings (summary): - Armenia in 2006 was comparable with EU-10 average on “first generation” reforms but lagged on “second generation” reforms relative to many European and some CIS countries. - PRSP 2006 benchmark non-achievements (actual vs. envisaged) - Enterprise restructuring: envisaged 3; actual 2.33. - Competition policy: envisaged 2.4; actual 2.33. - Banking reforms: envisaged 3; actual 2.67. - Financial market and non-banking financial institutions reforms: envisaged 2.5; actual 2.0. - Infrastructure reforms: envisaged 3; actual 2.33. *Italic: Source: _cr08376 - 174. In 2011-2021 the aforementioned trends will somehow change conditioned by* ### 182. The Government realizes that at the present phase of the country’s development ### 182. The Government realizes that at the present phase of the country’s development ### Second generation reforms targets and implementation benchmarks - Government objective: successful introduction and substantial acceleration of the “second generation” reforms to ensure sustainable long-term economic growth and institutional modernization. - Long-term envisioned milestones (as described in the text): - in 2010 to surpass the average level of European countries in transition registered in 2006; - in 2015 to surpass the present level of Poland; - in 2021 to surpass the present level of Hungary. - Definition note: Measured as the difference of the reform’s aggregate (the table shows the average numeric of the estimates). - EBRD definition: the “second generation” of reforms include restructuring of the enterprises; competition promotion policy; financial sector reforms (including banking); infrastructure sectors’ reforms (including telecommunication, railway, power sector, and road and water sectors). - Government comment: At the same time the Government considers that EBRD assessment of Armenia’s “second generation” reforms, particularly in power and water sectors, especially for 2006 are lower than should be... During the SDP implementation the Government will use EBRD reforms assessment methodology to calculate the respective assessments, which will be the major benchmarks for the implementation of SDP economic policy priorities. - Table 5.3. “First” and “second” generations reforms implementation benchmarks (Indicators and values) - Privatization: 2006 — 3.67; 2010 — 4.00; 2015 — 4.00; 2021 — 4.00 - “Small” privatization: 2006 — 4.00; 2010 — 4.33; 2015 — 4.33; 2021 — 4.33 - Enterprise restructuring: 2006 — 2.33; 2010 — 3.00; 2015 — 3.67; 2021 — 4.00 - Price liberalization: 2006 — 4.33; 2010 — 4.33; 2015 — 4.33; 2021 — 4.33 - Trade and currency exchange liberalization: 2006 — 4.33; 2010 — 4.33; 2015 — 4.33; 2021 — 4.33 - Competition policy: 2006 — 2.33; 2010 — 2.67; 2015 — 3.00; 2021 — 3.67 - Banking reforms: 2006 — 2.67; 2010 — 3.00; 2015 — 3.67; 2021 — 4.00 - Equity market and non-baking financial institutions: 2006 — 2.00; 2010 — 2.67; 2015 — 3.33; 2021 — 4.00 - General infrastructure reforms: 2006 — 2.33; 2010 — 2.67; 2015 — 3.33; 2021 — 4.00 - Telecommunication: 2006 — 2.67; 2010 — 3.00; 2015 — 3.67; 2021 — 4.33 - Railway: 2006 — 2.00; 2010 — 2.67; 2015 — 3.33; 2021 — 4.00 - Power sector: 2006 — 3.33; 2010 — 3.67; 2015 — 4.00; 2021 — 4.33 - Road sector: 2006 — 2.33; 2010 — 2.67; 2015 — 3.33; 2021 — 4.00 - Water and water removal: 2006 — 2.00; 2010 — 2.67; 2015 — 3.33; 2021 — 4.00 - Aggregate reforms: 2006 — 2.88; 2010 — 3.26; 2015 — 3.69; 2021 — 4.09 ### Ensuring equal conditions for economic competition (Policy objectives and measures) - Identified constraint: incomplete and weak system of competition protection can obstruct medium- and long-term development and pro-poor growth. - International experience: provision and maintenance of equal conditions for competition is a complicated, multi-element, long-term process conditioned by implementation of “second generation” reforms. - Reform priorities for regulating monopolies and maintaining competition: - correlate the law on competition with EU standards, especially specifying the provisions concerning the mergers and acquisitions, as well as financial groups with interconnected ownership; - substantially reinforce the institutional capacities and possibilities of Economic Competition State Commission (ECSC), in particular in regard of commodity market survey; determination of dominant position; identification of mergers and acquisitions limiting the competition; - substantially facilitate, accelerate and specify the process of cases filed by ECSC. - Access and market-entry focus: - ensure unstoppable access of new players to presently monopolized sectors; - reforms aimed at overall institutional modernization, elimination of entry access restrictions in individual sectors, and rehabilitation of free competition. - Two reform groups described: - First group (cross-cutting institutional and business environment reforms): - qualitative improvement of public governance, including transparency increase of administration and simplification of administration procedures, with step- by- step improvement of indicators according to SDP benchmarks; - constant improvement of business and investment climate; - step-by-step reduction of the shadow economy via specification and simplification of legal regulation of transactions, including SME development, deepening of financial mediation and reduction of loan costs, introduction of modern corporate governance standards. - Second group (sector-specific market liberalization): - substantial limitation of monopolies and introduction of free competition in state regulated industrial infrastructure sectors, including telecommunication, power sector, railway and aviation; - elimination of access restraints and formation of free market in areas of import of certain commodities and wholesale not regulated by the state and currently controlled by one or several interconnected companies (in particular petrol; aviation fuel; sugar; wheat import and wholesale sectors) mainly through improvement of tax and customs administration; limitation and elimination of different types of public entities sponsorship; promotion of entry of well-known transnational companies in that sector and capacity building of ECSC. ### Improvement of business environment (current assessment, targets and benchmarks) - Current assessment (2006 Doing Business summary): - Armenia overall quality of business environment in 2006: 39th in the world, 6th in ECA transition countries. - Title registration: 1st in ECA countries and 4th in the world. - Table 5.4 (selected comparative placements in 2006 among surveyed 178 countries; places show country ranking by area): - Armenia: Total — 39; 1 (creation of new enterprises) — 47; 2 (licensing processes) — 73; 3 (employment regulation) — 48; 4 (title registration) — 2; 5 (access to credits) — 36; 6 (protection of investors) — 83; 7 (payment of taxes) — 143; 8 (international trade operations) — 118; 9 (application of contracts) — 64; 10 (liquidation of the company) — 42 - Place of Armenia among ECA countries: 6; 6; 7; 4; 1; 10; 12; 23; 18; 19; 5 - Note: The respective figures characterize quality of business environment in areas: 1 – creation of new enterprises; 2 – licensing processes; 3 – employment regulation; 4 – title registration; 5 – access to credits; 6 – protection of investors; 7 – payment of taxes; 8 – international trade operations; 9 – application of contracts; 10 – liquidation of the company. - Sources cited: “Doing Business – 2008”, WB, 2007. - Identified weaknesses (2006): - External trade and tax payment indicators unfavourable: Armenia was the 18th and 23rd among surveyed 28 ECA countries respectively. - Cause: insufficient level of customs and tax administration. - Contract enforcement also weak: Armenia is the 19th. - Government target for 2008-2010: - substantially speed up business environment reforms so that in 2010 Armenia be rated among top 10 countries with the most favorable business environment, and thereafter keep and reinforce positions among top 10. - Table 5.5. The quality benchmarks for business environment (Indicators and values as presented) - Overall place*: 2006 — 39; 2010 — 9; 2015 — 3; 2021 — 3 - Creation of new businesses, place: 2006 — 47; 2010 — 3; 2015 — 2 - Number of procedures: 2006 — 92; 2010 — 2; 2015 — 2 - Duration, days: 2006 — 183; 2010 — 3; 2015 — 3 - Cost, % per capita GDP: 2006 — 4.82; 2010 — 2; 2015 — 2 - Statutory capital, % per capita GDP: 2006 — 3.10; 2010 — 0; 2015 — 0 - Functions of providing permission for construction, place: 2006 — 73; 2010 — 7; 2015 — 8; 2021 — 7 - Number of procedures (construction): 2006 — 199; 2010 — 9; 2015 — 9 - Duration, day (construction): 2006 — 116110; 2010 — 105; 2015 — 100 - Cost, % per capita GDP (construction): 2006 — 411.330; 2010 — 25; 2015 — 25 - Employment regulation, place: 2006 — 48; 2010 — 7; 2015 — 4; 2021 — 4 - Employing index: 2006 — 33.330; 2010 — 0; 2015 — 0 - Working hours toughness index: 2006 — 4020; 2010 — 0; 2015 — 0 - Index of firing complexity: 2006 — 200; 2010 — 0; 2015 — 0 - Employment toughness index: 2006 — 310; 2010 — 0; 2015 — 0 - Cost of firing (salary, week): 2006 — 134,3; 2010 — 4; 2015 — 4 - Title registration, place: 2006 — 22; 2010 — 2; 2015 — 2 - Number of procedures (title): 2006 — 32; 2010 — 2; 2015 — 3 - Duration, day (title): 2006 — 42; 2010 — 2; 2015 — 4 - Cost, as compared with title, %: 2006 — 0.40.3; 2010 — 0.3; 2015 — 0.3 - Getting credits, place: 2006 — 36; 2010 — 13; 2015 — 3; 2021 — 3 - Credit information index: 2006 — 57; 2010 — 7; 2015 — 7 - Legal rights index: 2006 — 56; 2010 — 9; 2015 — 9 - Credit registry coverage (for adult population % ): 2006 — 16.325; 2010 — 35; 2015 — 45 - Investor protection, place: 2006 — 83; 2010 — 12; 2015 — 9; 2021 — 9 - Identification index: 2006 — 58; 2010 — 9; 2015 — 9 - Director responsibility index: 2006 — 26; 2010 — 8; 2015 — 8 - Index of court cases filed by the shareholders: 2006 — 88; 2010 — 8; 2015 — 8 - Investor protection index: 2006 — 57; 2010 — 8.33; 2015 — 8.33 - Tax payments, place: 2006 — 143; 2010 — 80; 2015 — 70; 2021 — 50 - Number of payments: 2006 — 50; 2010 — 29; 2015 — 25; 2021 — 20 - Time spent, hour: 2006 — 1120300; 2010 — 200; 2015 — 150 - Cost, % per capita GDP (tax): 2006 — 65.136,6; 2010 — 30,0; 2015 — 25 - International trade, place: 2006 — 118; 2010 — 21; 2015 — 16; 2021 — 15 - Export, number of documents *: 2006 — 73; 2010 — 3; 2015 — 3 - Time required for export, days: 2006 — 305; 2010 — 5; 2015 — 5 - Export cost (US $ per container): 2006 — 11651165; 2010 — 1000; 2015 — 1000 - Import, number of documents *: 2006 — 83; 2010 — 3; 2015 — 3 - Time required for import, days: 2006 — 245; 2010 — 5; 2015 — 5 - Import cost (US $ per container): 2006 — 13351335; 2010 — 1200; 2015 — 1200 - Enforcement of contracts, place: 2006 — 64; 2010 — 24; 2015 — 9; 2021 — 8 - Number of procedures (contracts): 2006 — 50; 2010 — 36; 2015 — 27; 2021 — 25 - Duration, days (contracts): 2006 — 285285; 2010 — 195; 2015 — 170 - Cost (% of demand): 2006 — 1919; 2010 — 19; 2015 — 19 - Liquidation of enterprises, place: 2006 — 42; 2010 — 41; 2015 — 37; 2021 — 31 - Cost, % per capita GDP (liquidation): 2006 — 43; 2010 — 3; 2015 — 3 - Time, year (liquidation): 2006 — 1.91.6; 2010 — 1.5; 2015 — 1.4 - Rate of return, %: 2006 — 4242; 2010 — 45; 2015 — 50 - Notes accompanying Table 5.5: - according to the methodology the indicators of 2006 reflecting the number of documents required for export and import and demanded by the Georgian customs service in the Georgian port is 2. Thus, the number of documents required by the RA Customs service for export and import is 5 and 6 respectively - The comparative positions of Armenia from the viewpoint of overall quality of business environment, as well as of individual areas have been estimated by 2006 using the special program attached to the latest report of “Doing Business” (simulator, www.doingbusiness.org). *Italic source attribution: _Content extracted from the provided IMF PDF chapter/section._ ### 192. The framework of reforms, which during 2008-2021 should contribute to the ### _cr08376 - 192. The framework of reforms, which during 2008-2021 should contribute to ### Reform framework (2008-2021) - Objective: substantial improvement of business environment across legislative, procedural and administrative areas, and changes in state–business community interaction. - Main aims: - reduction and simplification of procedures; - reduction of time and financial resources required for their implementation (operational costs); - quality increase of business environment and elimination of legislation hampering the reduction of shadow economy; - reduction of direct interaction between public officials and businessmen through introduction of one-stop shops, e-governance and transition of procedures to on-line regime. - Timing: reforms scheduled taking into account degree of difficulty for given sectors and present situation peculiarities. ### Business registration (2006 baseline and 2008–2010 reforms) - 2006 baseline (Limited Liability Company, Armenia): - 9 procedures; - 18 days; - cost: 38.5 thousand dram or 4.8% of per capita GDP; - minimal statutory capital: 25 thousand dram or 3.1% of GDP per capita. - 2008–2010 reform measures: - elimination of overall requirement of the minimal statutory capital (with protection of the requirement by the state in areas subject to special regulation); - gradual elimination of the obligatory requirement of having a stamp, with the purpose of eliminating the latter by 2012; - transfer of state registration, receipt of taxpayer’s registration number and registration at the statistics service procedures to one-stop shop (Agency of State Registration of Juridical Persons of the RA Ministry of Justice to perform one-stop shop role); - creation of technical opportunities for on-line system of document registration, state registration and taxpayer’s registration and step-by-step implementation starting from Yerevan. ### Construction permits (2006 baseline and reforms) - 2006 baseline (example: industrial warehouse in Yerevan): - 19 procedures; - average duration: 116 days; - cost: 3.3 million dram or per capita 411% of GDP. - Reform objectives: - reduction of costs and number of procedures for construction permits; - starting in 2010 target: 9 procedures instead of 19; - concentrate all allowances concerning construction activities within one body; - reduce period required for providing a permit for construction by 6 days. ### Labor market and the New Labor Code (measures by 2010) - Context: enforcement of the New Labor Code clarified regulation, but some provisions are considered extremely tough; goal to liberalize labor market and encourage transfer of jobs from shadow economy to formal sector. - By 2010 measures to be taken: - eliminate necessity to conclude contractual agreements and mandatory requirements concerning time constraints; legal entities should clarify working procedures and employment relationship; - adopt a more flexible procedure of discharging employees; - reduce the time needed to notice the employee about his/her discharge and reduce the amount of compensation; - reduce the amount of remuneration for overtime work and mitigate labor time limitations; - eliminate restrictions concerning night and week-end work. ### Title registration - 2006 position: Armenia was 2nd in easiness of title registration after New Zealand. - Government stance: does not envisage a relative increase in quantity, time of procedures and relative cost of registration. ### Access to credit, collateral and registries (targets by 2010) - 2006 position: access to credit ranking was 36th. - Reform directions: - develop credit registries and expand information coverage; - changes in legislation on bankruptcy, pledge and company liquidation to expand list of property serving as collateral and rights of pledger; - by 2010 expand scope of information provided by private credit registries, including information about credits by commercial and non-banking financial organizations and fees of service-providing companies; - by 2010 set up a unified registry of pledged mobile property and make its information available for all banks and credit organizations. ### Investor protection (targets by 2010) - Context: relatively weak level of investors’ protection contributes to low portfolio investment, low corporate governance and concentration of property. - By 2010 company legislation amendments: - strengthen obligation to disclose transactions that represent potential conflict of interest; - increase responsibility of company managers to owners in case of contracts containing conflict of interest; - introduce mechanisms for efficient application of these amendments. - Target indicator: increase investors’ protect index from present 5 to 7.33 in 2010. ### Tax payment reforms (reducing operational costs) - 2006 baseline: - Armenia ranked 143rd by degree of easiness of tax payments and 23rd among 28 ECA countries; - taxes are paid by companies 50 times; - time required: 1120 hours or 140 man/day; - cost of tax payments: per capita GDP 65,1%. - Reform objectives: - reduce tax payment frequency and time spent; - step-by-step renounce monthly payments of VAT, profit tax and income tax (prepayments) and switch to quarterly principle of tax payments; - step-by-step transition to mostly on-line tax payment principle, consistent with technical facilities. ### Foreign trade, transport and customs (targets by 2010) - Context: unfavorable geographical location (absence of direct access to sea; two out of four land borders closed for trade) and high transportation costs; Armenia lags behind other ECA countries in external trade easiness. - Reform objectives: - reduce number of documents required for export and import; - reduce time for document preparation and receipt and land transportation cost cuts from the nearest port; - target: by 2010 require three documents for export and import. - Complementary reforms: - Armenian Railway reforms; - technical modernization; - substantial increase of railway transportation share in overall cargo transport. - Comparative 2006 figures cited for context: - Armenia (2006): export required 7 documents, time 30 days, cost per standard container $1165; import required 8 documents, time 24 days, cost per standard container $1335. ### Contracts enforcement and enterprise liquidation - Contracts enforcement (2006): - Armenia was 64th in world and 19th among 28 ECA countries. - Reform directions: - legislative reforms to reduce quantity and periods of procedures connected with enforcement of contracts; - judicial reforms to increase efficiency of civil case trials and reduce periods connected with contract enforcement. - Enterprise liquidation (2006): - Armenia was 42nd in world and 5th among 28 ECA countries. - Reform directions: - legislative and judicial reforms to simplify procedures and increase rights of creditors in bankruptcy procedures to reduce overall terms and increase rehabilitation provision; - increase liquidation managers’ qualifications and responsibilities to contribute to rehabilitation provision. ### Investment environment indicators (BEEPS) - Role: BEEPS indicators capture generalized opinion of business communities about major business and investment obstacles and enterprise operating conditions across sectors. - Use: indicators provide information about legal regulations applied in practice and characterize various business and investment obstacles in the country. *Source: _cr08376 - 192. The framework of reforms, which during 2008-2021 should contribute to the* ### 208. Unlike the business environment, where in 2006 among 28 ECA countries ### _cr08376 - 208. Unlike the business environment, where in 2006 among 28 ECA countries ### Investment-climate assessment and rankings (2005) - Aggregate summary: Armenia—Overall -2.41; Per capita GDP, US dollar (2004) 1120. - By enterprise size (quality of business environment among ECA countries in 2005): - Large enterprises: 6th (Armenia: large enterprises 10.16). - Medium enterprises: 9th (Armenia: medium enterprises 5.04). - Small enterprises: 21st (Armenia: Small Enterprises -5.17). - Comparators (selected from Table 5.6, showing Aggregate, 2005 and Per capita GDP, US dollar (2004)): - Slovenia 19.02; 14810 - Slovakia 16.12; 6480 - Estonia 15.63; 7010 - Croatia 14.66; 6590 - Belarus 13.33; 2120 - Latvia 9.63; 5460 - Hungary 8.44; 8270 - Lithuania 8.33; 5740 - Bosnia and Herzegovina 3.70; 2040 - Uzbekistan 2.69; 460 - Poland 2.26; 6090 - Check Republic 1.57; 9150 - Romania 1.21; 2920 - Kazakhstan 0.92; 2260 - Moldova -0.48; 710 - Russian Federation -1.01; 3410 - Bulgaria -1.72; 2740 - FYR Macedonia -2.71; 2350 - Azerbaijan -3.25; 950 - Ukraine -5.52; 1260 - Tajikistan -7.41; 280 - Serbia -11.60; 2620 - Kyrgyzstan -13.06; 400 - Georgia -13.62; 1040 - Albania -58.6; 2080 ### Major peculiarities and explanatory factors - Steep differences in investment conditions by enterprise size: least favorable for small enterprises and most favorable for large enterprises. - Main explanatory factors for divergence between business environment and investment climate: - The problem of real enforcement of quite advanced legislation regulating the business environment, mainly conditioned by: - low efficiency of public administration and judicial system; - high degree of corruption and sponsorship; - lack of an efficient system to restrict monopolies and protect competition; - low level of tax and customs administration. - Conditions of the physical environment affecting business and investment activeness: - level of services provided by financial mediation, information and infrastructure systems; - access to the external world. ### SDP (Strategic Development Program) targets and timelines for investment climate - Government plans: - By 2010: get the overall investment climate aggregate to Lithuania’s 2005 indicator. - By 2015: surpass the Latvian indicator. - By 2021: reach the Slovenian level of 2005. - Simultaneously: substantially adapt working conditions for small, medium and large enterprises. - Benchmarks are calculated based on the rate of economic growth envisaged in SDP and forecast per capita GDP and take into account business environment quality benchmarks. ### Policy components to achieve objectives (general policy) - Creation of efficient anti-monopoly and competition protection system. - Improvement of business environment and achievement of respective benchmarks. - Constant improvement of public administration quality and achievement of respective benchmarks. - Effective implementation of anti-corruption program and provision of efficient growth of judicial system. - Further deepening of financial mediation and ensuring of progressive growth of services. - Further liberalization of trade and elimination of technical obstacles. - Improvement of infrastructure quality; consideration of infrastructures as priority directions of the state investment programs; aviation and railway reforms and liberalization. ### Infrastructure targets and indicators (selected) - Infrastructure sector context: in 2005 Armenia was 7th among 26 ECA countries by overall quality estimate; transportation costs were ranked 23rd among ECA countries. Without transportation costs Armenia would be 4th by infrastructure service quality. - Program envisages: - Decrease transportation costs (companies citing transportation costs as major development obstacle) from present 9.2% to 4% by 2021. - Step by step decrease in power and water supply disruptions and improvement in quality of services via power, water supply and telecommunication sectors reforms. - Figure 5.2 targets (infrastructure indices shown for 2005, 2010, 2015, 2021 in chart form in source). ### Enterprise financing targets and indicators (Table 5.7, selected exact values) - Financing as the major development obstacle (companies, %): 2005 Value 18.1 Place 17; 2010 Value 16 Place 13; 2015 Value 12 Place 12; 2021 Value 6 Place 4. - Financing cost as the major development obstacle (companies, %): 2005 Value 22.6 Place 14; 2010 Value 20 Place 14; 2015 Value 15 Place 10; 2021 Value 10 Place 8. - Investments financed from internal sources, %: 2005 64.2 Place 8; 2010 62.2 Place 7; 2015 60 Place 6; 2021 55 Place 4. - Investments financed from the banks, %: 2005 19.5 Place 4; 2010 22.7 Place 4; 2015 25 Place 3; 2021 28 Place 1. - Investments financed from other formal sources, %: 2005 7.1 Place 19; 2010 9.7 Place 16; 2015 10 Place 16; 2021 14 Place 11. - Investments financed from informal sources, %: 2005 9.2 Place 26; 2010 5.3 Place 22; 2015 5 Place 19; 2021 3 Place 14. - Cost of collateral (% of credit amount): 2005 177.7 Place 19; 2010 170 Place 17; 2015 150 Place 15; 2021 130 Place 4. ### Labor-market targets and indicators (Table 5.7 and narrative) - Labor legislation as the major development obstacle (companies, %): 2005 2.9 Place 7; 2010 2.9 Place 7; 2015 2.9 Place 7; 2021 2.9 Place 7. - Lack of quality labor force as the major development obstacle (companies, %): 2005 2.3 Place 2; 2010 2.3 Place 2; 2015 2.3 Place 2; 2021 2.3 Place 2. - Companies that train labor force (companies, %): 2005 64.8 Place 21; 2010 70 Place 19; 2015 85 Place 12; 2021 90 Place 8. - Trained qualified labor force, %: 2005 16.5 Place 19; 2010 20 Place 16; 2015 30 Place 8; 2021 45 Place 4. - Qualified labor force, % of overall labor force: 2005 43.2 Place 17; 2010 46 Place 11; 2015 48 Place 9; 2021 48 Place 9. - Low quality labor force, % of general labor force: 2005 9.1 Place 10; 2010 8 Place 6; 2015 10 Place 15; 2021 10 Place 15. - Narrative context: From the employers' standpoint the labor market situation is relatively good given employment problems (the 7th among the 26 ECA countries). Major issue is low investment in enterprise training: Armenia was 21st by the number of training organizations and 19th by the share indicator of trained labor force. Labor-market policy will promote investments to increase labor force quality and liberalize labor regulations. ### Sector-specific goals and expectations - Enterprise financing: Priority direction is deepening financial mediation and amending legislation to simplify the collateral system. Expected result: during 2015-2021 create a modern and efficient system of financial mediation and reach in 2021 the present level of Croatia (the first in 2005). - Infrastructure: Reduce transportation-cost burden and service disruptions; reforms in power, water supply and telecommunications to improve service quality. *Source: BEEPS 2005, The World Bank.* ### 217. In the area characterizing the public administration quality and spread of ### _cr08376 - 217. In the area characterizing the public administration quality and spread of ### Public administration quality and corruption: findings and targets - Situation described as "one of the major factors threatening the further sustainable development of the country." - High incidence of unofficial payments by companies: - Unofficial payments to various public entities: rank 20th among the 26 ECA countries (as of 2005). - Companies making unofficial payments to tax inspectors: 39.9% (2005), rank 25th among the 26 ECA countries. - Targeted improvements are to be achieved through consistent implementation of public administration quality and efficiency policy (a priority of SDP) and the Anti-Corruption Strategy adopted in 2003. - Selected target indicator trajectories (Table 5.8, 2005–2021): - Corruption as the major development obstacle (companies, %): 19.8 (2005) → 17 (place) → 15 (2010) → 11 (place) → 12 (2015) → 9 (place) → 8 (2021) → 5 (place). - Unofficial payments (% of realization volumes): 1.2 (2005, place 20) → 1 (2010, place 15) → 1 (2015, place 15) → 0.7 (2021, place 8). - Companies making unofficial payments to tax inspectors, %: 39.9 (2005, place 25) → 35 (2010, place 23) → 25 (2015, place 18) → 15 (2021, place 7). - Companies making unofficial payments to get licenses, %: 15.1 (2005, place 17) → 12 (2010, place 13) → 8 (2015, place 8) → 6 (2021, place 5). - Companies making unofficial payments to get import licenses, %: 23 (2005, place 24) → 20 (2010, place 23) → 15 (2015, place 20) → 10 (2021, place 15). - Time spent by company management for public regulations (days per year): 4.2 (2005, place 11) → 4 (2010, place 8) → 3.5 (2015, place 6) → 3 (2021, place 3). - Time spent to communicate with tax authorities (days per year): 2.6 (2005, place 13) → 2.4 (2010, place 12) → 2.2 (2015, place 10) → 2 (2021, place 10). ### Judiciary system and crime: status, problems, and targets - Overall situation "relatively good" in judicial system: rank 10th among 26 ECA countries (as of 2005). - Two main problems identified: - Low use of judiciary for dispute settlement: Companies that settle issues through the judicial system, %: 7.6 (2005, place 26) → 15 (2010, place 24) → 20 (2015, place 24) → 30 (2021, place 19). Note: in 2005 Croatia was first with 61.8%. - Low level of unpaid mutual obligations is a major reason for weak use of judiciary: Companies that have unpaid mutual obligations with suppliers/buyers/consumers, %: 18.8 (2005, place 25) → 25 (2010, place 24) → 30 (2015, place 24) → 35 (2021, place 20). Footnote: In 2005 only 18.8% of companies had unpaid obligations (small companies - 19.5%; medium - 20%; large - 8.3%); Croatia’s indicator is 72% and Lithuanian - 88.3%. - Other judiciary-related indicators (Table 5.8): - Judiciary system and dispute settlement as the major development obstacle (companies, %): 12 (2005, place 12) → 11 (2010, place 11) → 10 (2015, place 11) → 9 (2021, place 11). - Companies that trust the judiciary system in settling the contracts, %: 52.5 (2005, place 11) → 56.5 (2010, place 10) → 60 (2015, place 10) → 65 (2021, place 5). - Security protection cost (% of realization volumes): 0.7 (2005, place 18) → 0.6 (2010, place 13) → 0.5 (2015, place 11) → 0.4 (2021, place 9). - Losses as a result of crimes (% of realization volumes): 0 (2005, place 1) → 0 (2010, place 1) → 0 (2015, place 1) → 0 (2021, place 1). - Policy priorities and measures: - Increase judiciary participation in economic life via general judiciary reforms and improvements in investment climate quality. - Aim to grow trust in the judiciary and mutual trust within business to reduce non-official contracts. ### Innovation, technology, and ICT diffusion: findings and targets - Problems: weak spread of modern Internet devices (e-mail and web pages) limiting efficient communication with consumers/suppliers; constrained by competition issues in telecommunications leading to high service cost, low connection speed, and relatively low accessibility. - Policy focus: encourage companies introducing innovations; eliminate obstacles to efficient competition in telecommunications; reduce shadow economy; introduce structures of knowledge-based economy. - Target indicators (Table 5.9, 2005–2021): - Companies making innovations, %: 71.8 (2005, place 11) → 80 (2010, place 3) → 80 (2015, place 3) → 80 (2021, place 3). - Research and development costs expenses (% of realization volumes): 0.3 (2005, place 6) → 0.4 (2010, place 4) → 0.45 (2015, place 4) → 0.5 (2021, place 3). - Companies using e-mail in communicating with suppliers/buyers/consumers, %: 45.6 (2005, place 22) → 70 (2010, place 11) → 75 (2015, place 8) → 85 (2021, place 7). - Companies using web pages in communicating with suppliers/vendors/consumers, %: 26.2 (2005, place 24) → 55 (2010, place 17) → 65 (2015, place 15) → 75 (2021, place 8). ### External trade and customs administration: problems and targets - External commerce situation in 2005 described as "very unsatisfactory" (next to last among ECA countries in 2005). - Main reasons: low level of customs administration and high level of sponsorship (corruption) in customs. - Consequences and priorities: - Drastic improvement of customs administration is a public economic policy priority. - Policies aimed at further liberalization of foreign commerce and reduction of transportation costs. - Selected target indicators (Table 5.9, 2005–2021): - External trade regulation and customs regulation as the major development obstacle (companies, %): 28.3 (2005, place 25) → 10 (2010, place 9) → 9 (2015, place 9) → 6 (2021, place 6). - Time needed in customs service for customs registration of imported lots, days: 4 (2005, place 17) → 3 (2010, place 11) → 2.8 (2015, place 9) → 2.5 (2021, place 7). - Time needed in customs service for customs registration of exported lots, days: 4.7 (2005, place 22) → 3 (2010, place 15) → 2.8 (2015, place 13) → 2.5 (2021, place 11). - Companies making unofficial payments for getting a permit for import, %: 23 (2005, place 24) → 10.2 (2010, place 16) → 9.9 (2015, place 15) → 8.2 (2021, place 10). - Footnote on 2005 perceptions: 36.2% of small enterprises, 25% of medium enterprises and 5.3% of large enterprises assessed the customs administration as the major obstacle to development and investment. ### Investments, FDI, and accumulation targets - SDP investment objectives are aligned to ensure forecasted GDP volumes; high accumulation volumes required during SDP implementation. - Aggregate investment requirements: accumulation to vary within 28-37% of GDP depending on economic growth rate; public investments projected to remain at 4.6-5% of GDP. - Substantial FDI increase envisaged: - "Accumulated volume of foreign investments during 2007-2021 is planned to increase by around 13 times." - Active involvement of transnational companies targeted as an instrument for technological modernization. - Table 5.10 key figures (investments in prices of respective years): - Total investments, billion dram: 683 (2005) → 954 (2006) → 1762 (2010) → 2653 (2015) → 3772 (2021). - Of which – public: 101 (2005) → 116 (2006) → 234 (2010) → 361 (2015) → 603 (2021). - Private: 583 (2005) → 838 (2006) → 1529 (2010) → 2292 (2015) → 3169 (2021). - Foreign direct investments, million UD dollar: 287.0 (2005) → 467.4 (2006) → 958,6 (2010) → 1468 (2015) → 2132 (2021). - Accumulated foreign investments, million US dollar: 1298.3 (2005) → 1774.4 (2006) → 5050 (2010) → 11362 (2015) → 22458 (2021). - Investments as % of GDP (Table 5.10): - Total investments: 30,5 (2005) → 35.4 (2006) → 37.5 (2010) → 33,9 (2015) → 28.8 (2021). - Public: 4,5 (2005) → 4.4 (2006) → 5.0 (2010) → 4.6 (2015) → 4,6 (2021). - Private: 26.0 (2005) → 31,0 (2006) → 32,5 (2010) → 29,3 (2015) → 24.2 (2021). - Foreign direct investments: 4,8 (2005) → 7.0 (2006) → 6,2 (2010) → 5,7 (2015) → 5,0 (2021). - Local investments: 21,2 (2005) → 23,0 (2006) → 26.3 (2010) → 23.6 (2015) → 19,2 (2021). - Accumulated foreign investments (% of GDP): 26.5 (2005) → 27.8 (2006) → 32,8 (2010) → 44,3 (2015) → 52,3 (2021). ### Structural economic transformation and sectoral projections - Historical context and concerns: - 2003-2007 growth rate almost twice that envisaged in PRSP, but structural shifts toward demand-driven growth dominated by construction and services. - Industrial contribution declined: annual average industrial growth rate 5.6% (2003-2007), with 2003-2005 averaging 8.3% and 2006-2007 averaging 1.4%. - Labor value appreciation and currency appreciation increased labor costs (average monthly salary 286 US dollars in 2007 vs. 53.6 US dollars in 2001). - Export/GDP ratio in 2007: 12.5% (about half of 2003 level); trade deficit rose from 594 mln. US dollars in 2003 to 2124 mln. US dollars in 2007. - Dependence on external financing increased; in first six months of 2008 no increase in monetary reserves was registered. - SDP transition timeline: - 2009-2011: continued demand-driven growth with construction and services main drivers. - Beginning 2012: switch to production-investment and knowledge-based economy requiring deep structural transformations and policy development. - Sectoral structure projections (Table 5.11, % to GDP): - Industry: 19.3 (2003) → 15.0 (2007) → 13.3 (2010) → 14.1 (2012) → 16.4 (2015) → 18.5 (2018) → 19.7 (2021). - Agriculture: 21.5 → 18.1 → 14.8 → 13.8 → 12.5 → 11.5 → 10.5. - Construction: 15.7 → 24.7 → 28.1 → 26.7 → 23.0 → 19.3 → 16.4. - Services: 34.4 → 32.2 → 32.0 → 33.6 → 36.8 → 40.4 → 43.9. - Net indirect taxes: 9.1 (2003) → 10.0 (2007) → 11.7 (2010) → 11.8 (2012) → 11.3 (2015) → 10.5 (2018) → 9.5 (2021). - Export: 24.8 (2003) → 13.0 (2007) → 10.6 (2010) → 12.6 (2012) → 16.9 (2015) → 21.8 (2018) → 25.8 (2021). - Import: -40.3 (2003) → -30.4 (2007) → -33.4 (2010) → -35.4 (2012) → -37.9 (2015) → -40.5 (2018) → -42.2 (2021). - External trade (turnover/GDP ratio): 65.1 (2003) → 43.4 (2007) → 44.0 (2010) → 48.0 (2012) → 54.8 (2015) → 62.2 (2018) → 68.0 (2021). - Policy measures to support transformation: - Redirect investments to industrial and service sectors and expand exports. - Improve business and investment environment, enhance competition, deepen financial intermediation, ensure SME development, and build institutional capacities. - Take strategic measures to develop industrial and service sectors and advance export activities. *Source: _cr08376 - 217. In the area characterizing the public administration quality and spread of* ### 232. So far Armenia is lacking complex economic policies. However, realizing the ### _cr08376 - 232. So far Armenia is lacking complex economic policies. However, realizing the ### Structural reforms and long-term industrial program - Government will elaborate and launch relevant complex long-term programs in 2008-2009. - The long-term industrial program will be aimed at building a competitive and modern industrial complex and will contain the following elements: - relevant mechanisms required to export contemporary technological complexes; - relevant conditions required to promote the entry of new companies, especially in the sphere of high technology, including creation of necessary infrastructure financed by public sector or in result of public-private cooperation; - development of training and retraining institutions required to prepare relevant high-quality professionals (particularly in the sphere of knowledge engineering); - promotion of systems required to ensure proper service and upgrading of high technologies; - mechanism required to reveal production complexes in Armenia having potential for development, promoting the process of their upgrading and strengthening as well as the process of creation on their basis integrated regional clusters (including relevant research organizations); ensuring financial support of both public and private sectors; - involvement of Diaspora’s investment and management capacities in the process of creation and development of modern production complexes (including establishment of various pan-Armenian informational portals and their further improvement with the purpose of involving the Diaspora in the investment projects of Armenia ); - mechanisms and means required to ensure creation of high technology systems in the long-term perspective. ### Service sector, information technologies, and “Electronic Armenia” - Mid-term perspective: beginning from 2012 the main contribution to economic growth will be ensured by service sector. - It is expected that in 2021 the share of this sector in GDP will reach 44% in against 32.2% in 2007. - Growth mostly in 2012-2021 ensured by progressive development of information technologies, financial mediation, services in the spheres of education, science and health as well as local and foreign tourism. - Development of information technologies is necessary for creation of a knowledge-based economy and the “Electronic Armenia” system (e-Governance, e-Entrepreneurship, e-Education and other e-systems). Government focus areas: - computerization of the population; - large-scale application of the Internet; - quality, accessibility, and availability of high technologies. - Table 5.12. Key benchmarks for the development of information technologies (years: 2006 2010 2015 2018 2021) - Share of home computers, %: 10 25 40 50 75 - Level of computerization of educational system, %: 10 30 50 90 100 - Use of the Internet by households, %: 5 25 40 50 75 - The level of computerization and use of the Internet in public administration system, %: 10 50 90 95 100 - Existence of functioning e-Governance websites in public and local administrative bodies, %: 50 100 100 100 100 ### Tourism development - Main objective: increase tourism input in national revenues, balanced territorial development, improvement of living conditions, and poverty reduction by increasing tourists’ visits, profits, and job creation. - Regional development: development of tourism in marzes to mitigate disparities between Yerevan and other regions. Reconstruction of the airports of Gyumri and Vanadzor highlighted as important. - Types of tourism to be developed: - Spa tourism - Mountain-ski tourism - Diamond cutting and jeweler’s art centre - Tours around the vineyards, cognac and wine factories presenting the whole circle of the production - Table 5.13 Basic outcome indicators of the Tourism Sector Development - Indicators (years: 2006 2010 2020) - Number of international tourists: 5 10.2 600.0 1,500 - Share of people employed in the sector of tourism among the total number of employed %: 1.7 1.8 1.9 - Expenditures made by the tourists, mln dram: 440 480 1,350 - Number of inside tourists’ visits (per thousand people): 369 500 1,000 ### Export promotion - Long-term export promotion program to be developed and launched beginning from 2009; components include: - creation of relevant institutions for export financing (using credit insurance and loan guarantee tools); - possible mitigation or elimination of trade restrictions; - commercial activities based on free trade agreements (particularly with the EU and EU member states); - assistance to exporters in the certification of their production in other countries, particularly in receiving ICO certificates; - a set of measures aimed to enlarge the list of exported goods and their geographical coverage, as well as the share of high technologies in total export volumes; - measures aimed to reduce transportation costs, including investment of public or joint public-private resources. ### Monetary policy and deepening of financial mediation - Recent trends: accelerating economic growth, move from restoration growth to investment-based growth, dram stabilization, and