Document of The World Bank FOR OFFICIAL USE ONLY Report Number: 58299-AM INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL FINANCE CORPORATION PROGRESS REPORT ON THE COUNTRY PARTNERSHIP STRATEGY FOR THE REPUBLIC OF ARMENIA FY2009 – FY2013 June 3, 2011 South Caucasus Country Department Europe and Central Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its content may not otherwise be disclosed without World Bank Authorization. GOVERNMENT FISCAL YEAR January 1 – December 31 CURRENCY EQUIVALENTS (Exchange Rate Effective as of June 3, 2011) Currency Unit Armenian Dram US$1.00 375.25 WEIGHTS AND MEASURES Metric System ABBREVATIONS AND ACRONYMS AAA Analytical and Advisory Activities IMF International Monetary Fund ADB Asian Development Bank ILCS Integrated Living Conditions Survey AF Additional Financing IPSAS International Public Sector Accounting CFAA Country Financial Accountability Assessment Standards CPA Country Procurement Assessment KfW Kreditanstalt für Wiederaufbau CPRR Country Program Results Review MDG Millennium Development Goals CPS Country Partnership Strategy MDRI Multilateral Debt Relief Initiative CPSPR Country Partnership Strategy Progress Report MTEF Medium-Term Expenditure Framework DCFTA Deep and Comprehensive Free Trade Agreement MOF Ministry of Finance DPO Development Policy Operation OSCE Organization for Security and Co-operation in EBRD European Bank for Reconstruction and Development Europe ESW Economic and Sector Work PEFA Public Expenditure & Financial Accountability EU European Union PER Public Expenditure Review FDI Foreign Direct Investment PFB Poverty Family Benefit FSAP Financial Sector Advisory Program PIU Project Implementation Unit GDP Gross Domestic Product PPP Public Private Partnership GEF Global Environment Facility RESCAD Rural Enterprise and Small-Scale Commercial GFDRR Global Facility for Disaster Reduction and Recovery Agriculture Development Project GFMIS Government Financial Management Information ROSC Report on Observance of Standards and Codes System SDP Sustainable Development Program IBRD International Bank for Reconstruction and SME Small and Medium-sized Enterprises Development TF Trust Fund IDA International Development Association TSA Targeted Social Assistance IDF Institutional Development Fund UNDP United Nations Development Program IFC International Finance Corporation USAID United States Agency for International Development The World Bank Group Team IBRD/IDA IFC Vice President: Philippe H. Le Houerou Vice President: Rashad Kaldany Country Director: Asad Alam Country Director: Nena Stoiljkovic Team Leaders: Jean-Michel Happi Team Leaders: Hester Marie DeCasper Naira Melkumyan Thomas Lubeck i   ARMENIA COUNTRY PARTNERSHIP STRATEGY PROGRESS REPORT TABLE OF CONTENTS I. Introduction ............................................................................................................................. 1  II.  Relevance of the CPS .............................................................................................................. 2  III.  Progress toward achieving CPS Objectives and Outcomes .................................................... 5  IV.  Proposed Modifications to the CPS ...................................................................................... 11  V.  Risks ...................................................................................................................................... 14  Figures, Tables and Boxes Figure 1: GDP Growth and Poverty……………………………………………………………….2 Table 1: Selected Economic Indicators 2007-2013 ……………………………………………….3 Table 2: List of Active Trust Fund Operations…………………………………………………….9 Table 3: Armenia: Planned vs. Actual Lending……………………………………….…….……13 Box 1: The Women in Lorut Village Voted for Water Supply…………………………………….7 Box 2: Use of the Armenia Treasury System for Project Accounts……………………….……….9 Annexes Annex 1: Updated CPS Results Matrix............................................................................................ 17   Annex 2: Standard CPS Annexes..................................................................................................... 18      ii     ARMENIA COUNTRY PARTNERSHIP STRATEGY PROGRESS REPORT I. INTRODUCTION 1. This Progress Report aims to review the relevance of the strategy outlined in the FY09-12 Country Partnership Strategy (CPS) between the Republic of Armenia and the World Bank Group (WBG), report briefly on progress toward achieving CPS objectives and outcomes, and introduce changes to the CPS program as necessary. The CPS was prepared against the background of the 2009 global economic crisis around two pillars: (i) addressing vulnerability and mitigating the adverse poverty effects of the crisis, and (ii) strengthening the foundations for medium-term competitiveness and growth. The strategy envisaged total IDA/IBRD allocation of US$545 million in FY09-12, of which US$150 million was from IDA and US$395 million was the indicative IBRD lending, with front-loading reflecting the crisis requirements, strong implementation focus, and a rich program of analytical and advisory activities (AAA) to underpin the policy dialogue and Bank lending. International Finance Corporation (IFC) commitments were projected at US$120-160 million. 2. Significant progress has been achieved towards the CPS results and milestones as defined in the Results Matrix. With respect to its first pillar – addressing vulnerability – strong results have been achieved in helping Armenia regain macro-stability, create jobs especially in rural areas, and limit the adverse poverty impact from the crisis. With respect to the second pillar – strengthening competitiveness for post-crisis growth – progress towards the CPS milestones is also on track, notably in improving the business environment, strengthening public sector institutions and infrastructure, and investing in new sources of growth. The Results Matrix presented in Annex 1 reflects progress to date and provides updated performance indicators and targets for the end of the CPS period. 3. Implementation of the CPS financing program is on track. IDA/IBRD commitments totaled US$277.6 million in FY09-10 and are projected to reach an additional US$163 million in FY11. Disbursements are also satisfactory, with a disbursement ratio at 68 percent at end-FY10. IFC investments during the CPS period to date total $96.4 million in SME, leasing and mortgage finance, trade finance, renewable energy finance, and equity in the mining sector. IFC expects to exceed its investment commitments during the CPS period due to increased focus and additional staff resources being allocated to realize market opportunities. On the analytical and advisory side, the programmatic works on poverty assessment and public financial management, as well as key sector notes have helped inform Bank lending and dialogue. IFC provided advisory services on investment climate reforms, microfinance, banking sector development, and sustainable energy finance. A High Level Policy Forum held in September 2010 has reinvigorated the strategic thinking on Armenia’s post-crisis challenges and opportunities.   4. While the strategic focus on the two pillars of the CPS remains relevant to Armenia, two modifications are proposed: to extend the CPS period by one year and provide additional financing. In order to align the CPS period with Armenia’s political cycle and the Government’s medium-term development program for 2011-2013, the period covered by the CPS has been extended by one year, from FY09-12 to FY09-13. Additional financing from Armenia’s continued access to IDA-16 will enable a further deepening of the Bank’s engagement. This is expected to be at the same levels as for IDA 15 (about $150 million for three years, which implies $100 million for the remaining two years of the CPS). IFC envisages the full implementation of the original CPS targets for new commitments. 