ADB-Armenia Partnership

The improvement of the Yerevan-Gyumri highway was made possible through an Asian Development Bank project in 2012. For 2014-2018, transportation is still a key priority sector for ADB in Armenia. Photo by: ADB / CC BY-NC-ND Since gaining independence in 1991, Armenia has made significant strides in poverty reduction, most notably with the incidence rate dropping from 54 percent in 2004 to just 28 percent in 2008. The 2009 economic crisis pushed poverty back to 34 percent, however, and although the 2013 rate dropped back to 32 percent, the downturn revealed the vulnerability of the country’s economy to external shocks. Several bottlenecks remain in the country’s business sector. Poor transport infrastructure, high cost of trading and unstable energy sources all impede on economic growth. These factors not only deter businesses from operating in Armenia, but also prevent the country’s integration into the regional and global economy. These problems must be addressed in order for Armenia to meet the targets set in its development strategy, which includes raising economic growth to 5 percent in the medium term and reducing the rate of poverty by 10 percent. The government likewise hopes to strengthen its export industry, increase foreign investment and create a more favorable business environment. In line with the government’s objectives, the Asian Development Bank has tailored its 2014–2018 partnership strategy for Armenia in order to bridge gaps in the country’s key sectors. Funding levels and priorities Armenia is classified as a Group B country, eligible for support from both ADB’s Asian Development Fund and ordinary capital resources. The country will be moved into Group C beginning January 2017, marking the end of ADF contributions. OCR commitments following the reclassification have been adjusted to make up for the loss of ADF support. Total financing for the 2014–2018 partnership period amounts to roughly $500 million. Listed below are previous funding allocations from ADB’s different financing instruments. In line with government objectives, ADB will engage three main sectors in implementing its partnership strategy: Transportation: The overall goal for this sector is to improve the movement of goods and people within Armenia and its surrounding region. In this light, ADB will focus on developing interstate and local roads, strengthening road transport policies and promoting sectoral reforms, and supporting pilot projects and other knowledge products and services on road safety. Urban infrastructure and services: This area of engagement will focus on achieving inclusive urban development. ADB will contribute to the advancement of urban infrastructure, with particular focus on increasing water supply and improving solid waste management and transportation. The bank will also strengthen urban governance, planning and environmental policies for sustainability. Pilot projects and other knowledge products and services on seismic safety and rural waste management will likewise be supported. Energy: Interventions under this sector are aimed at enabling Armenia to generate a steady supply of energy and increasing efficiency in electrical consumption. ADB will contribute to the improvement of energy transmission, development of renewable power sources and the rehabilitation of energy infrastructure and dams. The agency will also seek to help Armenia integrate into the regional economy by expanding the country’s energy trading capabilities. Below is a breakdown of ADB allocations by sector: Other areas of engagement include public sector management, disaster risk management, governance and gender equity. These sectors will benefit from the bank’s technical assistance activities. ADB will also support the private sector by strengthening Armenia’s export industry, trade and logistics management. Devex analysis The bank notes that there are significant risks to program implementation, thanks mostly to the limited capacities of government institutions in areas of public finance management and procurement. Armenia’s current program budgeting is poorly informed and executed, while procurement procedures fail to adhere to international standards. ADB intends to provide technical assistance throughout the duration of this partnership period to mitigate these risks. Countermeasures will include supporting program budgeting, training of implementing partners on procurement and due diligence, and conducting spot reviews of proposals to check the accuracy of bid evaluations. Other risk-mitigating measures include strengthening economic monitoring, forecasting and analysis, capacity assessments on project management capabilities of executing agencies, and bolstering environmental safeguards in relation to land acquisition. The renewal of ADB’s assistance to Armenia comes at a very critical period as the economic decline in the Russian Federation — caused by U.S. and EU sanctions and the drop in oil prices — continues to impact the Central Asian region. For Armenia, this means reduced demand for its exports and lower levels of remittances. With its new five-year plan, ADB stands ready to push for economic stability in Armenia and help the country in pursuing middle-income status. Contact Armenia Resident Mission Tel: (374-10) 546-373 Fax: (374-10) 546-374