significant increase in monetization (progressive growth of money base and monetary aggregates, rise of their ratio to GDP, gradual reduction of shading/dollarization). - Internal policy factors: tight fiscal and budgetary, monetary and credit policy aimed to restrain budget deficit and price increase within 1.5 – 3% (of GDP) and 3-5%, respectively. - External factors: substantially increased foreign currency inflows (through informal remittances) and continual increase in imported fuel, food and metal prices mainly determined by growing global demand and expansionary monetary policy adopted by the USA in recent years. - Table 5.14. Dynamics of main indicators characterizing the monetary policy in Armenia in 2001-2007 - Indicators (years: 2001 2002 2003 2004 2005 2006 2007) - Gross foreign reserves: 331.2 432.3 505.8 506 676.4 1072 1656.9 - %, to GDP: 15.6 18.2 18.0 15.4 13.8 16.7 18.1 - Import cover, month: 4.5 5.3 4.7 4.9 4.5 5.9 6.1 - Money base, bln. drams: 80.4 111.3 118.6 132.1 200.6 283.0 427.1 - %, to GDP: 6.8 8.2 7.3 6.9 8.9 10.6 13.6 - Money aggregate, bln. drams: 158.2 203.1 233.8 285.9 365.6 485.7 691.3 - %, to GDP: 13.4 14.9 14.4 15.0 16.3 18.2 22.0 - Observations: - Main growth of monetary policy indicators took place starting from 2004 and coincided with dram appreciation, expansionary US monetary policy, informal remittances, and abrupt increase in commodity prices. - In 2005-2007 gross foreign reserves, money base and money aggregate increased (annual average) by 44.4, 47.9 and 34.2 percent, respectively, with 18.1% growth of nominal GDP; in 2002-2004 growth rates of these indicators equaled GDP growth rate. - Appreciation of the dram increased dram-denominated transactions, raised monetization, and reduced shading/dollarization. - Appreciation effects: cost of living in foreign currency increased almost twice in 2005-2007; nominal wage (in US dollar terms) in 2001-2007 rose 5.13 times (or 3.16 times as compared with domestic currency terms). Example: in 2001 average nominal salary was 24.5 thousand dram or $44.1 per month; in 2007 it was 77.5 thousand drams or $226.5. If the exchange rate remained the same it would comprise in 2007 $139.6 or would be less by 62.3 percent. - Trade balance: in 2007 the trade balance deficit comprised 23.2% of GDP against 17.6% in 2004. - Exports: although in 2007 in terms of domestic currency export volumes remained at the level of 2003, in terms of US dollars they rose by 68 percent. - Policy stance: Government and CBA prioritize tight monetary and floating-rate policy to ensure stable and low prices, increase dramization, and reduce dollarization and shadow economy, accepting negative appreciation effects as temporary. - International comparison and monetization: - Despite rapid monetization growth in recent years, Armenia falls behind the majority of countries by money aggregates/GDP ratios; among CIS countries Armenia is one of the last, ahead only of Georgia and Azerbaijan. - SDP will prioritize increasing monetization alongside maintaining low inflation. - Next steps to improve monetization: - Measures to limit cash turnover and abrupt increases of monetary circulation through non-cash banking and electronic payment systems. ### Monetary policy assumptions and projections (SDP) - Major assumptions: - During the entire period of program implementation, the target of the rise in prices for 12 months should be 3 (+/-1.5) percent except for 2009-2010 when the target for the rise in prices should make 4 percent (+/- 1.5) percent. - Growth rate of informal private remittances expected to slow due to expected economic growth and subsequent improvement of living conditions, and expected decrease of global economic growth rate (including Russian Federation). - Beginning from 2009 a substantially toughening monetary policy of the USA is envisaged to limit foreign exchange supply thus counteracting the rise in fuel and other natural products’ prices. - Gradual improvement of the country’s negative trade balance/GDP ratio is envisaged owing to progressive growth of imports, which will limit domestic demand for foreign currency required for import. - Table 5.15. Gross foreign reserves and monetary aggregates forecasts for 2010-2021 (in current prices) - Indicators (years: 2007 2010 2012 2015 2018 2021) - Gross foreign reserves, mln US dollars: 1659.2 2058.8 2703.8 4303.3 6344.6 8348.5 - Percent to GDP: 18.0 14.6 15.8 19.1 21.7 22.3 - Import cover, month: 6.1 4.6 4.9 5.6 6.2 6.1 - Monetary aggregates, bln. drams: 691.3 1223.3 1650.9 2602.7 4226.1 7209.5 - Percent to GDP: 22.0 26.5 29.4 35.3 44.1 58.8 - Projection narrative: - Gross foreign reserves in nominal terms expected to grow by average annual 10.9 percent in 2008-2021 with estimated average annual 11.6 percent of GDP growth (expressed in current dollars). - In 2008-2012 gross foreign reserves will grow at a slower pace than GDP (9.4 percent and 15.4 percent, respectively), while in 2013-2021 they will demonstrate a faster growth rate (11.8 percent and 9.3 percent, respectively). - Historical context: in 2001-2007 the annual average growth of gross foreign reserves comprised 30.8 percent, with average annual 27.7 percent of GDP nominal growth (expressed in dollars). - Money aggregates expected to grow considerably faster than GDP: during 2008-2021 money aggregates will demonstrate an average annual growth of 18.8 percent, with the annual average growth of GDP comprising 10.2 percentage points. - In 2008-2012 money aggregate annual growth expected 19 percent on average; nominal GDP on average expected to grow by 12.3 percentage points per annum. - In 2013-2021 money aggregate annual growth expected 17.8 percentage points, almost two times higher than nominal GDP. - Drivers: progressive development of financial sector (particularly banking), government and CBA policies to deepen financial mediation, widen national currency turnout and electronic payments, and restrain circulation of domestic and foreign cash. *Source: _cr08376 - 232. So far Armenia is lacking complex economic policies. However, realizing the (extracted content)* ### 254. The financial sector in Armenia started to develop immediately after declaring ### The financial sector in Armenia ### Overview and structural features - The financial sector developed immediately after declaring independence and is dominated by the banking system. - In 2007 the specific weight of the banking system in the structure of entire sector comprised 93.7% against 96.6% in 2001. - Lending agencies started functioning in 2003 and during 4 years increased their assets by about 19 times. - The insurance sector failed to develop in 2001-2007. - Corporate equity markets remain in embryonic state; Armenia is missing investment banks and funds, as well as private pension funds. - The Sustainable Development Program (SDP) prioritizes substantially increasing the level of loan and credit accessibility through deepening financial mediation and raising financial sector relative rates and variables. ### Financial system assets (Table 5.16) — key statistics (bln drams, current prices; % to GDP) - Banking system assets: - 2001: 188.7; % to GDP 16.1 - 2002: 228.6; % to GDP 16.8 - 2003: 282.1; % to GDP 17.4 - 2004: 363.6; % to GDP 19.1 - 2005: 440.7; % to GDP 19.6 - 2006: 524.5; % to GDP 19.7 - 2007: 764.4; % to GDP 24.3 - Financial organizations assets: - 2004: 2.3; % to GDP 0.1 - 2005: 7.9; % to GDP 0.4 - 2006: 20.6; % to GDP 0.8 - 2007: 43.4; % to GDP 1.4 - Insurance sector assets: - 2001: 3.7; % to GDP 0.32 - 2002: 4.0; % to GDP 0.29 - 2003: 4.2; % to GDP 0.26 - 2004: 6.4; % to GDP 0.33 - 2005: 9.9; % to GDP 0.44 - 2006: 8.5; % to GDP 0.32 - 2007: 8.4; % to GDP 0.27 - Equity market capitalization: - 2001: 2.8; % to GDP 0.2 - 2002: 5.9; % to GDP 0.4 - 2003: 15.9; % to GDP 1.0 - 2005: 13.9; % to GDP 0.6 - Total assets: - 2001: 195.3; % to GDP 16.6 - 2002: 238.4; % to GDP 17.5 - 2003: 302.3; % to GDP 18.6 - 2004: 372.2; % to GDP 19.5 - 2005: 472.4; % to GDP 21.1 - 2006: 553.6; % to GDP 20.8 - 2007: 816.1; % to GDP 26.0 ### Loan investments and credit growth (Table 5.17 — bln drams) - Total loan investments: - 2001: 86.6 - 2002: 90.5 - 2003: 110.0 - 2004: 159.3 - 2005: 215.3 - 2006: 276.9 - 2007: 464.9 - Including banks: - 2001: 86.6 - 2002: 90.5 - 2003: 107.6 - 2004: 155.7 - 2005: 208.1 - 2006: 259.3 - 2007: 426.2 - Financial organizations: - 2001: 0.0 - 2002: 0.0 - 2003: 2.4 - 2004: 3.6 - 2005: 7.2 - 2006: 17.6 - 2007: 38.7 - By currency: - In drams: - 2001: 14.7 - 2002: 19.7 - 2003: 31.3 - 2004: 42.7 - 2005: 77.7 - 2006: 132.0 - 2007: 281.6 - In foreign currency: - 2001: 71.9 - 2002: 70.8 - 2003: 78.7 - 2004: 116.6 - 2005: 137.6 - 2006: 145.0 - 2007: 183.2 - By sector: - To legal entities: - 2001: 68.2 - 2002: 64.9 - 2003: 74.0 - 2004: 102.3 - 2005: 138.8 - 2006: 156.4 - 2007: 216.9 - To the population: - 2001: 18.4 - 2002: 25.7 - 2003: 36.0 - 2004: 57.0 - 2005: 76.5 - 2006: 120.5 - 2007: 248.0 - Of which consumer credits and mortgage credits: - Consumer credits (selected years): 12.8 (2002); 23.4 (2003); 39.3 (2004); 52.4 (2005); 71.4 (2006); 123.6 (2007) - Mortgage credits (selected years): 11.8; 25.4; 53.4 - Observations and comparisons (para 257): - Average annual growth of bank loans volumes (2001-2007): 32.3% - Nominal GDP average growth (2001-2007): 17.8% per annum - 60.7% of accumulative growth of loan volumes was secured at the expense of loans provided for the population. - Specific weight of loans to population in total volumes: - 2001: 21.3% - 2007: 53.3% - Average annual growth of loans in Armenian drams: 63.3% - Average annual growth of loans in foreign currency: 16.9% - Specific weight of loans in national currency of all loans: - 2001: 17% - 2007: 60.6% ### Domestic loan/GDP ratio: actual, rated and deviations (Table 5.18) - Domestic loan/GDP ratio, % (actual): - 2001: 7.31 - 2002: 5.59 - 2003: 6.27 - 2004: 7.33 - 2005: 8.40 - 2006: 9.13 - 2007: 13.48 - Domestic loan/GDP ratio, % (rated for ECA countries according to 1st equation): - 2001: 14.13 - 2002: 14.48 - 2003: 15.00 - 2004: 15.79 - 2005: 16.88 - 2006: 17.87 - 2007: 19.28 - Domestic loan/GDP ratio, % (rated for all countries according to 2nd equation): - 2001: 16.37 - 2002: 16.88 - 2003: 17.65 - 2004: 18.83 - 2005: 20.50 - 2006: 22.02 - 2007: 24.25 - Deviation of actual from rated (1st equation): - 2001: -6.82 - 2002: -8.88 - 2003: -8.73 - 2004: -8.46 - 2005: -8.48 - 2006: -8.73 - 2007: -5.80 - Deviation of actual from rated (2nd equation): - 2001: -9.05 - 2002: -11.28 - 2003: -11.38 - 2004: -11.51 - 2005: -12.09 - 2006: -12.88 - 2007: -10.77 - Interpretation (para 258): - In 2007 banking system volumes were by about 40% less than those rated for ECA countries and by almost 80% less than those rated for all countries (in case the domestic loan/GDP ratio works). ### SDP targets and benchmarks for domestic loan/GDP (Tables 5.19) - SDP envisages domestic loan/GDP ratio targets: - 2012: 25.3% - 2021: 36% - Table 5.19 selected figures: - Domestic loan, bln drams, in current prices (selected): - 2007: 423.3 - 2010: 994 - 2012: 1485 - 2015: 2561 - 2018: 4129 - 2021: 6631 - Domestic loan /GDP, %: - 2007: 13.5 - 2010: 21.2 - 2012: 25.3 - 2015: 32.7 - 2018: 40.4 - 2021: 50.6 - Domestic loan annual average growth rate, %: - 2007 (memorandum basis): 30.4 - 2010: 32.9 - 2012: 22.2 - 2015: 19.9 - 2018: 17.3 - 2021: 17.1 - Memorandum: Nominal GDP annual average growth rate, %: - 2007: 17.8 - 2010: 14.3 - 2012: 11.7 - 2015: 10.1 - 2018: 9.3 - 2021: 8.6 - Required dynamics (para 260): - To achieve benchmarks, domestic loan/GDP ratio should be kept at the level of 2001-2007; or domestic loan increase rate should be about 1.7-2.0% higher than GDP nominal growth rate except for 2010-2012, when they should exceed GDP growth rate approximately 2.3-2.4 times. ### Policy measures to increase loan access (para 261) - Increasing competitiveness and encouraging reputable foreign banks to enter the Armenian market (the only first-rate international bank currently functioning in Armenia is the HSBC Bank Armenia). - Increasing efficiency of bank operations and adopting a policy aimed to reduce expenses through introduction of new technology and banking instruments; integration of software programs and systems including substantial extension of mortgageable property. - Slightly deregulating the system and mitigating unduly strict standards to allow more effective use of bank assets. - Consistently integrating contemporary principles of corporate governance; ensuring openness and transparency of banking system; promoting real shareholding. - Creating institutional basis for protection of borrowers (financial Ombudsman – following the United Kingdom example), taking into account progressive growth of consumer credit. - Creating devices required to form, put in use and safeguard mortgage bonds to increase household mortgage lending, ensure sustainable improvement and reduce risks. ### Interest rate spread and bank capital/assets (Tables 5.20 and 5.21) — actual, rated, benchmarks - Table 5.20 actual and rated (2001-2007): - Bank spread (actual), %: - 2001: 13.83 - 2002: 18.18 - 2003: 14.85 - 2004: 14.60 - 2005: 12.17 - 2006: 12.54 - 2007: 10.77 - Bank spread (rated), %: - 2001: 11.03 - 2002: 11.99 - 2003: 11.57 - 2004: 11.02 - 2005: 10.56 - 2006: 10.29 - 2007: 9.11 - Deviation of actual spread from rated, %: - 2001: 2.80 - 2002: 6.19 - 2003: 3.27 - 2004: 3.57 - 2005: 1.61 - 2006: 2.25 - 2007: 1.66 - Bank capital/bank assets ratio (actual), %: - 2001: 21.65 - 2002: 18.41 - 2003: 17.76 - 2004: 17.78 - 2005: 21.50 - 2006: 22.91 - 2007: 22.48 - Bank capital/bank assets ratio (rated), %: - 2001: 13.75 - 2002: 14.67 - 2003: 14.27 - 2004: 13.74 - 2005: 13.29 - 2006: 13.02 - 2007: 11.85 - Deviation of actual ratio from rated, %: - 2001: 7.90 - 2002: 3.74 - 2003: 3.49 - 2004: 4.04 - 2005: 8.21 - 2006: 9.89 - 2007: 10.63 - Interpretation (para 263): - Bank spread and especially capital-to-assets ratio in Armenia are substantially higher than worldwide trends, indicating weak competition, high credit risks, strict normative standards and insufficient use of existing resources for domestic lending. - SDP benchmarks for 2007-2021 (Table 5.21): - Domestic loan /GDP, % (selected): - 2007: 13.5 - 2010: 21.2 - 2012: 25.3 - 2015: 32.7 - 2018: 40.4 - 2021: 50.6 - Interest rate spread, %: - 2007: 10.8 - 2010: 8.4 - 2012: 7.8 - 2015: 7.8 - 2018: 7.1 - 2021: 6.7 - Bank capital/bank assets ratio, %: - 2007: 22.5 - 2010: 11.1 - 2012: 10.5 - 2015: 10.1 - 2018: 9.7 - 2021: 9.3 - SDP expectations (para 262 and 265): - Reduce interest rate spread to 6.7 percentage points by 2021 against 10.7 in 2007. - Sharp decline (more than twice) in bank capital-to-bank assets ratio in 2008-2010 is expected from slight deregulation, mitigation of unduly strict standards, and increased competitiveness. ### Equity market development (paras 266–269 and Table 5.22) - Armenia ranks among world countries lowest in terms of equity market capitalisation and lags behind ECA countries. - Despite legislative and institutional basis (Armenian stock exchange, Central depository, regulatory role of Central Bank of Armenia), the equity market is constrained by absence of both demand and supply. - Supply-side constraints: - Prevalence of single-owned or group-owned companies unwilling to involve minor shareholders. - Strict requirements concerning disclosure of corporate information. - Management and communication systems of existing open joint-stock companies do not meet contemporary corporate governance standards (except banking system and some companies with foreign stakeholders). - Demand-side constraints: - Lack of trustful information and inability of minor investors to influence company management decisions. - Minor investors prefer directing free financial resources towards real estate markets. - SDP benchmarks for equity market volumes and capitalization (Table 5.22): - Domestic loan, bln drams (selected): - 2010: 994 - 2012: 1485 - 2015: 2561 - 2018: 4129 - 2021: 6631 - Equity market capitalisation, bln drams: - 2010: 237.3 - 2012: 419.1 - 2015: 725.7 - 2018: 1256.8 - 2021: 2176.5 - Equity market capitalisation/GDP ratio, %: - 2010: 5.0 - 2012: 7.1 - 2015: 9.3 - 2018: 12.3 - 2021: 16.6 - Equity market capitalisation annual average growth rates, %: - 2012: 32.9 - 2015: 20.1 - 2018: 20.1 - 2021: 20.1 - Memorandum: Nominal GDP annual average growth rate, %: - 2010: 14.3 - 2012: 11.7 - 2015: 10.1 - 2018: 9.3 - 2021: 8.6 *Source: IMF staff analysis contained in the provided chapter excerpt.* ### 270. Tthe strategy aimed at creation of actual equity market will be comprised of the ### _cr08376 - 270. Tthe strategy aimed at creation of actual equity market will be comprised of the ### Equity market creation strategy - Strategy components: - applying principles of integration and technical promotion; - promoting shares’ circulation in the stock; - implementing present-day standards of corporate governance. - Integration objective: - enable evaluation of Armenian companies to sell corporate shares in international stock markets and make shares circulating worldwide available to the local population. - Technical solutions: - modernization of exchange trade systems to link the Armenian stock market to OMX and other markets; - realization of technical linkage by OMX company. - Footnote detail: - In January 2008 the Armenian stock market and Central Depository were sold to Swedish OMX, which owns an extensive stock network including transition countries, and which in 2007 was bought by NASDAQ – one of the largest American stock exchanges. ### IPO and share circulation promotion (policy measures) - Regulatory body support for IPO process should include: - selection of companies; - execution of IPO file; - public disclosure; - introduction of contemporary standards of corporate governance; - considerable assistance to ensure initial public offering (IPO) process related to domestic companies’ shares. ### Insurance market findings and projections - Status in 2007: - total amount of insurance premiums comprised merely 4.8 bln drams, or 0.15% of GDP. - Near-term projection and policy changes: - obligatory third party vehicle insurance against harm envisaged for 2009 is expected to substantially develop the insurance market by 2010; - predicted overall amount in 2010 will make 30 bln drams, or 0,65% of GDP. - Further expected developments: - beginning from 2010 creation of a contemporary voluntary medical insurance will be initiated, with Government discussion of possible transformation into an obligatory system for government officials and some groups of budgetary employees (in particular, teachers). - Medium- and long-term projections: - By 2015 the total amount of insurance premiums will make at least 1.25% to GDP; - by 2021 it will comprise 2.5 % as compared with GDP. - Footnote on calculation: - Calculated on the basis of collected insurance premiums. ### Tax policy and administration (findings and priorities) - Context: - Economic developments and significant changes in tax administration after PRSP approval created a new situation; two-digit economic growth recorded in recent years but tax base has huge unused potential. - Goals of recent tax law amendments: - simplify and clarify taxation; - restrict and minimize tax evasion; - create more favorable conditions for investments and economic activity. - Tax Code development: - development of Tax Code initiated in 2007 to group tax laws; - in 2008 the development of special part of Tax Code will be completed; - mid-term application based on tax policy priorities listed below. - Mid-term tax policy priorities: - (i) Establish a simple tax system with a wider tax base to equally distribute taxation burden without raising tax rates, eliminating existing tax privileges, and excluding new tax privileges. - (ii) Transform alternative taxation procedures defined for particular activities into a unified taxation method to switch to a taxation system depending on economic output. - (iii) Improve taxation mechanisms by minimizing tax evasion and simplifying and clarifying legislative provisions. - Instrument to reach desired taxes-to-GDP level: - improvement of tax administration aimed at reduction and prevention of shadow activities; - implementation of activities envisaged by the RA Strategy for Tax Administration 2008-20011. - introduce principle of voluntary exercise of tax obligations and implement new tax control policies with defined criteria timeframes. - toughening of responsibility for disregard of tax duties to increase discipline among taxpayers. - Self-assessment and administrative reforms: - Introduction of effective self-assessment system requires a long-term comprehensive program including simplification and improvement of taxation procedures (including accounting); unification of taxpayers’ registration in various state structures; improvement of tax services and appeals system functioning. - Risk-based audit system should be introduced to strengthen tax oversight and increase efficiency; requires collection and analysis of data on taxpayers for risk-based selection; will reduce expenses for law-abiding taxpayers and focus control on issues causing tax evasion. - Customs administration improvements: - streamline and simplify customs legislation and procedures; - increase efficiency of control in customs administration system; - introduce enhanced mechanisms of customs declarations; - improve accountability and oversight of customs regulation and administration. - Technical and information systems: - improve technical conditions of tax and customs administration and mechanisms for informational exchange between the two systems to improve quality and efficiency of control over economic entities. ### Institutional modernization (EU alignment and timelines) - Rationale: - Institutional modernization in line with EU standards (experience of EU-10) is the basis for “second generation” reforms. - Three learning components from EU-10 experience: - (i) adaptation of RA legislation to corresponding EU legislation; - (ii) institutional adaptation: formation or reformation of governmental, public and other institutions in compliance with EU standards and requirements necessary for effective adaptation to corresponding EU legislation; - (iii) strengthening institutional capacities to bring capacities of newly formed or reformed institutions to those of EU institutions. - Implementation framework: - institutional modernization is a government priority and should be realized within the European Neighborhood Policy (ENP) framework adopted by Armenia in 2003. - Adaptation and timeline targets: - 30% of legislation will be adapted in 2010; - 60% will be adapted in 2015; - the process of adaptation will be accomplished in 2018. - Program development: - National Program for institutional modernization will be elaborated in 2008-2009 in line with the ENP Action plan approved for Armenia. - Institutional adaptation expectation: - as relevant legislation is adopted, corresponding institutions should be already introduced so that by 2018 the process of institutional adaptation will be accomplished. - Capacity strengthening target: - measures aimed to strengthen institutional capacities should ensure by 2021 conditions equal to those in EU-10 countries. ### Employment, labor, and poverty reduction — key findings and targets - Dignity employment concept: - aims to expand employment that provides minimal work remuneration enabling worker and family to avoid poverty and includes working conditions, degree of formality, and social security (especially minimal pension guarantees). - Employed-poor statistics and targets: - In 2005 around 24% of employed people and their family members were considered as poor. - Employment reduced the poverty risk by almost 10% points in 2005 compared with overall poverty level. - Target: by 2015 the share of the employed poor should constitute no more than 5%. - Target: in 2021 the problem will be completely solved, as the minimal earning of one family member having full employment will be equal to poverty line of an average family. - Formality of non-agricultural employment: - Program envisages formality degree of non-agricultural employees will grow by 2-3% per annum and in 2021 will constitute 85%. ### Economic activity of population — trends and projections - Recent trend: - Economic activity level decreased by around 4% in 2002-2006; women’s economic activity decreased by 4.7% reaching 48.8% in 2006 against 53.5% in 2002. - Economic activity decreased in all age groups except 30-34 year olds. - Current level and projection assumptions: - Present level of economic activity is 65% in the age group of 15-64. - If constant economic activity level is ensured, labor force supply will tend to grow until 2015 and later decline due to behavior of 15-64 years old age group. - Projection figure provided: Economically active population, thousand (2002–2021) assuming constant economic activity level at 65% (chart present in source). ### Overall employment levels, productivity and elasticity - Official and survey-based measures: - Official number of employed in 2006 (organizations and farms): 1,092 thousand workers (a slight 1.27% of employed people as compared with 2002). - Labor force sample surveys: share of employed in 2006 was 43.8%. - Employment growth estimate 2002-2006: - Approximate estimates show number of employed increased by 120-150 thousand people or by around 15%. - Employment elasticity: - In 2002-2006 elasticity of employment as compared with economic growth was 0.2%, meaning that 1% of economic growth expanded employment by 0.2%. - PRSP forecasts: employment elasticity in medium term was 0.17 and for 2002-2015 0.2% on average. - Observed outcomes: - Economic growth of 2002-2006 led to employment expansion and was accompanied by high rate of labor productivity. - Incomes from employment in the overall structure of population’s monetary income grew by around 11% during the last 5 years and were approximately doubled compared with 1999. ### Unemployment level and structure - Unemployment and poverty risk: - Being unemployed increased the poverty risk by around 60% in 2005 (household survey results). - Dual measurement of unemployment: - Official unemployment: unemployed registered in employment services. - Real unemployment: obtained from sample surveys and mostly consistent with ILO criteria. - The two measures differ by around 20% points but both show a clear reduction trend of registered and unregistered unemployment during the last 5 years. *Italic: IMF content unit _cr08376 - 270. Tthe strategy aimed at creation of actual equity market will be comprised of the (source PDF provided).* ### 294. The unemployment level, irrespective of its substantial decrease, still remains ### _cr08376 - 294. The unemployment level, irrespective of its substantial decrease, still remains ### Unemployment levels and recent trends - Official (registered) unemployment level in 2006 was 7% or less than 4% as compared with 2002 indicator. - Real unemployment (labor force sample surveys, self-reported) in 2006 was 27% – reduced by 7% as compared with 2002. - Figure referenced: Dynamics of registered and real (self-reported) unemployment rates in 2002-2006 (self-reported (ILO definition) vs Officially registered). ### Gender and age composition of unemployment - Women’s unemployment level continues to surpass men’s unemployment level (labor force alternative surveys). - Youth unemployment (by age groups) remains especially high, surpassing the average by around 2.5 times. - Figure referenced: Level of the real (self-reported) unemployment by age groups in 2002-2006 (age groups 15-19, 20-24, 25-29, 30-34, 35-39, 40-44, 45-49, 50-54, 55-59, 60-64; years 2002 and 2006). ### Long-term unemployment - Share of unemployed looking for a job for 12 months and more: - 51.3% in 2002 - 39.7% in 2006 - Policy emphasis: reduction of number of unemployed looking for a job for more than a year is of primary importance for poverty risk reduction. ### Program targets and policy orientation - SDP real unemployment mid-term target: 15% by 2015. - SDP long-term perspective target: not more than 10%. - Registered unemployed people indicator: will not be considered a program target; variations or possible increases in registered unemployment will not be regarded as deviations from the program. ### Unemployment benefits and impacts on registration - Average unemployment benefit size in 2006 was not more than 50% of poverty line. - Footnote details (preserved numbers): - In December 2006 10,000 people received unemployment benefit (11.8% of registered unemployed). - Average unemployment benefits was 9,000 drams per month (around $20). - On average the benefit amount was 57% of minimal salary and 14% of average salary. - Additionally 24,000 unemployed (2004) received monetary assistance – amounting 30% of the unemployment baseline benefit. - In 2006 more than 73% of the registered unemployed did not have employment during last 12 months and additional 13% during 6-12 months. All these people lost their right to receive benefit, which is given for maximum six months (NSS 2006). - Analysis: - Limited coverage and low benefit size mean increases in unemployment benefits alone will not play a serious role in poverty reduction among the unemployed. - Low benefit level is one reason unemployed do not register; modest unemployment benefits will continue to create significant differences between real and registered unemployment levels, reducing incentives for formalization and creating a vicious circle (informal employed cannot claim benefits). ### Employment in agriculture and rural poverty - Rural poverty is conditioned mostly by low employment incomes rather than high unemployment. - Unemployment level in rural areas is considerably (3-5 times) lower than urban unemployment level (various estimates). - In 2006, only 7% of the registered unemployed were from rural areas (official statistics). - Productivity and income distribution in agriculture: - Employment income distribution inequality coefficient is considerably lower in agriculture. - Overall rural poverty level and poverty level of self-employed in agriculture are approximately the same. - Footnote: According to 2005 HS (Household Survey), overall poverty level of the rural population was 28.3% and among rural self-employed it constituted 27.2%. - Conclusion: self-employment in agriculture does not reduce rural poverty risk. ### Non-agricultural employment structure and recent changes (2002-2006) - Two major assessment methods yielded share of non-agricultural employment in overall employment in 2006 as: - 76% (labor force sample survey) - 54% (enterprise and administrative data) - Reasons for discrepancies: different methodologies for assessing agricultural employment. - Observed structural trends (2002-2006): - Share of employed in public administration and social services decreased by around 10 percentage points. - Remuneration in public service, education and health increased; salary growth rates surpassed average salary growth. - Share of commercial (non-social) services increased by 4 percentage points to around 38% of non-agricultural employment in 2006. - Share of industry remained around 19% (stable in 2002-2006). - Employment in construction grew by around 70% (mainly due to informal employment). - Figure referenced: Non-agriculture employment trends by sector in 2002-2006 (Public administration and social services; Commercial services; Industry; Construction). ### Projections for non-agricultural employment (to 2021) - Expected share of non-agricultural employment in overall employment will grow to 80% in 2021 (by ILO methodology) over forthcoming 10-15 years. - Sectoral projections for 2021: - Construction: medium-term stable, in perspective will somewhat go down reaching 7-9%. - Commercial services: will reach 50%. - Social services and public administration: will go down to 25%. - Industry: will remain around 20% (mostly due to capitalization increase). - Basis: sector forecast, employment elasticity estimates, economic growth and labor productivity estimates, and expected efficiency/involvement forecasts for social services and public administration. - Expected impacts: positive impact on formalization and employment revenue increases through labor productivity growth. ### Formal vs informal employment - Informal employment: - 25% of non-agriculture employed in 2006 (level of informal employment in Armenia). - Share of hidden employed in overall employed number in 2002-2006 went down by around 2% (mostly due to reduction of unregistered self-employed). - If large share of agricultural employed counted as informal, share of informal employment in overall employment recalculated is around 45-50%. - Indicators referenced: Paid employees with no written (verbal) agreement; Unregistered self-employees (non-agriculture) for years 2002-2006. - Social insurance contributors: - Number increased by 110 thousand from 360 thousand to 470 thousand in 2002-2006. - In 2006 only 45% of overall employed made mandatory social insurance contributions. - Prospects and scenarios: - Expected trends of increasing employment formality to continue due to sectoral structural changes, maintenance of present low level labor taxation, tax administration improvements, and corporate governance expansion. - Conservative scenario: formality degree increases by 15% once in each five years. - Figure referenced: Number of social insurance contributors under expected scenario in 2002-2021 with yearly values starting 360 (2002), 418 (2003), 408 (2004), 459 (2005), 471 (2006), 498, 523, 549, 575, 601, 627, 656, 687, 718, 751, 785, 820, 857, 895, 934 (2007-2021 sequence shown in figure, Social security contributors, thousand). ### Labor productivity as growth driver (2002-2006 and projections) - Labor productivity growth in Armenia in 2002-2006 was around 60% – substantially surpassing average indicator of Europe and CIS countries. - Level comparisons: - Labor productivity level in Armenia is around 80% of Europe and CIS average. - Armenia versus 8 new EU member countries: rift around 4 times. - Taking into account purchasing power parity indicators: rift around 2.7 times. - Figure referenced: Labor productivity in 2002-2006, constant 2000 PPP US dollars (Central and South Eastern Europe (CSEE) and CIS vs Armenia). - Drivers of future labor productivity growth: - Quality and relevance of labor force supply (increase in enrollment in education, specialized secondary and higher education, and quality improvements). - Implementation of active employment policy. - Considerable increase of investments and sector distribution favoring higher-productivity sectors. - Program actions envisaged: - Consistent and sharp steps to improve entrepreneurial and investment climate. - Improve accessibility of financial mediation and increase its level. - Increase efficiency of public administration and social services. - Figure referenced: Labor productivity index (2002=100), constant 2000 PPP US dollars (2002-2006) for CSEE and CIS and Armenia. ### Emigration, remittances, and labor market implications - Migration trends (2000-2006): reflected positive labor market changes; reduction of negative balance of official migration (change of permanent residence); positive balance of unofficial migration registered in 2002-2006. - Figure referenced: Migration balance in Armenia in 2000-2006, persons (series showing negative to positive balances 2000-2006). - Share of foreign remittances in monetary incomes: - Decreased by around 6 percentage points or 70% in 2006 making 9% instead of 15% in 2002. - Foreign remittances considerably decreased poverty risk. - Large remittance volumes put pressure on labor market: reduction of economic activity and increase of labor force price. - Emigration drivers and effects: - Major reason: differences in labor market demand conditions between Armenia and the Russian Federation (major receiving country). - Labor migration has dual role: - Short-term: substantial significance for poverty reduction given high unemployment in Armenia. - Long-term: risks due to informal migration, unstable employment, and lack of minimal social protection elements. - Ongoing efforts: mitigate migration, provide information and consultative support to emigrants and immigrants, and programs encouraging immigration. ### Labor market institutions and policy levers - Key labor market regulation institutions impacting growth, productivity, and employment: - Taxation system and level - Level of involvement in trade unions - Minimum salary policy - System and level of unemployment benefits - Employment protection level - Forms and level of active labor market policies - Labor taxation: - Legislation concerning labor force taxation has not been substantially changed in recent years; its level is not considered high. - Figure referenced: Labor taxation in Armenia and OECD member countries (Armenia: 2006; OECD member countries: 2004) showing components as % of labor costs (Income tax; Employees' social security contributions; Employers' social security contributions) across listed countries. *Source: IMF content unit _cr08376 - 294. The unemployment level, irrespective of its substantial decrease, still remains* ### 316. Nevertheless, taking into account the economic development level of Armenia, ### _cr08376 - 316. Nevertheless, taking into account the economic development level of Armenia, ### Labor taxation, formal employment, and SDP policy - The increase of labor force taxation burden can seriously hamper high economic growth rate and employment expansion in Armenia given its economic development level. - Low level of formal employment implies any increase of tax burden will lead to more unequal competition and cannot contribute to expansion of formal employment. - Given the financial state of Armenia, reducing the tax burden is not sound until the tax income collection rate is substantially increased. - Major SDP policy in this area: - Maintain the present potential level of labor force taxation. - In parallel, increase efficiency of labor taxation by means of formalizing employment. - Note: parametric reforms of tax legislation are envisaged with the major objective to simplify and unify the labor force taxation regime. ### Employment protection legislation and rigidity - Legislative limitations aimed at employment protection (notably conditions of firing) can protect employee rights and help accumulate work experience and skills, but their rigidity is a serious obstacle to SME expansion and employment creation. - Employment rigidity is particularly problematic for reducing youth unemployment. - World Bank widespread employment rigidity index, 2005: - Armenia: 49 - High income countries average: 38 - Low and medium income countries of Europe and Central Asia average: 44 ### Minimum wage policy and unemployment benefits - Since independence, minimal salary policy aimed to encourage entrepreneurship and expand formal employment; Armenia is rated among countries with "mosey liberal" labor market. - Past modest minimal salary policy did not yield desired consequences. - PRSP new approach: establish correlation between minimal salary and poverty threshold. - Forthcoming minimal salary policy: - In the mid term, minimum salary will grow faster to ensure first the poverty threshold in 2008 and then up to 2010 equal to 32-33% of the average salary, after which it will mostly follow the average salary growth rate. - Impact on unemployment benefits: - Unemployment benefit size is related to the minimal salary under present legislation. - Frequent use of the minimal salary for various social assistance projects or administrative punishments will not be encouraged; such legislative provisions will be gradually reviewed. ### Active employment policy and activation approach - International experience shows active labor market policies yield modest overall results, though can be useful for certain groups; even EU countries with large budgets still observe high unemployment/inactivity among program users. - Policy implication: first identify job seekers’ needs before linking them to active employment programs. - OECD-informed activation policy elements to be pursued in Armenia: - (i) improvement of personal, social and vocational skills and capacities; support to social integration; - (ii) individually tailored ways of participating to ²Þ²ø given the age, experience, needs and priorities of the person; - (iii) beneficiary’s use of resources and capacities; - (iv) networking with the labor market services, social services, health services, housing sector and communities; - (v) cooperation and interaction between beneficiaries and agencies in planning, shaping and implementation. - Capacity building needs: - State Employment Service is insufficiently staffed, incompletely equipped and weakly motivated; capacities should be built. - Expansion of other active labor market projects with priority to most cost-effective projects. ### Social partners, vocational education, and local employment strategies - Encourage maximum involvement of social partners (trade unions and employers) in labor market regulation and state intervention decision-making. - Continue successful practices of Armenian district employment centers and establish public-private partnerships to develop and implement local job-creation strategies. - Employers’ role in vocational education: - Law on Vocational Education and Training (July 2005) improves position of social partners; employers are full-fledged partners. - Employers’ organizations’ participation helps reduce labor market mismatch. - Working standards/job descriptions should be stipulated by employers following negotiated procedures with stakeholders. - Training standards/job descriptions should be used to develop educational programs in educational institutions. ### Social enterprises, accessibility of services, and labor mobility - SDP will emphasize introduction of social enterprises (where at least 50% of employees are disabled) to integrate persons with disabilities through employment opportunities. - This will be incorporated into activities under RA Law On Social Protection of Persons with Disabilities to address social problems and use labor potential of disabled persons. - Ensuring accessibility and availability of vitally important services (healthcare, educational, social) in marzes will impact poverty reduction. - Programs to regulate internal movement of labor force will help mitigate unequal development of labor markets. ### Agriculture and rural development — overview and structural trends - Agriculture is a main sector and primary livelihood in rural areas. - Specific weight of agriculture in GDP decreased by almost two times in last 11 years (1996–2006) due to lower growth rate in agriculture relative to overall economy. - 1995-2006 growth comparisons: - GDP grew by 2.59 times. - Value added in agriculture grew by around 1.7 times. - Value added in non-agricultural sector grew by 2.93 times. - Employment dynamics: - Growth in 1995-2006 was almost exclusively attributable to increased work productivity; newly opened official workplaces were fewer than redundant ones. - No flow-out of labor from agriculture to non-agricultural sector; in 2001-2006 agricultural employment stabilized at 45-46 percent of overall employment. - Productivity and unit cost developments, 1996–2006: - If in 1996 agricultural labor productivity was one third of non-agricultural productivity, by 2006 it was almost four times lower. - Labor productivity in agriculture in 2006 increased by 92.6 percent compared to 1996 (6.8% annual average). - Productivity of non-agricultural sector increased by 3.94 times compared to 1996 (14.7% annual average). - Prices and incomes: - Sales price index for agricultural producers in 2006 grew by 23.9 percent compared to 2001. - Consumer price index increased by 18.6 percent over the same period. - In 2006 incomes earned in agriculture comprised 61.1% of average salary in non-agricultural sector (74.7% in 1996); nominal agricultural incomes rose by 5.9 times from 1996 to 2006 while non-agricultural nominal average salary rose by about 7.2 times. - Labor force unit cost (ratio between salary and labor productivity): - In 1996 unit costs in agriculture and non-agricultural sector were almost the same; in 2006 agriculture unit cost was more than 3 times higher, limiting financing opportunities from internal resources. - Policy implications for SDP given need to maintain earned income levels and limited labor transfer from agriculture: - Consider public sector expenditure priorities in the agrarian sector within SDP timeframe. - Wide use of public resources for maintenance and renovation of agricultural infrastructures. - Increase availability of credit funds and expand banking and other financial opportunities for farms. - Develop an efficient farm subsidizing system that accounts for natural conditions and ensures effective production under unfavorable conditions. - Implement effective technologies in main agricultural sectors (crop production and cattle breeding); pursue zonal specialization and effective location of production. - Create favorable conditions for development of production and service infrastructures in agriculture. - Develop agricultural products processing sector: promote effective location of processing units, introduce innovative technologies, improve production competitiveness, provide marketing assistance and contractual relations with primary producers, create and expand rural SMEs, and ensure sanitary and phyto-sanitary activities in line with international standards. - Develop an efficient risk insurance system for farms with public funds participation and public-private partnership principles. ### Key agricultural statistics and structural indicators (selected figures from tables and text) - Table 7.1 selected indicators (1996 ... 