5. This CPS Progress Report maintains the principles of selectivity, partnerships and flexibility proposed in the CPS. In this connection, the additional financing will support a selective 1  program of lending and analytical and advisory services for FY12-13. The Bank Group will maintain the necessary flexibility to balance between the CPS pillars and mix of instruments that will be most appropriate to the evolving country conditions. The Bank will also continue leveraging other development partners given competing demands on IBRD resources and on the internal administrative budget. II. RELEVANCE OF THE CPS Armenia’s economic outlook has improved but its recovery remains fragile 6. A fragile economic recovery is underway, following the deep contraction in 2009. The economy grew by 2.1 percent in 2010 driven by mining, trade, tourism and transport, but was held down by a sharp drop in agriculture due to weather. While rebounding from a 14.2 percent decline in 2009, the recovery has been sluggish and uneven (see Figure 1 and Table 1). Mining sector growth has been buoyed by high metal prices, while the global economic recovery has also helped a recovery in remittances and FDI. GDP growth is projected at 4-5 percent annually over 2011-2013 driven by a recovery in agriculture, exports, and the reactivation of private investments from capital inflows. Overall, Armenia’s economic recovery remains subject to significant risks due to its narrow economic base, export concentration in mining commodities, agricultural vulnerability to weather conditions, and high dependence on remittances.   7. Banking sector performance is improving. The economic recovery in non-agricultural sectors has been supported by a recovery in bank credit which increased by 30 percent in 2010. In addition, banking sectors indicators are improving. For instance, non-performing loans1 (NPLs) of commercial banks estimated at 5.4 percent in December 2010 are now lower than the peak of 7.9 percent recorded in August 2009, though still higher than pre-crisis levels of 2.5 percent in December 2008. 8. Recent inflationary pressures have challenged macroeconomic management. Inflation increased to 6.5 percent in 2009 and rose to 9.4 percent in 2010, primarily on account of higher international food and energy prices. Data for April suggest that inflationary pressures are moderating and, thus, end-of-period CPI inflation is projected to decline to 6.2 percent in 2011. 9. The counter-cyclical fiscal stimulus in 2009 has been followed by a program of substantial fiscal consolidation. Key targets are to reduce the fiscal deficit from 7.8 percent of GDP in 2009 to about 2.4 percent of GDP by 2013, and the 2010 budget outcome already reflected a significant adjustment with the deficit down to 5.6 percent of GDP. This adjustment was driven mainly by spending cuts (by 1.7 percentage points) that safeguarded key social programs and investments. Looking forward, there is limited room to continue cutting expenditures without harming the recovery. Further fiscal consolidation will therefore focus on tax revenue reforms to enhance collections. For this reason, the Government has started revamping the revenue administration and modernizing the tax policy framework.                                                              1 Using the IMF’s definition 2  10. Increased debt ratios have reduced headroom for policy action and call for continued donor support. The counter-cyclical fiscal policy resulted in a significant debt build up, with the debt-to-GDP ratio increasing from 16 percent in 2008 to 40 percent in 2010 and debt service increasing from 10.5 percent of exports to about 14 percent over the same period. While these indicators are projected to stay within prudential limits, their higher levels limit the fiscal space available to respond to any new shock. In this situation, concessional donor assistance will continue to be important to support the pace at which the fiscal stimulus is unwound and fiscal consolidation is strengthened. Table 1: Selected Economic Indicators, 2007‐2013    2007 2008 2009 2010 2011 2012 2013    Actual Projected Output and Prices  GNI per capita (US$, atlas method)  2580 3380 3070 3140 3090 3200 3310 Unemployment Rate (% of labor force) 1/  7.0 6.3 7.0 7.0 6.9  6.8 6.7 CPI inflation, end of period (percent change) 6.6 5.2 6.6 9.4 6.2  4.6 4.0 Real GDP Growth (percent change)  13.7 6.9 ‐14.1 2.1 4.6  4.3 4.2 Agriculture   10.4 3.3 ‐0.1 ‐15.7 9.0  3.0 3.0 Industry  11.7 7.8 ‐30.4 6.1 4.5  5.4 4.0 Services  13.8 5.0 0.0 4.7 3.0  3.6 4.6 Gross national savings (% of GDP)  31.8 32.0 17.9 17.3 15.5  17.2 18.7 Investments (% of GDP) 38.2 43.8 33.9 31.2 27.0  27.5 28.0    (In percent of GDP, unless otherwise specified) Public Finance  Revenues and Grants  20.1 20.5 21.1 22.5 22.7  21.5 22.2 o/w Tax Revenue and Social Contributions 18.7 19.7 19.6 19.5 20.2  20.6 21.0 Expenditure and Net Lending 22.4 22.2 28.9 28.2 26.6  24.7 24.6 Current Expenditure  15.8 18.3 22.7 22.0 22.4  20.4 20.1 Capital Expenditure and Net Lending  6.6 3.9 6.2 6.1 4.2  4.3 4.5 Overall Fiscal Balance ‐2.3 ‐1.8 ‐7.8 ‐5.6 ‐3.9 ‐3.2 ‐2.4 External Sector  Current Account Balance  ‐6.4 ‐11.8 ‐15.8 ‐13.9 ‐11.5 ‐10.3 ‐9.3 Exports of Goods and Services  19.3 15.1 15.6 20.1 19.4  20.9 21.9 Imports of Goods and Services  39.0 40.7 43.1 45.8 46.6  47.6 47.9 FDI Inflows (US$ m)  701 925 725 569 620  651 684 Net Remittances (US$ m)  1129 1534 900 1056 1192 1346 1507 Intl Reserves (US$ m)  1659 1407 2004 1859 1790 1730 1574 External Public Debt (EPD) 2/  14.0 13.6 36.1 37.1 41.8  41.6 38.6 EPD service (% of Exports of GNFS)  2.9 3.1 5.4 4.9 6.5  13.3 20.2 Notes: 1/ officially registered unemployment; 2/ public and publicly guaranteed Source: Armenian authorities and World Bank staff estimates 11. Achieving external balance also remains a challenge. The current account deficit, while declining, remains high. In 2010, exports advanced significantly, growing from 15.6 to 20.1 percent of GDP, but imports too increased due to various factors including the higher fuel and grain prices. The deficit is projected to narrow from 14 percent of GDP in 2010 to about 9 percent of GDP in 2013. It has been financed mainly through donor assistance and foreign direct investment, and any adverse shock to these external inflows would slow down the pace of adjustment. The Central Bank of Armenia has maintained a floating exchange rate regime; however the real exchange rate is still estimated to be overvalued by about 10-12 percent. While the reserves remain at a comfortable level of five months of imports, Armenia’s overall debt situation does not provide any headroom for deviating from a tight 3  internal and external adjustment path without exacerbating economic vulnerability and risk. Key structural reforms are therefore needed to promote exports, raise overall competitiveness, spur economic growth based on tradeable sectors, and reduce the current account deficits. Promoting competitiveness is essential for accelerating economic growth 12. The most important strategic challenge facing Armenia is to improve the productivity and competitiveness of its tradeable sector to accelerate growth in the medium-term. In this connection, the Government is undertaking reforms aimed at improving the investment climate and infrastructure services. These include, inter alia, establishing a one-stop shop to centralize all procedures for business registration, streamlining the business licensing procedures, improving trading across borders, introducing elements of e-governance and e-filing of tax returns, and modernizing tax inspection with a view to adopt risk-based approaches. Deepening and broadening these reforms are essential for an effective private sector response. In addition, the upcoming negotiation for a Deep and Comprehensive Free Trade Agreement (DCFTA) with the European Union (EU) will enhance competitiveness through trade facilitation, reduction in border costs, services liberalization, and standards harmonization. 