Development Effectiveness Brief: Armenia Supporting Economic Resilience The Asian Development Bank (ADB) has been working with the Government of Armenia since 2005, and in 2008 opened a resident mission in the capital, Yerevan. This development effectiveness brief presents how ADB’s operations in Armenia help improve people’s lives in the country and the challenges ADB and the country face in pursuing agreed development goals. Find out how Armenia continues to benefit from infrastructure investments in the aftermath of the global financial crisis of 2008–2009 which exposed the country’s economic vulnerabilities. About the Asian Development Bank ADB’s vision is an Asia and Pacific region free of poverty. Its mission is to help its developing member countries reduce poverty and improve the quality of life of their people. Despite the region’s many successes, it remains home to a large share of the world’s poor. ADB is committed to reducing poverty through inclusive economic growth, environmentally sustainable growth, and regional integration. Based in Manila, ADB is owned by 67 members, including 48 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance. DEVELOPMENTDEVELOPMENT EFFECTIVENESS EFFECTIVENESS BRIEF BRIEF BANGLADESHARMENIA SUPPORTING ECONOMIC RESILIENCE ASIAN DEVELOPMENT BANK 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines www.adb.org ASIAN DEVELOPMENT BANK DEVELOPMENT EFFECTIVENESS BRIEF ARMENIA SUPPORTING ECONOMIC RESILIENCE ASIAN DEVELOPMENT BANK Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) © 2017 Asian Development Bank 6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines Tel +63 2 632 4444; Fax +63 2 636 2444 www.adb.org Some rights reserved. Published in 2017. Publication Stock No. BRF178990-2 DOI: http://dx.doi.org/10.22617/BRF178990-2 The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. By making any designation of or reference to a particular territory or geographic area, or by using the term “country” in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area. This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) https://creativecommons.org/licenses/by/3.0/igo/. By using the content of this publication, you agree to be bound by the terms of this license. For attribution, translations, adaptations, and permissions, please read the provisions and terms of use at https://www.adb.org/terms-use#openaccess This CC license does not apply to non-ADB copyright materials in this publication. Please contact [email protected] if you have questions or comments with respect to content or permission to use. Corrigenda to ADB publications may be found at http://www.adb.org/publications/corrigenda Notes: In this publication, “$” refers to US dollars. “AMD” refers to dram, the currency of Armenia. All photos are from ADB. CONTENTS Figures, Table, and Boxes iv Abbreviations v Armenia Development Indicators 1 ADB and Armenia: Forging the Future Together 2 A Snapshot of Armenia’s Economy 2 ADB’s Activities in Armenia 3 ADB’s Contributions to Development and Poverty Reduction 5 Rural Roads 5 Promoting Regional Cooperation 6 Improving Operational and Organizational Effectiveness 8 Benefits of the North–South Corridor Investment Program 8 ADB’s Success in Supporting Improved Water-Supply Systems 9 Automated Business Registration 9 Challenges Faced by Women Entrepreneurs 12 ADB Assistance for Urban Development 12 Disaster Risk Management 15 Future Challenges: Continued and Effective Implementation Going Forward 16 FIGURES, TABLE, AND BOXES FIGURES 1 Growth of Armenia’s Gross Domestic Product, 2008–2016 2 2 Cumulative ADB Lending by Sector, as of 31 December 2016 3 TABLE Loan and Technical Assistance Approvals 4 BOXES 1 Roads as Lifelines for Rural Dwellers 5 2 Acquiring Land for the North–South Road Corridor 7 3 Bringing Clean Water to Artashat 10 4 Registering Businesses Electronically 11 5 Boosting Women’s Entrepreneurship 13 6 Protecting an Archaeological Site in the Middle of Yerevan 14 Abbreviations ADB Asian Development Bank AWSC Armenia Water and Sewerage Company GDP gross domestic product km kilometer(s) MSMEs micro, small, and medium-sized enterprises SME DNC Small and Medium Entrepreneurship Development National Center (of Armenia) ARMENIA Development Indicators Non-Millennium-Development-Goal Indicator Earlier Period Later Period Population (million) 3.1 (2006) 3.0 (2016) Average annual population growth rate (2006– (2011– (2010–2015) (0.7) 2011) (0.3) 2016) Urban population (% of total population) 63.9 (2006) 63.7 (2016) Life expectancy at birth (years) 73.3 (2006) 75.0 (2016) Adult literacy (% 15 years and above) … 99.7 (2011) Maternal mortality ratio (per 100,000 live births) 26.6 (2006) 27.1 (2016) Infant mortality rate (below 1 year old per 1,000 live births) 13.9 (2006) 8.8 (2016) Gross enrolment ratio in basic school (%) 95.4 (2006) 90.7 (2015) Child malnutrition (% below 5 years old) 4.0 (2005) 2.6 (2015) Population below national poverty line (%) 26.5 (2006) 29.8 (2015) Population with access to safe water (%) 91.3 (2006) 97.3 (2015) Population with access to sanitation (%) 66.1 (2006) 69.9 (2015) Memorandum Item 2009 2010 2011 2012 2013 2014 2015 2016 GDP growth in constant prices (%) (14.1) 2.2 4.7 7.2 3.3 3.6 3.2 0.2 … = data not available, GDP = gross domestic product. Note: ( ) around figures in this table indicates negative values. Sources: Asian Development Bank. 2016. Basic 2016 Statistics. Manila; National Statistical Service of the Republic of Armenia. ADB AND ARMENIA: Forging THE FUTURE TOGETHER A Snapshot of Armenia’s Economy Modern Armenia emerged in 1991, when the breakup of the Soviet Union resulted in the country’s independence. Since then, Armenia has successfully overcome the legacy of a centrally planned economy and the breakdown of the former Soviet Union trading networks. However, its economic transition to a market economy is still ongoing. For a small landlocked country facing geopolitical constraints, Armenia’s economic growth was rapid from the mid-1990s until 2008—averaging about 9.5% annually. This strong recovery is attributed to the pursuit of market-oriented reforms, the rapid expansion of credit, a real estate boom, and large inflows of external assistance and workers’ remittances. However, economic growth was weaker in later years, for instance, 3.2% in 2015 and 0.2% in 2016 due mainly to continued weaknesses in external environment. The global financial crisis of 2008–2009 exposed the vulnerabilities of Armenia’s economy, particularly its dependence on remittances and narrow economic base. Construction declined by about 40% in 2009, accounting for most of the 14.1% collapse in gross domestic product (GDP) that year. While the current account deficit has diminished markedly since then, and the average annual inflation rate has remained steady, the government budget deficit and the public debt have increased significantly. Figure 1: Growth of Armenia’s Gross Domestic Product, 2008–2016 of growth () () Agriculture Industry (including construction) Services GDP GDP = gross domestic product. Note: ( ) around figures on the y axis indicates negative values. Source: National Statistical Service of Armenia. ADB and Armenia: Forging the Future Together 3 Asian Development Bank (ADB) has been successfully helping Armenia to integrate its economy regionally and to make it more resilient, inclusive, and environmentally sustainable. ADB has been The main focus of ADB’s efforts is on strengthening the economy by building or rehabilitating successfully infrastructure (including roads, water, and energy delivery) and by generating business helping Armenia opportunities for micro, small, and medium-sized enterprises (MSMEs). to integrate its economy regionally and to make it more ADB’s Activities in Armenia resilient, inclusive, and environmentally When Armenia joined ADB in 2005, ADB and the Government of Armenia worked together to identify key development challenges and determine where support would be needed. ADB’s sustainable. interim operational strategy for Armenia, 2006–2009 identified three priorities: accelerating rural development, promoting the private sector, and strengthening regional cooperation. The interim operational strategy was designed to address Armenia’s key development challenges by fostering pro-poor sustainable economic growth, inclusive social development, and good governance. ADB reaffirmed its development partnership with Armenia through its first country partnership strategy (for 2014–2018), approved in January 2015. The strategy supports (i) transport infrastructure by working to improve regional and urban roads in Yerevan and secondary cities; (ii) water and other urban infrastructure and services in secondary cities; and (iii) energy security, by diversifying energy sources, rehabilitating and upgrading electricity transmission, and expanding distribution networks. Since 2005, Armenia has received $1.19 billion from ADB, including for advancing key projects in many areas, such as transport, finance, energy security, and water supply and urban services. This funding was provided for 12 sovereign projects (of which two were multitranche