2006): - Specific weight of agriculture in GDP, %: 34.80 ... 18.65 - Specific weight of agricultural employment, %: 40.82 ... 46.16 - Incomes earned in agriculture, as % of salaries in non-agricultural sector: 74.70 ... 61.10 - Work productivity in agriculture, as % of productivity in non-agricultural sector: 77.37 ... 25.60 - Labor force unit cost in agriculture, %: 28.94 ... 78.82 - Labor force unit cost in non-agricultural sector, %: 24.97 ... 24.59 - Banking and credit to agriculture (end-2006): - Banks’ credit investments into agriculture: AMD 14,196 billion, or 5.5 percent of total credit investments and 3 percent of agricultural value added. - Crediting of industry at end-2006: AMD 39,263 billion, 15.1 percent of total credit investments and 9.8 percent of value added in industry. - Table 7.2 export/import highlights (1996–2006): - Export of agricultural products, USD million: grew from 1.18 (1996) to 26.79 (2006). - Specific weight of exports in total exports, %: 0.41 ... 2.67 - Specific weight of exports in agricultural value added, %: 0.21 ... 2.32 - Import of agricultural products, USD million: examples include 184.11 (1996), 179.33 (2006). - Specific weight of imports in total imports, %: 21.51 ... 8.17 - Specific weight of imports in agricultural value added, %: 33.07 ... 15.52 - Integration into world economy (1996–2006): - Export of agricultural products in current dollars grew by 22.7 times. - Specific weight in agricultural value added grew by 11 times. - Dominant share of export growth occurred in 2002-2006: - Exports grew by 10.5 times during 2002-2006. - The increase in export during 2002-2006 accounted for 94.6 percent of total increase in exports. *Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08376.pdf* ### 333. One of the main priorities of the Government policy in this sector would be to ### _cr08376 - 333. One of the main priorities of the Government policy in this sector would be to ### Policy priorities for agricultural sector - Encourage a progressive growth of export of agricultural products and ensure the increase of their specific weight. - Implement policy within an overall strategy for promotion of foreign trade, improvement of customs administration, reduction of transportation costs and elimination of technical barriers for trade. - Encourage establishment of integrated private structures and enterprises for primary processing of agricultural products and ensure availability of credit financial resources for them, taking into account the specifics of agricultural production. - Promote development of sectors providing services to agriculture, including integrating structures, primary processing enterprises, network of supplying and marketing cooperatives. - Large government investments into agricultural infrastructure, specifically in areas of irrigation and rural roads, and other areas: land improvement; selection of cultivated plants and seed farming; promotion of advanced technologies; development of consulting system. - Mitigate natural risks through development of relevant infrastructures (antihail stations; antispate measures; etc) and through development and introduction of an appropriate insurance system. - Develop and introduce an efficient system for agricultural subsidies aiming at mitigation of objectively existing regional differences and creation of equal conditions for agricultural production and impacting farm crop pattern by encouraging production of highly marketable agricultural products. - Support establishment of small and medium agrarian enterprises in rural areas; increase possibilities of organic agriculture; develop agro-tourism and other sectors to ensure employment in rural areas. ### Historical performance, 1996–2006 - Specific weight of imported agricultural products in agricultural value added decreased by more than 2 times during 1996-2006. - Specific weight of imported agricultural products in overall import of goods decreased by 2.3 times during 1996-2006. - Table 7.3 highlights farm activity indicators, 1996-2006: - Number of farms, thousand: 319.5 (1996), 321.1 (1997), 333.8 (1998), 335.1 (1999), 332.6 (2000), 334.8 (2001), 334.7 (2002), 337.9 (2003), 338.5 (2004), 339.2 (2005), 339.2 (2006). - Specific weight of the production of farms in agricultural output, %: 98.9 (1996), 99.2 (1997), 99.2 (1998), 98.5 (1999), 97.5 (2000), 96.9 (2001), 96.8 (2002), 96.2 (2003), 96.2 (2004), 97.2 (2005), 97.6 (2006). - Average number of employed per farm, people: 1.83 (1996), 1.72 (1997), 1.67 (1998), 1.64 (1999), 1.66 (2000), 1.65 (2001), 1.47 (2002), 1.49 (2003), 1.48 (2004), 1.48 (2005), 1.48 (2006). - Value added per farm, AMD thousand: 712.1 (1996), 730.8 (1997), 875.8 (1998), 782.5 (1999), 701.8 (2000), 865.7 (2001), 922.0 (2002), 994.1 (2003), 1222.6 (2004), 1205.0 (2005), 1376.3 (2006). - Level of marketability, % and Sales/Domestic consumption series (partial years shown): Level of marketability, %: 45.1, 49.9, 54.1, 58.9, 55.7, 55.8, 54.2 (years not individually labeled in source table extract). Sales, AMD thousand: 316.5, 432.0, 498.8, 585.5, 681.0, 672.4, 808.2. Domestic consumption, AMD thousand: 385.3, 433.7, 423.2, 408.6, 541.6, 532.6, 568.0. - In 2000-2006, value added produced by a farm almost doubled in nominal terms; sales increased by 2.55 times. - Farms still maintain in-kind nature of management due to low monetary output, insufficiency of inner resources for development and extremely small sizes. ### Farm structure and marketability - Majority of agricultural products is produced by individual farms; their specific weight increased in 2003-2006. - Participation of commercial agricultural enterprises in production of agricultural products fluctuated in the range of 0.8-3.8 percent. - PRSP forecasts versus actual marketability: - PRSP envisaged marketability level of farms: 48% in 2005 and 54.2% in 2006. - Actual marketability level: 55.8% in 2005 and 58.7% in 2006. - Factors influencing increased marketability: - Rapid growth of domestic demand for agricultural products, and absolute and relative decline of imports of agricultural products. - Increase of prices for agricultural products and creation of relatively more favorable conditions for agricultural production. - Reforms of irrigation system and improvement of irrigation water supply conditions. - Improvement of crop pattern through progressive growth of production volumes for highly marketable agricultural products and relative decrease for low-marketability products (particularly, wheat). ### SDP forecasts and targets (2006–2021) - SDP envisages a shift from extensive to intensive development; small farms remain the basis of production while promoting large commercial enterprises. - SDP foresees lower agricultural growth rates in 2007-2015 than in 1996-2006 and lower than non-agricultural sector, widening the gap that will start to lessen after 2015. - Employment assumptions: - Based on 1996-2006 trends, SDP estimates current employment levels will be maintained in 2008-2021. - Note: Sample surveys in 2006 show employment in agriculture constituted 24.3% of overall employment or about 240 thousand people, compared with 46.16% or 504.3 thousand people according to official statistics. - Degree of present over-employment in agriculture in 2006 made 47.5% (average labor time of one employee, in percentage as compared with the full employment level); SDP envisages it wouldn’t increase and is likely to decrease conditioned by about 50% growth of agricultural employment in 2006-2021. - Table 7.4: Main Indicators for Development of Agriculture, 2006-2021 (selected entries preserved exactly) - Total Value Added, AMD billion, in current prices: 495 (2006), 697 (2010), 982 (2015), 1379 (2021). - % of GDP: 18.7 (2006), 14.8 (2010), 12.5 (2015), 10.5 (2021). - Index, 2006 = 100: 100 (2006), 125 (2010), 148 (2015), 173 (2021). - Average annual actual growth rates %: 5.74, 3.44, 2.64 (periods not individually labeled in source table extract). - Average annual actual price increase in agriculture %: 11.9, 3.4, 3.0, 3.0 (years not individually labeled). - Number of employed: 504.3 (2006), 504.3 (2010), 504.3 (2015), 504.3 (2021). - Labor productivity, AMD thousand, in current prices: 948.4 (2006), 1383.1 (2010), 1946.0 (2015), 2734.3 (2021). - Average annual growth rates of labor productivity, %: 5.74, 3.44, 2.64. - As % of non-agricultural sector productivity: 30 (2006), 25 (2010), 23 (2015), 23 (2021). - Labor force unit cost, %: 78.82 (2006), 70 (2010), 65 (2015), 60 (2021). - Earned monthly income from agricultural activities, AMD thousand, in current prices: 46.39 (2006), 80.7 (2010), 105.4 (2015), 164.1 (2021). - As % of average monthly salary in non-agricultural sector: 61.1 (2006), 57.1 (2010), 52.2 (2015), 52.2 (2021). - Export of agricultural products, USD million: 26.8 (2006), 56.8 (2010), 177.3 (2015), 498.5 (2021). - Specific weight in total exports, %: 2.67 (2006), 3.5 (2010), 4.1 (2015), 4.8 (2021). - Specific weight in agricultural value added, % (exports): 2.32 (2006), 2.6 (2010), 5.9 (2015), 11.8 (2021). - Import of agricultural products, USD million: 179.3 (2006), 386.1 (2010), 506.1 (2015), 542.5 (2021). - Specific weight in total imports, %: 8.17 (2006), 7.5 (2010), 5.2 (2015), 3.0 (2021). - Specific weight in agricultural value added, % (imports): 15.5 (2006), 16.8. (2010), 15.7 (2015), 12.0 (2021). - Number of farms, thousand: 339.2 (2006), 330.8 (2010), 320.4 (2015), 307.9 (2021). - Specific weight in agricultural output, %: 97.6 (2006), 95.2 (2010), 92.2 (2015), 88.6 (2021). - Average value added by a farm, AMD thousand, in current prices: 1376.3 (2006), 2000.6 (2010), 2825.8 (2015), 3968.1 (2021). - Marketability level, %: 58.7 (2006), 63.0 (2010), 70.0 (2015), 75.0 (2021). - Sales, AMD thousand: 808.2 (2006), 1167.9 (2010), 1824.3 (2015), 2575.5 (2021). - Domestic consumption, AMD thousand: 568.0 (2006), 685.9 (2010), 781.8 (2015), 858.5 (2021). - Credits to agriculture, as % of agricultural value added: 2.97 (2006), 6 (2010), 11 (2015), 18 (2021). - Credits to agriculture, AMD billion, in current prices: 14.2 (2006), 41.8 (2010), 108.1 (2015), 248.2 (2021). - SDP envisages increase of specific weight of large commercial farms in agricultural value added from 2.4% in 2006 to 11.4% in 2021 and a reduction in number of farms by 10% with migration of labor force from farms to commercial enterprises. - Main policy components to ensure transition: - Improvement of business and investment environments. - Application of effective mechanisms for pawning of agricultural lands, reviving of land market and significant reduction of informal transactions related to land sales. - Main driving forces for 2008-2021 agricultural development: - Progressive growth in export of agricultural products. - Sharp increase of food self-provision level via import replacement. - Estimated export increase: exports of agricultural products in nominal USD terms to increase by approximately 12.6 times by 2021 (relative to 2006) and bring the specific weight of exports in agricultural value added to 11.8 percent in 2021 (from 2.32% in 2006). - Specific weight of imported agricultural products in agricultural value added to decline from 15.5 percent in 2006 to 12 percent in 2021. - Role of domestic market: Autonomous expansion of domestic market was main driver in 1996-2006; its role will diminish during SDP as demand for agricultural products will grow slower than demand for non-agricultural goods and services. - Financial intermediation and service structures: - Estimated sharp increase of financial intermediation volumes: crediting volumes expected to reach 18% of agricultural value added (against 3% in 2006). - Creation of effective structures servicing agriculture: system of supply and service cooperatives, integration structures, primary processing enterprises. ### Target indicators and rural economy composition - Table 7.5: Target Indicators for Development of Agriculture, 2005-2021 (selected exact figures) - GDP*, AMD billion: 560.36 (2005), 638.9 (2006), 1,005.5 (2010), 1,498.3 (2015), 2,252.5 (2021). - Agricultural value added: 411.1 (2005), 469.3 (2006), 684.4 (2010), 963.0 (2015), 1,353.1 (2021). - Value added in non-agricultural sector: 149.3 (2005), 169.5 (2006), 321.1 (2010), 535.3 (2015), 899.4 (2021). - Value added in agriculture, as % of GDP: 73.4 (2005), 73.5 (2006), 68.1 (2010), 64.3 (2015), 60.1 (2021). - Employment, thousand people: 601.1 (2005), 606.7 (2006), 623.6 (2010), 637.8 (2015), 653.6 (2021). - in agriculture: 500.7 (2005), 500.7 (2006), 500.7 (2010), 500.7 (2015), 500.7 (2021). - in non-agricultural sector: 100.4 (2005), 106.0 (2006), 122.9 (2010), 137.2 (2015), 152.9 (2021). - Employment in agriculture, as % of total employment: 83.3 (2005), 82.5 (2006), 80.3 (2010), 78.5 (2015), 76.6 (2021). - Per capita GDP, AMD thousand: 484.4 (2005), 551.4 (2006), 855.9 (2010), 1,247.3 (2015), 1,847.0 (2021). - Per capita GDP, USD: 1,058.2 (2005), 1,325.4 (2006), 2,802.5 (2010), 4,084.1 (2015), 6,047.7 (2021). - * The nominal estimates of added value created in rural areas. - Table 7.6: Target Indicators for Development of Agriculture, 2006-2021 (Year 2005 = 100) (selected exact figures) - GDP*: 108.9 (2006), 144.3 (2010), 181.0 (2015), 226.1 (2021). - Value added in agriculture: 109.1 (2006), 133.9 (2010), 158.7 (2015), 185.2 (2021). - Value added in non-agricultural sector: 108.5 (2006), 172.9 (2010), 242.8 (2015), 338.9 (2021). - Employment: 100.9 (2006), 103.7 (2010), 106.1 (2015), 108.7 (2021). - in agriculture: 100.0 (2006), 100.0 (2010), 100.0 (2015), 100.0 (2021). - in non-agricultural sector: 105.6 (2006), 122.4 (2010), 136.6 (2015), 152.3 (2021). - Per capita GDP: 108.8 (2006), 142.1 (2010), 174.4 (2015), 214.5 (2021). - * The nominal estimates of added value created in rural areas. - Composition of rural economy (2005 baseline): - In 2005 agricultural activities generated 74 percent of GDP in rural areas (Value added in agriculture: 73.4 percent of rural GDP in 2005). - Employment in agriculture comprised 83.3% of total rural employment in 2005. - SDP notes such prevalence puts rural welfare in dependency on agricultural development; with lower agricultural growth rates envisaged by SDP, gap in living standards between rural areas and Yerevan and other cities will inevitably widen unless addressed. ### Rural development program and employment status - In 2008 a comprehensive national program of territorial development with a rural development component will be developed to prevent further deepening of the rural-urban gap and reduce differences in living standards between Yerevan, other cities and rural areas. - Main objectives of the program: - Diversification of activities for rural population. - Promotion of progressive development of non-agricultural sector branches. - Creation of non-agricultural employment through development and application of arrangements and directions for efficient use of public and private financial resources. - Employment policy constraint: - Carrying out of employment policy (in particular proactive policy) activities among rural population is significantly hindered by lack of definition of the employment status of the rural population. - Revision and clarification of the employment status of the rural population based on current situation, shaped realities and international experience will be of top priority to expand and raise productivity of employment policy activities among the rural population. *Source: ROA NSS; extracted sections and tables from the provided content unit.* ### 8. Infrastructure Development ### 8. Infrastructure Development ### Overview and strategic priorities - Recent positive developments in Armenia’s industrial infrastructures: transport, energy, water and irrigation and telecom — improved access and scope of services, increased financial sustainability of service providers, decreased direct and indirect subsidies, and increased public and private investment with deepened public-private cooperation. - Armenia still lags behind Eastern and Central European states in structural and management reforms required for free-market operation of infrastructures; delays may stall growth and create fiscal risks. - Obsolescence of infrastructure assets is a major challenge for sustainable development and poverty elimination. - Estimated annual investment demand (telecom excluded): 3 to 5 percent of GDP. - SDP public investment framework: average about 4.6 percent of GDP annually; about 50-60% of which will go to industrial infrastructure. ### Drinking Water - Key recent outcomes and gaps: - Average supply duration across the country in 2006: 12.1 hours per day, exceeding 1998 corresponding indicator by 4 hours. - Centralized water supply coverage of rural areas: increased from 64.7% to 78%. - Share of users receiving water less than 1 hour daily: decreased from 16.3 percent in 1998 to 0.5 percent in 2006. - Supply duration continues to vary across regions; in about half of urban communities supply duration is less than 12 hours a day; in 6 towns it does not exceed 4 hours. - Data collection on rural water supply is incomplete; about 560 villages are not covered by specialized service companies. - Cost recovery and affordability: - Drinking water and sanitation tariffs do not fully cover costs; except in Yerevan, tariffs do not even cover running costs, impeding management reform and private investment. - WHO standard referenced: 50 liters per capita daily. - Prudential affordability benchmark: average daily consumption expense should not exceed 3% of consumer spending or disposable income. - 2006 estimates: average national affordable tariff AMD465 AMD/cubic meter per month; current tariff AMD140 per cubic meter. - Affordable tariff for the first consumption decile in 2006: AMD146 per cubic meter. - Medium-term projections indicate cost recovery can increase without jeopardizing access for the most vulnerable. - Yerevan: 2006 trust management agreement established tariffs for the next 10 years, with affordability to increase due to income growth and tariff reduction. - Public investment and financing: - In the medium term affordable tariffs will not cover required capital costs; sector will remain a public investment priority during SDP implementation. - Planned financing: mostly bilateral and multilateral donor assistance including concessional loans and grants. - Overall public investment level for the sector will reach and stay around 0.3% of GDP. - To attract private investors the Government will continue and deepen management reforms and wider denationalization of system management. - Sector goals and targets (Table 8.2): - Reform index EBRD Transition Indicators: 2.33 (2007) → 2.67 (2012) → 3.33 (2015) → 3.67 (2018) → 4.00 (2021). - Average national indicator for water supply duration (hour/day): 12 (2006) → 16 (2012) → 20 (2015) → 22 (2018) → 22 (2021). - Level of public investment, % of GDP (Annual average for previous 3 years): 0.25% (2007) → 0.4% (2012) → 0.4% (2015) → 0.3% (2018) → 0.3% (2021). - Policy directions: - Continue management reforms and denationalization to increase private sector attractiveness. - Ensure reliability and efficiency, reduce losses, and improve quality of supply and sanitation. - Develop community water supply investment programme using public investment to address priorities. ### Irrigation - Current situation and constraints: - Most agricultural products produced in over 300 thousand extremely small and small farms; about half depend heavily on irrigation availability, affordability and reliability. - Structural and management reforms and participatory management have improved irrigation indicators; areas not irrigated due to lack of access and households citing lack of access have decreased. - Due to wear and tear, high energy consumption and inefficient management, only 70 percent of irrigable land is irrigated. - Introduction of cost-recovery tariffs may make agriculture financially unappealing for many farmers given low returns for some crops. - Cost recovery transition and support: - New calendar for gradual increase of cost-recovery established: target 72% in 2011. - Transition from input subsidies to results-based public funding to support WUAs (Water User Associations) and encourage higher tariffs and multiple tariff systems. - Continued state funding and budget grants to 2018 to cover current deficit; size of grant program to be determined within MTEF framework based on SDP target indicators. - Public investment: - Public investment for recovery and modernization of irrigation systems, including MCA, will remain at 0.2% of GDP throughout SDP implementation. - Project selection for budget financing will be based on economic efficiency. - Sector goals and targets (Table 8.3): - Reform index EBRD Transition indicators: 2.33 (2007) → 2.67 (2012) → 3.00 (2015) → 3.33 (2018) → 4.00 (2021). - Irrigable areas Thousand ha: 123 (2006) → 160 (2012) → 180 (2015) → 180 (2018) → 180 (2021). - Current cost-recovery level %: 40% (2006) → 75% (2012) → 85% (2015) → 100% (2018) → 120% (2021). - Public investment level, % of GDP (Annual average for previous 3 years): 0.05% (2007) → 0.2% (2012) → 0.2% (2015) → 0.2% (2018) → 0.2% (2021). - Policy directions: - Strengthen participatory management through denationalization as WUAs develop and form unions. - Use results-based public funding to improve efficiency and encourage cost recovery. ### Transport - Strategic importance: - Development and increased efficiency of transport system is essential for high growth, access to social services, labor mobility and reduction of regional disparities. - Modal structure and implications: - Road transport accounts for about 59% of cargo transportation and about 90% of passenger transportation. - Condition of national road network significantly affects transportation costs economy-wide. - Investment priorities and actions: - SDP envisages large-scale investments to improve the national road network; priority to most intensively used segments. - Increase public funding for local road infrastructure to ensure at least one proper motor route connecting each settlement to regional centres and develop roads to major tourist attractions; a prioritized list will be established in a long-term development programme. - Augment and more effectively disburse public investments for motor road maintenance to prevent deterioration and ensure safer, faster transport. - Continue and deepen management reforms in railway and air transportation sectors to design balanced transportation structure. - Sector goals and targets (Table 8.4): - Reform index EBRD Transition indicators (Road transport): 2.33 (2007) → 3.00 (2012) → 3.33 (2015) → 4.00 (2018) → 4.00 (2021). - Communities with at least one adequate road connecting them to a regional centre, % of total number of communities: 3% (baseline) → 20% (2012) → 40% (2015) → 60% (2018) → 80% (2021). - Length of properly maintained roads compared to total length of same category roads: - International: 90% (baseline) → 90% → 90% → 90% → 90%. - National: 40% (baseline) → 80% → 90% → 90% → 90%. - Local: 10% (baseline) → 30% → 50% → 70% → 90%. - Public investment, % of GDP (Annual average for 3 previous years): 0.8% (2007) → 1.0% (2012) → 1.2% (2015) → 1.5% (2018) → 1.5% (2021). ### Energy - Structural and operational status: - National energy system fully meets domestic demand and maintains some export potential. - Electricity distribution and sale realized by a private company; generation by 5 independent power producers, one Aeolian power plant/wind farm and numerous private small hydropower plants. - 2007 statistics: - Total electricity generation in 2007: 5,897 KWt/h, of which: - 31.4% generated by hydropower plants - 25.3% by thermal power plants - 43.3% by Armenia’s Nuclear Power Plant - Gas imports in 2007 from Russian Federation: 2,055 mln cubic meters. - Number of users at end of 2007: 519 650, of which 514 200 are residential users. - Asset condition and modernization needs: - Revaluation identified urgent need for replacement and modernization of generation capacities, electricity and natural gas transmission and distribution networks, and natural gas underground reservoirs. - Other challenges: lack of local fossil fuel deposits of industrial significance, dependence of significant part of generating capacity on single source supply, and limited capacities of the current transport system. * _cr08376 - 8. Infrastructure Development_* ### 382. The Government has already taken some steps to improve the situation, ### 382. The Government has already taken some steps to improve the situation, ### Recent reforms and investments in the energy sector - Structural reforms intensified: natural gas supply system, electricity distribution network, Sevan-Hrazdan Cascade (in the framework of debt/ equity swap with Russian Federation) and all small HPPs were privatized. - Electricity market support structures established: a System Operator and Metering Center. - Introduced a system of direct contracts for wholesale trade to promote further liberalization. - Law on Energy amended to eliminate the state’s monopoly in the nuclear energy sector to ensure long-term development of nuclear energy. - Service fee collection maximized: consumers fully pay for consumed electricity and natural gas. - Current balance of public energy companies has been positive since 2003. - Modernization works at the majority of 220 KW transmission network substations finalized with KfW Bank and World Bank loan support. - Construction completed: second Iran-Armenia transmission line. - Automatic Meter Reading (AMR) system deployed with USAID technical assistance. - With EU INOGATE support: gas metering station built in Koghb; modernization works in Abovian underground gas reservoir. - About US$90 million worth of maintenance was carried out at Armenian Nuclear Power Plant with donor support to increase safety; maintenance will continue. - Japan-Armenia loan agreement (signed in 2005): construction works of a 242 MWt combined cycle power facility have started in Yerevan Thermal Power Plant. - Construction of first (Meghri-Kajaran) section of Iran-Armenia gas pipeline completed; works for Kajaran-Aparan section underway. - Rehabilitation of small hydropower plants started with grant from Energy Efficiency and Renewable Energy Fund and German KfW bank. - In the last five years, total output of small HPPs doubled; currently total generated capacity is about 58 MWt. - With grant funding from Islamic Republic of Iran the first wind power plant with capacity of 2.6 MWt was built in Pushkin pass. ### Energy sector development strategy: priorities and projected investments - Key directions highlighted to ensure long-term sector development, meet domestic demand, and ensure energy security and independence: - usage of renewable energy recourses; - Nuclear power engineering; - Diversification of energy supply and regional integration; - Promoting and encouraging energy productivity in all sectors utilizing energy recourses. - National policy priorities (based on international principles and 2006 national program): - Electricity generation: maximum possible use of local renewable energy sources (hydro, wind, thermal, solar). - Construction of new NPP facility. - Meeting remaining local and external demand for electricity using thermal and combined cycle power facilities. - Table 8.5. Main target indicators for energy sector: - Reform index EBRD Transition indicators: 3.33 (2007), 4.00 (2012), 4..00 (2015), 4.00 (2018), 4.33 (2021). - Public investment, % of GDP (Annual average for 3 previous years): 0.5% (2007), 0.3% (2012), 0.2% (2015), 0.2% (2018), 0.2% (2021). ### Measures for diversification, reliability, and regional integration - Envisaged measures: (i) Completion of Kajaran-Ararat section of Iran-Armenia gas pipeline, enabling import of required natural gas quantities; (ii) Enlargement of underground natural gas reservoirs; (iii) Construction of a hydropower plant to utilize the hydropower potential of Arax river; (iv) Improving transmission networks: construction of third high-voltage (400Kw) overhead transmission line (Armenia-Iran intersystem), construction of a new Armenia-Georgia 400Kw overhead transmission line, reconstruction of the 220Kw Kars line; feasibility analysis for new transmission lines to ensure integration with regional power grids; (v) Implementation of joint projects with international energy associations in CIS, BSEC and other frameworks; (vi) Creation of a regional energy market. ### Energy efficiency and program implementation - Significant improvement of energy saving and efficiency in all sectors utilizing energy resources is a priority to ensure energy independence, competitiveness, and improved living standards. - Government committed to consistently implement the policy stipulated by the national program on saving energy and renewable energy resources of RA approved in 2007. ### Regional development: trends, causes, and scenarios - Since early 2000s regional development disparities increased; economic role and significance of Yerevan grew, widening living standard differences. - Yerevan’s share in Armenia’s GDP grew from 42.1% in 1999 to 58.4% in 2006; Yerevan population share remained essentially unchanged at 34 percent. - GDP regional data (selected figures, AMD bln, current prices): - Armenia total: 987.4 (1999), 1,031.3 (2000), 1,175.9 (2001), 1,362.5 (2002), 1,624.6 (2003), 1,907.9 (2004), 2,242.9 (2005), 2,656.2 (2006). - Yerevan: 416.0 (1999), 477.2 (2000), 537.4 (2001), 648.2 (2002), 820.2 (2003), 979.7 (2004), 1,249.8 (2005), 1,550.8 (2006). - Total (without Yerevan): 571.5 (1999), 554.2 (2000), 638.5 (2001), 714.3 (2002), 804.4 (2003), 928.2 (2004), 993.1 (2005), 1,105.4 (2006). - Sector concentration contributing to disparity (shares in Yerevan, 1999 vs 2006): - Construction: 47.5% (1999) to 82.5% (2006). - Trade: 80% (1999) to 86% (2006). - Other sectors: 51.7% (1999) to 64.8% (2006). - Growth rates 2000-2006: - Average annual economic growth rate in Yerevan: 16.8%. - National average: 11.5%. - Outside Yerevan average: 6.3% (urban settlements 7.6%, rural 5.4%). - Syunik marz average: 18.3% (only marz exceeding national average). - GDP per capita (AMD thousand, current prices) for Yerevan: 376.7 (1999), 432.1 (2000), 486.6 (2001), 587.5 (2002), 744.3 (2003), 889.1 (2004), 1,134.1 (2005), 1,404.9 (2006). - Relative GDP per capita trends: - Total Armenia as % of Yerevan indicator: 81.6 (1999), 74.3 (2000), 75.2 (2001), 72.2 (2002), 68.0 (2003), 66.8 (2004), 61.5 (2005), 58.7 (2006). - Total without Yerevan as % of Yerevan: 72.0 (1999), 60.8 (2000), 62.2 (2001), 57.7 (2002), 51.3 (2003), 49.4 (2004), 41.4 (2005), 37.1 (2006). - Other cities as % of Yerevan: 63.0 (1999), 57.3 (2000), 53.5 (2001), 51.2 (2002), 46.9 (2003), 45.0 (2004), 39.8 (2005), 34.8 (2006). - Rural areas as % of Yerevan: 79.6 (1999), 63.8 (2000), 69.7 (2001), 63.2 (2002), 54.9 (2003), 53.1 (2004), 42.7 (2005), 39.3 (2006). - Baseline scenario (if 1999-2006 trends continue): - Yerevan share of GDP projected to reach 67% in 2012, 69.6% in 2015, 71.8% in 2018, and 73.8% in 2021. - Living standards disparity (Yerevan vs other regions, per capita GDP) projected to increase by factor of 3.9 in 2012, 4.4 in 2015, 4.9 in 2018, and 5.4 in 2021. - Baseline scenario assumption: in 2008-2021, 1 percent of economic growth in Yerevan corresponds to 0.551 percent of such growth in the regions. - SDP (targeted regional development policy) scenario: - Aims to bring regional growth rates close to Yerevan between 2008–2014; by 2015 regional growth rates to exceed Yerevan’s. - Capital’s share in national GDP expected to reach 62% in 2014, then decrease to 61.1% in 2018 and 60.8% in 2021. - Disparity in living standards stabilizes and decreases: factor of 3.12 in 2014 and 2.98 in 2021. *Source: _cr08376 - 382. The Government has already taken some steps to improve the situation,* ### 395. In the recent years the ongoing investment concentration continues to remain ### _cr08376 - 395. In the recent years the ongoing investment concentration continues to remain ### Investment concentration and regional distribution (2001-2006) - Nominal investments grew by an average 30.7% annually between 2001-2006. - Investment growth in Yerevan: 46.2%. - Investment growth elsewhere: 12.1%. - Yerevan share in total public and private investment grew from 41.6 to 72.8 percent. - Share of the rest of Armenia dropped from 58.4 to 27.2 percent. - AMD billion, in current prices (selected annual totals reported): - Armenia total: 232.3 295.2 394.1 464.6 666.1 886.2 - Yerevan: 96.7 175.3 258.6 261.6 537.4 645.5 - Marzes (without Yerevan), incl.: 135.6 119.9 135.5 203.0 128.7 240.7 - Other cities: 19.7 57.2 69.3 79.3 97.3 78.0 - Rural areas: 115.9 62.7 66.2 123.7 31.4 162.7 - % of total investment by area (selected years): - Yerevan: 41.6 59.4 65.6 56.3 80.7 72.8 - Marzes (without Yerevan), incl.: 58.4 40.6 34.4 43.7 19.3 27.2 - Other cities: 8.5 19.4 17.6 17.1 14.6 8.8 - Rural areas: 49.9 21.2 16.8 26.6 4.7 18.4 ### Regional development scenario and projected GDP growth (SDP) - Objective: approximate regional economic growth rates to Yerevan growth rate by 2015 and ensure prevalence thereafter; mitigate interregional disparities. - Projected average annual GDP growth rates (Table 9.4) — percentages preserved exactly as in source: - Indicators: 1999-2006 | 2007-2010 | 2011-2012 | 2013-2015 | 2016-2018 | 2019-2021 - Armenia total, of which: 10.4 10.5 7.7 6.6 5.9 5.4 - Yerevan: 16.8 12.1 8.0 6.5 5.8 5.4 - Marzes (without Yerevan), incl.: 6.3 8.1 7.2 6.7 6.1 5.5 - Other cities: 7.6 9.1 9.6 9.4 8.2 6.7 - Rural areas: 5.4 7.4 5.2 4.3 3.9 3.6 - Planned approach: - Approximate regional development rate to Yerevan rate in 2008-2014. - From 2015, regional growth rate should exceed Yerevan growth rate. - Rural areas expected to grow at lower rates than Yerevan/other cities due to agricultural dependence and limited non-agricultural opportunities. ### Policy measures envisaged (2008-2009) to support regional development - Develop and introduce a comprehensive state policy aimed at reducing development disparities and accelerating regional development. - Policy package components: - Direct public investment programs toward elimination of gaps in industrial and social infrastructure predominantly outside Yerevan. - Regular analysis of entrepreneurial and investment climates, shortcomings of public and local administration (mostly in cities and towns) and approximation with best national standards to improve entrepreneurship, investment climate, and public/local administration. - Develop and introduce a public funding system for regional development including: - Public funding of investment programs for intra- and inter-regional industrial and social infrastructure development. - Public funding for promotion of rural development and agriculture subsidies. - Public support to SME development outside Yerevan, including resources to be provided as collateral for loans taken by small and medium enterprises. - A system of structural funding for accelerating growth in other cities. ### Structural funds and financing targets - Structural funds planned to be deployed from 2010; organizational structure and list of cities to be determined in 2008-2009. - Planned allocation from structural funds to other cities: - 2009–2014: total means will equal 0.1% of GDP. - 2015–2021: will grow to 0.15% of GDP. - Rationale: structural funds used as seed money to attract private investment and augment added value in target cities. ### SDP regional distribution of planned investments (Table 9.5) - AMD billion, in current prices (selected columns preserved exactly): - Indicators: 2006 | 2010 | 2012 | 2015 | 2018 | 2021 - TOTAL: 100.0 100.0 100.0 100.0 100.0 2867.2 - Yerevan: 72.8 67.2 63.4 58.4 60.5 1678.5 - RA marzes (excluding Yerevan): 27.2 32.8 36.6 41.6 39.5 1188.7 - Other towns: 8.8 17.7 18.3 24.1 25.4 756.2 - Of which structural funds *: 0.0 1.9 1.9 2.3 2.3 18.3 - Rural area: 18.4 15.1 18.2 17.6 14.1 432.5 - Note in source: in 2021 in comparison to 2006, the investment level in nominal terms will increase ten-fold; structural funds will have an important role. ### Expected impacts on living standards (Table 9.6) - Yerevan GDP per capita, AMD thousand: 1405 2596 3229 4244 5469 6987 - Yerevan GDP per capita, USD thousand* : 3.4 8.5 10.6 13.9 17.9 22.9 - *2010-2021 GDP per capita denominated in USD was calculated using USD1 = AMD305 exchange rate - % of Yerevan indicator (regional shares of Yerevan per capita): - Armenia total, of which: 58.7 55.4 55.1 55.2 55.4 55.3 - Marzes (without Yerevan), incl.: 37.1 32.2 31.7 31.9 32.2 32.0 - Other cities: 34.8 31.3 32.2 35.0 37.4 38.7 - Rural areas: 39.3 33.0 31.3 29.4 27.8 26.4 - Expected outcome: mitigate growing disparity of living standards by 2014 and decrease disparities from 2015 onward, eventually leading to less difference between Yerevan and elsewhere. ### Public administration and judicial system reforms — rationale and indicators - Efficiency, quality, accessibility, transparency, accountability, and controllability of public administration and judicial system are key preconditions for poverty reduction. - World Bank estimate cited: a one standard point improvement of public administration indices in a long-term perspective could result in the growth of per capita incomes from two to three times. - Six governance indicators from World Bank used in SDP (percentage rating, 0-100): - (i) Civil society participation in government formation, freedom of speech and mass media. - (ii) Political stability (likelihood of overthrowing government constitutionally or by coup d’etat). - (iii) Government effectiveness (quality of public services, civil service quality and independence, ability to develop and implement policy). - (iv) Regulatory function quality of the government (ability to develop and implement policies supporting private sector). - (v) Rule of law (extent society is governed by laws; performance quality of judicial system emphasized). - (vi) Control of corruption (degree to which government exercise of power is guided by private and elite interests). - Dynamics of ROA Governance System indicators (percentage rating, 1998-2007) — Table 10.1 values preserved exactly: - 1. Civil Society Participation...: 35.3 37.2 34.8 33.3 30.0 30.4 26.9 30.0 - 2. Political Stability: 22.6 17.9 23.6 28.3 31.6 38.2 35.1 42.3 - 3. Government Effectiveness: 29.7 18.7 45.5 45.5 44.5 49.3 51.2 46.4 - 4. Regulatory Function Quality...: 26.6 28.1 56.7 57.1 53.2 56.9 59.0 60.2 - 5. Rule of Law: 38.0 36.1 35.6 39.4 38.0 41.5 38.1 40.5 - 6. Control of Corruption: 21.6 23.0 32.4 33.8 28.9 33.5 35.0 30.0 - Observed trends noted in source: - Main progress reported for political stability and government effectiveness (indicators 2-4). - 2003-2006: control of corruption and rule of law did not show tangible progress. - Indicators measuring elections, freedom of speech and mass media had some declining tendency compared to 1998-2000. ### Comparative governance positioning (2007) - Governance indicators for Armenia and comparator countries (percentage rating, 0-100) — Table 10.2 values preserved exactly for select entries: - Armenia: Civil Society Participation... 