13. Fighting corruption in public administration remains a key development challenge. This entails tackling the lax practices in tax and customs administrations, inadequate enforcement of conflict of interest regulations, and addressing issues of dominance and its abuse in all markets, including those where oligopolistic structures might prevail. Professionalizing the core public sector is also essential. Breaking the nexus between oligopolistic control, low tax collection, and lack of competition, is central for Armenia to tap into its significant investment and growth potential. In this connection, a new legislation is being considered on conflict of interest. Tax administration reforms are also being initiated with support from the Bank and other donors. With the Bank’s support, further progress is being made on reducing the risks of corruption in state institutions through the introduction of e-governance and public sector modernization. The establishment of e-budget system has allowed citizens to monitor the state budget expenditures in any sector on a daily basis. The public awareness and access to information have improved through the judicial information DataLex systems installed in courthouses and public offices throughout the country. IT innovations under the Bank projects have opened new horizons for efficiency, transparency and accountability of the Government. Reducing poverty and protecting the most vulnerable citizens remain key priorities 14. Poverty increased during the crisis and undercut the hard-won gains on poverty reduction in the pre-crisis years. The incidence of poverty rose from 27.6 percent of the population in 2008 to 34.1 percent of the population in 2009 after more than a decade of continuous decline. The situation was worse in the rural areas where poverty increased from 27.6 percent in 2008 to 34.9 percent a year later. Poverty also became deeper and more severe in 2009, with a poverty gap of 7.8 percent (vs. 5.1 percent in 2008) and poverty severity of 2.4 percent (vs. 1.4 percent in 2008). In addition, inequality as measured by the Gini coefficient increased on the basis of both consumption (from 0.24 to 0.26) and income aggregates (0.34 to 0.36) between 2008 and 2009. According to the 2009 Integrated Living Conditions Survey (ILCS), about 40 percent of households suffered the direct impact of the crisis through loss of labor income, remittances, or income from farm activities. As a result, unemployment worsened, particularly among women and the youth. 15. Armenia has continued to make progress towards achieving its Millennium Development Goals (MDGs) by 2015. In 2010, the Government published a second progress report on meeting the MDGs, which also sets out more ambitious goals than the global targets. The report stressed the significant progress in eradicating poverty in the pre-crisis years. It also noted, inter alia, that the rates of infant and maternal mortality have fallen; primary school enrollment has reached over 98 percent, with 4  higher ratio of girls to boys in primary and secondary education; and the proportion of population with access to safe water and sanitation has significantly improved over the past few years. 16. Evidence suggests that the observed increase in poverty in 2009-10 was substantially lower than what would have occurred in the absence of countercyclical measures which provided protection to the poor and vulnerable. Securing public expenditures on social protection and targeting of safety net programs helped avoid worse outcomes, as the poverty impact of the crisis was reduced from a projected 8 percentage point increase to 5.5 percentage points. However, rising food prices in 2010 put additional pressures on household incomes, particularly for the poor. In response, the Government has strengthened its social safety nets for the most vulnerable households; continued supporting programs that generate employment; and stepped-up investments in agriculture to improve productivity, enhance food security, and mitigate the risks of a food crisis. The CPS program remains relevant to support the Government’s priorities 17. The Government reaffirmed its medium-term development objectives in its 2011-2013 Medium-Term Expenditure Framework (MTEF) approved in August 2010, which highlight:  Reducing poverty, including regional disparities and the elimination of extreme poverty;  Ensuring human development through better and accessible healthcare and education services;  Modernizing the public administration and judiciary and fighting corruption; and  Deepening economic growth through a more friendly business environment and improved infrastructure. 18. To support the Government in its efforts to meet these priorities and achieve its Millennium Development Goals, the CPS strategic directions and programs aiming at addressing vulnerabilities and medium-term competitiveness and growth remain relevant for the rest of the CPS period. III. PROGRESS TOWARD ACHIEVING CPS OBJECTIVES AND OUTCOMES 19. Progress towards achieving the CPS objectives and outcomes has been satisfactory. The following sections provide a brief and selective overview of the implementation progress under the two pillars of the strategy, the portfolio performance, and the coordination with other donors. Detailed assessment and indicators of the CPS progress are presented in the updated Results Matrix in Annex 1. Significant results have been achieved under the first pillar --Addressing Vulnerability 20. Job generation through community-driven initiatives and infrastructure rehabilitation has been an essential outcome of Armenia’s fiscal stimulus package. The Government used various instruments to support labor-intensive public investment projects in sectors such as urban development, transport, and irrigation. For instance: (i) under the Armenia Social Investment Fund Project, about 20,000 person/months of short-term employment have been generated, from 200 community projects completed as of March 2011, covering schools, health care facilities, community centers, potable water supply, gas supply, etc.; (ii) under the Lifeline Roads Improvement Project and the related Trust Fund, over 12,000 person/months of labor were created in rural areas, while rehabilitating 290 km of lifeline roads linking smaller towns and cities with the main road network; (iii) under the Irrigation Rehabilitation Emergency Project, a total of 10,814 person/months of temporary jobs were created while rehabilitating 89.4 km of irrigation canals, which helped to reduce water losses and increase irrigated areas for agriculture by 7,300 hectares; and (iv) under the Rural Enterprise and Small Scale Agriculture Project, about 5,060 person/month jobs were created through 165 sub-projects supporting community 5  infrastructures and investment plans in 141 villages. The Project improved access to farmer advisory services with over 23,000 farmers served on regular basis. 21. Safeguarding and better targeting of social spending have mitigated the poverty impact of the crisis. Budget allocations for the pro-poor social protection programs have been maintained around 30 percent of total spending in 2009-2011, supported in part by the DPO program. Armenia spent about 6.8 percent of GDP on all these programs in 2009 which was scaled up to 8 percent of GDP in 2011. Government’s spending on social assistance programs, including the Poverty Family Benefit (PFB), public works, unemployment benefits, and social care, were also increased from 1.9 percent of GDP in 2009 to 4.1 percent of GDP in 2011. The protection of social spending has been instrumental in lessening the potential impact of the crisis on the poor. The Government plans to increase coverage of the PFBs from 25 percent of all poor families in 2009 to 55 percent by 2012, and to improve targeting by reducing the number of non-eligible beneficiaries and thereby increasing the share of resources going to the poor. 22. Access to, and quality of, health care have improved following the development of primary health care (PHC) networks, introduction of general family medicine, changes in basic benefits packages, provision of modern equipment to PHC facilities in rural areas, and upgrading of staff knowledge and skills. Over 1,182 physicians were re-trained as family physicians and 1,306 nurses as family nurses. About 80 percent of the population is now covered with retrained family medicine providers. Four regional hospitals were renovated, 70 rural PHC facilities improved (26 new constructions and 44 renovations), and 200 PHC facilities provided with standard sets of supplies, furniture, medical and information technology (IT) equipment. Through the Health Sector APL, the Bank is supporting two key objectives of the health system aiming at improving health outcomes by reducing mortality and morbidity, and protecting against high out-of-pocket payments which still account for two-third of all health sector spending and are a deterrent to seeking care, particularly among poorer populations. 