30.0 | Political Stability 42.3 | Government Effectiveness 46.4 | Regulatory Function Quality 60.2 | Rule of Law 40.5 | Control of Corruption 30.0 - Georgia: 42.3 | 23.6 | 52.1 | 58.7 | 42.9 | 48.3 - Azerbaijan: 14.9 | 24.0 | 28.0 | 31.1 | 23.3 | 11.1 - CIS average: 21.2 | 32.8 | 27.4 | 30.4 | 21.4 | 20.6 - Average for Eastern Europe and Baltic countries: 64.0 | 55.1 | 62.0 | 68.1 | 54.4 | 56.9 - Source observation: governance indicators for Armenia are generally more favorable than CIS averages but significantly lower than Eastern Europe and Baltic countries. *Source: _cr08376 - 395. In the recent years the ongoing investment concentration continues to remain* ### 411. Public administration system reforms are implemented in three key directions: ### 411. Public administration system reforms are implemented in three key directions: ### Key directions - Structural and functional reforms of public administration system; - Introduction and development of civil service; - Reforms of financial management system. ### Structural and functional reforms of public administration system (10.1.1) - Main reforms of the ROA governance system implemented in 2000-2006: - Bodies adjunct to the ROA Government and ministries were included into the administrative systems of relevant ministries as agencies, inspectorates, state non-commercial entities. - Functions of public administration bodies were clarified. - Important results of the reforms: - A functional analysis was conducted at the public administration bodies that revealed overlapping, redundant functions and functions non-specific to that body; - Relevant management entities were created within the public administration and local government bodies. The functions of heads of the entity and the governing body were separated from each other; - Agencies and inspectorates with a detached unit status were established within ministries that are specialized in the area of service provision, regulation and implementation of supervisory and inspection functions; - Various advisory committees and councils adjunct to the ministers were established, which came to replace former “collegial” governance bodies; - 21 bodies adjunct to the Government were included in the structure of relevant ministries as agencies, inspectorates or structural units; - Many institutions of the ministries, operating within the system of bodies adjunct to, the Government were reorganized into state non-commercial entities, with management functions being detached from them; - Management structure of ministries was consolidated with secretariats, departments and divisions formed within them; - New organization charters of the ministries were approved; they were brought into full compliance to strategic tasks and functions reserved by the laws and other legislative acts. - Quantitative and institutional outcomes: - The reforms resulted in laying off more than 750 government employees; - The number of ministries was reduced from 21 to 16. - Remaining challenges: - Management capacities are yet to be established; ministries lack sufficient capacities to formulate effective policies and to ensure timely and efficient implementation of adopted policies and legislation. - Need to strengthen strategic planning approach of political and discretionary officials and to develop methods for professional administrative staff to implement strategic goals and tactical solutions. - Clear delineation of political and professional administrative services is essential; development and enhancement of the chief of staff institute within ministries and other public administration bodies is of particular importance. - Current chiefs of staff are often limited to housekeeping and organizational issues and do not have mandate to settle management issues (e.g., power to appoint officials directly subordinate to them, authority for staff planning, rational distribution and use of resources, management of staff’s financial funds, tangible assets and procurement), impeding establishment of professional management principles. - The system of cooperation between the ministries is not functioning adequately, causing delays in decision making. - Creation of e-governance, electronic documentation circulation, unified databases and information exchange means is expected to reduce paperwork, optimize staffing levels and support professional development. ### E-governance: current status and planned measures - Current status: - Despite views on forming an information society, e-governance is not well advanced. - Government bodies have taken steps (e.g., websites) but Armenia lacks a unified approach to provision of online services. - According to the five-level classification system of online e-governance systems applied by EU, Armenia currently is mainly on the last two levels, i.e. public administration bodies limit themselves merely to providing information or maximum allowing to download necessary documents and forms. - Public Sector Modernization Project (World Bank credit) — five components: - The first component: objective of strengthening the public service management. The pilot program will be implemented at the ROA Government Staff, the ROA Ministry of Finance and Economy and the ROA Ministry Economy. It is expected that the testing will result in drafting a document that outlines all the gaps and issues, which will be explored as a result of introduction and application of this pilot system. Only after the results of this study are available, it will be possible to decide on options and format for future targeted introduction of such systems at other government bodies. - The second component objective: installation of government electronic procurement system both at the central and regional and city of Yerevan levels. - Under the third component: envisaged to strengthen the Supervisory Board through elaboration of audit standards and methodologies as well as developing e-governance capacities. - The forth component objective: developing capacities for improved policy development and implementation, which also includes the installation of electronic documentation flow system. - The last component envisages capacity development for the local-self governance bodies through introduction of electronic systems for provision of services. - Strategic and coordination requirements: - Further development of e-governance requires a strategic approach and a high level of coordination; current approach is not well coordinated and risks repeated investments. - Approaches presented align with the Concept of information technologies development elaborated by the RA Ministry of Economy. - Two backbone options for e-governance network infrastructure: - The network infrastructure of e-governance can be based on an e-governance backbone specially designed for that purpose, with only public administration bodies being connected to it; - A national telecommunication backbone is established, within which the Government acquires a certain volume of capacities in order to provide its electronic services and to insure intergovernmental communication. - Trade-offs: the first approach could ensure higher reliability and independence; the second allows private sector involvement. Given limited public resources, participation of the local IT private sector can be the beneficiary variant. - It is necessary to develop legal, institutional and regulatory framework for cooperation of the public and private sectors. - Compatibility framework (requirements and aspects): - Importance: a compatibility framework is required as the basis for providing high quality online services and for elaboration of a unified system. - Definition: the compatibility framework is a system of standards and guidelines determining ways of interaction between organizations. Standards and approaches set in the all-European compatibility program must be considered. - Three main aspects highlighted in the all-European compatibility framework: - Organizational compatibility: identification of business objectives, modeling of business processes and cooperation of different administrative units aiming at exchange of information flows and having different internal structures and processes. - Semantic compatibility: ensuring adequate semantic perception of transmitted information by any other program, which initially has not been designed to receive such information. - Technical compatibility: e-governance systems must be technically capable to connect with each other and interact; includes interaction environment, interconnection of services, presenting and exchanging information, accessibility and security. - Institutional requirements: development of RA compatibility framework requires a strong and efficient institutional basis; establishment of the Integration Competency Center can play a significant role in coordination of technical development of e-governance programs and services and in developing a unified and commonly accepted policy and strategy of e-governance in Armenia. - Efficiency, reengineering and infrastructure gaps: - E-governance development must promote savings and require reengineering of operating business processes. - Unified information centers and technological platforms must exclude double investments and support efficient programmatic development across government. - Currently basic technical infrastructures for e-governance in Armenia are insufficient: telecommunication network of the government, government’s unified portal and the user identification point must be addressed urgently. - Target services, benchmarking and timelines: - Initial target group: 20 public services subject to benchmarking on national levels in EU member states and other countries. Benchmarking determines complexity (proficiency) level of given online service based on 5 levels. - The 20 services are formed on the basis of citizens' “case-studies/life situations” and “business episodes” for which e-governance services are rendered. - Sustainable Development Program target: - It is envisaged that already in 2012 Armenia will reach EU average indicators with respect to development level of e-governance services provided to business sector, and as far as the citizens are concerned this process will last longer. - It is expected that by the end of 2010 the GoA will develop a comprehensive program aimed at ensuring the mentioned level of e-governance services, which will comprise a detailed action plan, estimations of required investments and a corresponding supervision framework. - Expenditures of e-governance maintenance and development must be included in the budget framework and have corresponding reflection in 2010-2012 Medium Term Expenditure Frameworks. - It is essential to carry out analysis of total incomes and expenses necessary for achieving the set goals for each separate service, to determine a resource distribution priority program. - Demand and accessibility considerations: - Expanding e-governance services and raising their quality should not be an aim in itself; it is important to assess demand level of citizens and/or business circles for each online service, especially considering accessibility issues for certain population groups (e.g., socially vulnerable groups using social security services). - The GoA is expected to continue efforts to ensure internet accessibility and raise computer literacy; expanding e-governance services can motivate internet and computer usage. - Transparency and anti-corruption potential: - Expanding e-governance services can become a reliable tool to ensure transparency of public administration activities and reduce corruption risks; experience of new EU members shows that electronic systems and reduced direct, personalized communication between civil servants and private sector positively impact corruption control. ### Institutional steps and coordination - In September 2007 an inter-ministerial working group chaired by the ROA Minister of Trade and Economic Development was established by the ROA President Decree No. NK-113-A dated July 3, 2007, assigned to submit by the end of the year a new draft concept paper on development of information technologies, which would also include the introduction of electronic governance system in Armenia. *Source: _cr08376 - 411. Public administration system reforms are implemented in three key directions:* ### 430. Currently, a number of pilot projects have been initiated to this effect, ### _cr08376 - 430. Currently, a number of pilot projects have been initiated to this effect, ### Pilot projects and ICT for service delivery - Pilot projects initiated to: - design and build internet networks in some regions (marzes); - implement distant learning programs for children of remote (bordering) villages through use of those networks and with support of specialists from schools in Yerevan or marz centers; - provide medical consultancy and services. ### E‑governance introduction and expansion - Since 2001 in 10 marzes and starting from 2003 in 12 towns of Armenia, elements of e‑governance introduced with UNDP “Support to IT Society and Democratic Governance Development”. - Internet centers and a regional administration system established (www.region.am). - Outcomes and plans: - Increased availability and ease of information exchange. - Planned for 2009: introduce the e‑systems of regional administration in 219 communities. - Planned for 2009: establish local networks in 84 self‑governance bodies. - Planned activities: establish a unified information network for the communities and undertake capacity enhancement (including training of the staff). ### Government coordination, project management, and performance control - Communication between Government staff and ministries will be enhanced for better coordination and systematization of functions. - Clarification of relations and functions: - Relation between the SDP and other strategies of the ROA Government, and functions of Government staff and ministries, will be clarified using a standard evaluation approach to policy development and policy assessment. - Establishment of a Government project management/performance control unit: - Will be accountable to the Prime Minister; - Will submit progress report on the implementation of set objectives; - Will monitor the process of performance improvement at governance bodies. - Current functions performed by ROA Public Sector Reform Commission, PRSP Secretariat, ROA Ministry of Finance, and ROA Ministry of Economy will be transferred to the relevant unit of the Government staff. - Introduction of criteria for assessment of service provision process and quality improvement at ministries and departments. - Ministers required to submit annual reports of conducted assessments and undertaken improvement measures. ### Publicity, transparency, and civil society participation - Adoption of the ROA Law “On Freedom of Information” has enhanced development of systems for governance effectiveness, transparency and accountability. - 2004–2006 Government policy aimed at: - introduction of main provisions of the new Law on information freedom; - establishment and capacity development of structural units within government bodies to process and disseminate information. - Public participation trends: - Encouragement of professional, advisory boards adjunct to governance bodies with NGO representation. - Challenge: transfer experience from PRSP (SDP) and anti‑corruption program development to ministries, regional governments and local self‑governance bodies. - Strengthening NGOs and promoting cooperation between civil society and public administration to ensure success of public participation. - Presidential decree dated May 13, 2005: “On Approval of Procedure for Allocating Funds from the State Budget as Grants to Non‑Governmental Organizations” creates opportunities for development of a participatory process culture. ### SDP monitoring and evaluation institutionalization - Institutional foundations of the SDP monitoring and evaluation system will be laid down at ROA public governance bodies to provide opportunities for participatory monitoring and fuller implementation of accountability, transparency and publicity principles. ### Decentralization, territorial administration, and regional development experience - Reforms based on key principles: - decentralization and deconcentration; - strengthening local self‑governance; - inclusion of regional development specifics into strategic national programs. - 2002–2006 donor‑supported prospective regional development plans designed for Tavush, Gegharqunik, Ararat, Vayots Dzor, Syunik. - Donors also supported implementation, injecting appropriate financial resources into the ROA State Budget. - Comprehensive plans for Gegharqunik and Tavush were based on PRSP priorities and included participatory processes and monitoring/evaluation (including participatory monitoring). - Government will apply the institutional system developed in Tavush and Gegharqunik to other marzes to achieve objectives mentioned in paragraph 302 in a more systematized manner. - Comprehensive regional development projects will: - define field priorities with local societies, local government bodies, regional authorities and the Ministry of Territorial Administration; - involve additional financial, technical and professional recourses from the state budget and international/donor organizations; - ensure transparency of activities and funds spent and evaluate them via monitoring systems; - involve wider circles of regional society in planning and implementation. - Participatory structures: - regional development committees within regional councils; - field task groups; - regional NGO networks mandated to represent population views as members of regional development committees and field working groups. - Emphasis on equal representation of regional authorities and civic society in these structures. ### Regional development concept — fundamental provisions - The Government’s regional development concept includes: (i) Main priorities and directions for regional development should be reflected in medium‑term comprehensive regional development plans prepared by regional governments and approved by the ROA Government. (ii) Main objective of the Regional Development Plans (RDP) is to ensure implementation of development priorities set by the PRSP and other strategic Government programs, taking into account region‑specific features. (iii) Preparation and implementation of the RDPs should be done with active participation of the civil society. (iv) The RDPs shall go through periodic reviews connected to review and approval of the SDP and other strategic programs and based on circumstances arising during RDP implementation explored by monitoring and evaluation. (v) During RDP preparation and implementation, the role of regional councils will increase and capacities to coordinate and manage the process will be created at regional governments. (vi) Based on RDPs drafted with a uniform methodology, Government regional policy priorities will be clarified and set forth to target alleviation of human and income poverty and mitigation of regional inequalities. (vii) Regional structure of capital expenditures made by the Government for social infrastructures will target, first of all, reduction of human poverty level with priority given to poorer marzes. (viii) To reduce income poverty and mitigate inequalities in economic development of marzes the Government: - will allocate funds to study the economic potential of every marz; - most likely, will support preparation of development plans for priority sectors in marzes and presentation of these plans to local and foreign investors and entrepreneurs; - will make some investments into regional infrastructures (also in cooperation with private sector) to significantly improve conditions necessary for business development; - in certain cases will provide direct and indirect financial support to entrepreneurs in the poorest marzes and regions (especially, in high mountainous and bordering areas) for launching business. - These priorities and activities will influence decisions by the supreme board for development of medium‑term expenditure frameworks on intersector and regional allocation proportions for surplus budget resources. - In coming years, marz‑formulated plans and priorities using a uniform methodology and Government territorial policy will have a more significant role in designing strategic national development plans. ### Strengthening local self‑governance capacities and required reforms - New ROA Law “On Local Self‑Governance” improved and added functions and powers for local self‑governance bodies. - Challenges: - Poor administrative capacities and administrative fragmentation reduce efficiency in exercising new mandatory and delegated powers. - Important measures: - Consolidation of communities and creation of intercommunity unions; - Strengthening management capacities in large rural communities; - Provision of workstations with modern hardware and communication means. - Required reforms (summary): (i) Adoption of legislative acts on implementation of mandatory powers of communities, which will: - set forth procedures, norms and criteria for implementation of mandatory powers; - clarify and establish the least amount of financing required for exercising mandatory powers; - provide opportunity for internal (community council, community members) and external supervision over implementation of mandatory powers. (ii) Setting of procedure and financing mechanisms for implementation of powers delegated to communities by the Government, clarifying implementation functions and amount of financing required. - Once legislation defining procedure for mandatory powers is in place, it will be possible to enforce Article 67 of the Law “On the Local Self‑Governance”. - Government will improve the financial equalization system to account for both per capita income capability and expenditure needs of communities, directing financial flows mainly to the poorest communities. - Expected results: - Local self‑governance bodies will begin exercising many currently unexercised powers; - Administrative expenses will significantly reduce; - Efficiency of the local self‑governance system and availability and quality of provided services will increase; - New preconditions for supervision by community councils and public will be created; - Efficiency of implemented powers and use of financial resources will increase. ### Introduction and development of civil service - Since 2001 civil service and relevant professional services introduced into ministries, territorial administration bodies and local self‑governance bodies to separate political, discretionary and service positions and recognize chief of staff as senior civil servant among professional civil servants. - According to ROA Law “On the Civil Service”, all positions were classified and provided with descriptions. - Current limitations: - Human resource management information system yet to be developed; - Staff management capacities in ministries remain weak; - Civil Service Council’s ability to efficiently enforce the Law is limited, impeding establishment of professional merit‑based civil service. - Progress in last 5 years: - Active development and pilot period of establishment and introduction; - Growth in civil servants’ professional knowledge and skills; - Progress via attestation system and open competitions for vacant positions; - Mandatory training once every three years. - Pay and social protection: - A pay scale developed on the basis of position groups and subgroups linked to professional skills and length of service. - Issues of social protection (pension, life and medical insurance, other social security issues) not completed yet. ### Policy to improve civil service effectiveness and legal framework - Government policy priorities: - Improve legal framework; - Appoint to vacant positions on a competitive basis; - Establish staff management units in governance bodies as preliminary phase. - Need to review concept of civil service and public service to harmonize different types of service and enable mobility between them. - Planned adoption of ROA Law “On Public [State] Service” to: - complete legal framework; - provide classified list of officials by type and group of service with respective titles; - link professional positions to content of implemented work and align titles to work nature; - separate administrative positions from professional positions to enable differentiated staff management policy. ### Remuneration, retention, and Table 10.4 - Issue: - Salaries of civil servants are noncompetitive compared to private sector, causing drain of qualified specialists to private sector. - Civil servants’ pay system and pay level do not sufficiently retain qualified personnel despite certain salary increases. - Policy response: - Official salaries of civil servants will increase during the entire SDP period with rates higher than the average for economy in general (see Table 10.4). - Table 10.4: Average Monthly Salaries for Employees of Public Administration System in 2007-2021 (AMD ’000) - Employees of public administration bodies, of which - 2007 114.9 - 2008 127.5 - 2009 144.0 - 2010 162.8 - 2011 184.0 - 2012 207.8 - 2015 300.0 - 2018 432.8 - 2021 624.5 - Civil servants - 2007 104.9 - 2008 127.9 - 2009 144.5 - 2010 163.3 - 2011 184.5 - 2012 208.5 - 2015 300.1 - 2018 434.1 - 2021 626.5 *Source: IMF staff compilation of the cited PDF chapter.* ### 448. In the same time, it is important to provide civil servants with some social ### _cr08376 - 448. In the same time, it is important to provide civil servants with some social ### Civil service reforms and social protection - Develop and adopt relevant laws for pension and medical insurance of public servants in the coming years. - Introduce and enhance the civil servant code of ethics: - The code currently approved by the Civil Service Council will be enhanced and brought into compliance with the unified code of ethics for public servants of the European Union. - Develop a training system for civil servants: - New programs and potential for training exist, but implemented training policy is described as "still passive." - Approval of a new concept for training, liberalization of training and liberation from administrative regulations aim to replenish the civil service with knowledgeable personnel and motivate staff to receive professional training. - Performance assessment and incentives: - The attestation process is currently identical to the admission process and does not encourage mobilization of capacities. - There is no direct link between work assignment, job description and material and moral incentives. - Absence of a performance assessment system; its introduction would enable linking performance results to remuneration and promotion systems. - Applicability to other public services: - Issues noted similarly apply to tax, customs, diplomatic, police, community service, etc., because their activities are regulated by main principles of civil service. ### Financial management system reforms (2002–2006 and planned) - Medium-Term Expenditure Framework (MTEF): - Transition to medium-term programming of public expenditures; since 2003 the MTEF has been integral to budgeting under the Law. - MTEF aligns with PRSP principles and became the main source to finance PRSP implementation. - Move toward output-based / program budgeting: - First steps undertaken in 2004-2006, yielding results: - Budgets and MTEF proposals of four selected ministries (Education and Science, Health, Labor and Social Issues, Culture) are submitted in a new, programmatic budgeting format. - Internal and external reports of those ministries consolidate financial and non-financial output indicators. - Necessary capacities for budget preparation and execution on programmatic principles were established at those ministries. - Ten additional ministries and departments included in 2007; since 2008 involved also all other ministries and state agencies. - Planned completion: - In 2010-2011 the ROA Government will complete a full transition to the ROA State Budget preparation and execution by programmatic budgeting principles. - Objectives: more targeted and addressed budget allocations; increase spending efficiency; expand independence and flexibility of line ministries in budget execution as reserved by the Law. - Attention to introduction of a system of program output indicators, and establishment of monitoring, evaluation and internal audit functions in ministries and departments. - Advanced budgeting methods to be introduced at regional level (programmatic budgeting or output-based budgeting). - Audit and internal audit framework: - New constitution (2005) increased sovereignty and independence of the ROA Chamber of Control; relevant amendments in new law on the ROA Chamber of Control. - Segregation of internal and external audit functions to be further clarified. - During 2007 the ROA Government with World Bank assistance drafted the law “On Internal Audit”, planned for discussion and adoption by the ROA National Assembly in 2008; the law will enter into force in January 2009. - Interim activities supported by the ROA government and World Bank: - Developing criteria (standards) for internal audit based on corresponding international standards. - Developing a manual on internal audit, including sample documents (audit plan, sample forms of working documents, sample forms of reports, etc.). - Developing training, teaching and certification plans for internal auditors, and preparation of examination tests for certification. - The manual must be developed on the basis of the “Strategy for introducing teaching, continuous training and qualification system for public finance management system specialists”, developed with World Bank assistance and to be approved by the ROA government in 2008. - Treasury and accounting reforms: - Second generation reforms of the ROA Treasury System (2003-2006) aimed to transform Soviet-era accounting into a system compliant with international public sector accounting standards and consistent with Government Financial Statistics (GFS 2001). - Actions undertaken: - Approval of ROA public sector accounting system and the third generation treasury reform program (2003). - Development and approval of new budgetary and accounting classifications and guidelines. - Action plan for introduction of financial reporting standards. - Identification of ROA Government units subject to inclusion into consolidated reports. - Training programs strengthened capacities to prepare and execute 2008 budgets under new classifications. - State non-commercial organizations: - After adoption of ROA Law “On State Non-Commercial Organizations”, many social sector entities reorganized into state non-commercial organizations, which are main service-delivering organizations in the social sector. - Government will increase effectiveness of management and performance, increase performance accountability and introduce a monitoring system while ensuring independence and free competition remain priorities. - IPSAS and financial management information systems: - With World Bank assistance, legal and institutional frameworks are being developed for adoption of accrual-based IPSAS and designing the Government financial management information system; works to be completed in 2009-2010. - Strategic program for public finance management: - Government will develop, within a year, a comprehensive strategic program for public finance management and a corresponding action plan. ### Tax/GDP ratio goals and tax administration reforms - PRSP envisaged an annual 0.5 percentage point increase of tax and duty collections against GDP. - Observed 2003-2006: GDP/Taxes ratio remained almost unchanged despite measures. - Government targets: - Increase the GDP/Taxes ratio by 0.6 percentage points in 2007. - Increase the GDP/Taxes ratio by 1.6 percentage points in 2008. - Increase by annual average of 0.3-0.4 percentage points during the entire planned period. - Main reforms and activities planned: - (i) Correct and timely taxation of large companies/large-scale business. - (ii) Defining an efficient tax burden for the small business through implementation of mild tax administration. - (iii) Introduction and development of a system of voluntary exercise of tax obligations (self-assessment system). - (iv) Adoption of new tax policies. - (v) Improvement of tax administration legislation, including simplification and clarification of provisions and establishment of a unified tax system. - (vi) Development and introduction of mechanisms for VAT assessment in agriculture. - Modernization and capacity enhancement of tax and customs bodies: - Restructuring of tax and customs bodies and increase of efficiency of administration. - Improvement of logistics. - Installation of modern information technologies. - Deployment of modern policies for human resource management. - Overcoming cases of corruption in tax and customs bodies. ### Main target indicators of the ROA governance system development (targets vs. baseline) - Government plans that indicators characterizing the ROA governance system will surpass the 2006 level of the Eastern Europe and Baltic countries by 2012 and by 2021 reach the level of Western Europe countries in 2006. - Primary importance: further democratization of governance process, securing rule of law and anti-corruption measures. - Table 10.5: Planned Indicators for the ROA Governance System (percentage rating, 0-100, 2006 - 2021): - 1. Civil Society Participation in the Process of Government Formation, the Freedom of Speech and Mass Media - 2006 (actual): 26.9 - 2007 (actual): 30.0 - 2010: 50.0 - 2012: 65.3 - 2015: 72.0 - 2018: 80.1 - 2021: 90.6 - 2. Political Stability - 2006 (actual): 35.1 - 2007 (actual): 42.3 - 2010: 51.2 - 2012: 56.6 - 2015: 62.0 - 2018: 69.0 - 2021: 76.4 - 3. Government Effectiveness - 2006 (actual): 51.2 - 2007 (actual): 46.4 - 2010: 58.1 - 2012: 63.1 - 2015: 71.5 - 2018: 81.6 - 2021: 90.0 - 4. Regulatory Function Quality of the Government - 2006 (actual): 59.0 - 2007 (actual): 60.2 - 2010: 67.8 - 2012: 71.7 - 2015: 77.0 - 2018: 81.4 - 2021: 89.6 - 5. Rule of Law - 2006 (actual): 38.1 - 2007 (actual): 40.5 - 2010: 45.1 - 2012: 51.3 - 2015: 63.4 - 2018: 78.7 - 2021: 90.0 - 6. Control of Corruption - 2006 (actual): 35.0 - 2007 (actual): 30.0 - 2010: 47.1 - 2012: 55.3 - 2015: 68.9 - 2018: 79.3 - 2021: 90.2 ### Judicial system reforms - Objectives and principles: - Develop a more efficient and accessible judicial system to ensure legal and social guarantees, accessibility of justice, protection of human rights and fundamental freedoms, and increase legal practice efficiency. - Constitutional reforms aimed at establishing an independent and efficiently functioning judicial system in line with Council of Europe commitments. - Key constitutional and legal changes: - Constitutional amendments (2005) established the General Assembly of Judges as supreme self-governance body of judicial authority and revised procedures for composition of the Council of Justice to exclude executive representation and reduce executive influence over judicial appointments and disciplinary proceedings. - Cassation Court status clarified as the highest judicial instance of the Republic of Armenia (except constitutional justice matters) to ensure uniform application of law. - Second phase of judicial reforms: - Concept based on increasing independence, autonomy and self-governance of judicial authority, financial independence, and separating judicial practice from court administration; aligned with EU - Armenia ENP action plan requirements. - July 2006: National Assembly adopted first package of legal initiatives for the 2nd phase, including ROA Law “On Judicial Service” to transfer management and administration functions to a newly created Judicial Department. - February 22, 2007: National Assembly adopted the ROA Judicial Code, which: - Includes conceptual provisions and international requirements. - Defines self-governance bodies of judicial authority. - Clarifies mandate of the Council of Justice. - Envisages establishment of separate administrative courts, specialized first instance criminal and civil courts, and a court marshal service. - Regulates human resource policy issues of judicial bodies. - Stipulates the basic code of ethics for judges and procedures for disciplinary sanctioning. - Provides for establishment of a Judicial Training School for continuous education of judges. - New Judicial Code establishes a new system of first instance courts including specialized administrative, civil and criminal courts established in 2007. - Need for establishment of the administrative court is included in the Action Plan of the EU-Armenia European Neighborhood Policy (Primary Area 1, item 8). - Complementary legislation: - New Codes for Criminal, Civil, and Administrative Courts developed in line with the revised Constitution. - Revision of constitutional provisions related to the Constitutional Court and expansion of persons eligible to apply to the Constitutional Court. - ROA Law “On Constitutional Court” developed and adopted on July 1, 2006. - ROA Law “On the Office of Public Prosecutor” adopted on February 22, 2007: - Introduced a new concept eliminating over-centralization in the prosecutorial system. - Prohibited case investigations by the prosecutor’s office, reserving oversight of legality of inquest and investigation to prosecutors. - Introduced principle that the same prosecutor is responsible for a criminal case from investigation start to end of court trial. *Source: Excerpt from the provided IMF PDF content unit.