23. Significant improvements have been made in access to, and quality of, water supply in the Capital City Yerevan and in more than 300 other municipal and rural communities. Under the Yerevan Water and Wastewater Project, progress has been made in delivery of water services for about 1.1 million inhabitants in Yerevan (around 33 percent of the country’s population) with the increase of duration of water from 17.4 hours in November 2008 to 21.5 hours in January 2011 along with the increase of bacteriological safety from the baseline of 93 percent to 98 percent. Similarly, under the Municipal Water and Wastewater Project, for another million inhabitants living in 37 towns and 268 rural communities, the average daily hours of drinking water service have increased from 6 to 14 hours, and the revenue collection increased from 48 percent to 95 percent during the same period. Both projects have also successfully anchored private sector participation in the service delivery, through a lease contract in Yerevan and a management contract in other municipalities. 24. Access to safe, clean and affordable heating has increased. With support from the Bank- financed Urban Heating Project, the share of households in multi-apartment buildings with safe gas based heating increased from 11 percent in 2008 to 71 percent in January 2011, and the number of gas-use related accidents fell from 37 to 10 per 10,000 gas connections. The Project provided capital grants to over 8,000 urban poor households to buy safe gas heaters and connect to the gas supply network. Heating systems of 119 schools were also rehabilitated, which helped increase the schools’ average winter-time indoor temperature and eliminate idle classroom days. 25. Increased energy is being produced from renewable sources, mostly small hydropower plants privately owned and operated. With contribution from the Bank-funded Renewable Energy Project, GEF grants, and IFC investment to private operators, the installed capacity of renewable-energy- based power plants connected to the grid increased from 47 megawatts (MW) in 2006 to 137 MW in 2010 and the related power generation increased more than three times, reaching 417 gegawatt-hour in 2010. 6  Bank financing of renewable energy projects had a strong demonstration effect by confirming the viability of such investments. The Bank and IFC also helped improve the legal and regulatory environment, introduce new technical standards for connecting small power plants to the grid, and update the geographic information systems and databases for renewable resources. The creation of a more conducive business environment attracted several commercial banks which seized these opportunities and started financing renewable energy projects. 26. Gender policies have been mainstreamed into the Government’s Sustainable Development Program (SDP). Progress has been achieved in education, legal, and social and human rights dimensions. The Bank’s poverty work helped diagnose gender-based vulnerability and differences in poverty status and in access to health and social protection. It also supported the introduction of gender-sensitive indicators for general statistical reporting purpose and for incorporating these indicators into the monitoring framework of the SDP. Community-driven approaches supported in Bank-financed projects have given voice to women in the choice of community-level investments (see Box 1). However, important challenges remain due to high unemployment which disproportionally affects women, income gaps2, and low representation in politics3. Box 1: The women in Lorut village voted for water supply The problems of Lorut are as old as the village road. One of these problems is the main water system, which was built in 1964. The low capacity of the pipes limits not only the availability of drinking water, but also limits the water available for land cultivation and livestock breeding, and, in turn, the villagers' income. As in most small communities in Armenia, every household has its problems, which are then intertwined with the community's shared problems. To deal with these problems, community councils were created under the Community Economic Development component of the RESCAD Project. These councils are not able to resolve all issues at once, but can define priorities and the more urgent projects. The Lorut community council decided that the renovation of a four kilometer segment of the water line was a top priority. Council member Norik Sargsyan – a village mayor during the Soviet years – thinks that this is the right decision: "There was a time when we wanted to spend on roads. The women found out about this and argued that they needed water more… clever they were to choose water.  Under the second pillar, important steps have been taken to lay down the foundations for competitiveness and accelerated growth in the medium-term 27. Reforms aimed at improving the business climate and incentives for private investment are underway. In January 2010, the Government approved the Action Plan for Improving Armenia’s Business Environment based on a memorandum of reforms on Doing Business in Armenia. Progress has been achieved in reducing the barriers to entry through the creation of a one-stop shop for business registration, and trading across border which was eased by introducing self-declaration desks at customs and risk management systems. Other priorities aim at curbing corruption, improving tax administration, and modernizing the tax inspection procedures. This agenda is supported by advisory services under IFC’s Project on Regulatory Simplification and Doing Business Reform, the Bank’s Second Foreign Investment and Export Facilitation Project, and policy advice under the DPO series. 28. A new competition law was approved by Parliament in April 2011 to provide greater enforcement capacity to the Competition Agency. This law will create a level playing field for all firms and will help ease barriers to entry and expansion, as well as curb market dominance and its abuse. These reforms are carried out within the framework of the DPO program and in collaboration with the                                                              2 According to the ILCS, the average income of women constituted only 61 percent of that of men in 2009. This indicator, however, improved by some 4.5 percentage points over 2008-2009. 3 Out of 131 seats in the Parliament as of April 2011, only 10 were occupied by women. 7  European Union (EU). To further support this work, the Bank is carrying out an Institutional and Governance Review (IGR) that analyzes competition issues as well as the issues of state capture. 29. The mining sector presents potential for attracting new investments, creating jobs, and providing fiscal revenues. However, to reap these benefits, the Government needs to bring its legal and regulatory framework in line with international standards in order to attract new investors. To this effect, the Government submitted a new Mining Code to the National Assembly in October 2010, which adheres to best practices for fiscal, environmental, social and licensing standards. This code benefited from consultations with stakeholders, including environmental non-governmental organizations (NGOs), mining companies, and donors. In parallel, IFC has provided continued financial and technical support for development of Armenia’s first new gold deposit since independence, by ensuring transparency and best practice in managing environmental and social risks. A recently approved Trust Fund for South- South Experience Exchange between Practitioners will help share knowledge in the promotion of downstream diamond processing and marketing industries with Botswana, Lesotho, Mauritius, Namibia and Armenia. 30. Increasing financial intermediation, notably small and medium-sized enterprise (SME) access to finance, has been key for accelerating economic growth. To address the effects of the crisis on credit conditions, the Bank supported expansion of SME and household credit through a Project on Access to Finance for SMEs. To date, more than 1,000 SME borrowers have accessed this facility, and several new banks and one credit organization became participants in 2010. IFC has also provided financing to banks and leasing companies in order to expand access to finance, and contribute to economic diversification and job creation. Targeted IFC credit lines have been provided to support expansion of microfinance, lending to SMEs, the agriculture sector and for the construction of new small hydropower plants. IFC has also rapidly expanded its Global Trade Finance Program which gives Armenian banks and their SME clients more favorable terms of trade. On the advisory side, IFC is implementing a Microfinance Program to increase access to finance for low-income individuals and small-scale entrepreneurs by strengthening banking sector capacity to reach underserved populations, particularly in rural areas. IFC’s Banking Market Development advisory project worked with the Central Bank to establish the National Mortgage Company, which has refinanced more than 900 mortgage loans; during the crisis this program was refocused to help banks improve risk management practices, accelerate workouts of troubled assets and return to lending. The CPS implementation is supported by a healthy and well performing portfolio 31. The Bank’s portfolio consists of 17 operations (12 IDA credits and 4 IBRD loans and one TF- Geofund) with total commitments of $481.8 million, of which $199 million were undisbursed as of May 2011. Disbursement remains highly satisfactory, with disbursement ratio at 68 percent at end-FY10. As of end-April 2011, IFC’s committed portfolio totaled $89 million in 23 projects with 10 clients, of which $87.1 million (9 percent) is disbursed and outstanding. 32. Implementation of all Bank projects is satisfactory and there is no project at risk. A Country Program Results Review (CPRR) was carried out in 2010, which highlighted key generic issues, including the use of country systems for financial management and procurement, mainstreaming of project implementing units (PIUs) into ministries, budgeting for operation and maintenance of infrastructure facilities to ensure sustainability after project closure, and monitoring and evaluation tools and capacities. The Government is taking actions to integrate the PIUs into the ministries. A major milestone in this direction was the recent transfer of all projects’ designated accounts from commercial banks to the Armenia Treasury Account. 8  Analytical and advisory services remain central to the Partnership Strategy 33. Since FY09, the Bank has carried out core diagnostic studies, and economic and sector work to help inform the implementation of the CPS and country dialogue. Much of the focus has been on financial management through a Country Procurement Assessment Report (FY09), ongoing programmatic public finance analysis, the Assessment of Quality Standards (FY11) as well as the annual poverty analysis with its strong focus on the social impact of the economic crisis and the effectiveness of remedial measures. The High Level Policy Forum (FY11) has stimulated thinking on post-crisis growth and catalyzed government action on further actions to strengthen the investment climate, particularly in mining, competition policy, and conflict of interest issues. Key sector notes were produced in the main areas of strategic engagement, including water, energy (power, gas, and heating) and roads maintenance. IFC advisory services focused on investment climate reforms, microfinance, banking and leasing sector development, and sustainable energy finance. These services have underpinned the Bank interventions, and have built the capacity of ministries and IFC clients. 34. An active program of 16 Trust Fund operations for about $15 million is co-financing ongoing projects as well as providing sector diagnoses and strategies that underpin the Bank’s dialogue and possible interventions. (Table 2). PHRD and Dutch TFs have supported institutional improvements in the judicial system. Table 2: Armenia: List of Active Trust Fund Operations PROJECT NAME TF Program Amount Amount Approval Closing /Donor Approved Undisbursed FY FY (US$ million) (US$ million) Ministry of Trade and Economic Development IDF 0.39 0.00 2009 2012 Capacity Building Piloting Fiduciary Control for NCOs IDF 0.43 0.28 2009 2012 Strengthening Forest Monitoring IDF 0.40 0.14 2009 2012 Building Government Capacity for Better IDF 0.46 0.15 2009 2012 Monitoring for Results Public Debt Management IDF 0.37 0.18 2008 2011 Strengthening Public Sector Internal Auditing IDF 0.48 0.38 2009 2013 Strengthening National Assembly’s Capacity IDF 0.49 0.49 2011 2014 for Policy Formulation and Public Dialogue Implementation of IPSAS Strategy 2 IDF 0.50 0.50 2010 2014 Improving Fiscal Management and Tax IDF 0.50 0.50 2010 2014 Compliance in the Government of Armenia Judicial Reform Project PHRD 3.00 0.91 2007 2013 Armenia E-Society and Innovation for PHRD 0.99 0.17 2009 2011 Competitiveness Project Judicial Reform Project 2 Dutch TF 4.84 1.12 2008 2012 II Foreign Investment & Export Facilitation Dutch TF 1.98 0.96 2008 2012 Transaction Advisory Support for PPP for Solid Multiple 0.48 0.36 2010 2012 Waste Management for Yerevan city Energy Supply Reliability & Energy Efficiency Multiple 0.09 0.09 2010 2011 Lifeline Road Improvement Project Multiple 0.05 0.00 2010 2011 TOTAL 15.45 6.23 9  Box 2. Use of the Armenia Treasury System for Project Accounts In line with the World Bank’s overall goal of using and enhancing country systems, the project-designated accounts in commercial banks for World Bank-funded operations have been transferred to the Armenia Treasury. The Ministry of Finance (MoF) with close support from the Bank successfully resolved all procedural issues related to opening foreign currency accounts for donor-financed projects, installed the software providing for on-line management of the accounts, and trained Treasury officials and implementing entities’ staff on their applications. Following a successful pilot launched during 2010, all Bank-financed projects’ Special and Designated Accounts were moved to the Treasury and operate with e-applications through an advanced Treasury-Client on-line system. Most importantly, this new system is now available for all other budget programs. This is the outcome of many years of sustained work by the Bank team and Government counterparts in building capacity in government systems, upgrading Treasury operations, and improving the MoF’s internal control systems, which were all supported by various IDF grants and Trust Funds over the past few years. This important development will bring improved cash management and financial savings to the Government.  