* ### introduction of proportionate official salaries for judges and prosecutors. In the same ### _cr08376 - introduction of proportionate official salaries for judges and prosecutors. In the same ### Legal and institutional reforms enacted - Laws and amendments adopted to strengthen judicial independence, reduce corruption opportunities, and improve access to justice: - Law “On Advocacy” adopted on February 14, 2004 guaranteeing state guaranteed legal assistance for criminal cases and specific civil cases; introduced the office of public defender and leveled pay for public defenders with prosecutors. - ROA Judicial Code required publication of key judicial acts of the Cassation Court in the “Official Bulletin of the Republic of Armenia” and on the official website of the judicial authority; publication procedures for other instances to be determined by the Council of Court Chairmen. - Laws approved on June 1, 2006: “On Amendments in the Civil Procedural Code”, “On Amendments in the ROA Law on Advocacy”, “On Amendments in the ROA Law on Court Composition” — abolished the institute of specially licensed lawyers required for cassation appeals. - Laws approved on July 7, 2006: “On Amendments and Addenda in the Criminal Procedural Code”, “On Amendments and Addenda in the Civil Procedural Code” — stipulated cassation appeal deadlines, grounds for taking appeals into proceedings, and required Cassation Court decisions to be justified and ensure proper interpretation of the Law. - ROA Law “On Amendments and Addenda in the Criminal Procedural Code of the Republic of Armenia” adopted on February 22, 2007 — regulates impermissibility of reconviction and repeated prosecution, closure of cases for specific offenses upon victim-suspect settlement, and application of an expedited procedure for court trial. - ROA Law “On Commercial Arbitration” adopted on December 25, 2006 establishing alternative dispute resolution mechanisms aligned with the UNICTRAL model law. ### Access to justice and public defender expansion - Main directions and planned actions: - Further expansion of structures for free legal assistance; initial coverage includes criminal cases and some civil categories (alimony collection, compensation for disability or other damages, compensation of losses from death of breadwinner). - Expected expansion to additional civil case categories and subject categories (particularly socially vulnerable groups). - Planned simplification of documentary justification required to obtain free legal assistance. - Action Plan of the EU-Armenia European Neighborhood Policy (Primary Area 1, item 7) highlights enhancement of free legal assistance; a project “Access to Justice” funded by the European Commission to be launched in 2008 supporting the “Bar Association” and “Judicial training school”. ### Transparency, e-governance, and legal expertise - Measures to increase public participation, awareness, and legal expertise: - ROA Law “On Legal Acts” (Article 31, item 8) envisages possibility for other public bodies, legal entities and natural persons to provide conclusions (including expert opinion) on compliance of proposed drafts independently from government legal expertise. - PRSP emphasizes public participation, social partnership, social inclusion, and public awareness as milestones for legal expertise and law development. - Judicial Reforms credit project implementing modern information technologies, including electronic governance systems, to enhance public control procedures and cooperation with the population. - Armenian legal information search system “ARLIS” and websites (www.arlis.am, www.laws.am, www.legislation.am) and Ministry of Justice website (www.justice.am) were launched in December 2005. - Since 2005, important draft laws are published on the Ministry of Justice website for public discussion; opinions received are discussed and published. A “My Right” television show was produced in 2005-2006 and broadcast on the Public Television of Armenia to raise public legal awareness. ### Judicial administration, technology, and training - Court administration improvements: - In the first half of 2005, US “DPK Consulting” implemented a consulting project on caseloads and court administration in three Yerevan courts; software development for automation of court administration and case management launched in second half of 2005. - In 2005 the ROA Laws “On Amendments in the Criminal Procedural Code” and “On Amendments in the Civil Procedural Code” provided for installation of court digital recording system and approved operation, archiving and maintenance procedures for the “SRS Femida” digital recording system. ### Budgetary financing and judiciary salaries (key statistics and scenario) - Historical financing and comparative indicators: - Funds allocated for remuneration of judges in 2004-2006 are almost twice less than the relevant targets set forth in the PRSP; judiciary financing/GDP ratio met only by 60 percent. - Specific weight of total judiciary expenditures in the state budget of Armenia: - In 2002-2004 did not exceed 0.5 percent of total expenditures. - In 2007 the indicator comprised 0.9 percent. - Table 10.6: Specific Weight of Total Judiciary Expenditures in the State Budget (2002) - Armenia 0.4 - Bulgaria 0.7 - Russian Federation 0.9 - Romania 1.7 - Lithuania 1.3 - Slovakia 1.2 - Table 10.7: The Ratio of Per Capita Judicial Expenses/Per Capita GDP (2004) - Bulgaria 0.0025 - Estonia 0.0023 - Latvia 0.0019 - Lithuania 0.0021 - Romania 0.0019 - Russian Federation 0.0033 - Slovakia 0.0024 - Czech Republic 0.0028 - Armenia 0.0008 - Conclusion: judges in Armenia are paid significantly less than in comparable countries, underscoring need for substantial salary increases. - Salary increase scenario (Table 10.8: Average Monthly Salaries in the Judiciary, 2008-2021) — amounts in AMD ’000, Indicators by year: - Judicial System: - 2007 107.8 - 2008 114.0 - 2009 127.7 - 2010 144.3 - 2011 163.0 - 2012 184.2 - 2015 265.8 - 2018 383.5 - 2021 553.4 - Prosecutorial System: - 2007 119.9 - 2008 245.7 - 2009 277.0 - 2010 313.2 - 2011 353.9 - 2012 400.0 - 2015 577.0 - 2018 832.6 - 2021 1201.4 - By 2021 the salaries in judicial system will increase by 5.13 and in prosecutorial system by 10 times as compared to 2007. - Footnote: “The average monthly salary of judges exceeds the average monthly salary of judicial system by about 2.7 times, and in case of prosecutor’s the indicator amounts to 1.2 times.” ### Enforcement, bailiffs, and alternative dispute resolution - Enforcement and bailiff services: - Current mandatory enforcement of court decisions being addressed by improving ESD legal framework and technical replenishment. - Strategic solution: establishment of independent, state licensed private bailiff services (state licensed private entities empowered to enforce court decisions). - Introduction of this institute aims to avoid unwarranted expenses for people. - EU-Armenia ENP Action Plan (Section 4.1.1, Reform of the Judiciary, item 8) considers alternative enforcement services important for increasing efficiency and effectiveness of court decision implementation. - Commercial arbitration and mediation: - ROA Law “On Commercial Arbitration” adopted December 25, 2006 provides an arbitration legal framework; development remains a priority due to lack of prior arbitration institute, qualified arbitrators, and established practices. - Planned activities: training of arbitrators, inclusion of topical studies for judges, implementation of case arbitrations with participation of arbitrators with international standing. - Mediation: development and application of legislation on mediation, especially court adjunct mediation, complying with international standards is an important task. ### Procedural safeguards, experts, witnesses, and expedited trials - Expert evidence and expert status clarification: - Civil and criminal procedural codes stipulate expert’s opinion as evidence, but parties do not have equal rights in selecting experts or presenting expert opinion—more evident in criminal proceedings. - Planned clarifications include whether a separate law on legal expertise is needed, or provisions should be in procedural codes, and defining parties’ rights at pre-court and trial stages and expert competence checks. - Witness and victim protection: - ROA Law “On Amendments and Addenda in the Republic of Armenia Criminal Procedural Code” adopted on May 5, 2006 introduced procedural and extra-procedural activities for protection of trial participants. - Implementation procedures for these activities in administrative and legal relations remain to be regulated; a law regulating these issues is expected. - Expedited trial and consent institute: - Further enhancement of expedite trial in criminal proceedings expected to exclude undue delays and rights limitations from deadline protractions. - Introduction of an institute of consent expected to reserve notable procedural privileges to suspects who support pretrial investigation bodies in disclosing offences. ### Case distribution and anti-corruption measures - Introduction of modern case distribution systems: - Automatic case distribution mechanisms are promoted to exclude arbitrariness and chairman influence in assigning cases and to fight corruption. - The ROA Government anti-corruption program envisages introduction of a computer-based case distribution mechanism. *Source: _cr08376 - introduction of proportionate official salaries for judges and prosecutors. In the same (extracted content).* ### 502. Establishment of an effective system for publication of judicial acts. The Action ### 502. Establishment of an effective system for publication of judicial acts. The Action ### Publication system for judicial acts - The Action Plan of the EU-Armenia European Neighborhood Policy plans to increase the transparency and predictability of judicial acts particularly through creating an effective system of publication of judicial acts (Section 4.1.1, Reforms of the Judiciary, item 4). - The Judicial Code stipulates a compulsory publication of all the judicial acts on the official website of the judiciary. - Works for creation and completion of the website are currently underway. - Future plans: - Development of a unified judicial decision database. - Development and introduction of judicial decision classification system for making the use of precedent more accessible. - Providing public accessibility of this database has a strategic significance. ### Training of judges - The Judicial Code stipulates mandatory training of judges; the judges shall annually take at least 80 and at most 120 academic hours of training. - Course development to fully implement this requirement will include: - General as well as demand-based courses relevant for judges in a given phase. - Specifics of applying judicial decisions that have precedence importance. - Classifiers, in the case of developing judicial decision classifiers. - Courses explaining the IT to be used by judges. - Additional training emphasis: - Facilitation of training for judges who are members of the Council of Justice specifically on issues related to appropriate implementation of their responsibilities as members of the Council of Justice. - This training will support due implementation of Council of Justice functions such as human resource policy in the judicial system, formulation of practice for interpretation of code of ethics of judges and application of disciplinary sanctions to judges. ### Training and education of judicial servants - The judicial service system was introduced in Armenia in 2006. - As a result of 2006-2007 legislative amendments the judicial servants have assumed many functions related to facilitation of regular operations of court system. - Development of judicial servants’ training courses is prioritized on issues including: - Preparation of budgetary requests for the courts. - Summarization of statistics and practices. - Human resource management. - Installation and application of IT. ### Equipment, technical assistance and archives - Continue to provide equipment and technical assistance to the First Instance, Appeal and Cassation courts and the Constitutional Court. - Activities include, inter alia, introduction of modern approaches and technologies for archive management and maintenance, provision of new software and technical assistance to staff for implementation of newly assumed functions. ### Public awareness and legislative drafting - Raising public awareness about legal acts is crucial for sustainability and enhancement of publication achievements. - Public discussions of draft legislative acts are considered an important strategic activity. - Draft legislation developed by the Ministry of Justice is already published and submitted for public discussion on the official website of the Ministry. - It is necessary that in the future such procedure is stipulated by the Law for legislation drafted by other government bodies as well, to guarantee civil society’s awareness and active participation. ### Maintaining public order, public security and fight against criminality - Maintaining public order, ensuring public security and efficiency of fight against criminality, as well as transparency, quality and accessibility of police services are key prerequisites of the poverty reduction strategy. - Police reforms implemented in 2001-2007 covered key directions: - Transfer of criminal-executive institutions from the RA Ministry of Interior Affairs to the Ministry of Justice in 2002; Fire Protection Department administered by Emergency Situations; protection function transferred in phases from RA Police to RA MOJ over 2006-2007. - Restructuring the Ministry of Interior Affairs into Police in 2003, depolitizing the system; RA Law On Police defines that the post of the police chief is not a political post and only a person serving in police can be appointed. - Adoption in 2001 of RA Law On Police establishing tasks, legal basis, principles, structure, rights and obligations, financing and supervision; police legislation formed (8 laws, around 80 GoA decisions of normative act nature, 35 orders issued by the chief of police of RA). - Development of police legislation to align with international standards, emphasizing human rights and excluding possible arbitraries. - 2002 law on Serving in Police set main principles for serving in police; adoption of “The Disciplinary Rule Book of RA Police” in 2005 regulating disciplinary rules, official investigation, applying disciplinary punishments and code of ethics. - Introduction and future harmonization with RA Law On Special Public Service (in effect since January 1, 2008). - RA Police to keep the Public Register (RA Law On Public Register) accumulating population information from various state agency databases; the register will shape the Register of Voters. - Planned improvements: information accumulation mechanisms to ensure accuracy and up-to-dateness; strict supervision over legal basis for utilizing the information; passing a number of legal acts and large-scale organizational activities. - The Public register of Population envisaged to serve as a core for formation of an informational society, contribute to full introduction of e-governance system and improve quality of e-services. - Ensuring publicity and transparency of police activities: since 2005 leadership and chiefs inform the public through regular press conferences and briefings; public information available at www.police.am including legislation, summary of crimes, statistical and analytical information; citizens can address leadership with questions. - Transfer of investigation function from Prosecutor’s Office to investigation bodies; about 90% of cases will be transferred from the Prosecutor’s Office to the General Investigation Department of RA Police (GID); organizational activities undertaken: structural changes of GID, training of investigators. - Anticipated changes with the new Code of Criminal Procedure (in development) expected to settle practical problems and improve crime prevention within the state Program of Crime Prevention. - Traffic safety program: State Motor Vehicle Inspectorate reorganized into Traffic Police; detachments transformed into patrol service authorized to fine drivers at place; jurisdiction moved from Territorial Police to centralized Traffic Police administration; Construction and Mounting Department liquidated and functions transferred to municipal communities; technical examinations being delegated to private companies. - Future plans: full re-equipment of the service; raise efficiency of detachments; install video monitoring and speedometer equipment on major crossroads and highways of big cities to register violations; expected outcomes include drastically raised discipline of traffic parties, full implementation of inevitability of responsibility for law infringement, reduction of corruption risks in Traffic police. - Financial measure: opening an off-budget account for Traffic Police allowing 70% of sums received from fines for administrative violations to be directed to technical re-equipment of the service, and the remaining 30% paid to the police officer discovering the violation as a bonus. - Establishment of the Citizenship and Migration Department adjunct to RA Police expected; since 2009 planned introduction of Passports and ID Cards of RA citizens adjacent to international standards: - Passports with vital data to be used outside the Republic of Armenia. - ID Cards to be used only within the country. - A package of legislative amendments will be developed followed by organizational works. ### Police remuneration, social security and staffing - The system of remuneration and social security of police officers is of utmost importance for efficiency of reforms and anti-corruption strategy. - The average monthly salary of 2007 (63 thousand drams) is uncompetitive against the private sector, substantially lower than average monthly salary of employees of the judicial system, prosecutor’s office and other public administration bodies, and lower than average monthly salaries of police officers in a number of European and CIS countries (see Table 10.9). - Table10.9. Average monthly salaries of police staff in RA, and a number of EU and CIS countries (2007) - Country Average Monthly Salary (USD) - 1. Estonia 1,630 - 2. Poland 1,100 - 3. Lithuania 1,050 - 4. Bulgaria 450 - 5. Russia 600 - 6. Ukraine 700 - 7. Georgia 500 - 8. Armenia 200 - Observations and recommendations: - Anti-corruption policy should be based not only on improving remuneration and ensuring social guarantees of judges and prosecutors, but also of officers of other law-enforcement bodies to avoid salary differentials encouraging corruption and outflow of specialists. - In the last 5 years among officers released of their posts only one out of each 4 posts has been replenished; this is mainly a result of a combination of responsible and hard work with unequal remuneration. - Recommendation: throughout the implementation of the Sustainable Development Program it is recommended to raise the official salaries of police officers in a progressive way bringing it to the level of average salaries of civil servants. - Table 10.10. Average monthly salaries of RA Police officers in 2008-2021 - 200820092010201120122015 20182021 - Average monthly salary of RA Police officers thousand drams - 83.7110.5145.8184.5210.0306.0 447.8654.5 ### Anti-corruption policy - Citizen surveys show corruption in Armenia is problematic in areas of commercial activities, issuance of licenses and permits, tax collection and customs services. - Corruption Perceptions Index by “Transparency International” for Armenia in the last three years: 3.0 in 2003, 3.1 in 2004 and 2.9 in 2005. Armenia is ranked 88 among 159 countries. - The anti-corruption strategic program has been in place since 2003; prior to that, legal acts and organizational measures were implemented (e.g., adoption of the ROA Law “On Civil Service” on December 4, 2001). - In 2003-2007 the ROA strategic anti-corruption program executed its mission via: - Adoption of many legislative documents aimed at prevention of corruption (more than 50 laws and secondary legislation documents). - Establishment of new institutional structures. - Accession to recognized anti-corruption international organizations (the Council of Europe GRECO and the OECD Network for Fighting Corruption in Transition Economies). - Signing and ratification of international agreements (the Council of Europe Civil Law Convention on Corruption and Criminal Law Convention on Corruption, the UN Convention against Corruption). - One of the challenges is fulfillment of commitments assumed under those documents. *IMF content unit _cr08376 - 502. Establishment of an effective system for publication of judicial acts. The Action* ### 514. The ROA strategic anti-corruption program has promoted the establishment of ### _cr08376 - 514. The ROA strategic anti-corruption program has promoted the establishment of ### Anti-corruption institutional reforms and bodies - An anti-corruption council chaired by the ROA Prime Minister was established by ROA Presidential decree. - An ROA anti-corruption strategy monitoring commission adjunct to the Council was established. - An anti-corruption division was created within the ROA General Prosecutor’s Office and later reorganized into a department. - The ROA Police and the ROA National Security Service have similar anti-corruption units. - Assessment: - The anti-corruption council can be considered an established structure. - The anti-corruption strategy monitoring commission “needs revising” because it lacks professional auxiliary structures and mainly consists of representatives of political parties and NGOs proposed by those parties; the NGOs represented are “not yet showing interest in the process of joint fight against corruption.” - Recommendation: - When adopting a new anti-corruption strategy, revise the principle of composition of these institutional structures and the requirements set for them. - Discuss establishment of a specialized structure to assume implementation of the anti-corruption strategy and policies and to coordinate activities of specialized anti-corruption units within law enforcement bodies (currently partially carried out by the ROA General Prosecutor’s Office). - The proposed new structure would be able to conduct awareness raising activities and cooperate with civil society to implement joint initiatives. ### Monitoring, statistics, and indicators of corruption - Prior to 2007, Armenia had an approved methodology for maintaining criminal corruption statistics under 59 cases; the ROA Police summarized law enforcement data and submitted them to the ROA National Statistical Service. - Taking into account international experience and the principle that only violations related to the abuse of office should be considered corruption, “the number of corruption offences was reduced to 22,” which “reflects the fight against corruption more adequately and excludes consideration of economic crimes as corruption.” - The report notes that the 22-offence list “should be completed by a number of other types of crimes, which in compliance with the provisions of the UN Convention against Corruption are corrupt by nature and are subject to special registration /e.g. inducing to bribery or commercial bribery, bribing for false evidence, false conclusions or incorrect translation, etc/.” - Recommendation: - Develop and complete a system of anti-corruption monitoring and evaluation indicators to obtain a more comprehensive picture of the fight against corruption and to monitor it across sectors: civil service, police, prosecutor’s office, judicial system and others. ### Civil society, media, education, and awareness - The involvement of civil society is “another important mission” of the ROA anti-corruption strategic program. - Active propaganda and proactive participation of mass media, TV and NGOs have communicated new signals to society and government bodies. - According to Transparency International, one reason for the stable corruption perceptions index is “the unawareness of citizens and population of Armenia about corruption or their own misinterpretations and inaccurate perceptions of corruption.” - Recommendation: - Implement education and information campaigns among the population; educational and explanatory policies should be an important component of the fight against corruption. - Promote NGO-organized instructional activities, incorporate subjects on reasons of corruption and its consequences into the official curriculum, and facilitate training seminars for public servants and private sector employees on methods of fighting corruption and anti-corruption mechanisms. ### Legal framework, criminalization, and public service ethics - Precise definition of various corruption practices as criminal offences is integral to the fight against corruption; education and awareness alone are not sufficient. - Recommendation: - Bring definitions of corruption crimes and their content in legislation into compliance with international standards, in particular with requirements of the Criminal Law Convention on Corruption of the Council of Europe. - Replace complex and segregated provisions with fewer provisions that include all cases of active and passive corruption. - Envisage criminal responsibility for corruption offenses for legal entities as well (currently only natural persons are subjects of criminal responsibility under the Criminal Code; legal entities face only administrative responsibility). - Relevant draft legislation regulating criminal responsibility of legal entities “will be submitted to the ROA National Assembly.” - Public service ethics: - Urgent needs: development of a unified public service system, application of unified European code of ethics for public servants, adoption of specific codes of ethics for certain professional services. - Recommendation: - Introduce strict disciplinary penalties for violating the code of ethics and establish detached units in public administration bodies supervising the code of ethics, conflict of interests and financial statements. - Issues remain unresolved regarding receipt of gifts by public officials and avoiding conflicts of interest; legal and practical application remain problematic. - Recommendation: - Establish controlling mechanisms over the property of public servants and cross-validate financial disclosures (including clarifications and cross-validations carried out by the State Tax Service) to raise the level of responsibility for declaring personal incomes and property. ### Financial control, audit, and anti–money laundering (AML) - A financial supervision center implementing the Republic of Armenia legislation on money laundering adopted in 2004 is established under the Central Bank of Armenia. - Assessment: - The legislation “still needs improvement; specifically, it should be brought into compliance with the requirements of international laws.” - Results of the center’s activities “are not tangible yet”; to date the ROA General Prosecutor’s Office has received “only a few reports on suspicious transactions, but those cases were not fully investigated.” - Financial control/audit institutions: - Internal audit units were established in the ROA Ministry of Finance and Economy and other public administration bodies; relevant reforms have registered some progress. - External audit is carried out by the Chamber of Control of the ROA National Assembly; the new law on Chamber of Control regulates the activities of this constitutional body and “should become an important unit of fight against corruption in Armenia.” ### Outcome targets in the new anti-corruption strategy - The new anti-corruption strategy will consider the following as outcome indicators: - Transparency International’s Corruption Perceptions Index of 2.9 in 2006 will reach 3.3 in 2009 and 4.0 in 2011; - Freedom House’s transition corruption rating of 5.75 in 2006 will be reduced to 5.4 in 2009 and to 4.25 in 2011; - World Bank Governance Indicator on Control of Corruption will grow from 33.5 in 2006 to 40.5 in 2009 and to 55 in 2011. --- ### Social protection system: objectives, funding priorities and projections - Definition and goals: - Social protection is defined as the comprehensive whole of activities carried out by state and non-state bodies aimed at expanding opportunities of households and individuals to withstand certain risks and satisfy needs. - The goal of state policy is management of social risks with the objective of their regulation and reduction. - Classified social risk groups: Sickness; Disability; Old-age; Survivors/surviving relatives; Family/children; Unemployment; Housing strategy; Other types of social isolation. - State programs and components include: - State Social Assistance Programs (family benefits, disability and other social pensions, one-off pregnancy and childbirth allowances, child care benefits, other pecuniary and non-pecuniary social services), - Social security programs for disabled, veterans and children (rehabilitation and social-medical recreation programs, services at home and in institutions), - State Social Insurance programs (old-age and disability pensions, temporary incapacity and pregnancy benefits), - Employment programs (unemployment benefits, training, public works), - System of allowances for separate target population groups. - SDP funding objectives and growth targets: - SDP targets to increase public expenditure for social protection. Specific growth statements: - “In 2010 the public expenses for social protection as compared to the same indicator in 2007 will increase for about 2, in 2015-4.1, and in 2021 for more than 6.7 times.” - “The ratio of public expenses for this sector to the GDP will also increase, and by 2021 will make 6.9 % against 4.7% of GDP in 2007.” - Table excerpts (as presented in source): - Public expenditure allocated for social protection, AMD mln * 219,2 253,6303.1345.5438.6611.5856.5 1,000.5 - Ratio to GDP, % 6.0 6.16.46.57.57.88.4 7.6 - Index, 2007=100 148.1 171.3204.8233.4296.3413.0 578.5 675.8 - including` Pension provision, AMD mln 158.4 182.5225.2261.5330.7469.6681.1 814.4 - Ratio to GDP, % 4.3 4.44.85.05.66.06.7 6.2 - Ratio to social protection expenditure, % 72.3 71.974.375.775.476.879.5 81.4 - Index, 2007=100 173.5 199.8246.6286.4362.1514.3745.9 891.9 - Other programs of social protection, AMD mln 60.8 71.278.084.1107.9141.8175.4 186.1 - Ratio to GDP, % 1.7 1.71.71.61.81.81.7 1.4 - Ratio to social protection expenditure, % 27.7 28.125.724.324.623.220.5 18.6 - Note: *Starting form 2010 including the expenditures for introduction of accumulative pension system. - Funding allocation and priorities: - Public expenditures for social protection are predominantly allocated to pension provision. - The share of funds allocated to pension provision in total social protection expenditures will grow and “by 2021 will constitute about 80 %.” The total share of all other programs will correspondingly decrease. ### Social assistance system and priority programs (overview and projections) - Policy focus: increase goal orientation and effectiveness of financial assistance through key programs (public benefits, family and other social benefits) and transition from mere financial aids to delivering comprehensive social services (packages) based on need assessment. - Priority programs through implementation of SDP: family benefits; childbirth one-off benefit; child care benefit for children under two; benefits to first degree disabled people and families taking care of a “disabled child.” - Projections excerpt (as presented in source): - Social assistance, employment and other social programs, AMD mln of which- 60.871.278.084.1107.9141.8175.4 186,1 - Family benefits, AMD mln 29.832.837.040.947.062.781.8 85.2 - Share in Social assistance, employment and other social programs, in % 49.046.047.448.743.544.246.7 45.8 - Childbirth one-off benefit, AMD mln 1.34.14.75.18.29.18.6 8.0 - Share in Social assistance, employment and other social programs, in % 2.25.86.16.17.66.54.9 4.3 - Child care benefit for children under 2, AMD mln 0.21.31.61.83.04.05.0 6.4 - Share in Social assistance, employment and other social programs, in % 0.41.82.12.22.82.82.8 3.5 - Benefit to families taking care of first group disabled persons and disabled child, AMD mln 4.65.97.3 10.0 - Share in Social assistance, employment and other social programs, in % 4.34.14.2 5.4 - Other programs, AMD mln 29.533.034.736.245.260.272.6 76.4 - Share in Social assistance, employment and other social programs, in % 48.546.344.543.141.942.441.4 41.1 *Source: IMF staff summary of ROA anti-corruption program and Social Development Program content as presented in the source PDF.* ### 537. The Poverty Family Benefit System (hereinafter PFBS, created in 1999) targeting ### _cr08376 - 537. The Poverty Family Benefit System (hereinafter PFBS, created in 1999) targeting ### PFBS impact on poverty (2005 IHS results) - PFBS activities help to reduce poverty in the country by 1.8 percentage point, including a 2.5 percentage point reduction of extreme poverty. - PFBS predominantly impacts reduction of extreme poverty and is specifically significant in small and medium cities and rural areas. - Due to the PFBS, 35.9 percent of pre-benefit “net” extremely poor population has overcome extreme (food) poverty, but did not move over the general poverty threshold; 0.1 percent among them has moved beyond the general poverty threshold and overcome poverty. - PFBS impact effectiveness: - 36 percent of the country’s “net” extremely poor population moved beyond food poverty. - 5.8 percent of the country’s pre-benefit “net” poor population overcame general poverty due to PFBS. - PFBS Impact Assessments (from Table 11.5): - Pre-benefit “net” poor population: Total, % = 100.0 - Pre-benefit “net” extremely poor population: Total, % = 100.0 - Of which: beneficiaries, % = 25.3 (poor), 50.7 (extremely poor) - Moved beyond poverty due to family benefit, % of beneficiaries = 23.0 (poor), 0.1 (extremely poor) - Moved beyond extreme poverty due to family benefit, % of beneficiaries = ... (poor), 70.9 (extremely poor) - Moved beyond poverty due to family benefit, % of the country’s population in that group = 5.8 (poor), 0.1 (extremely poor) - Moved beyond extreme poverty due to family benefit, % of the country’s population in that group = ... (poor), 35.9 (extremely poor) ### Coverage, registration, and dynamics (1999–2007) - Registration and beneficiary dynamics (Table 11.3 excerpts): - Number of families registered in the PFBS: - 1999 = 520,009 - 2000 = 394,773 - 2001 = 319,587 - 2002 = 272,696 - 2003 = 216,550 - 2004 = 210,053 - 2005 = 208,910 - 2006 = 181,907 - 2007 = 172,484 - PFBS registered families as percentage of total number of families in Armenia: - 1999 = 67.7 - 2000 = 52.8 - 2001 = 44.0 - 2002 = 38.6 - 2003 = 28.4 - 2004 = 27.0 - 2005 = 25.4 - 2006 = 23.7 - 2007 = 22.1 - Family benefit recipient families: - 1999 = 211,555 - 2000 = 199,456 - 2001 = 174,800 - 2002 = 149,603 - 2003 = 141,218 - 2004 = 134,224 - 2005 = 127,167 - 2006 = 130,190 - 2007 = 124,689 - Proportion of family benefit recipient families in the number of registered families, %: - 1999 = 40.7 - 2000 = 50.5 - 2001 = 54.7 - 2002 = 54.9 - 2003 = 65.2 - 2004 = 63.9 - 2005 = 60.9 - 2006 = 71.5 - 2007 = 72.3 - Family benefit recipient families as percentage of total number of families in Armenia: - 1999 = 27.5 - 2000 = 26.7 - 2001 = 24.1 - 2002 = 21.2 - 2003 = 19.2 - 2004 = 17.2 - 2005 = 16.5 - 2006 = 16.9 - 2007 = 16.2 - Interpretation: - During 1999-2007 the number of families registered in the PFBS reduced by around 3 times (67.7 percent in 1999 to 22.1 percent in 2007). - Number of beneficiary families declined in 1999-2006 by 1.7 times. - The proportion of beneficiary families to registered families grew and comprised around 72 percent in 2007. - Declining registrations and beneficiaries are explained by reduction of poverty and extreme poverty. ### Public expenditures, allowances, and adequacy (2000–2007 and projections) - Public expenditures and allowance dynamics (Table 11.4 excerpts): - Total amount of family benefits, AMD million: - 2000 = 17,720 - 2001 = 16,850 - 2002 = 14,850 - 2003 = 12,350 - 2004 = 16,093 - 2005 = 19,557 - 2006 = 24,208 - 2007 = 26,183 - Percentage of the GDP: - 2000 = 1.72 - 2001 = 1.43 - 2002 = 1.09 - 2003 = 0.76 - 2004 = 0.84 - 2005 = 0.87 - 2006 = 0.91 - 2007 = 0.83 - Percentage in the state budget expenditures: - 2000 = 6.8 - 2001 = 6.1 - 2002 = 5.0 - 2003 = 3.4 - 2004 = 4.1 - 2005 = 4.0 - 2006 = 4.2 - 2007 = 4.3 - Average monthly allowance per family, AMD: - 2000 = 7,196 - 2001 = 7,712 - 2002 = 6,554 - 2003 = 7,099 - 2004 = 8,254 - 2005 = 12,200 - 2006 = 15,495 - 2007 = 17,499 - Average monthly allowance per beneficiary family member, AMD: - 2000 = 2,148 - 2001 = 2,255 - 2002 = 1,841 - 2003 = 1,983 - 2004 = 2,520 - 2005 = 2,954 - 2006 = 3,751 - 2007 = 4,375 - Average monthly allowance per beneficiary family member against food poverty threshold, %: - 2000 = 29.9 - 2001 = 30.6 - 2002 = 24.5 - 2003 = 25.6 - 2004 = 28.1 - 2005 = 35.6 - 2006 = 38.0 - 2007 = 41.5* - *Projection - Interpretation: - State budget allocations for family benefits were reduced in 2000-2007 by almost 2 times and comprised 0.83 percent of the GDP in 2007. - In nominal terms total allocations increased by almost 1.5 times (2000–2007), enabling a two time increase of the average size of monthly family allowance for beneficiary families. - In 2006 the average monthly allowance per beneficiary family member covered 38 percent of food poverty threshold (after adjustments described in source). ### Addressness, targeting errors, and distributional outcomes - Addressness measures: - In terms of poverty groups, PFBS addressness is around 60 percent. - Addressness of funds channeled through family allowances is around 61 percent. - PFBS addressness for the poorest 50 percent of population is around 80 percent; 78 percent of PFBS funds is allocated to them. - Around 35 percent of finances through the benefit system are given to the poorest 10 percent of population; 45 percent of people in that decile are benefit recipients. - “Net” extremely poor and poor population comprising deciles 1 to 3 receives 60 percent of the benefit sum total. - More than half of the poorest 10 percent of population (around 55 percent) does not receive allowance—mainly due to composition of population registered in the system. - Coverage and error rates: - 92 percent of pre-benefit “net” extremely poor families registered in the PFBS receive allowance (system margin of error for registered “net” extremely poor families = 8 percent). - In general, 80 percent of registered “net” poor families receive allowance (system margin of error for registered “net” poor families = 20 percent). - 67 percent of registered non-poor families receive allowance (margin of error for non-poor groups is 3 times higher than for poor families). - The PFBS vulnerability assessment is more inclusive than classification solely by poverty groups because it also considers vulnerability (poverty risk). - Distribution by consumption deciles (Table 11.7 excerpts): - Poorest 10%: - Share of benefit recipient population in decile population, % = 44.6 - Share of benefit recipient population in the total benefit recipient population, % = 33.4 - Share of monthly resources provided in the form of family benefits, % = 35.3 - Beneficiary/registered population ratio = 0.9 - 2nd decile: - Share of benefit recipient population in decile population, % = 19.0 - Share in total benefit recipient population, % = 14.1 - Share of monthly resources via benefits, % = 14.0 - Beneficiary/registered ratio = 0.6 - 3rd decile: - 15.5; 11.6; 10.7; 0.6 - 4th decile: - 13.6; 10.1; 9.4; 0.6 - 5th decile: - 11.3; 8.4; 8.7; 0.7 - 6th decile: - 9.0; 6.7; 6.4; 0.5 - 7th decile: - 7.2; 5.4; 4.5; 0.5 - 8th decile: - 6.5; 4.8; 4.7; 0.5 - 9th decile: - 4.5; 3.3; 3.7; 0.5 - Richest 10%: - 3.0; 2.2; 2.6; 0.4 - Total: - Share of monthly resources provided in the form of family benefits, % = 100.0 - Beneficiary/registered population ratio = 0.7 ### Registration barriers and reasons for non-application (2005 IHS) - Major reasons poor families do not register: - More than half of the “net” poor and extremely poor families not registered in the PFBS do not believe they will receive any allowance after applying. - For “net” extremely poor families that have not applied: - 2.1 percent were not aware about the system. - 6.7 percent faced difficulties in obtaining documents. - 53.5 percent do not believe they will get benefit. - Around 18 percent considered themselves well-off. - Difficulties in obtaining documents are more problematic for “net” poor and extremely poor families than for non-poor. - Implication: - A significant part of poor population is not registering in the PFBS. The 2005 IHS indicates more than half of PFBS registered families (55.9 percent) were pre-benefit “net” non-poor families. - Among families registered in the system in 2005: - “Net” poor comprised 44.1 percent, including only 14.9 percent of the “net” extremely poor. - Around 39.1 percent of “net” poor families were registered in PFBS, including 60.7 percent of “net” extremely poor and 12.6 percent of non-poor families. - Around 60 percent of “net” poor families and 40 percent of “net” extremely poor families were not registered in the system. - In 2005 only around 50 percent of the poorest 10 percent of population was registered in the PFBS. - Improvement of system’s addressness and effectiveness should be linked with increasing the number of poor applying to the system. ### Methodological notes on poverty identification - Internationally accepted approach uses population consumption characteristics to identify poverty groups because declared incomes understate true living standards in transition economies. - If identification used declared incomes (2005 IHS): - 26.2 percent of the population would have been extremely poor and 52.3 percent poor. - According to actual consumption (2005), 4.6 percent were extremely poor and 29.8 percent poor. - Declared incomes exaggerate incidence of extreme poverty by 5.7 times and overall poverty by 1.7 times. ### Programmatic context, projections, and policy targets (2008–2021) - Programmatic superiority of SDP over PFBS: SDP is more addressed and effective for increasing living standards of poor population and for poverty and inequality alleviation. - Policy objective (PRSP targets) for 2009-2012: - Match number of benefit recipient families with number of poor families so that ratio of benefit recipient families to poor families equals 1 by 2012 (currently the ratio is 0.7). - In 2013-2021 this ratio will increase, reaching 1.7 in 2021 to ensure funds are channeled to families with consumption below the MCB. - The approach estimates that by matching to the MCB around 97 thousand families will be included in the family benefit system. - Projections and targets (Table 11.8 excerpts): - Public expenditures allocated for family benefits, AMD million: - 2008 = 29,761 - 2009 = 32,757 - 2010 = 36,963 - 2011 = 40,927 - 2012 = 46,967 - 2015 = 62,702 - 2018 = 81,827 - 2021 = 85,245 - Percentage of GDP ratio: - 2008 = 0.81 - 2009 = 0.79 - 2010 = 0.79 - 2011 = 0.78 - 2012 = 0.80 - 2015 = 0.80 - 2018 = 0.80 - 2021 = 0.65 - Note: GDP ratio for 2008-2018 should be the same within the range of 0.8 %. Afterwards it should gradually decrease reaching 0.65% by 2021. - Number of benefit recipient families: - 2008 = 116,204 - 2009 = 114,000 - 2010 = 114,000 - 2011 = 114,000 - 2012 = 114,000 - 2015 = 114,000 - 2018 = 114,000 - 2021 = 97,666 - Number of poor families according to the WB methodology: - 2008 = 159,631 - 2009 = 148,743 - 2010 = 138,232 - 2011 = 126,496 - 2012 = 114,702 - 2015 = 83,785 - 2018 = 70,859 - 2021 = 57,469 - Ratio of benefit recipient families/poor families according to the WB methodology: - 2008 = 0.7 - 2009 = 0.8 - 2010 = 0.8 - 2011 = 0.9 - 2012 = 1.0 - 2015 = 1.4 - 2018 = 1.6 - 2021 = 1.7 - Number of poor families according to the MCB (families with consumption below the MCB): - 2008 = 291,712 - 2009 = 274,790 - 2010 = 246,262 - 2011 = 225,789 - 2012 = 205,216 - 2015 = 161,960 - 2018 = 130,162 - 2021 = 97,392 - Ratio of benefit recipient families/MCB and poor families: - 2008 = 0.4 - 2009 = 0.4 - 2010 = 0.4 - 2011 = 0.5 - 2012 = 0.5 - 2015 = 0.6 - 2018 = 0.7 - 2021 = 1.0 - Fiscal implication: - Public allocations for family benefits should increase by 1.8 times by 2012 and by three times by 2021 as compared to 2007. *Source: IMF staff summary of PFBS content in the provided document.* ### 553. This will lend an opportunity to increase the amount of average monthly benefit ### _cr08376 - 553. This will lend an opportunity to increase the amount of average monthly benefit ### Family benefit increase and projected levels - The amount of average monthly benefit per family is projected to increase: - "more than 2 times in 2007-2012" and "around four times in 2021 as compared to 2007", reaching about AMD 72,000 (text: "reaching about AMD 72,000"). - Table 11.9 — Amount of average monthly benefit paid per family, in AMD: - 2008: 21,090 - 2009: 23,658 - 2010: 26,695 - 2011: 29,558 - 2012: 33,921 - 2015: 45,285 - 2018: 59,097 - 2021: 71,862 - Index, Year 2007 = 100 (from table): - 2008: 120.5 - 2009: 135.2 - 2010: 152.6 - 2011: 168.9 - 2012: 193.8 - 2015: 258.8 - 2018: 337.7 - 2021: 410.7 ### Coverage relative to poverty thresholds and MCB - Projected coverage in 2021 by the family benefit: - "103 percent coverage of per capita food poverty threshold" - "70 percent coverage of general poverty threshold" - "30 percent coverage of the MCB by the benefit" - Table 11.9 — Ratios (per capita family benefit / threshold), %: - Ratio of per capita family benefit / per capita extreme poverty threshold, %: - 2008: 46.0 - 2009: 48.7 - 2010: 52.9 - 2011: 56.7 - 2012: 63.2 - 2015: 77.2 - 2018: 92.1 - 2021: 102.6 - Ratio of per capita family benefit / per capita poverty threshold, %: - 2008: 30.5 - 2009: 32.3 - 2010: 35.1 - 2011: 37.6 - 2012: 41.9 - 2015: 51.2 - 2018: 61.1 - 2021: 68.0 - Ratio of per capita family benefit / MCB, %: - 2008: 14.5 - 2009: 15.4 - 2010: 16.7 - 2011: 17.9 - 2012: 19.9 - 2015: 24.3 - 2018: 29.1 - 2021: 32.3 ### Benefit design and labor market incentives - Policy objective: increase benefit amounts while maintaining beneficiaries' motivation to participate in economic activities and the labor market. - Design rule: raise minimum and average salaries in parallel so that per capita family benefit: - "shall range from 18 to 20 percent of minimum salary" - "shall make around 6-7 percent of average salary" - Table 11.10 — Average per capita amount of benefit, in AMD (per capita): - 2008: 5,272 - 2009: 5,914 - 2010: 6,674 - 2011: 7,390 - 2012: 8,480 - 2015: 11,321 - 2018: 14,774 - 2021: 17,966 - Table 11.10 — Minimum monthly salary rate, in AMD: - 2008: 25,000 - 2009: 30,000 - 2010: 37,370 - 2011: 41,560 - 2012: 45,400 - 2015: 57,300 - 2018: 72,000 - 2021: 88,300 - Table 11.10 — Average monthly salary, in AMD: - 2008: 90,967 - 2009: 103,313 - 2010: 115,665 - 2011: 128,692 - 2012: 139,792 - 2015: 176,338 - 2018: 218,115 - 2021: 267,534 - Benefit ratios: - Benefit per capita / minimum salary ratio, %: - 2008: 21.1 - 2009: 19.7 - 2010: 17.9 - 2011: 17.8 - 2012: 18.7 - 2015: 19.8 - 2018: 20.5 - 2021: 20.3 - Benefit per capita / average salary ratio, %: - 2008: 5.8 - 2009: 5.7 - 2010: 5.8 - 2011: 5.7 - 2012: 6.1 - 2015: 6.4 - 2018: 6.8 - 2021: 6.7 ### Poverty reduction impact estimates - Estimated reductions in the incidence of population consumption below the general poverty line attributed to family benefit impact alone: - "by 4.8 percentage points in 2008" - "by average of 5 percentage points in 2012-2015" - comparative baseline: "against 1.8 percentage points in 2005" - Figure 11.3 (poverty headcount indices, general poverty threshold): - Poverty headcount index "before" family benefits (selected years shown in figure): 2005: 31.6; 2008: 29.8; 2012: 22.1; 2015: 16.9 (values read from figure labels) - Poverty headcount index "after" family benefits (selected years shown in figure): 2005: 22.1; 2008: 16.9; 2012: 13.8; 2015: 11.9 (values read from figure labels) ### Medium-term poverty and regional impacts - By 2015 and 2021 relative to 2007: - "reduce the poor population against the MCB by 2 times by 2015" - "by around 3 times by 2021 as compared to 2007" - Regional impact estimates (medium-term perspective 2008-2015): - "pre-benefit 'net' poverty rate will decline in average by 3.5 percentage points in the small and medium cities of Armenia" - "by 10 percentage points in rural areas due to the impact of the system" - Expected outcome: support mitigation of regional inequalities. ### Targeting, vulnerability assessment, and addressness improvements - Transition constraints: - Direct (income-based) vulnerability assessment is presently unrealistic because of income declaration limitations. - Transition to direct method planned when declared household incomes approximate at least 80 percent of the total amount of the country’s managed revenues. - Planned improvements to the existing indirect (score-based) method: - Reduce margin of error for coverage of non-poor groups to 10 percent in 2015 at the latest, thereby increasing system addressness up to 90 percent. - Ensure high representation of extremely poor and poor population registered in the system by bringing representation of the poorest 10 percent of population registered in the system to at least 80 percent, via proactive awareness-raising, identification, and simplified document collection for the poor. - Introduce a flexible system for regular monitoring of system addressness, outcomes and impact assessment, alongside analysis and application of IHS results. - Coordination of social assistance: - Combine family benefit system with other social assistance programs (education, health services, preferential tariffs and credit interest rates, etc.) by: - implementing programs through identification of the most vulnerable groups on a case-by-case basis rather than predominantly by benefit recipient status; and - assessing other social assistance packages provided to benefit recipient families and their impacts. ### Childbirth one-off benefit — design and projections - Historical context: - Since October 2003 the childbirth one-off benefit equaled 35,000 drams and stabilized at that level. - Table 11.11 — Births and beneficiaries, 2001-2007: - Births: 2001: 32,065; 2002: 32,229; 2003: 35,793; 2004: 37,520; 2005: 37,499; 2006: 37,639; 2007: 40,142 - Beneficiaries: 2001: 25,674; 2002: 25,707; 2003: 28,884; 2004: 30,283; 2005: 25,237; 2006: 29,201; 2007: 38,801 - Ratio of beneficiaries/births, %: 2001: 80.1; 2002: 79.8; 2003: 80.7; 2004: 80.7; 2005: 67.3; 2006: 77.6; 2007: 96.6 - Differentiated benefit by birth order: - Benefit amounts for first and second child (planned midterm): - 2009: 50,000 - 2010: 56,000 - 2011: 58,000 - 2012: 64,000 - 2015: 81,000 - 2018: 89,000 - 2021: 97,000 - Table 11.12 — One-off childbirth benefit amount for first and second child, drams* (2008 base): - 2008: 35,000 - 2009: 50,000 - 2010: 56,000 - 2011: 58,000 - 2012: 64,000 - 2015: 81,000 - 2018: 89,000 - 2021: 97,000 - Index, 2008=100: - 2008: 100.0 - 2009: 142.9 - 2010: 160.0 - 2011: 165.7 - 2012: 182.9 - 2015: 231.4 - 2018: 254.3 - 2021: 277.1 - Minimum consumption basket monthly, drams (table): - 2008: 36,316 - 2009: 38,499 - 2010: 39,977 - 2011: 41,325 - 2012: 42,566 - 2015: 46,509 - 2018: 50,829 - 2021: 55,537 - Ratio of benefit / MCB amounts, %: - 2008: 96.4 - 2009: 129.9 - 2010: 140.1 - 2011: 140.4 - 2012: 150.4 - 2015: 174.2 - 2018: 175.1 - 2021: 174.7 - Third and subsequent childbirths: - One-off childbirth benefit amount for the third and subsequent childbirths (table 11.12): - 2008: 430 - 2009: 480 - 2010: 496 - 2011: 1,000 - 2012: 1,000 - 2015: 1,000 - 2018: 1,000 - 2021: 1,000 - Public allocations directed towards one-off childbirth benefits (table 11.12, values): - 2008: ... - 2009: 4.1 - 2010: 4.7 - 2011: 5.1 - 2012: 8.2 - 2015: 9.1 - 2018: 8.6 - 2021: 8.0 - Policy rules and timeline: - Connect one-off childbirth benefit amount to the size of minimum consumption basket. - For first and second child, midterm increases to the amounts listed above (2009–2011), then calculations tied to MCB with coefficients: - 2012: one-off benefit = minimum consumption basket amount multiplied by 1.5 - after 2012: one-off benefit = minimum consumption basket amount multiplied by 1.75 - For third and subsequent births: - 2009 amount set at 430.thousnad AMD (text contains typographic form) - By 2010-2011: equal the amount of yearly MCB (12 times MCB) - After 2012: match double amount of yearly MCB (24 times MCB) and remain at that level through program period - Payment modality: part of the benefit for third and subsequent child paid in a lump sum, remaining part according to timeline and purposes defined by law (e.g., when the child becomes 3 years old) - Exclusion: "Families with high incomes (according to Tax Code families that are subject to financial disclosure) will not be included in the program." - Outcome summary: - Projected one-off childbirth benefit for first and second child will be: - 64,000 drams in 2012 - 81,000 drams in 2015 - 97,000 drams in 2021 - Growth relative to 2008: - 2012: "grow for 1.8 times compared to the same indicator in 2008" - 2015: "2.3 times" - 2021: "2.8 times" ### Child care benefit for children under 2 years old - Eligibility: currently a working parent on leave until the child is 2 years old. - Historical beneficiaries (Table 11.13): - Beneficiaries by year: - 1999: 10,450 - 2000: 10,091 - 2001: 8,780 - 2002: 7,326 - 2003: 7,721 - 2004: 7,330 - 2005: 6,320 - 2006: 5,404 - Benefit amount history: - Until 2007: 2,300 drams - Since 2007: 3,000 drams - Planned midterm changes and targets: - Anticipated beneficiary numbers (Table 11.14): - 2007: 4,262 - 2008: 4,500 - 2009: 6,000 - 2010: 6,000 - 2011: 6,000 - 2012: 9,000 - 2015: 9,500 - 2018: 9,500 - 2021: 10,000 - Benefit amount drams/monthly (Table 11.14): - 2007: 3,000 - 2008: 3,000 - 2009: 18,000 - 2010: 22,422 - 2011: 24,936 - 2012: 27,240 - 2015: 34,380 - 2018: 43,200 - 2021: 52,980 - Public expenditures on child care benefit for children under two, bln. drams (table): - 2007: 0.2 - 2008: 0.2 - 2009: 1.3 - 2010: 1.6 - 2011: 1.8 - 2012: 3.0 - 2015: 4.0 - 2018: 5.0 - 2021: 6.4 - Design rule: - Connect monthly benefit to minimum salary and begin from 2009 adjust it to "60% of the minimum monthly salary". - Expected social objective: assist young families and working women and their children; anticipate number of beneficiaries rising to 10,000 by 2021. ### Benefit to families taking care of Group I disabled persons and "disabled children" - Rationale: - Group I disabled persons and "disabled children" require substantial support due to total dependence and need for external care (definitions per ROA government Decree N. 780). - Planned introduction and indexing: - Benefit introduced beginning from 2012. - Amount adjusted to the minimum consumer basket with a corresponding coefficient. - SDP envisages: - 2012: set amount at 50% of the minimum consumer budget - 2018: increase to 80% of the MCB - 2021: increase to 100% of the MCB - Result: "in the period 2010-2021 the amount of the benefit in question will increase by almost two times." - Table 11.15 — Benefit amount projections: - Benefit amount, drams*: - 2012: 25,500 - 2015: 32,600 - 2018: 40,700 - 2021: 55,500 - Minimum consumption basket, per month, drams (table): - 2012: 42,566 - 2015: 46,509 - 2018: 50,829 - 2021: 55,537 - Ratio of benefit amount / MCB, %: - 2012: 60.0 - 2015: 70.0 - 2018: 80.0 - 2021: 100.0 - Public expenditures on the Benefit to Families Taking Care of Persons with Group I Disability and "Disabled Children" (table): - 2012: 4.6 - 2015: 5.9 - 2018: 7.3 - 2021: 10.0 ### Other social assistance programs and child protection priorities - Program priorities for children in difficult living situations: - Strengthen child care and protection system. - Decrease number of children in child care and protection institutions and prevent inflow to these institutions. - Improve institutions and ensure integration of institutionalized children into society. - Create alternative services providing care to disabled children. - Continuation: - Program of child care leave benefit (assisting parent on leave until child is 2) will continue. *Source: IMF staff report content unit _cr08376 - 553. This will lend an opportunity to increase the amount of average monthly benefit* ### 574. A new three –level child protection system has been introduced in ROA- on ### _cr08376 - 574. A new three –level child protection system has been introduced in ROA- on ### Child protection system: structure and objectives - A new three–level child protection system has been introduced in ROA on national, regional and community levels. - Public management level objective: ensure a unified and structured child protection policy. - Regional level objective: implement the policy through a specialized system. - Expected benefits of a unified system: - Decisions concerning the future life of children in hard living situations based on results of professional and qualified assessment. - Regulated operation of structures dealing with issues concerning children. - Creation of a unified database comprising information about children in hard life situations. ### Orphanages and alternative family- and community-based services - Current institutional care: - Eight public orphanages caring for 935 children. - Four charity orphanages caring for 250 children. - Primary causes for children entering institutions: social reasons driven by low living standards, expensive medications and medical services, parents lacking skills, and absence of child-care services. - Programs and measures to reduce institutionalization and prevent accession: - Return children to biological families or find adoptive families. - Expand the system of daycare centers and child-care and protection boarding institutions to serve as alternatives for children from orphanages and special general education institutions. ### Institutional care for disabled children and alternatives - Specialized orphanages for disabled children: - Two public specialized orphanages caring for 370 children. - One charitable specialized orphanage caring for 60 children. - Identified needs and priorities: - Renovation of institutions to create favorable conditions for care, treatment, upbringing, social-psychological rehabilitation and development. - Organizing alternative services for social-medical provision of disabled children living in families to help decrease the number of children in institutions. ### Disability rights, integration policy, and service expansion - Policy basis: derives from the principles and provisions of the "Convention on Rights of Persons with Disabilities" adopted by UN in December 2006 and signed by Armenia on the 30th of March 2007. - Planned legislative and policy changes: - Corresponding amendments to legislation and measures for integration of persons with disabilities in society, creating equal conditions, ensuring accessibility of transport and information, and enhancing accessible environment and buildings. - Revision of the model of eligibility for disability. - In 2009 it is envisaged to shift from the RA model (which defines disability) to the model accepted in the European Union, which instead defines the level of incapacity to work. - Service expansion priorities: - Create integrated community rehabilitation centers for people with disabilities. - Expand programs of medical and social rehabilitation and increase their addressness. - Ensure high quality education, including inclusive education for disabled children. ### Social support, shelters, and day-care services - Programs to provide integrated shelters for socially vulnerable families, including elderly and disabled persons living alone, and persons from other social groups. - Core principles: self-assistance and integration into society. - Homeless persons to be provided with temporary shelters. - Establish day care and social integration centers for elderly and disabled persons providing care and social services (primary healthcare, social-psychological consultations, etc.) to promote social activity and indirectly contribute to poverty elimination for these groups. - Continued delegation of mandate for providing social services through supporting NGOs to maintain and expand day-care centers for elderly and disabled people established by NGOs. ### Pension system: current situation and challenges - Pensioners have benefited the least from economic growth of 2002-2006. - Insurance pension relative to average salary: - 21 percent in 2002. - 17 percent in 2006. - At end-2006: - Average retirement insurance pension comprised AMD 12,059 or only 90 percent of extreme poverty line calculated for 2005. - Pensions in other groups fluctuate in the range of 40 to 80 percent of extreme poverty line; for social insurance pensioners it comprises 40 percent. - Long-term demographic challenge: - Potential support ratio (ratio of population above employment age to population of employment age) expected to grow from current 0.18 and reach around 0.40 in 2050. - Effective support ratio (ratio of population above employment age to social insurance payers) may significantly improve in coming 10-15 years if increasing employment formalization persists. ### Employment formalization and projections - Assumptions on employment formalization: - It is expected that until 2012 the average annual growth of the degree of employment formalization will comprise 3 percent and in 2012-2021 – 2 percent. - The degree of employment formalization – the ration of social insurance payers to non-agricultural sector employees – will reach 82 percent by 2021 compared to 59 percent in 2006. - The degree of employment formalization increased in 2002-2006 by around 10 percentage points; the scenario is considered realistic. ### Government objectives and principles for pension policy - Main objectives: - Steady improvement of the social condition of pensioners. - Implementation of pension system reforms aimed at ensuring long term financial sustainability. - Policy aims: - Firstly maximum reduction and then complete exclusion of poverty and poverty risks among pensioners. - Steady reduction of the grave differences between living standards of pensioners (including the disabled) and employed population. - Principle stand points: - The social pension is the main tool to fight poverty among pensioners; it is the minimum life supporting guarantee. - Establish incentives for involvement in the pension system through clear differentiation of social pensions and employment (insurance) pensions, with employment pensions conditioned by service (insurance) term and contribution amount. ### Pension reform strategy and targets - Reform approach: - Proceed with reforms of the “distributive” parametric system and introduce a new cumulative system in parallel. - Mid-term targets (SDP): - Bring the level of planned insurance pensions to at least: - 100% of the MCB from 2012; - 150 percent of MCB from 2018. - Indexation of insurance pensions on the basis of consumer price index starting 2018 (or after attaining 150 percent of the MCB). - Bring the level of planned social pensions to at least: - Poverty threshold beginning from 2015; - 100% of the minimum consumption basket beginning from 2018. ### Fiscal implications and financing targets - Required increase in public expenditures for pensions: - Bring pensions to 5.8percent of the GDP by 2021, instead of 3 percent effective for 2007. - It is noted that public expenditures allocated for pensions will be brought to 6.3% of GDP by 2018 (without the expenditures on introduction of cumulative system), after which nominal expenditures will continue to increase though the ratio to GDP will reduce determined by pension indexation policy adopted in 2018. - Financing gap: - Required financing will exceed expected volumes of social insurance payments. - During the PRSP this gap will in average comprise 1 percent of the GDP with a growing tendency at the beginning and a declining one at later stages. - Budgetary framework: - Targets expected to be attainable by maintaining the consolidated budget deficit in a secure range, at the level below 2.5 percent of the GDP. - Cumulative pension system introduction: - Launching planned in 2010. - Additional fiscal burden estimated at 0.2-0.4 & of GDP and will be compensated by general fiscal revenues of the consolidated budget rather than by increasing the tax burden of labor force. ### Expected outcomes for pensioner poverty and programmatic indicators - The program expects that pensions will help significantly reduce the poverty level of pensioners. - Selected programmatic indicators (Table 11.16) snapshot (actual and SDP forecasts): - Pensioners poor: 30.0 (2005) ; 26.5 (2008 actual) ; 4.6 (2012 SDP) ; 3.2 (2015 forecast). - Pensioners extreme poor: 3.9 (2005) ; 4.6 (2008 actual) ; 0.6 (2012 SDP) ; 0.3 (2015 forecast). - Single pensioners poor: 20.0 (2005) ; 19.2 (2008 actual) ; 0.0 (2012 SDP) ; 0.0 (2015 forecast). - Single pensioners extreme poor: 0.0 (2005) ; 0.0 (2008 actual) ; 0.0 (2012 SDP) ; 0.0 (2015 forecast). - Pensioners, 75 years old and above poor: 30.5 (2005) ; 29.5 (2008 actual) ; 4.9 (2012 SDP) ; 2.9 (2015 forecast). - Pensioners, 75 years old and above extreme poor: 5.2 (2005) ; 4.9 (2008 actual) ; 0.4 (2012 SDP) ; 0.2 (2015 forecast). ### Parametric reforms planned by 2012 - Planned measures by 2012: - Make pension eligibility criteria stricter by increasing the minimum term of service allowing receipt of employment (insurance) pension, setting it at 10 years. - Revise the model of recognizing disability by shifting to the EU model of determining level of loss of ability to work. - Improve registration of persons’ pension rights through content, procedural and technical changes to individual registration and personalized reporting, turning the personalized database into a source of main indicators for projections and characterization of the pension system. - Use self-working (automatic) information exchange systems and improve governance to ensure accessibility, efficiency and high quality of social service packages. - Reform pensions on preferential terms by paying this type of pensions through the employer. - Introduce a mandatory insurance system for industrial accidents and professional diseases, within which pensions will be paid in cases of disability or loss of the bread-winner caused by industrial accident or professional disease. - Set up a connection between personal incomes and the amount of employment pension to make the system attractive for social security payments and involve larger population groups. ### Health sector: role in human development and comparative indicators - PRSP emphasizes healthcare as investment in human capital with priorities: increased access to and quality of medical services; primary healthcare is top priority; mother and child health protection and prevention of contagious diseases are of special priority. - Policy instruments: increased public spending in healthcare, redistribution of spending toward primary healthcare, and increased efficiency of sector management reform. - Comparative health indicators (selected 2006/2005 values): - Life Expectancy at Birth, years: ARM 73.3 ; EU 78.5 ; EU-15 79.7 ; EU-12 74.0 ; CIS 67.0. - Child Mortality (0–1 years), per 1,000 live births: ARM 13.9 ; EU 5.1 ; EU-15 4.3 ; EU-12 8.3 ; CIS 13.4. - Maternal Mortality (3 years average), per 100,000 live births*: ARM 24.0 ; EU 6.4 ; EU-15 5.4 ; EU-12 10.4 ; CIS 29.3. - Level of Mortality (all causes), per 100,000 population**: ARM 844.5 ; EU 678.1 ; EU-15 606.2 ; EU-12 945.1 ; CIS 1,394.3. - Mortality due to Cardiovascular Diseases, per 100,000 population**: ARM 421.8 ; EU 272.7 ; EU-15 213.8 ; EU-12 493.1 ; CIS 799.8. - TB, newly registered cases, per 100,000 population: ARM 49.0 ; EU 17.1 ; EU-15 10.0 ; EU-12 44.1 ; CIS 91.1. - HIV, newly registered cases, per 100,000 population: ARM 2.0 ; EU 55.4 ; EU-15 86.8 ; EU-12 2.21 ; CIS 18.73. - Prevalence of Diabetes, % of the total population: ARM 1.2 ; EU 3.5 ; EU-15 1.5. - Figure 12.1 highlights child (U5) and maternal mortality in 2006 vs PRSP targets: - Child mortality (U5), per 1,000 live births: PRSP 14.4 ; Actual 15.8. - Maternal mortality, per 100,000 live births: PRSP 22.0 ; Actual 24.0. *Italic: Source: IMF content unit _cr08376 - 574. A new three –level child protection system has been introduced in ROA- on* ### 597. At the same time, child mortality (under 5 years of age) and maternal mortality ### _cr08376 - 597. At the same time, child mortality (under 5 years of age) and maternal mortality ### Utilization of health services: trends and levels - Positive trends in 2003-2006 for both ambulatory-outpatient and hospital care utilization. - In 2006 the average number of visits to ambulatory-outpatient clinics per patient was 2.8, against 2.0 visits in 2003. - Number of patients admitted to hospitals per 100 population was 8.4 in 2006 vs. 6.9 in 2003. - Despite improvements, utilization levels remain generally low at both outpatient and inpatient institutions; respective indicators are 3 times lower than the average for CIS and EU new member states. ### Household survey findings and inequities in access - 2005 RA NSS Integrated Survey of Living Conditions: on average only about 30 percent of the population with health problems referred to a medical institution. - The first (poorest) quintile’s frequency of referrals was about 2.5 times lower than the fifth (richest) quintile. - In the month preceding the survey, 14.7 percent of the population in the first (poorest) quintile experienced health problems, against 20 percent in the fifth (richest) quintile. - Choice of type of healthcare institution in 2005: overall 48 percent of referrals were to ambulatory-outpatient clinics, and 33 percent to hospitals. - Fifth (richest) quintile characteristics in 2005: referrals to outpatient clinics about 40 percent; referrals to hospitals about 38 percent; referrals to diagnostic centres 13.3 percent. - Comparison with 1998/1999 survey: in 1998/1999, 60 to 65 percent of the population in the first four quintiles referred to ambulatory-outpatient clinics, while hospital referrals were between 20-28 percent—indicating decreased variation by income in choice of institution by 2005. ### Public spending on health: levels, trends, and comparisons - Key constraint: low level of public spending on healthcare. - Between 2003–2006 nominal public spending improved and implementation was fuller: 2006 spending amounted to AMD39.4 bln, i.e. the double of 2003 figures, and the budgets for 2003-2006 were implemented in full, at the level of 100 percent. - Actual nominal budget expenditure in the healthcare sector was close to or exceeded PRSP targets, while actual public spending as % of GDP was below PRSP target level. - Public spending in healthcare in relation to GDP remained about 1.5 percent in 2006. - International context: this level is among the lowest in the world, about 4 times below EU and OECD average indicators and about half of the CIS average. - WHO estimates: private spending in the healthcare sector is about 4% of GDP, higher than in developed countries except USA and Switzerland. - Policy implication: growth of public spending in the medium to long term shall be among the top priorities, given accessibility, quality, and high prevalence of unofficial out-of-pocket payments. ### Programming budget expenditure: targets and scenarios - Government plans to increase public spending on healthcare to: - 1.7% of GDP in 2010 - 2.2% in 2012 - 2.5% in 2015 - 3.5% in 2021 - against 1.5% in 2006 - Implementation of the program scenario will result in: - 2.4-fold increase of real public spending in healthcare sector in 2012 compared to 2006 - 3-fold increase in 2015 - about 7-fold increase in 2021 - Real per capita public health spending will increase correspondingly if the scenario materializes. - The share of healthcare expenditure in consolidated budget expenditure is planned to reach 12% by 2021, against 6.8% in 2006. - Short-term (next 5 years) distribution within the sector: planned allocation of 7-11 percent of public spending to capital programs; this share will decrease and stabilize at 5-6% towards the end of the program cycle. - Program indicators of consolidated budget expenditure (selected figures from Table 12.2): - Consolidated Budget Expenditure in Healthcare Sector, AMD bln (Actual/Budget/Program across years): - 2006: 39.5 - 2007: 46.9 - 2008: 54.6 - 2009: 66.1 - 2010: 81.2 - 2011: 103.3 - 2012: 126.4 - 2015: 193.8 - 2018: 296.6 - 2021: 459.0 - including capital expenditure vs. total, %: - 2006: 11.4 - 2007: 8.5 - 2008: 14.8 - projections: (9-11), (9-11), (9-11), (7-9), (7-9), (6-7), (5-6) - % of GDP: - 2006: 1.5% - 2007: 1.5% - 2008: 1.5% - 2009: 1.6% - 2010: 1.7% - 2011: 2.0% - 2012: 2.2% - 2015: 2.5% - 2018: 2.9% - 2021: 3.5% - % of Consolidated Budget Expenditure: - 2006: 6.9 - 2007: 6.2 - 2008: 6.3 - 2009: 6.6 - 2010: 7.1 - 2011: 7.9 - 2012: 8.5 - 2015: 9.2 - 2018: 10.3 - 2021: 12.0 - Change from the previous year, %: - 2006: 26.8 - 2007: 18.8 - 2008: 16.4 - 2009: 21.1 - 2010: 22.9 - 2011: 27.2 - 2012: 22.3 - 2015: 15.3 - 2018: 16.6 - 2021: 15.0 - Real public spending (index, 2006 = 100)**: - 2006: 100 - 2007: 114 - 2008: 122 - 2009: 139 - 2010: 164 - 2011: 202 - 2012: 240 - 2015: 337 - 2018: 472 - 2021: 669 - Per capita real public expenditure (index 2006 = 100)**: - 2006: 100 - 2007: 113 - 2008: 121 - 2009: 138 - 2010: 163 - 2011: 200 - 2012: 236 - 2015: 327 - 2018: 453 - 2021: 637 - *Notes in table: Projected enabling environment indicators; Inflation adjusted.* ### Health sector priorities and policy directions - Conceptual framework of priorities under the Sustainable Development Program remains consistent with PRSP and will guide medium-term national policy. - National policy priorities include: - increased access to and quality of healthcare services, with emphasis on basic services across regions - mitigation of disparities in utilization across income groups - attention to accessibility of healthcare for children, mothers, and the aged - WHO-recommended emphasis on primary health care: prevention and control of contagious and non-contagious diseases; protection of public health from hazards; increasing public awareness and healthy behavior. - Core actions to attain sector priorities: - augment budget appropriations and increase efficiency of utilization - optimize the healthcare system and reduce duplication of services - streamline roles of primary and hospital care systems - increase transparency and accountability; improve financing mechanisms to diminish informal payments (especially in hospital services) ### Sectoral programming and institutional reforms - Primary healthcare is prioritized in the mid-term and will absorb 40-45 percent of budget appropriations for the sector initially; from 2015 onward, when public spending reaches 2.5% of GDP, distribution will be 30% primary healthcare and 70% in-patient treatment. - National policy for primary healthcare aims to complete transformations introducing family medicine and strengthening new structures. - Government will define the framework of relations with service providers and streamline public and capital spending mechanisms as individual and group medical practice grows. - Rural health priorities: - improve human and technical resource base of rural health posts - modernize primary healthcare institutions (polyclinics) in urban areas including Yerevan - develop mobile and distant health care services (e.g. emergency care) to serve remote and bordering areas - Hospital care priorities: - modernization of regional hospital network; completion of modernization in next 7-8 years (WB-financed project underway to modernize ten hospitals in the regions of Armenia) - renovations of buildings and technical base; staffing regional hospitals with highly qualified medical personnel if required - motivate hospitals to increase efficiency given current underloading and high efficiency potential - promote and deepen hospital management reforms and introduce corporative management systems; by 2015 all public hospitals should have management boards - obligatory annual independent financial audits for healthcare institutes and publication of results to increase accountability - gradually bring compensation for services into conformity with real cost to improve quality and reduce informal out-of-pocket payments; prioritization for socially significant services (e.g. obstetric and gynecological), then other state-financed services ### Specific program priorities - The program identifies Mother and Child Health Care as a specific program priority (section 12.1.5.1). *Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08376.pdf* ### 625. The government policy in the health sector will continue assigning top priority to ### _cr08376 - 625. The government policy in the health sector will continue assigning top priority to ### Maternal and child health: priorities and targets - Government policy priorities: - Assign top priority to mother and child health protection and improving reproductive health. - Planned actions (by means of relevant budget redistribution) specifically aim at: - providing quality antenatal care for pregnant women, - promoting exclusive breast feeding for preventing lack, - early diagnosis and prevention of high-risk diseases, - increased immunization coverage and elimination of regional disparities. - Expected outcomes: significant increase of accessibility and affordability of health care services for children and decrease of maternal and child mortality rate, in line with UN Millennium Development Goals. - Neonatal mortality has the largest share in child mortality; problems of intensive neonatal therapy are highly prioritized. - Additional activities to increase awareness about child care and child feed. - Table 12.3 — Targets for Maternal and Child Mortality (Indicator values by year) - Child mortality (0 ̈ 1 years), per 1,000 live births: - 2006: 13.9 - 2008: 12.0 - 2009: 11.5 - 2010: 10.9 - 2012: 10.3 - 2015: 8.2 - 2018: 7.9 - 2021: 7.6 - Child mortality (1 ̈ 5 years), per 1,000 live births: - 2006: 15.8 - 2008: 14.1 - 2009: 13.5 - 2010: 12.8 - 2012: 12.1 - 2015: 9.6 - 2018: 9.3 - 2021: 8.6 - Maternal mortality (3 year average), per 100,000 live births: - 2006: 24.0 - 2008: 18.5 - 2009: 14.5 - 2010: 14.0 - 2012: 13.4 - 2015: 10.3 - 2018: 8.4 - 2021: 7.0 ### Diseases of special social significance and non-communicable diseases (NCDs) - Government program priorities include prevention, early diagnosis and effective treatment of diseases of special social significance, including contagious and non-contagious diseases. - Observations: - Non-contagious diseases cited: cardiovascular and chronic respiratory diseases, diabetes, malignant neoplasms. - Poor and socially vulnerable population groups are mostly at risk. - Government medium- and long-term intentions and actions: - Develop and continuously improve the national policy and plan for prevention of and control over non-communicable diseases. - Integrate prevention and control of non-contagious diseases into Government policies in other related sectors. - Through appropriate budget reallocations, expand financing of corresponding programs to improve accessibility and quality of services. - Assist activities aimed at decreasing risk factors of non-contagious diseases (anti-smoking and anti-alcohol campaigns, promoting healthy nutrition and physical activity). - Take targeted steps in public and private sectors to establish and develop infrastructure necessary for effective management and treatment of chronic diseases, including: - corresponding policy; - qualified medical personnel; - accessibility of basic medications and technologies; - primary health care standards, guidelines; - effectively operating reffereal mechanisms. - Assist in carrying out periodic surveys aimed at preventing and controlling non-contagious diseases and introduce an efficient progress monitoring and evaluation system. - Poverty reduction strategy focus: - Increase efficiency of interventions against socially dangerous and high risk diseases for socially vulnerable groups: malaria, TB and HIV. - Prevent spread of TB and HIV, eradicate mortality from malaria and drastically decrease mortality from HIV/AIDS and TB, reaffirming Armenia’s commitments for attaining WHO targets. - HIV/AIDS emphasis: - Increased public awareness on HIV/AIDS, prevention of spread, and increased efficiency of treatment. - Strengthen and deepen regional and international cooperation and efficient use of technical assistance from specialized organizations. ### Ensuring access to medicines - Goal: Ensure access of the population to medicines as a main goal of health reforms. - Current situation: - Physical accessibility of medicines has significantly improved. - Economic accessibility remains low due to low purchase power of the population. - System of reimbursement to cover particular vulnerable groups exists but is not operating at full capacity and requires further improvement. - Legislative and regulatory steps (RA Law “On medicines" and related measures): - Ensure appropriate regulation at all stages of medicines circulation – from creation to consumption. - Approve, introduce and keep under state control requirements for all units functioning in pharmaceutical service including laboratories, clinics, pharmacies, importers and manufacturers. - New pharmaceutical manufactures will be developed in compliance with approved standards; existing units will undergo corresponding reforms until 2010. - Improve and simplify the drug registration system. - Improve the process of drug import, including introduction of a new licensing regime for importers under which only manufacturers or their representatives will be licensed to import pharmaceutical products. - Regulate and clarify activity of pharmacies; small pharmacies (kiosks) should be allowed to sell only medicines without prescription to enable pharmacy kiosks in small, particularly rural, areas and provide essential pharmaceutical products. ### Education: accessibility, public spending and enrolment (overview) - Sector priority: Education is prioritized as prerequisite for stable development and preservation/reproduction of human capital; reforms at all levels aim to ensure universally accessible quality education and increase sector efficiency; aligned with UN European Economic Committee Strategy “Education for Sustainable Development”. - Table 12.4 — Dynamics of Public Expenditures in Education Sector in 2000-2006, percentage of GDP (selected figures) - Consolidated budget expenditures for education, % of GDP: - 2000: 2.9 - 2001: 2.5 - 2002: 2.2 - 2003: 2.2 - 2004: 2.3 - 2005: 2.7 - 2006: 2.8 - Average for ECA and FSU countries, 2004: 4.1 - Average for OECD countries, 2004: 5.4 - Preschool education, % of GDP (2000–2006): 0.23 0.23 0.22 0.20 0.23 0.22 0.23 (comparison: ECA/FSU 0.6; OECD 0.4) - Elementary, basic and general secondary education, % of GDP (2000–2006): 1.98 1.69 1.37 1.42 1.53 1.98 1.96 (comparison: ECA/FSU 1.9; OECD 3.7) - Consolidated budget expenditures in education sector, AMD million (2000–2006): 29,545 29,931 29,746 35,241 43,067 61,675 73,075 - Public expenditures in education sector , % of total expenditures of consolidated budget (2000–2006): 11.3 11.8 9.9 9.7 10.9 12.6 12.7 - Key observations on education spending and outcomes: - Despite nominal doubling of public expenditures in education since 2003, share in GDP in 2006 was still 1.6 times lower than the average for ECA and FSU countries in 2005 and 2 times lower than OECD 2004 average. - Distribution of public expenditures: - Around 71 percent allocated to elementary, basic and general secondary education (around 77 percent for secondary and special secondary education). - Preliminary and secondary vocational education receives 3.8 percent; higher and post-graduate education receives 7.2 percent of funds. - Since 2003, share for general education rose by 5.8 percentage points; share for vocational programs declined by 4.4 percentage points. - Per-student spending: - At three levels of general education, annual per student public expenditures in 2006 exceeded the 2003 level by 2.4 times. - In 2006 per-student public expenditures comprised around 13.5 percent of per capita GDP (9.1 percent in 2003) and were 10.5 percentage points lower than OECD 2004 average. - In 2006 annual public expenditures per tertiary student comprised around 30 percent of per capita GDP (41 percent in 2003), reaching the 2004 OECD average. - Public expenditures per student in preliminary and secondary vocational education under basic benefit package are 3.5 times higher than per school student; they were reduced by around 2 times in 2000-2006. - Enrolment statistics and inequalities: - Overall enrolment of 6-16 years old remains high at average 92 percent. - Enrolment at age 6 is relatively low at 50.3 percent (delayed school start, low preschool enrolment). - Enrolment declines from age 15: at age 15 indicator is 95.3 percent; at age 16 it is 77.4 percent; for age 17-21 average is 40 percent. - Gross enrolment in general secondary education around 90 percent; net enrolment at basic education level around 96 percent and homogeneous across regions, gender and poverty groups. - Gross enrolment at high school grew to around 80 percent in 2005/2006 from 74 percent in 2002 (ECA and FSU average in 2004: 87 percent). - Gross enrolment at preschool in 2005 comprised 27.5 percent (ECA and FSU average: 50.1 percent); gross enrolment at tertiary and post-graduate level around 28 percent (ECA and FSU average: 43 percent). - Enrolment in vocational programs and tertiary institutions has grown since 2001 but remains low compared to ECA and FSU averages and highly polarized by income and region (favoring non-poor, urban population and Yerevan). - Inequality by quintile: - Preschool and later 9th-10th grades show significant inequality between poor and non-poor. - Basic education enrolments are high and homogeneous (ratio of enrolments for richest and poorest quintiles are 1.8, 1.3 and 1 respectively). - Tertiary education is the most unequal: enrolment in the richest quintile is about 15 times higher than in the poorest quintile and 2.5 times higher than the country average. - Table and figure highlights (selected numeric snapshots) - Figure 12.7: Enrolment of 3-29 year old by age (percentage examples): - Age 3: 20.6% - Age 4: 31.1% - Age 5: 32.3% - Age 6: 50.3% - Age 7: 95.2% - Age 14: 98.6% - Age 15: 95.3% - Age 16: 77.4% - Age 17: 47.3% - Age 18: 49.8% - Age 21: 31.5% - Age 29: 2.9% - Figure 12.8: Gross enrolments by consumption quintiles (selected values, %): - Pre-school: 1st (poorest) quintile 22.3, 5th (richest) quintile 67.4 - Basic school: values cluster around 100.0–102.7 across quintiles - High school: 1st quintile 80.9, 5th quintile 90.1 - Higher education: 1st quintile 29.0, 5th quintile 67.4 - VET: 1st quintile 12.4, 5th quintile 10.6 *Source: _cr08376 - 625. The government policy in the health sector will continue assigning top priority to (PDF).