35. Institutional Development Funds (IDFs) have been instrumental in strengthening public sector institutions, notably in financial management information systems, public sector accounting and internal auditing, debt management, and fiduciary controls. They helped enhance transparency, effectiveness, and accountability in the use of public resources, and paved the way for a far reaching public financial management (PFM) reform program supported by the Bank. Sustained capacity strengthening of the Treasury enabled the transfer of Bank-funded projects’ designated accounts to the Treasury; a major step towards increased use of country systems (Box 2). The CPS benefited from strong coordination with the IMF, EU and other partners and public outreach 36. Strengthening partnerships is one of the CPS principles and the Bank Group will increasingly rely upon leveraging other development partners given competing demands on IDA and IBRD resources and on the internal administrative budget. Through donor coordination, the World Bank was able to leverage its portfolio and exercise greater selectivity. The Bank collaborated closely with the IMF on the overall fiscal stimulus package and related programs. It worked jointly with the EU on policy dialogue in key areas such as competition, export promotion, and trade policies. It liaised with the USAID on, inter alia, tax administration reform, and worked closely with the US-funded Millennium Challenge Corporation (MCC) on irrigation and rural development. Joint field missions and detailed information sharing on design works with the MCC were instrumental in helping the Bank prepare new irrigation projects on a fast track. In addition, the World Bank coordinated with the Asian Development Bank (ADB) on road rehabilitation, with ADB focusing on highways and the North-South Corridor and the World Bank on rural and lifeline roads. The Bank worked with UNDP to help the Government update its SDP and take the lead on donor coordination. 37. Stakeholder consultation and public outreach have been scaled-up in the Bank projects and policy dialogue. The Bank has worked closely with the Government to consistently reach out to project beneficiaries, local government officials, and other stakeholders. Various workshops and consultative events have been organized with local authorities, the business community, civil society organizations (CSOs), and think tanks on key policy issues, including investment climate reforms, export promotion and trade policies, social protection, energy, agriculture, and mining. The Bank also stepped up its engagement with academic institutions and students through the conduct of policy seminars. With support from an IDF Grant, the Bank is helping strengthen the Parliament’s capacity for policy formulation and public dialogue. These communications and outreach have widened the dialogue and knowledge dissemination on institutional and policy reforms. 10  IV. PROPOSED MODIFICATIONS TO THE CPS 38. The period covered by the CPS is extended by one year, from FY09-12 to FY09-13, so as to align it with Armenia’s political cycle, given the legislative and presidential elections scheduled in 2012 and 2013, respectively. This extension would also synchronize the CPS with the Government’s medium- term development program for 2011-2013 as also laid out in the MTEF. Accordingly, the indicative IDA/IBRD lending envelop was increased from US$545 million in FY09-12 to US$640 million in FY09- 13, of which US$440 million were committed during FY09-11. 39. The Progress Report envisages an indicative IDA/IBRD lending program worth $200 million over the period FY12-13. Armenia’s total IDA resource envelope for FY12-13 is projected at $100 million. These amounts are indicative only and assume the same level of overall IDA resources during the IDA16 period (FY12-14) as in the IDA15 period (FY09-11). Actual allocations will depend on: (i) total IDA resources available, (ii) Armenia’s performance rating; (iii) the performance and assistance terms of other IDA borrowers; (iv) changes in the list of active IDA-eligible countries; and (v) terms of financial assistance provided. The IBRD commitments are expected to remain unchanged relative to what was presented in the CPS, with the indicative lending envelope for FY12-13 envisaged at $100 million (Table 3). This includes FY12 commitments totaling $55 million and FY13 commitments of $45 million. Actual delivery of IBRD resources is dependent on how government demand and performance evolve in the course of the CPS period, and on IBRD's lending capacity and demand from other borrowers. 40. This Progress Report continues the selectivity embedded in the original CPS, deepens engagement in some sectors, and scales up ongoing successful operations.  In FY12, the lending program covers four operations totaling US$105 million, including: (a) the third Development Policy Credit ($30 million); (b) the Public Financial Management and Revenue Administration Reform Project ($20 million); (c) the Irrigation Project ($40 million); and (d) the Municipal Water and Wastewater Project ($15 million).  In FY13, the lending program comprises three projects worth US$95 million, including: (i) the Development Policy Credit ($25 million), (ii) the Additional Financing of the Health APL2 Project ($30 million); and (iii) the Additional Financing of the Lifeline Road Improvement Project ($40 million).  Overall, the portfolio will be consolidated from 15 projects in June 2011 to 11 projects in June 2013; as seven new projects would be prepared while 11 ongoing operations would close. The TF program will also be consolidated, with 13 out of the 16 active TFs scheduled to close by 2013. 41. The proposed lending program will further strengthen the CPS goals aiming at addressing vulnerability, while building the foundations for competitiveness and medium-term growth. In this connection:  The annual DPC series will focus on improving fiscal management, pro-poor budget allocations, social protection policies, as well as business climate and competition reforms. 11   Institutional reforms in the area of public financial management and revenue administration will enhance effectiveness, efficiency and transparency of public finance and tax administration, which are at the core of the Government’s fiscal consolidation policies.4  Continued investments in rural development, lifeline roads rehabilitation, and irrigation will spur farmers’ productivity, enhance the agriculture sector’s contribution to economic growth, and provide job opportunities to the rural population.  In the health sector, the Bank will further support the Government’s reforms agenda, focusing on non-communicable diseases (NCDs) which account for over 90 percent of the causes of mortality. The new health project will fund cost-effective interventions on the prevention and control of priority NCDs; covering a broad range of activities at all levels of health service provision from primary health care to tertiary specialized level, including reconstruction and refurbishment of specialized hospitals, and rehabilitation/construction of rural ambulatories. The project will also help consolidate the ongoing institutional reforms of health financing, governance and social accountability, licensing of providers, quality assurance, and co-payment of care.  The follow-on municipal water and wastewater project will extend the rehabilitation of existing infrastructure necessary to reduce the excessive amounts of unaccounted for water, which threaten the financial viability of the water utility. It will also promote much needed regulatory and institutional changes, including cost recovery tariff policies, and will further enhance PPP in the water sector through lease contract of public utilities with technical assistance from the ongoing Trust Fund for Transaction Advisory Support. 42. Knowledge services will continue to underpin investments and policy dialogue and will provide the analytical building blocks for future lending under the next CPS. Cutting across the two pillars of the CPS, the ongoing programmatic works will inform the policy dialogue on debt and fiscal consolidation, poverty and social protection, and financial sector stability. In addition:  Work on trade and export promotion will help inform the Government’s reforms in view of its negotiations for a trade agreement with the EU.  A growth study will help identify new sources of growth and job creation.  