* ### 642. Due to general education sector reforms, the indicators characterizing the system ### _cr08376 - 642. Due to general education sector reforms, the indicators characterizing the system ### System effectiveness and staffing / classroom indicators - Student/teaching position ratio in 2006: 13.7 (10.6 in 2003). - Actual student/teacher ratio in 2006: 10.9. - Comparative averages cited: - Average student/teacher ratio in the ECA and FSU countries in 2005: 13. - OECD countries in 2004: 15.1. - Density of classrooms: - Average students per classroom in 2005: 22. - Average students per classroom in 2003: 20. - Reached the average for the OECD countries. - Student/non-teaching workload ratio: - 2006: 22.5. - 2003: 20.2. - Ratio of non-teaching positions to teaching positions: fluctuates around 0.6. - Conclusion: efficiency has increased but remains below international standards in several respects; governance reforms have yet to deliver desired outcomes. Anticipated demographic decline of school-age children implies need for continued improvement even with planned structural changes (three-year high school, transition to 12-year secondary education). ### Teacher remuneration and relative remuneration indicators - Average monthly wage for a teaching position in 2006: AMD 58,000. - Grew by around 3 times in 2003-2006. - Ratio of average salary for full-time teaching position to per capita GDP: - 2006: 0.85. - 2003: 0.43. - OECD comparison: - In 2004 this ratio in the OECD countries comprised 1.3 and was differentiated by length of service and teaching level. - Priority: increase salary/per capita GDP ratio to 1.5 and stabilize at that level. ### Enrolment indicators by educational level (selected figures) Preschool Education - Gross enrolment in preschool in 2005: 27.5 percent. - Urban: 38 percent. - Rural: 11 percent. - Gross enrolment by poverty status in 2005: - Non-poor: 30 percent. - Poor: 23.2 percent. - Extremely poor: 18.5 percent. - Changes 2004–2005: - National indicator did not change overall. - Declined by 1.9 percentage point for the non-poor. - Grew by 3.6 percentage point for the poor (including 4 percentage point increase among the extremely poor). Basic School (elementary and middle) - Gross enrolment in basic school (2005): 101.1 percent. - Net enrolment of the 7-14 year old in basic school (total): 96.1 percent. - Subgroups (Gross / Net): - Non-poor: 100.5 / 95.5. - Poor: 102.5 / 97.3. - Extremely poor: 95.7 / 90.6. - Yerevan: 102.2 / 96.4. - Other urban: 100.5 / 95.2. - Rural: 100.9 / 96.4. - Boys: 101.5 / 96.1. - Girls: 100.8 / 96.0. - International comparator: - ECA and FSU countries, average, 2004: 95.7 (gross). - Non-survivor / dropout notes (2005/2006 academic year): - 1st–3rd grade students who remained in same grade: 227 (out of 121,502 total 1st–3rd grade students = 0.19 percent). - 7–9 year old that left the school: 1,219 (~1 percent non-survivors to the 4th grade). - Share of non-survivors at 4th–8th grades: 1.6 percent. High School - Gross enrolment at high school in 2005 (ROA NSS): approximately 80 percent. - ECA and FSU average in 2004: 87 percent. - Only 6 percent of 8th grade graduates in 2004/2005 did not continue to high school. - 2005 IHS data: 6.3 percent of the 18-19 year old have complete basic general education as highest education received. - Highest-education-is-basic education shares among 18-19 year olds: - Non-poor: 2.8 percent. - Poor: 16 percent. - Extremely poor: 35 percent. - Conclusion: poor youth disproportionately leave the system after basic school; gross and net high school enrolment indicators are decreasing and show significant poverty-group differences. Professional and Tertiary Education - Gross enrolment in professional programs: 38.4 percent. - Including tertiary and post-graduate only: 28.5 percent. - Disaggregation (Gross professional / tertiary only): - Non-poor: 48.8 / 37.3. - Poor: 12.9 / 6.9. - Extremely poor: 6.2 / 4.8. - Yerevan: 64.1 / 53.0. - Other urban: 35.7 / 25.0. - Rural: 20.4 / 12.2. - Boys: 37.7 / 30.3. - Girls: 38.9 / 27.2. - International comparator: - ECA and FSU countries, average, 2004: tertiary and post-graduate gross enrolment 43.0 percent. - Ratios and regional inequality: - Tertiary enrolment in Yerevan is 2.1 times and 4.3 times higher compared to other urban and rural areas respectively (text indicates these ratios for tertiary level). - Population with professional education (25-34 year old): - 49.8 percent have some professional education. - 27.2 percent: secondary and preliminary vocational education. - 22.6 percent: tertiary education. - Comparison: figure close to OECD average though gross enrolment lower than many ECA and FSU countries. ### Primary goals, targets and priorities (SDP / general and professional education) - Primary goal of the SDP: general education (complete secondary school including three-year high school) to ensure preparedness for labor market and opportunity for vocational education. - Program aims in general education: - Improve quality of complete secondary education. - Establish and introduce efficient unified system for supervision and knowledge assessment. - Make quality relevant to tertiary educational and international criteria. - Ensure equal accessibility of complete quality secondary education at all levels, especially high school, for all population groups. - Constant improvement of system effectiveness and governance bodies/institutions. - Priorities outlined: - Ensure equal enrolment of all population groups in elementary, basic, and high school, with increased enrolment of the poor in high school. - Prevent risk that establishing the three-year high school reduces enrolment of the poor; consider setting the school as minimum educational level in law. - Zoning of high schools to provide equal opportunities for vulnerable communities (small, remote, high mountainous, bordering, isolated rural) to enroll without additional expenses. - Introduce distant learning and inclusive education systems in communities without a high school; target: involve secondary schools in distant learning system by 2012 (implies enhancement of telecommunication and IT). - Train teachers (especially high school), align career development with new curricula, and increase salary/per capita GDP ratio to 1.5 and stabilize at that level. - Replenish material-technical and didactic bases (laboratory equipment, hardware, internet connection, etc.). - Improve quality and accessibility of preschool education; increase number of children from vulnerable groups in preschool as a matter of state concern. - Improve health care related and consulting activities in educational settings; implement “Healthy Life-Style” course covering HIV/AIDS, STDs, psychic, sexual and reproductive health. - Introduce and develop inclusive education system to create equal opportunities for vulnerable children. - Professional education priorities: - Ensure equal opportunities for able youth of all population groups to study at vocational institutions. - Increase enrolment by introducing programs raising accessibility and mitigate inequality. - Increase quality of professional education and align it with labor market demands, strategic objectives, international standards and Bologna Treaty provisions. - Target: at least two internationally accredited higher education institutes by 2015. - Financing objective: - Increase state budget allocations for education bringing them as close as possible to the level of developed countries while implementing intra-sector reforms to increase quality and efficiency. ### Program indicators for public expenditures in education and expected outcomes - Consolidated budget expenditures for education will permanently increase during the program period: - In 2010 they will comprise 2 times the 2006 level. - In 2015: 4-fold of 2006 level. - In 2021 will exceed 2006 level by 7.5 times. - Average annual increase in 2007-2021 of consolidated state budget expenditures for education: 14.5 percent. - In 2007-2009 annual average growth rate will exceed the above average by 1.6 times due to anticipated introduction of the three-year high school. - Thereafter growth rate will gradually decrease and after 2015 be sustained in vicinity of 9-10 percent due to expected demographic changes (decreasing number of beneficiaries). - Share of consolidated budget expenditures for education: - Will grow by 2.2 percentage point over the program; from 2012 on stably exceeding 14% and in 2021 exceeding 15%. - In 2008-2012 the share will demonstrate higher growth rate than overall consolidated budget expenditures. - Education share in GDP: - Will steadily grow to reach 4 percent of GDP in 2015 and 4.5 in 2021. - In 2021 this indicator will increase by 1.7 percentage point compared to 2006 and will approach the 2005 average for the ECA and FSU countries. - In nominal terms, this growth will ensure approximately 7-time increase of annual public expenditures per beneficiary compared to 2006. - Table 12.7: Program Indicators of the Consolidated Budget Expenditures in Education Sector (selected rows) - Consolidated budget expenditures allocated to education, AMD billion: - 2007: 95.4 - 2008: 110.9 - 2009: 135.1 - 2010: 156.0 - 2011: 179.1 - 2012: 211.4 - 2015: 313.5 - 2018: 419.4 - 2021: 590.2 - Changes in percentage against the previous year: - 2008: 30.5 - 2009: 16.3 - 2010: 21.9 - 2011: 15.4 - 2012: 14.8 - 2015: 18.0 - 2018: 15.4 - 2021: 11.7 10.9 (note: table shows "11.7 10.9" in the last row as presented in the source) - Index, 2007=100: - 2007: 100.0 - 2008: 116.3 - 2009: 141.7 - 2010: 163.5 - 2011: 187.8 - 2012: 221.6 - 2015: 328.8 - 2018: 439.8 - 2021: 618.6 - Education sector expenditures, % of the GDP: - 2007: 3.0 - 2008: 3.0 - 2009: 3.2 - 2010: 3.3 - 2011: 3.4 - 2012: 3.6 - 2015: 4.0 - 2018: 4.1 - 2021: 4.5 - Education sector expenditures, % of the consolidated budget expenditures: - 2007: 13.2 - 2008: 12.6 - 2009: 13.5 - 2010: 13.6 - 2011: 13.7 - 2012: 14.3 - 2015: 14.9 - 2018: 14.6 - 2021: 15.4 *Source: _cr08376 - 642. Due to general education sector reforms, the indicators characterizing the system* ### 661. Taking into account the reforms in general education area, the share of general ### _cr08376 - 661. Taking into account the reforms in general education area, the share of general ### Education sector spending structure and projections - Share of general secondary education in public expenditures of education sector will fluctuate around 75 percent in 2007-2012 (and for general secondary and special education 78 percent). - After 2012 the share will gradually decrease, ensuring an increased share of professional program expenditures, and will stabilize around 70 percent in 2021 approaching the 2004 average for the OECD countries (around 68 percent). - The share of expenditures allocated for professional educational programs in the total educational expenditures will increase by 5 percentage points throughout the program life and will reach 16 percent in 2021. ### Intra-sector figures and GDP ratios (Table 12.8 summary) - Total public expenditures in education sector, %: 100.0 (2007), 100.0 (2008), 100.0 (2009), 100.0 (2010), 100.0 (2011), 100.0 (2012), 100.0 (2015), 100.0 (2018), 100.0 (2021). - Elementary, basic and secondary general, special education, %: 81.9 76.6 78.4 78.4 78.2 78.0 75.0 73.0 73.0. - Sector expenditures, % of the GDP: 2.5 2.4 2.6 2.6 2.7 2.8 3.0 ... 3.0 3.3 (table formatting indicates figures across years; preserve listed values). - Professional programs, %: 9.6 13.0 11.3 11.3 11.6 11.7 14.1 15.8 16.0. - Professional programs sector expenditures, % of the GDP: 0.29 0.40 0.37 0.38 0.41 0.42 0.56 ... 0.65 0.72. - *Consolidated budget expenditures. ### Per-student public expenditure projections (Table 12.9 summary) - Projection highlights (elementary, secondary and high schools): - Average annual per student public expenditures in AMD: - 2007: 166,494 - 2008: 194,114 - 2009: 228,803 - 2010: 248,351 - 2011: 295,995 - 2012: 341,252 - 2015: 480,166 - 2018: 586,281 - 2021: 736,460 - Index, 2006=100 (same rows implied): 149 174 205 222 265 306 430 525 660 (as presented in table formatting). - Average annual per student public expenditures in international dollar: 1,284 1,558 1,744 1,807 2,064 2,299 2,922 3,232 3,683. - Average annual per student public expenditures, % of per capita GDP: 17.14 17.54 18.24 17.64 19.04 20.14 21.84 20.74 20.45. - Estimates of school age population numbers, thousand people (Index, 2006=100): 432.7 405.8 430.0 457.7 443.4 433.8 432.5 468.8 524.1 (table rows reflect these values). - OECD average, 2004: average annual per student public expenditures, international dollar = 6,875; % of per capita GDP = 24.0. ### Expected outcomes from financing increases - The proposed increase of public expenditures will allow doubling the 2006 per student public expenditures in 2009 and exceed it by around 7 times in 2021. - The ratio of annual per student expenditures to per capita GDP will grow and in 2021 will comprise approximately 20 percent of the latter. - Estimated gross enrolment in general secondary education: 96 percent in 2012 and 98 percent in 2021, with increases in high school enrolment of poor population. - Demographic note: forecasts predict decrease of population of relevant age; even with introduction of the three-year high school in 2009 and expansion of the student base, only in 2018 the number of students will recover to the 2006 figures for school age population. ### Professional and tertiary education spending mix (Table 12.10 summary) - Share of spending for professional programs in education expenditures, %: 9.6 13.0 11.3 11.3 11.6 11.7 14.1 15.8 16.0. - Of which: - Share of preliminary and secondary vocational education, %: 3.7 6.8 4.6 4.4 4.2 4.2 4.5 4.9 5.0. - Share of tertiary and post-graduate education, %: 96.9 179.9 121.1 115.8 110.5 110.5 118.4 128.9 131.6. - Expenditures for professional education programs aim at progressive increase of the tertiary education share, reducing the gap in per student public spending between secondary vocational and tertiary levels. - Goal to retain an average 1 to 2 ratio of per school student to per tertiary student annual public expenditures despite increases in general secondary spending. ### General education current vs capital spending (paragraphs 665, Table12.11) - Around 21.5 percent of 2005-2006 spending for general education was capital expenditures. - Capital expenditures projected path: - Grow by additional 3-4 percentage point in 2008-2009, - Reduce to 15 percent in 2012, - Stabilize around 8-9 percent after 2017. - Table 12.11 selected figures: - Public expenditures in general education, %: 100.0 across listed years. - Current, %: 74.7 74.5 75.0 80.0 85.0 85.0 90.0 91.0 92.0. - Index, 2006=100 for current: 95.2 94.8 95.6 101.9 108.3 108.3 114.7 116.0 117.2. - Capital, %: 25.3 25.6 25.0 20.0 15.0 15.0 10.0 9.0 8.0. - Index, 2006=100 for capital: 117.5 119.0 116.1 92.9 69.7 69.7 46.5 41.8 37.2. ### Teachers’ wages, staffing ratios, and current spending composition - Policy aims: - Bring by 2007 the average salary of teachers to per capita GDP level and then continue to increase it. - In 2009-2011 the average salary of teachers to per capita GDP level will rise from 1.1 to 1.3 points. - In 2012-2021 the teacher’s salary will stably exceed per capita GDP level by 50-60 percent. - Specific salary projections: - 2007 average monthly salary for teaching position: AMD 74,000. - In 2012 this amount will increase by 2.8 times (relative to 2007). - In 2021 by around 6.5 times of the 2007 level. - Staffing ratios: - Student/teacher ratio in 2009-2012 will be brought to 14.55-14.56 and maintained at this level. - Student/non teacher ratio will increase in 2009-2011 to 24.11, 24.12 and 24.14 respectively, then gradually increase up to 26 in 2021. - Non-teaching position/teaching position ratio expected to decline from 60% in 2006 to 52 percent in 2012 and to 50 percent thereafter. - Expenditure composition: - In 2007-2012 salaries will on average comprise 78 percent of current spending of education. ### Targeted social measures in general education - Continue special government support for training of teachers from rural, bordering and mountainous communities. - Replenishment of teaching staff with qualified specialists in those communities. - Continue policy of providing elementary school students with textbooks and literature. ### Professional education access, financing and enrolment targets - Policy aims: - Competitive education, encouragement of higher educational achievements. - Public financing arrangements based on abilities and educational merits assessed by unified criteria to ensure accessibility and mitigate inequality of enrolment across social groups. - New schemes to be developed and introduced: - Public subsidies (scholarships, student loans and grants) to most talented graduates and students displaying high academic progress. - More friendly terms and conditions for youth from vulnerable families. - Expected outcomes: - Increase gross enrolment in tertiary education to 33 percent in 2012 and 42 percent in 2021. - Reduce the enrolment gap of poor population compared to non-poor by at least 2 times. --- ### Poverty reduction: cultural concept (overview and rationale) - Cultural factors are integrated into the poverty reduction strategy on the basis that national identity, traditional values, historical and cultural heritage, and national world outlook affect poverty levels. - State role: ensure citizens’ cultural activities, access to education, cultural services and benefits, and reproduction and development of cultural potential. - Observed problems since independence: - Substitution of real cultural values with "fake" culture due to non-interference and chaotic cultural market. - Migration of cultural life to the capital, causing regional cultural impoverishment. - Collapse of community cultural infrastructure, closures of culture clubs and centers, loss of employment for culture professionals. - Decline in cultural education access for children from socially vulnerable households and diminished attendance of cultural education institutions. - Low remuneration for culture teachers, sometimes equaling minimum salary level, leading to shortages in culture disciplines. - Loss of artisans, craftsmen, and folk ensembles’ opportunities to work and create. - Conclusions: - Chaotic and poor cultural market inhibits promotion of true national culture; creating a real market for cultural products and services is a priority. - Regional concentration of cultural life has reduced cultural exchange and opportunity outside the capital. - Lack of professional training systems prevents integration of culture professionals into new relations and fails to meet demand for new cultural professions. - Cultural factor is important for poverty assessment and can be crucial for poverty reduction. ### Cultural heritage, livelihoods, and poverty reduction opportunities - Cultural component emphasizes protection and utilization of tangible and intangible cultural heritage. - Potential interventions to reduce poverty and create jobs: - Development of national arts and crafts. - Incorporation of restored historical and cultural monuments in travel itineraries and destinations. - Creation of ethnographic or arts and crafts centers near historical and cultural monuments. - Recovery of national festivities and lore; involvement of local population in cultural tourism and heritage activities. - NGOs, mass media and other stakeholders will be actively involved in implementation. ### Cultural policy objectives (paragraph 678) - Improvement of social conditions of artists and culture professionals. - Participation in cultural life, increased access to cultural services and formation of a sound cultural environment. - Increased access to cultural education. - Enhancement of a healthy social and psychological environment; ensuring the nation’s cultural security. - Making cultural life in the regions of Armenia more active and involving regional artists in regional cultural life. *Source: _cr08376 - selected excerpts on education sector financing, per-student projections, staffing and salaries, professional education access, and the culture concept of poverty reduction.* ### 679. Research, protection, conservation, restoration, recovery and utilization of ### 679. Research, protection, conservation, restoration, recovery and utilization of stationary cultural monuments ### Research, protection, conservation, restoration, recovery and utilization (overview) - Objective: research, protection, conservation, restoration, recovery and utilization of stationary cultural monuments (especially in the border regions) to protect cultural heritage, boost tourism development, create local artisan centers, and create employment opportunities including participation of local population in archaeological excavations (for jobs that do not require special professional skills). - Priority actions: incorporation of cultural and historical monuments in travel itineraries and tourism destinations, organization of events, creation of artisan centers. ### Identification, archaeological research and protective zoning (targets and activity levels) - Annual targets: - 5 to 10 newly discovered historical and cultural monuments to be identified, studied and included in the National Register of Cultural and Historical Monuments, with 1 unit subject to protection by the state included in the Register annually. - Archaeological works to be commissioned at 20 to 30 sites annually. - Monitoring and design targets (2008-2013): - Between 1,000 to 1,500 monuments and archaeological sites to be monitored. - Development of proposals for format and procedure of operation of these sites. - Development of prioritized scoping plan for recovery (reinforcement, conservation). - Design of protective zones for 400 to 600 monuments. - Review and update designs of protective zones for additional 200 to 400 monuments. - Recovery (reinforcement and conservation) works for 10 to 15 monuments annually. - Between 15 to 20 historical monuments and archaeological sites to be annually included in tourist travel destinations and itineraries. - Establishment of a procedure for management of a cadastre of historical and cultural monuments. ### Integrated program for conservation of cultural values - Purpose: conserve the country’s cultural heritage, increase accessibility to cultural services and benefits, develop civil society awareness of culture, and ensure protection of cultural values. - Focus areas: conservation and eventual use of museums, libraries and archive collections; development, procurement and installation of systems to improve storage and management of art collections and archives; introduction of surveillance/monitoring systems for museum and library collections. ### Conservation of intangible cultural heritage (priorities and program elements) - Priorities: - Promoting interest of population at large towards intangible national cultural values and involvement in cultural undertakings. - Implementation of specific program for conservation of intangible cultural values (ethnographic heritage, traditional arts and crafts). - Program components (listed): - Support to the development of traditional arts and crafts. - Establishment of family artisan workshops; training on national arts and crafts; development and publication of training materials and guides. - Compiling lists of intangible cultural values both in Armenia and abroad and publication thereof. - Government support to artisans and national arts and crafts development. - Training on folk music and dance. - Establishment of folk theatres. - Conducting national traditional festivities and writes and production of respective films. - Additional actions: - Collection and study of samples of non-material cultural values. - Development and implementation of an assistance program supporting organizations engaged in collection and dissemination of national non-material cultural values. - Commissioning and publication of materials, research and textbooks. - Development of a program for research and conservation of Armenian non-material values abroad. - Inventory of non-material cultural values. ### Promotion of and increased access to cultural values (distribution and access measures) - Aim: efficient and balanced distribution of cultural institutions across the country; ensure socially vulnerable population has access to cultural services. - Actions to establish criteria and implement distribution: - Defining criteria for efficient distribution of cultural institutions, including number of institutions/population ratio. - Mapping of efficient distribution of cultural institutions. - Development of a system of subsidized access to paid cultural services and establishment of new rates of such access. - Implementation of a distribution program. - Monitoring of efficient distribution of cultural institutions. - Notes on regional disparities: - Situation more favorable in Aragatzotn, Shirak, Vayots Dzor, Syunik and Tavush regions. - Number of cultural institutions extremely limited in Lori, Kotayk, Ararat and Armavir. - Recovery priorities: - Recovery of regional culture clubs (community libraries, recreation centers, folk ensembles, artisan workshops, studios) prioritized, especially in border communities, to create jobs, decrease outward migration, promote national and cultural values among youth, and address national security considerations. ### National promotion program and media outputs - National program objectives: - Ensuring access to museum and library collections in hard copy and electronic formats. - Increased access of the local population and tourists to the museums by means of publication of museum maps and guides. - Branding and local and international advertising of Armenian culture to increase awareness and build a positive image. - Annual media production targets: - Produce 3 to 5 documentary films and TV program annually. - Publish 2 to 5 publications on Armenia’s cultural monuments annually. ### IT and electronic information management systems (digital access and infrastructure) - Planned developments: - Online storage of museum, library and archive collections, creation of websites and a unified portal. - Development of multimedia programs for libraries and archives. - Development of virtual museums and audio guides. - Development of a project for the creation of a consolidated database on Armenian libraries, museums and archive collections. - Creation of a consolidated database on Armenian libraries, museums and archive collections. - Development of a project for the creation of an electronic data management system. - Establishment of wide area network between cultural institutions. - Creation of a central hub connecting all cultural institutions. - Testing and deployment of the wide area network connecting all cultural institutions. - Increasing access to information in Armenia’s border, high alpine and remote communities. ### Promotion of modern art, cultural infrastructure and cultural processes - Support mechanisms: - Support to debut and pilot programs, implementation of grant projects, creation of conditions for development across art fields, fostering cultural interaction and integration of traditional non-material cultural values in modern art, and promotion of competitive modern art. - Government assistance to cultural and art programs to be provided on competitive basis. - System for public support to consumers of cultural services to increase access; new pricing policy and subsidies for socially vulnerable population groups. - Continued implementation of a ‘Debut’ grant programme to support young talented artists. - Program on Support to Theatre and Dance Companies: state funding on a competitive basis to projects undertaken by these cultural institutions; improved mechanisms for earmarking and allocation of priority-based support. - Continued support to performing arts through commissioning and sponsoring socially oriented performances and works (process started in 2001) to introduce modern plays and improve social conditions of actors and performers. - Infrastructure renovation and equipment: - Design of a program for renovation of buildings and premises of cultural institutions and upgrade of material and technical base. - Assessment of needs in buildings, premises, equipment and supplies. - Registration and classification of cultural institutions in small, medium and big communities. - Implementation of an integrated program on supplying cultural institutions with modern equipment. - Continued inter-regional cultural exchange program and guest tours of performing companies, including guest performances of Yerevan and regional theatre companies, and deployment of mobile movie theatres and libraries (Bibliobus). ### Key objectives for art development and cultural movement - Implementation of a state grant program in the arts sector (music, theatre, visual arts, cinematography, dance, circus, literature, etc.). - Ensured protection of copyright. - Increased opportunities for cultural institutions to engage in entrepreneurial activity. - Broader opportunities for promotion of works of art, including through the mass media and online. - Establishment of a public fund for art promotion. ### Human resource policy in the culture sector and cultural education - Agenda for Cultural Education: - Government decree No. 47 (November 18, 2004) endorsed the Agenda for Cultural Education. - Government subsidies, as of 2007, to children from socially vulnerable households studying in music and art schools; potential future expansion to other fields of art after research. - Establishment of reference school centres across regions to provide in-depth specialised cultural education, ensure high quality and accessibility. - Priorities: provision to art schools of modern facilities and equipment, new instruments and supplies, renovation of buildings and premises. - Human resource program elements: - Development and implementation of a comprehensive programme of professional training and re-training, research and analyses of human resource situation in the regions. - Development of workable schemes for distribution of culture professionals across regions. - Improved mechanisms for government funding for training of culture professionals. - Preparatory works for introduction of curricula to train professionals in new fields. - Introduction of a flexible mechanism for free of charge musical education. - Establishment of subsidized quotas for students of secondary and higher cultural education institutions. - Increased access to art education for socially vulnerable population groups. - Training of professionals in new fields of art education. - Managerial training (2008-2021): - Promulgation of a system of training for managers in the culture sector both in Armenia and abroad. - Regulation of human resource issues, streamlining professional and service requirements, staffing of culture institutions with trained managers, deployment of managers to border, mountainous and remote communities. ### International cultural interaction and cooperation - Rationale: cultural exchange, involvement in international specialized structures, expansion of cultural dialogue, promotion of Armenian cultural heritage and involvement of the Diaspora to support cultural development and competitive modern art infrastructure. - Program aims: - Strengthening ties linking Armenians to their motherland and conservation of national cultural heritage. - Establishment of a pan-Armenian cultural information database. - Creation of guarantees for conservation and protection of Armenian cultural heritage. - Protection of Armenian national identity; strengthening ties with the motherland. - Preservation and involvement of the Armenian Diaspora in international cultural exchange. - Professional presentation and dissemination of information on Armenia and Armenians worldwide; countering disinformation and negative propaganda. ### Funding of programmes in the culture field for 2008-2021 (timeline and phases) - Implementation timeline: 2008 – 2021. - Two phases: - First phase covering 2008-2013. - Second phase spanning 2013-2021. - Process: upon completion of the first phase, programme assessment and revision will be undertaken and new priorities set as necessary. ### State Budget Funding of Key Components of the Culture Sector (Table 12.12 excerpts) - Total, AMD bln (selected values as presented in source): - 2006: 8.7 - 2007 Actual: 10.1 - 2008 Assumptions: 9.2 - 2009: 10.4 - 2010: 10.8 - 2011: 11.3 - 2012: 12.4 - 2015: 16.5 - 2018: 22 - 2021: 29.2 - Selected subcomponents and figures (as presented in source): - Libraries: 0.76 (2006); 0.88 (2009); 0.92 (2010); 1.16 (2011); 1.1 (2012); 1.0 (2015); 1.1 (2018); 1.5 (2021); 2.0 (later entries shown as 2.6 in table). - Museums and exhibitions: 1.88 (2006); 1.40 (2007); 1.26 (2008); 1.51 (2009); 1.42 (2010); 1.42 (2011); 1.56 (2012); 2.06 (2015); 2.7 (2018); 3.5 (2021). - Culture clubs, centres: 0.77 (2006); 0.02 (2007); 0.026 (2008); 0.023 (2009); 0.034 (2010); 0.035 (2011); 0.035 (2012); 0.034 (2015); 0.051 (2018); 0.07 (2021); 0.09 (later); 0.092 (table continuity). - Other culture institutions: 0.61 (2006); 0.57 (2007); 0.57 (2008); 0.66 (2009); 0.680 (2010); 0.58 (2011); 0.59 (2012); 0.653 (2015); 0.88 (2018); 1.2 (2021); 1.5 (later). - Art: 2.99 (2006); 4.28 (2007); 3.27 (2008); 3.74 (2009); 4.49 (2010); 5.0 (2011); 115.53 (table entry formatting presents 115.53 then 7.0 9.34 13.0—source table entries reflect formatting irregularity). - Cinematography: 0.48 (2006); 0.58 (2007); 0.60 (2008); 0.70 (2009); 0.62 (2010); 0.62 (2011); 0.62 (2012); 0.686 (2015); 0.88 (2018); 1.2 (2021); 1.5 (later). - Restoration of monuments and cultural values: 0.77 (2006); 0.055 (2007); 0.056 (2008); 0.074 (2009); 0.76 (2010); 0.76 (2011); 0.84 (2012); 1.12 (2015); 1.54 (2018); 1.97 (2021). - Political parties, NGOs, trade unions: 0.18 (2006); 0.20 (2007); 0.180 (2008); 0.17 (2009); 0.179 (2010); 0.179 (2011); 0.20 (2012); 0.31 (2015); 0.40 (2018); 0.53 (2021). - Capital reconstruction of cultural sights and restoration of monuments: 2.1 (2006); 2.3 (2007); 2.3 (2008); 2.3 (2009); 2.3 (2010); 2.5 (2011); 3.13 (2012); 4.5 (2015); 5.1 (2018). *Source: _cr08376 - 679. Research, protection, conservation, restoration, recovery and utilization of* ### 707. Funding of the culture sector in 2008-2021 will be provided from the ### _cr08376 - 707. Funding of the culture sector in 2008-2021 will be provided from ### Culture sector funding (2008–2021) - Funding sources: consolidated state budget, private sector, and other sources. - State budget funding projections for 2008-2021 are reflected in Table 12.12 (table content not reproduced here). - Long-term priorities: libraries, museums and exhibitions to consolidate cultural values and increase population access. - Operational to capital expenditure ratio will remain stable at the level of 20 to 80 percent respectively. ### Youth policy — Situation overview (12.4.1) - Historical development: - Coordinated national youth policy implementation began in 1995 with a youth issues department in the Ministry of Culture and Youth Issues. - Structural reforms in 1998 and re-orientation to a youth policy department in 2002. - Since 2007, the Ministry of Sport and Youth Issues is the state authority for youth policy development and implementation. - Legal framework: Government decree No. 798 of December 14, 1998 spells out core principles, beneficiaries, goals and objectives. - Demographics and human resource importance: - Youth defined as 16 – 30 years of age. - According to 2005 Statistical Yearbook of the National Statistical Service, youth comprises 821,600 persons, or 25.6% of the population. - State budget appropriations for national youth programmes increase annually. - State Budget Funding of Youth Programmes, 2003 – 2007 (AMD mln): 2003: 197.9; 2004: 233.8; 2005: 279.9; 2006: 316.2; 2007: 342.9. - Broader funding: additional state budget appropriations for education, health, social protection, sports and other sectors also target youth; alternative sources include local and international NGOs, international organisations, community budgets, charity organisations; largest such source noted as All Armenian Youth Fund. - Programme focus (2003–2007): - Increase spiritual, cultural, and education level of youth; meaningful leisure; address socio-economic challenges; encourage talented youth; environmental, health, sports, employment, professional orientation, education and training initiatives with active youth participation. - Patriotic education, proactive societal stance, international cooperation, information exchange, regional youth centres, rural youth development, enabling self-fulfillment. - Institutional developments: - National Youth Strategy for 2007 developed in 2005 and endorsed by Government in 2006. - 2006 programme implemented: Youth Programmes Implementation Centre public non-commercial organisation representations established countrywide; Regional Youth Centres created and operationalised with local administrations, regional NGOs and international organisations. - Regional Youth Centres: governed by boards of partner representatives; function as resource centres providing legal and health counseling, computer services, library/reading halls, training courses, professional orientation; cooperate with regional State Employment Service centres. - Employment support: - "Center for professional orientation of young people" SNCO established within the RA Ministry of Labor and Social Issues provides 14-30 (35) year-old people with labor market information and consultancy and runs training programmes for labor market adaptation. - Civil society role: - About 3,000 NGOs registered at the Ministry of Justice; about 50 percent are youth organisations or work for/with youth. - Research and reporting: - Preparation of Armenia’s National Youth Report completed at the end of 2006 with Council of Europe and UNDP support; comprehensive description of youth situation and foundation for strategy implementation. ### Key principles and objectives of national youth policy (12.4.2) - Government stance: addressing youth problems is a policy priority; youth should have full-fledged, proactive participation and opportunity to freely express opinions; their voice should be heard at all public administration levels. - Government actions for coming years will: (i) Strengthen social partnership with civil society and youth organisations, (ii) Ensure interagency dialogue on youth issues, (iii) Develop European and international cooperation in youth and related fields, (iv) Develop a legal framework based on international criteria, (v) Continuously promote the national youth policy and action plan and adapt them to the changing environment. - Underlying principles to guide policy: (i) Integration of legitimate intersts, rights and obligations of the state, society, citizens and youth; (ii) Equity of all beneficiaries of the national youth policy; (iii) Publicity; (iv) Access to state support mechanisms; (v) Program approach to the implementation of the national youth policy; (vi) Ensuring equal opportunities for the youth and youth organizations to participate in development and implementation of the national youth policy. ### Priorities for action (12.4.3) - Framework: PRSP-coordinated actions to address youth challenges in education, healthcare, spiritual, culture, sports, legal and social protection and employment. - Objectives within PRSP: promote youth participation in decision making at community, regional and national levels; develop human and institutional capacities; contribute to poverty reduction and decreased youth unemployment; ensure mentally and physically healthy, educated and patriotic youth. Priority 1 — Promotion of participation in national life - Problem: Insufficient youth involvement in decision making and national/political life leading to lack of awareness and detachment. - State role: ensure enabling mechanisms and access to income opportunities, participation in decision making, information, labor and housing market, healthcare, education, clean environment, freedom of movement and recreation. - Expected Results: - State governance bodies and local administrations will ensure the participation of the youth in the policy development and implementation process. - The youth will have greater access to recreation, information, skill and capacity development opportunities. Priority 2 — Increased opportunities for employment - Problem: High unemployment among Armenian youth; education system not aligned with volatile labor market. - State role: ensure professional education that develops required skills and capacities; enable entrepreneurship and employment; strengthen cooperation among education/training institutions, employment centres, private sector. - Expected Results: - Youth centres will have information databases and will provide advisory services and opportunities for professional orientation. - The youth will have access to information on small and medium entrepreneurship, training and credit. - Rural youth will acquire skills and capacities for implementation of innovative ideas for more productive agriculture. Priority 3 — Promotion of healthy lifestyle - Problem: Emergence of new physical and mental health risks: increased smoking, substance abuse, harmful practices at younger ages; insufficient school-provided knowledge leading to physical and mental deficiencies, unprotected sex, spread of STIs (primarily HIV/AIDS), unplanned pregnancies; poverty increases vulnerability. - State role: increase awareness, provide knowledge and services to protect youth from risks. - Expected Results: - The youth will have access to appropriate healthcare services. - The youth will be informed about healthy lifestyle and will have an opportunity to benefit from reproductive health services. - Vulnerable youth will have access to information on how to prevent HIV/AIDS. Priority 4 — Increased coordination and promotion of spiritual, cultural and patriotic education - Actions: coordinated action to involve youth in national, economic, political and cultural life; training for youth leaders and workers; support system for talented youth; incorporate youth component in local, regional and national initiatives including national minorities; support civic initiatives and programmes for youth education and development. - Expected Results: - Public administration bodies will have resources and information to respond to the needs of the youth and help them exercise their rights. - A more advanced level of cooperation between government, private sector and youth NGOs. - Improved coordination