New analytical work on agriculture will look at the opportunities and challenges in the sector, particularly in the light of vulnerability to climate change.  The Joint Bank-IMF Financial Sector Assessment Program (FSAP) update will take stock of the sector’s performance and prospects.  Strategic work is also proposed on the education sector, with a view to defining the priorities for public policy to support innovation and skills.  The above analysis will help the Bank prepare Policy Notes for the new Government after the elections, as well as inform the next CPS.  Lastly, Armenia will benefit from the ongoing regional analytical work on the South Caucasus including on such issues as gender, and job creation, labor markets and skill development, which would include a look at youth unemployment, vulnerability, and social inclusion.                                                              4   These reforms will build upon the extensive PFM works carried out under various IDFs for: (i) Piloting Fiduciary Control for NCOs; (ii) Strengthening Public Sector Internal Auditing; (iii) Implementation of IPSAS Strategy 2; (iv) Improving Fiscal Management and Tax Compliance in the Government of Armenia; and (v) Public Debt Management.  12  Table 3: Armenia – Planned vs. Actual Lending   CPS Lending Program    CPS Progress Report Lending Program    ( in US$ million)  (in US$ million)  FY09‐10 Planned  FY09‐10 Actual    IDA  IBRD IDA IBRD ASIF Additional Financing‐1  $8  ASIF Additional Financing‐1 $8 RESCAD AF  $2  RESCAD AF  $2 SME Line of Credit    $50 SME Line of Credit  $50 Water AF  $20  Municipal Water and Wastewater AF  $20 Lifeline Roads  $25  Lifeline Roads Improvement   $25 Education Quality & Relevance  $25  Education Quality & Relevance  $25 ASIF AF‐2    $7 ASIF  AF‐2  $7 Social Assistance AF    $5 Social Protection AF  $5 Irrigation    $30 Irrigation  $30 Rural Roads    $36 Lifeline Roads AF  $36.6 Public Sector Management    $9 Public Sector Modernization  $9 DPC‐1  $60  DPC‐1  $60 Lifeline Roads Improvement AF    $43   E‐Society  $24          $140  $204 $140 $137.6 Total IDA/IBRD FY09‐10  $344 Total IDA/IBRD FY09‐10 $277.6 IFC Financing to Private Sector  $42 IFC Financing to Private Sector $40.4 FY 11 Planned  FY11 Actual      Lifeline Roads Improvement AF $40     E‐Society  $24     Health APL2 AF  $19 DPC‐2  $25 DPC‐2  $21 $4 Agriculture  $14 Agriculture  $16  Energy Financing to Priv. sector  $36  Electricity Supply Reliability  $39       $75 $37 $126 Total IDA/IBRD FY11  $75 Total IDA/IBRD FY11 $163 IFC Financing to Private Sector  $50 IFC Financing to Private Sector $50 FY12 Planned  FY12 Forecast  Energy Financing    $40 DPC–3  $10  DPC‐3  $30 PFM    $8    PFM and Tax Administration  $20 Roads 2    $68 Irrigation    $40     Municipal Water and Waste Water  $15    $10  $116 $50 $55 Total IDA/IBRD FY12  $126 Total IDA/IBRD FY12 $105 IFC Financing to Private Sector  $30 IFC Financing to Private Sector $30   FY13 Forecast      DPC‐1 (new series) $25 Health APL3  $25 $5 Lifeline Road Improvement    $40       $50 $45 Total IDA/IBRD FY13     Total IDA/IBRD FY13 $95 IFC Financing to Private Sector     IFC Financing to Private Sector $30 TOTAL IDA/IBRD FY09‐12  $545 TOTAL IDA/IBRD FY09‐13 $640.6 13  43. The IFC will continue to seek investment opportunities in the financial and real sectors, building upon its portfolio across industries, including SME finance, agriculture, trade finance, small hydropower generation, the mining sector, and investments in services and manufacturing. IFC will continue to support reform of the entire business climate through its advisory services related to the business enabling environment through projects focusing on tax and customs reforms, and investment climate regulatory simplification. IFC will also consider client specific advisory services focused on portfolio management, access to finance, renewable energy and energy efficiency. CPS Results Framework 44. The CPS Results Matrix presented in Annex 1 has been updated to reflect progress in implementation. The main indicators have remained broadly unchanged, although the Results Framework has been revised to capture more fully the results from ongoing and new operations.    V. RISKS The CPS identified a number of risks that remain relevant to date, though with some variations. While the downside risks to a sustained economic recovery have moderated, overall economic and political risks are tilted to the upside, with some macroeconomic risks increasing and governance, regional and natural disaster risks, as well as energy vulnerability remaining significant. 45. The macroeconomic risks are significant. Although the economy has begun to recover, the downside risks remain high. A new global economic downturn will have ripple effects on the demand of Armenia’s exports and the reduction of remittances and foreign investment flows. This would lead to a sharper economic contraction than before, as the Government has less fiscal and debt space for further counter-cyclical and social support policies. Social tensions would increase, exacerbated by rising food prices, growing poverty, and reduced job opportunities, notably for the youth, with the risk of social upheavals. Although Armenia will be unable to avoid the fallout from a new global economic crisis, the ongoing economic recovery, program of fiscal consolidation, and steps to improving productivity and improving the investment climate provide for some optimism. By strengthening Armenia’s economic and social agenda, the World Bank Group helps mitigate the external risks arising from the global economic environment and increase the economy’s resilience to a possible shock.   46. Armenia remains vulnerable to energy supply shortages in the long run. Over 2016-2020, Armenia would need over 850 megawatts of new power generation capacity to meet the increasing demand and make up for power supply shortfall, when old thermal power units are discontinued and the existing nuclear power plant is decommissioned. The investments for new generation capacity are large, will have substantial fiscal implications, and require tariff increases which would adversely affect the affordability of energy for residential customers and the overall economic competitiveness. The Bank Group and other development partners are supporting the Government through selected sector investments and AAA to help address these challenges. 47. The regional security risks remain significant due the frozen conflict over the Nagorno- Karabakh and closed borders with Turkey and Azerbaijan. As a result of the frozen conflict, the perception of risk in the region remains high which deters private investment. Closed borders also impose lost economic opportunities for all sides and increases transport-related trade costs for Armenia which undermine competitiveness. The need to maintain sizeable defense expenditures also impose high opportunity costs in terms of foregone investments in social services and essential infrastructure. There has been no major breakthrough over the Nagorno-Karabakh conflict and tensions with Azerbaijan remain high, despite continued peace talks including periodic meetings between the Presidents of Armenia and Azerbaijan, under the auspices of the OSCE Minsk Group co-chaired by Russia, USA, and 14  France and some progress in confidence-building measures through civil society joint projects and exchange visits. 48. The risks of natural disasters and climate change remain high. Armenia is a high risk country in terms of exposure to natural disasters and severity of potential human and economic losses from earthquakes that are the principal risk. The country needs serious investments into prevention activities, including reinforcement of key public buildings, such as schools, hospitals and government buildings. Armenia is also highly exposed to increased climate extremes. A Bank report financed under the Global Facility for Disaster Reduction and Recovery (GFDRR) has recommended actions for short, medium and long term interventions directed toward reduction of risks of natural disasters in Armenia. These included establishing a disaster risk insurance framework. The Bank requested the country to join the recently- created South East European Countries Catastrophe Risk Insurance Facility (SEEC CRIF); however, the authorities have felt that the country is not ready yet to join this Facility at this time, given its institutional capacity constraints. 