in implementation of the national youth strategy and policy. - Increased level of spiritual, cultural, patriotic education of the youth. - Deepened cooperation between youth in Armenia and in the Diaspora, contributing to development of Armenian culture, protection and promotion of national values, and strong national morale. ### Key objectives for 2008–2021 (12.4.4) - The key objectives include: (i) Increased level of coordination in implementation of the national youth policy and development of an appropriate legal and regulatory framework; (ii) Advanced cooperation with youth organizations and provision of state support to such organizations; (iii) Increased education level of the youth, creation of healthy and sound recreation opportunities; (iv) Analysis of socio-economic problems and implementation of actions to address these problems; (v) Implementation of initiatives for patriotic and civic education; (vi) Development of the national youth policy at the regional level (operationalisation of regional youth centres and creation of community youth centres, implementation of initiatives for the rural youth and those living in border areas); (vii) Creation of enabling environment for self-fulfillment of the youth, state support to gifted and talented youth; (viii) Ensured access of the youth to the required information; (ix) Development of international and pan-Armenian youth cooperation. ### Implementation, monitoring, evaluation and funding (12.1.5) - Implementation structure: - Authorised government body to ensure daily implementation of the national youth strategy and policy via two programmes: first covering 2008 – 2012, second covering up to 2021. - Various ministries (education and science, culture, sports and youth issues, health, labor and social issues, foreign ministry, defense), regional and local administrations to contribute by sharing information and coordinating/harmonising actions. - Coordination and monitoring: - Coordination and monitoring should take place at the deputy minister level through regular interagency and working meetings. - Regular reviews of strategy implementation to develop programmes for youth and civil society development. ### Environmental protection (12.5) - Environmental protection and natural resource management objectives in the 2003 Poverty Reduction Strategy: (i) efficient use of forest resources; (ii) eliminate the extreme air pollution; (iii) mitigate the negative consequences of global ecological changes; (ii) prevention of soil degradation, limiting human activity that causes desertification; (iii) improvement and effective utilization of meadows; (iv) efficient management and use of water resources, restoration of the Lake Sevan ecological balance and relevant conditions to ensure preservation natural balance; (v) municipal waste treatment and management of hazardous industrial waste. *Source: _cr08376 - 707. Funding of the culture sector in 2008-2021 will be provided from* ### 736. In the conditions of stable economic growth, the current approach of national ### National environmental policy and management (paragraphs 736–767) ### Overview and objectives - In conditions of stable economic growth, national environmental policy should focus on ensuring availability of natural resources for future growth, their balanced use and establishment of guarantees for prevention of environmental pollution. - Armenia’s integration in regional and international cooperation frameworks poses new requirements for environmental management, including monitoring of trans-boundary impact of movement of hazardous and toxic waste and genetically modified organisms. - National policy and legislation for environmental protection pursue the following objectives: - Prevent or limit detrimental impact on human health and environment; - Protect biodiversity; - Ensure adequate rate of recovery of renewable natural resources; - Ensure rational and efficient use of non-renewable natural resources. ### Legal and institutional reforms - Recent legislation and programs enacted in the last 5 years include: - Forest Code of RA (2005) and the National Forest Program (2005); - Law on Key Provisions of National Water Policy (2005); - Law on Waste (2004); - Laws on Special Protected Areas (2006) and on Environmental Monitoring (2005); - Law on Ozone Depleting Substances (2007). - Objectives of the environmental component of European Neighborhood National Policy (2006) include harmonization of national environmental legislation, development of secondary legislation, regulations, technical requirements, standards and methodologies, and instituting appropriate institutional reforms. - Despite legal progress, workable mechanisms and professional institutions are still lacking and pose serious obstacles for future development and have limited capacities. ### Financial resources, fees, and budgetary arrangements - Budget revenues from environmental and resource use fees and levies have grown consistently with improved monitoring, inspections, and economic growth. - Collection of fees for exploitation of natural resources in 2006 increased by 50.5% or by 1,338.9 mln drams compared to 2005, enabling gradual increase of budget appropriations for environmental protection interventions. - Legislative and institutional changes: - Law on the Budget System of RA amended (09.11.2006, HO-174-N entering into effect since 2011) to stipulate: “Annual environmental expenditure earmarking shall be no less than the sum total of actual budget revenues from environmental and natural resource usage fees collected in the previous budget year”. - Forest Restoration and Development Fund established by Government Decree No. 891 of 2004 (effective 2005). - Environmental Protection Fund (special account at the Central Bank of RA) started accumulation of security funds generated from licensing of mining activity. - Performance indicators and targets: - Current spending for environmental protection is GDP 0.2-0.3 %; based on this indicator Armenia ranks among the last in Eastern Europe, Caucasus and Central Asia (source EDRC, data of 2005). - The country must gradually draw closer the ratio of environmental protection spending’s specific weight (excluding foreign assistance) to GDP to the level of European countries (2.0 % of GDP). - Public environmental expenditure management (PEEM) based on best international practices is recommended. ### Institutional capacity, monitoring, and information systems - Implementation priorities: - Create sound mechanisms for monitoring, inter-sector cooperation, environmental impact assessment, mitigation and prevention of risks. - Develop electronic environmental databases, modern information collection, communication, processing and dissemination technologies, and an environmental hazard rapid response system. - Thorough review of environmental information collection and public monitoring systems; national agenda for environmental monitoring endorsed in 2006 will require serious institutional and legal reform. - Improve administration, simplify and streamline management, introduce e-management to mitigate corruption risks. - Promote mechanisms of incentives for environmentally benign practices based on public-private partnership principles and enterprise environmental rating; introduce international ISO standards. - Decentralization: - Strengthen interaction between the capital and the regions; regions currently lack resources and capacities required for a decentralized system of environmental management. - River basin management bodies initiated in 2007; full operation requires more community and civil society representation and professional training. ### Priority environmental challenges and sectoral actions - Environmental policy must address GDP-related growth in negative environmental impact and promote resource-efficient technologies to phase out obsolete and hazardous technologies. - Environmental fees: - Current rates established low to create enabling conditions for economic development; these rates do not cover resource value and economic costs of damage and thus do little to change business behavior. - Serious analysis will be undertaken to improve environmental impact assessment and its phased implementation. - Increase in ecological fees shall be used primarily for creating incentives among enterprises that pollute to change behavior, not merely as a source of increasing tax revenues. - Mining sector: - Development of mining requires augmenting geological surveillance works. - Methodology for environmental impact assessment due to pollution and mining waste is non-existent, due to lack of qualified professionals, structures and funding. - Environmental payments will be revised until the end of 2008 to bring them in line with international pricing trends. - Develop concept for exploration of earth entrails. - Priorities include tailing dam management and reclamation of abandoned and idle mining sites. - Involvement of private sector, international assistance, and Clean Development Mechanism under Kyoto Protocol require enabling conditions and program development. - Land conservation and agriculture: - Current land use practices cause diminished productivity, erosion, salination and alkalization of soils; overexploitation of pastures and hayfields deplete animal feed stock and threaten biodiversity. - Address land degradation to ensure sustainable agriculture development, reduce outward migration of rural population and reduce poverty. - Actions include developing criteria for land quality and productivity, quality monitoring, regulation of land use, registration and supervision systems, recovery of affected agricultural lands and natural landscapes, and economic incentives. - Lake Sevan: - Conservation and replenishment enabled stable rise of water level by 247 cm between 2001-2007. - Urgent issues: shoreline management, removal of vegetation in flooded areas, dismantling illegally built structures and buildings, redesign of infrastructures and roads. - Fish stock is alarmingly low; lack of accurate estimates complicates recovery planning. Review fishing licensing and introduce cooperation between private and public sectors. - EBRD loan provided in 2007 to build sewage treatment facilities in 5 towns of the Lake Sevan basin; full basin protection requires commissioning of facilities in all settlements and industries in the lake basin. - Promote organic agriculture and use of high quality organic fertilizer generated at biogas stations to reduce chemical pesticides and manure pollution. - Forest management and biodiversity: - Mass logging during energy crisis years and under-funding of forest recovery led to shrinking forested areas, species depletion, loss of natural reproduction capacity and reduced productivity. - Positive shifts: management plans developed for 7 forestries and 2 specially protected forest areas (total area 188,827 hectares); interagency task force and Forest Monitoring Centre established; Forest Recovery and Development Fund established in 2004. - Community forest management plans under development; pilot projects ongoing. - Government committed to encouraging community and private forest management and pest management projects in line with Clean Development Mechanism under the Kyoto Protocol and Global Environmental Facility. - New category of industrial forests established; planting and management mechanisms not fully developed. - Management plans developed for Sevan and Dilijan National Parks; biodiversity monitoring in Khosrov, Shikahogh and other protected areas. - Sound management of specially protected areas requires increased public funding and efforts to establish income generation mechanisms and community and trust management arrangements; mobilization of third party funding is needed. - Water resources and treatment: - Programs to protect national water resources, regulate river flows and ensure availability and rational use of water are planned in view of vulnerability from global climate change. - Reconstruction of water treatment facilities is a priority: out of 21 available facilities only Yerevan water treatment facility is currently operational and provides for mechanical treatment of wastewater. - Establishment of initial treatment facilities at enterprise level will reduce basin pollution load. - Industrial and municipal waste: - Waste management (collection, sorting, organized treatment) is a short-term priority and requires considerable investment. - Industrial and construction waste disposed together with municipal solid waste in municipal and rural disposal sites; existing disposal methods and infrastructure do not meet required standards and create unfavorable sanitary and hygienic conditions. - Strategic program of system modernization, infrastructure reform and management technique refinement is expected to be developed. - Some progress in creating a system for waste hazard assessment and inventory development; cost-effective treatment and disposal technologies remain an issue. - Treatment, recycling and safe disposal of radioactive waste from Armenian nuclear power plant and other industrial facilities must be effectively resolved in coming years due to expected liquid and solid radioactive waste from decommissioning and construction of a new plant. ### Key recommendations and actions (implicit in text) - Harmonize and develop secondary legislation, regulations, technical requirements, standards and methodologies; institute institutional reforms. - Build professional institutions and workable mechanisms for enforcement, monitoring and inspections. - Increase environmental expenditure toward reaching 2.0 % of GDP (excluding foreign assistance) over time and implement PEEM based on international best practices. - Revise environmental payments and fees to reflect resource value and damage costs; use increased fees to create behavioral incentives for polluters. - Strengthen environmental information systems: electronic databases, modern ICT, rapid response systems, and public monitoring. - Promote decentralized river basin and regional environmental management with community and civil society participation and capacity building. - Prioritize sectoral programs: mining environmental assessment and reclamation, land conservation and sustainable agriculture, Lake Sevan shoreline and fisheries management, forest recovery and community forestry, reconstruction of water treatment facilities, and waste management modernization including radioactive waste planning. *From the provided IMF content: paragraphs 736–767.* ### 768. Mitigation of negative impact on human health. According to the findings of ### _cr08376 - 768. Mitigation of negative impact on human health. According to the findings of ### Mitigation of negative impact on human health - Most polluted cities of Armenia identified by atmospheric pollution monitoring: - Alaverdi (sulphur dioxide emissions from copper-molybdenum extraction and processing facility) - Ararat and Hrazdan (cement factory dust emissions) - Yerevan (mostly automobile emissions) - Automobile emissions: - Account for more than 90% of total emissions in Yerevan. - Reducing these emissions requires an integrated and consistent approach. - Government decision No. 1033-N of 14.07.2005 approved a program on measures to reduce harmful automobile emissions, to be implemented between 2005-2013. - Yerevan master plan envisages: - Development of the public transportation system. - Increased number of bigger public buses, by 31.6% by 2010 and by 45% by 2020. - Development of electric public transportation means. - Prohibition on leaded petrol, enforced since 2000, created favorable conditions for enforcing the use of exhaust emission control systems. - As a first step, it has been prohibited to import to Armenia vehicles without such systems. - Long-term reduction of emissions from stationary sources: - Requires development of a national policy conducive for import and promulgation of environmentally friendly technologies. - Urban parks and recreation zones: - Proper management and development improve public health and quality of life and help urban dwellers cope with thermal stress, especially during summer months. - Tailing dumps: - Negative health impacts possible from tailing dumps (e.g. in Akhtala, Dastakert, Agarak). - Necessity to develop and implement a project aimed at improvement of ecological situation of tailing dumps. - Environmental governance: - A sound environmental protection and management system requires adequate participation and involvement of society and the private sector in decision making. - Such participation should be based on proper access to environmental information and transparent decision making practices. ### Urban Development — General Overview - Sector dynamics and sustainability: - Urban development is the most dynamic sector of Armenia’s economy; between 2001 -2996, the total volume of construction grew by factor of 4.5. - Sustainability requires consistent improvement of both quantitative and qualitative indicators. - Urban poverty and homelessness: - Poverty levels in Armenia’s cities and towns (except Yerevan) are the highest in the country. - Out of 29 thousand homeless persons in Armenia, more than 19 thousand are urban dwellers deprived of basic amenities, living in temporary shelters, dormitories, public buildings. - Priority of sustainable urban development: - Ensure favorable living conditions for present and future generations and improve their quality of life. - Address rehabilitation of historic urban areas, safe and affordable housing and access to utilities, protection from natural and manmade disasters, earthquake resistance and safe operation of structures, and efficient management of capital investments. - Relation to regional development and multi-polar development: - Importance of balancing development of settlements and areas, neutralizing threats of uncontrolled urbanization in seismically active zones, and preventing undesirable growth of population density in the capital. - Proposed priorities for urban development: - (i) Spatial development and planning; - (ii) Earthquake resistant design and construction; - (iii) Reduced impact of geological hazards; - (iv) Improved housing conditions. ### Spatial Development and Planning - Rationale: - Spatial development and planning are essential elements of sustainable human development and require long-term planning at national, regional and central levels informed by socio-economic development plans. - Historical patterns and challenges: - Soviet-period economic model, complex relief and challenging climate resulted in lopsided spatial planning characterized by unipolar development. - Dangerous trends: capital-centric dynamic development while small and medium-sized towns and villages remain isolated; increased construction density, social stratification, emergence of prime and low-grade districts. - Requirements: - Urban development plans developed with broad participation of society. - Integrated landscape planning process including urban and cultural landscapes, degraded landscapes, environmentally valuable and vulnerable areas. - Armenia ratified the European Landscape Convention on March 23, 2004. - Preservation and recovery of architectural heritage and historic city areas; implementation requires public-private partnership. - Priority actions for spatial development and planning: - (i) Development of Master Plan of Armenia’s Spatial Organisation (based on an analysis of Habitation Master Plan); - (ii) Drafting of regional spatial development plans; - (iii) Development of master plans and zoning maps for all communities; - (iv) Development of spatial planning documentation for Sevan Lake catchment area; - (v) Development of building and distribution plans for territories around national highways; - (vi) Development of rehabilitation plans for historic areas, architectural and natural monuments; - (vii) Implementation of provisions of European Landscape Convention and the principles of the UN “Habitat” process; - (viii) Deployment of the national urban cadastre; - (ix) Improvement of urban development legal and regulatory framework. ### Earthquake resistant design and construction - Seismic risk overview: - Seismic characteristics reviewed after the 1988 earthquake; earthquake hazard and risk assessment was raised by 1-2 points. - More than 80 percent of the country’s territory appeared in 7 and above magnitude area. - Housing stock vulnerability: - In the last 15 – 20 years lack of financial resources led to no systemic approach to safe operation and maintenance of buildings; scope of major renovation was extremely limited. - About 89.4 percent of apartment blocks was built before 1990 and after the review of the seismic characteristic these buildings no longer meet the current prudential norms for earthquake resistance. - Damaged apartment blocks may not ensure people’s safety in the event of an earthquake; delayed maintenance can result in irreversible technical damage and loss of an important national resource. - Need for systemic approach: - Important to ensure consistent implementation of measures aimed at enhancement of control of the urban norms, ensuring earthquake resistance and safety of the country’s housing stock. - Data on national housing stock: - Housing stock Area % of the total - 1 Total area of housing stock (thousand square meters) 76,173.3 - - 2 Total area in apartment complexes, including Yerevan 26,554.1 13,979.5 34.9 52.6 - 3 Total number of apartment complexes - in Yerevan - built before 1990 - dilapidated and emergency (2003) 21,778 4,709 19,235 581 - 21.6 89.0 2.7 - Recommended actions: - Create technical documentation packages for apartment block buildings. - Create a consolidated database on the technical conditions of the housing stock to estimate hazard level for each building and improve efficiency of rehabilitation projects. - Inventory of other public buildings (shopping malls, sports facilities, stations, etc.) within deadlines established by the law, development of required action plans and effective monitoring. - Create an inventory of apartment blocks based on an approved program and implementation plan, with priority assigned to hazardous and damaged buildings. ### Reduced impact of geological hazards (combating landslides) - Landslide problem and consequences: - Landslides prevalent in Tavush, Vayots Dzor, Syunik, Lori, Kotayk, Gegharkunik, Ararat and some districts of Yerevan. - Landslides cause damage to houses, infrastructure, industrial facilities, ecosystems; threaten life and health; cause depopulation, destruction of historic and cultural sites, impoverishment, displacement and emigration, and impede economic and population growth. - JICA 2004 analysis: - Number of landslides in Armenia 2,504 - Total area of all landslides 1,216 km2 - Number of settlements in landslide areas 233 - Number of border settlements in landslide areas 113 - Length of roads damaged by landslides 238 km - Length of railways damaged by landslides 4.05 km - Agricultural lands in landslide areas 10,819 ha - Historic sites in landslide areas 6 - Economic impact and policy response: - Deployment of a landslide hazard management system with consistent implementation of engineering works will reduce economic damage and create favorable conditions for increased investment. - Program priorities include surveying and regular monitoring of most hazardous landslide sites, identification of hazardous houses and accommodation of relocated residents. - Some particularly hazardous areas may require engineering solutions. - In 2007 the government endorsed a concept of landslide disaster management for creation and deployment of a management system and formulation of a national program; one target is to ensure the survey, forecasting and prevention of landslides for safe operation of buildings, facilities and infrastructure and provision of full information on landslide areas. - Historical damage estimate (as of August 2004): - Data on 145 landslide sites: total damage estimated AMD21.3 bln; potential damage totaled AMD26.8 bln. ### Improvement of Housing Conditions - Housing demand and disaster response: - Housing conditions and access to safe and affordable housing are basic requirements and key factors in assessing household poverty level. - From independence, government faced accommodation challenges for victims of natural and manmade disasters and maintenance/management of Soviet-era housing stock. - Program achievements and remaining needs: - During 2000 – 2006 about 16 thousand households received an opportunity to improve their housing conditions under government program approach. - Demand remains high: about 43 thousand households in need of housing, of which 26 thousand are homeless. - Solutions proposed in approved projects cover all remaining households in need, but issues remain for poor households living in temporary shelters who cannot afford even basic amenities. - To reach the Millennium Challenge target indicators (MCA, 11 objective) by 2015, it would be necessary to improve the housing conditions of about 16 thousand homeless households. - Institutional framework and challenges: - Reforms resulted in prevalence of private ownership; about 95 percent of housing stock is now privately owned. - Institutional framework is generally favorable with a regulatory framework in place and participatory management elements emerging. - Functions of servicing, maintenance and modernization of apartment blocs are not yet fully implemented due to lack of funding and gaps in the institutional framework. *Excerpt from the provided IMF content unit.* ### 798. The spending on maintenance of collective ownership of apartment blocks in the ### _cr08376 - 798. The spending on maintenance of collective ownership of apartment blocks in the ### Maintenance status and risks - Spending on maintenance of collective ownership of apartment blocks in the last 15 years was fragmented and more oriented towards current or emergency repair. - Mandatory renovation works pursuant to the maintenance norms of collectively owned apartment blocks were not carried out. - Result: accumulated wear of apartment block buildings and the need for considerable investment which the owners (residents) alone cannot realistically afford. - Likelihood of further deterioration of the situation with maintenance and management of apartment blocks in terms of ensuring their safe operation is rather high due to the current socio-economic reality. ### Housing policy priorities and planned measures - Developments will target people, including poor households, that became homeless, ensuring access to the constitutional right to adequate housing through provision of guarantees and clarification of actions. - Creation of social housing planned to facilitate social and community integration. - A respective legal framework is planned to be created, a program for improvement of housing conditions will be designed and steps will be taken for its implementation. - Another priority: management and maintenance of apartment blocks — adjust and streamline scope and mechanisms of government involvement based on a well designed program aimed at safe utilization of housing stock. - Priority will be given to communities characterized by high vulnerability (poverty risk). ### Government support areas - Government support will be provided in the following two main areas: - (i) Support for maintenance and modernization of infrastructure of apartment block buildings; - (ii) Support to the improvement of the institutional framework and capacity building of apartment block management bodies. - Within the second assistance area, funding will be provided for: - Establishment and sustainable operation of mechanisms for the management of apartment blocks and sensitization of owner participation and activity. - Creation of an information register on apartment blocks. - Government support to management bodies will be provided in a centralized way: - First phase: provided to local administrations on principle of co-financing, to be followed by management bodies of apartment blocks. - Community poverty level will be one of the priority factors in determining the level of government support. ### Survey findings (2007) - Comprehensive survey of apartment blocks conducted in 2007 indicates: - 65.6 percent (7,812 buildings) of apartment blocks are managed by condominiums. - 34.4 percent (4,098 buildings) are managed by the communities. - In 31 (65 percent) out of 48 cities condominiums are not established at all, and apartment blocks are managed by the communities. - Survey identified need for renovation of some elements of collectively owned buildings. ### Public funding estimates for urban development sector, SDP framework, 2009 – 2012 (AMD mln) - TOTAL 9,672 - 1. Spatial development and planning, total 1,802 - 1.1. National, regional and local urban development documents and designs 1,053 - 1.2. Planning of specially regulated urban development objects 209 - 1.3. Historic buildings, architectural and natural heritage conservation and recovery program development 100 - 1.4. Implementation of a project on deployment of national urban cadastre 170 - 1.5. Legal reforms in urban development sector 270 - 2. Earthquake resistant construction and design 1,065 - 2.1. Formulation of a program for preparation of apartment block technical documentation package 5 - 2.2. Apartment block technical documentation packages for 10,000 buildings * 1,060 - 3. Reduced impact of geological hazards, total 960 - 3.1. Prospecting and monitoring of most hazardous landslide areas 811 - 3.2. Review of technical conditions of housing 140 - 3.3. Development of a national program to combat landslides ** 9 - 4. Improvement of housing conditions, total 5,845 - 4.1. Development of a project on provision of housing for homeless households *** 70 - 4.2. Measures for management, conservation and maintenance of housing stock **** 5,775 - Comments (as provided): - * The project implementation will be sustainable and during 2013 – 2016 will cover the remaining 12 thousand buildings. - ** Implementation of measures of the national programme to combat landslides will start in 2013. - *** The final size of public funding for provision of housing to homeless households will be based on the developed project. - **** AMD5,250 mln will be used for maintenance and modernisation of building infrastructure, while AMD525 mln will be used for improvement of institutional framework and strengthening of capacities of management bodies. ### Implementation approach and targeting - Emphasis on co-financing in first phase: central government → local administrations → management bodies. - Community poverty level to be a priority factor in determining government support levels. - Measures include capacity building for management bodies and creation of an apartment block information register. ### Fiscal context and relevance to funding capacity - Macroeconomic and fiscal developments 2003-2007 affected consolidated budget indicators and future capacity to fund housing priorities. - Key fiscal facts and projections excerpted from broader budget framework (selected figures preserved as presented): - Nominal growth of budget revenues throughout 2003-2007 totaled AMD 399.1 billion. - Budget revenues fell short of projected levels by AMD 170.0 bln for 2003-2007. - Public funding estimates for urban development sector (2009–2012) TOTAL AMD 9,672 mln, including AMD 5,775 mln for measures for management, conservation and maintenance of housing stock. - Projected consolidated budget indicators (selected projections): - Taxes/GDP ratio in 2021 projected to comprise about 25.6% instead of actual 19.3% in 2007. - Expenses/GDP ratio projected 29.2% in 2021 instead of actual 23.9% in 2007. - Budget deficit (to GDP) projected to fluctuate within 1.5-2.5%. - Projected intersectoral distribution of consolidated budget expenditures (selected lines, % to GDP): - Total expenditure: 2009 24.1% → 2012 25.2% → 2015 26.9% → 2018 28.2% → 2021 29.2% - Housing and public services: 2009 0.9% → 2012 0.6% → 2015 0.4% → 2018 0.4% → 2021 0.6% - Social services (including science): 2009 11.6% → 2012 13.8% → 2015 14.9% → 2018 16.0% → 2021 16.1% *Source: _cr08376 - 798. The spending on maintenance of collective ownership of apartment blocks in the* ### 818. Consolidated budget deficit adjusted indicators are somewhat higher than the initial ### _cr08376 - 818. Consolidated budget deficit adjusted indicators are somewhat higher than the initial ### Consolidated budget deficit and funding projections - SDP macroeconomic framework includes a scenario of introduction of the new pension system under which budget expenditure will include 5% of merit pensions. - Forecast disbursements of these pensions will comprise 0.2-0.4% of GDP and will be financed through issuing of public securities. - Stable indicators of public debt repayment in the projected period: 0.2-0.3% of GDP. - Table 13.5 Consolidated Budget Deficit and Funding Projections (% of GDP) — Actual / Projection (selected series as presented): - Deficit: -1.9, -1.4, -1.5, -2.4, -1.9, -2.3, -2.3, -2.4, -2.5, -2.5 - Funding: 1.9, 1.4, 1.5, 2.4, 1.9, 2.3, 2.3, 2.4, 2.5, 2.5 - Internal sources: 1.3, 0.4, -0.3, 1.3, 0.7, 0.8, 0.9, 0.8, 1.0, 1.1 - External sources: 0.6, 1.0, 1.8, 1.1, 1.2, 1.5, 1.4, 1.6, 1.5, 1.4 - *According to IMF GFS based on 1986 methodology* ### Public debt policy principles and overview - Public debt policy principles: - The overall public debt will remain within the manageable limits – given the current stability indicator of the debt (Solvency condition). - Public debt/GDP ratio indicator estimated under a somewhat conservative scenario, accounting for potential additional spending during economic reforms (citing experience where 1-2% of GDP spending can be underestimated). - The share of domestic debt in public debt structure will increase to make monetary risk more manageable. - Additional external debt will be taken only with relevant guarantees ensuring mid-term debt stability, reflecting Armenia’s medium income status. - 2003-2007 public debt movements: - Public debt in USD: USD1,174 mln in 2003 → USD1,672.5 mln in 2007. - Public debt in AMD: AMD664.4 bln in 2003 → AMD485.1 bln in 2007 (downward trend due mostly to Dram appreciation). - As of end-2007, public debt to GDP ratio decreased more than 2.5 times compared to the respective period of 2002. - Domestic debt share somewhat increased, mostly due to appreciation of the Dram. ### Public debt indicators 2002-2007 (Table 13.6 excerpts) - Public Debt (% of GDP) by year: 46.0, 42.7, 41.8, 43.0, 35.7, 40.7, 24.7, 38.5, 21.9, 17.8 - Domestic debt (% of GDP) by year: 2.7, 2.7, 2.7, 2.6, 2.7, 2.6, 2.3, 2.6, 3.0, 2.0 - External debt (% of GDP) by year: 43.3, 40.0, 39.1, 40.4, 33.1, 38.1, 22.4, 35.9, 18.9, 15.8 - Source: RA NSS, Ministry of Finance, PRSP Projections ### Domestic debt management and transactions - Since September 2004 government issued coupon bonds with medium and long-term maturity to extend repayment periods and reduce interest rates. - 2003-2006 showed increased efficiency in domestic debt management: gradual reduction of debt servicing costs and increased opportunities for financing budget deficit from internal sources. - Table 13.7 Domestic Debt Transactions, 2002-2006, AMD million (columns: Placed State Securities; Security Yield; Redemption; Domestic debt financing; Deficit Financing): - 2002: 41,883.8 ; 38,202.8 ; 34,255.5 ; 5,955.3 ; 3,947.3 - 2003: 43,300.0 ; 40,267.0 ; 37,963.7 ; 5,587.3 ; 2,303.3 - 2004: 43,900.0 ; 44,018.2 ; 38,435.5 ; 5,408.2 ; 5,582.7 - 2005: 46,800.0 ; 45,701.6 ; 39,333.4 ; 5,066.4 ; 6,368.1 - 2006: 32,253.6 ; 32,474.9 ; 25,392.1 ; 5,251.1 ; 7,082.8 - Government plans to increase funding of consolidated budget deficit from internal sources; projected government internal debt to GDP ratio: - 2007: 2.4% - 2011: 4.2% - 2015: 4.4% - 2021: 4.5% ### External debt structure, projections and indicators (Table 13.8 excerpts) - Public Debt, % of GDP (selected values): 24.7, 21.9, 17.8, 16.0, 15.9, 16.4, 16.7, 17.0, 19.8, 21.9, 23.9 - External public debt, % to GDP (selected values): 22.4, 18.9, 15.8, 13.5, 13.2, 13.2, 13.3, 14.5, 15.3, 15.9 - Domestic public debt, % to GDP (selected values): 2.3, 3.0, 2.0, 2.4, 2.7, 3.2, 3.7, 5.3, 6.6, 8.0 - External debt servicing/import of goods and services, % (selected values): 2.4, 1.6, 1.5, 1.5, 1.3, 1.6, 1.6, 1.5, 1.4, 2.0, 1.1, 1.0, 0.78, 1.0, 0.78, 1 - Public debt percentage/tax revenues, % (selected values): 2.5, 2.1, 1.8, 1.5, 1.5, 1.8, 2.1, 2.11, 2.3, 2.4, 2.9 - Public debt percentage consolidated budget expenses, % (selected values): 2.0, 1.7, 1.5, 1.2, 1.5, 1.7, 1.8, 1.84, 2.0, 2.2, 2.5 - Currency structure: since 2001 foreign debt mostly comprised loans denominated in US dollar, Special Drawing Rights (SDR), Euro and Japanese Yen. - In 2006 the specific weight of concessionary loans in general external debt structure was around 98.2%. - Projection: external debt to GDP ratio will continue to decrease in the programming period due to relative increase in domestic financing; in the long term it will gradually increase but “it wouldn’t exceed 13% of GDP by the end of projected period.” ### Trends, outlook and risks - General tendency: public debt will tend to increase; ratio of public debt percentage to tax revenues and the share in public expenditure structure will increase and in 2021 will make 2.94 and 2.54%, respectively (text states these figures). - In 2005, specific weight of public debt in GDP was already less than 25%. - From 2008, public debt-to-GDP ratio will tend to increase making 23.9% in 2021. - Armenia will continue to rank among countries having light debt burden (public debt/GDP ratio does not exceed 25%). - Main risks to realizing the debt scenario: - unprecedented depreciation of AMD-to-foreign currency exchange rate (especially US dollar); - significant price rise of credit resources in global market; - significant increase in consolidated budget deficit due to deviation from the SDP macroeconomic and tax and budget scenario. - Recommended mitigation: continuous and effective implementation of reforms in the system of public financing offered within the PRSP framework. ### Program monitoring, evaluation and review (PRSP → SDP transition) - Government decision No. 1780-A of November 2004 endorsed a PRSP monitoring and evaluation concept framework; reporting formats and guidelines were established. - PRSP monitoring indicator system: - Total indicators: 177 - Target indicators: 36 - Intermediate indicators: 141 - Indicator groups: Poverty reduction and welfare growth; Education; Healthcare; Basic public services and utilities; Alienation and disparity; Sustainable human development. - Data and quality issues for 2001-2004: - Information missing on 40 indicators. - Information incomplete or substandard quality on more than 30 indicators. - Monitoring system functioned with regard to 60 percent of the indicators; some information was not sufficiently credible. - Public administration bodies lacked dedicated units for collection, summary and analysis of monitoring information. - Lack of a standard methodology for evaluation of monitoring indicators complicated comparability. - Identified needs and planned actions: - Improve PRSP monitoring and evaluation systems in parallel to PRSP review. - Create appropriate institutional framework and review the system of indicators with capacity building measures. - Create and strengthen professional capacities in public and private sectors through methodological guidance, support and on-the-job training; donor technical support available in some cases. - Establish monitoring units within public administration bodies, streamline information flows and create coordination mechanisms between monitoring units. - Deploy a methodology for collection, evaluation and analysis of indicators to ensure uniform reporting formats and guide capacity development. - Institute an alternative feedback mechanism parallel to the monitoring system, enabling non-public sector qualitative assessments where methodology and capacities exist; some donor assistance offered. - Ensure SDP monitoring and evaluation system supports program progress measurement, impact assessment on economic development and living conditions, and includes criteria defining access to information by stakeholders to broaden participatory use of data. - Transition plan: - Government, with donor support, will transition from PRSP monitoring indicators system towards a workable SDP monitoring and evaluation system. - The system will be piloted at government ministries and agencies and rolled out across the public administration system within a two years’ time frame. - Consolidated SDP monitoring and evaluation framework should define and manage: - (i) System of program monitoring indicators and targets and review mechanisms; - (ii) Methodology for indicator monitoring and evaluation; - (iii) Methodology for collection, consolidation and analysis of the indicators assuring the gender component; - (iv) Reporting formats and submission procedures; - (v) Key functions of the parties to program monitoring system and their capacity strengthening measures; - (vi) Monitoring and evaluation mechanisms for SDP-related assistance programs implemented by Armenia’s development partners; - (vii) Public awareness mechanisms on civil society participation in PRSP monitoring and evaluation process and results. - Civil society participation: - Government places great importance on civil society participation in SDP monitoring and evaluation within a participatory process to ensure communication of civil society views to implementing institutes for inclusion in strategy implementation reports. - Review cycle: - SDP targets, indicators and policy priorities are subject to change upon program review planned every two years based on country developments, program implementation progress, stakeholder proposals and monitoring findings. *Source: _cr08376 - 818. Consolidated budget deficit adjusted indicators are somewhat higher than the initial (PDF).* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08376.pdf_