15  Progress on FY09-13 CPS Results Matrix                 Strategic Objective 1: Strategic Objective 2:   Addressing Vulnerabilities Strengthening Competitiveness for Post-Crisis Growth     Results Area 1: A post-crisis Armenia that regains Results area 4: Governance is strengthened; as a result public sector   macro-stability and is poised for high growth Outcome 1: Macro stability maintained through efficiency rises Outcome 1: Conflict of interest among public officials is substantially   appropriate external and domestic fiscal adjustment diminished; and corporate governance rules are enforced and fair market Outcome 2: Tax regime and administration reformed competition is established; Judicial decisions are rule-bound and better   Outcome 3: Financial intermediation rises, with growth in enforced   SME credit lines to rise as a share of total credit Outcome 2: Improved performance of public administration and revenue Results Area 2: Adverse poverty impact limited collection agencies amidst assured health and social protection Outcome 3: Efficiency of public expenditure allocation increased as a Outcome 1: Income poverty impacts are limited through result of the program budgeting and financial accountability reforms employment generation from job-creating programs and Results area 5: Foundation for knowledge economy and through improved poverty targeting. Phased introduction competitiveness strengthened of multi-pillar pension reforms Outcome 1: Infrastructure in support of knowledge-based economy being Outcome 2: Increased utilization of basic health services developed. Strategy being implemented for increased internet penetration, by the poor, with a decline in out-of-pocket payments. amidst the laying of a national ICT broadband backbone network. Outcome 3: Urban households and schools employ safe Outcome 2: PPP framework in operation. Commercially valuable gas-based heating spectrum available for private sector use; operational Universal Services Outcome 4: Improvement of solid waste management Fund; and civil aviation regime fully liberalized.   service quality Outcome 3: In transport management, road network is improved and Results Area 3: Rural and environmental risks analysis and regulatory capacities strengthened.   decrease Outcome 4: In energy, decommissioning of the nuclear plant being planned; PPP agreements financing new renewable energy based   Outcome 1: Irrigated area rises as institutions for water generation capacity; improved energy efficiency and transmission losses management develop.   Outcome 2: Rural output and employment is supported. reduced. Outcome 3 International best practice compliant mining Outcome 5: In water, improved service reliability and water quality, greater   code under implementation. operating efficiency. Closer alignment of service tariffs with costs. Outcome 6: A growing private sector faces more open competition and   Outcome 4: Preparedness for handling natural disasters is access to finance. developed.       Outcome 7: In education, increase of net preschool (5 years old)   enrollment rate. Tertiary education financing expands through higher   education financing reform and introduction of competitive innovation funds and a student loan scheme. The national Quality Assurance system in   line with European Higher Education Area is fully functional.   Engagements: National and Local Level 16  Private Sector               Annex 1: Updated CPS Results Matrix   FY09-FY12 CPS Results Areas and Progress during the period of FY09-FY11 Revised FY09-FY13 Results Outcomes Areas and Outcomes CPS OBJECTIVE 1: ADDRESSING VULNERABILITIES RESULTS AREA 1: A POST-CRISIS ARMENIA THAT REGAINS MACRO-STABILITY AND IS POISED FOR HIGH GROWTH (This Results Area reflects Armenia’s high level strategic goals and indicators) Outcome 1: Macro stability maintained through appropriate external and domestic fiscal adjustment Indicator: GDP growth, share of tradable sectors GDP growth: 2.6% (Jan-Dec 2010) Indicators: GDP growth, share of in GDP, fiscal deficit, inflation. Share of tradable sectors in GDP: 60% (Jan-Dec 2010) tradable sectors in GDP, fiscal Baseline: GDP contraction (-8%) in 2009, share of Fiscal deficit: 4.9% preliminary deficit, inflation. tradable in GDP = 60 percent, fiscal deficit (-6) % Inflation (12-months): 9.4% (actual) Baseline (2009): GDP contraction - of GDP, inflation up to 5.5%. 14.2%, share of tradable sectors in Target: positive GDP growth in 2011-2012, GDP - 60 percent, fiscal deficit - percentage share of tradable in GDP rises by 2012, 7.8% of GDP, inflation 6.6%. inflation below 5 percent in 2012, fiscal deficit Target: The average GDP growth is below 5 percent of GDP in 2012. at least 4% for 2011-2013, percentage share of tradable sectors in GDP rises by 2013, inflation below 5 percent in 2013, and fiscal deficit below 5 percent of GDP in 2013 World Bank Group Program: DPO series, High-Level Policy Forum, Programmatic Fiscal Work, Multi-Donor TF on Regional Trade Outcome 2: Tax regime and administration reformed Indicator: Tax/GDP ratio, In order to make more appropriate cross-country comparisons of the fiscal Indicator: Tax/GDP ratio Baseline: Tax/GDP=16.8% in 2008 performance, the tax revenue indicator for Armenia is recalculated to reflect social Baseline (2009): Tax/GDP=19.6% Target: Tax/GDP =17% in 2012 contributions and to net out the VAT refunds. According to this approach the Target: Tax/GDP=22% in 2013 preliminary data for GDP ratio for 2010 is 19.4%. (data from MTEF 2012-2014) 17    FY09-FY12 CPS Results Areas and Progress during the period of FY09-FY11 Revised FY09-FY13 Results Outcomes Areas and Outcomes World Bank Group Program: DPO series, PFM and Tax Project, Programmatic Fiscal Work Outcome 3: Financial intermediation rises, with growth in SME credit lines to rise as a share of total credit Indicator: Helping SMEs withstand the crisis and SME sector employment as % of total employment was slightly increased to 42.2% in Indicator: Cumulative amount of position for recovery 2009 compared with 42.1% in 2008. medium term credit provided to Baseline: SME sector employment as % of total SMEs granted by the PFIs. employment is 41% in 2007; In the area of microfinance, IFC’s Armenia Microfinance Project is working with a Baseline: Cumulative amount of Target: SME sector employment as % of total partner financial institution (PFI) to increase access to finance for Armenian low- credits provided to SMEs granted by employment is expected to reach 50% by 2012 income individuals and small entrepreneurs. The key aspect of the program aims to the PFIs – zero (beginning of 2009). incentivize a PFI to significantly strengthen its capacity to reach the underserved Target: Cumulative amount of (particularly in the regions of the country) and offer them a variety of microfinance credits provided to SMEs granted by products. The PFI provided 28,498 micro loans in the first year of the program the PFIs to reach $60 million by (January 2010-December 2010), 35% above than the annualized target. 2012. World Bank Group Program: Access to Finance for SMEs (AFSME), IFC activity, ROSC AA assessment RESULTS AREA 2: ADVERSE POVERTY IMPACT LIMITED AMIDST ASSURED HEALTH AND SOCIAL PROTECTION Outcome 1: Income poverty impacts are muffled through employment generation from job-creating programs and through improved poverty targeting. Indicator: Reduction in poverty. Economic crisis of 2009 had negative implications on poverty profile. Overall poverty Indicator 1: Number of jobs Baseline: Poverty headcount ratio – 24.9% of total rate has increased from 27.6% in 2008 to 34.1% in 2009 while the share of very poor generated through job-creating population (2007). and extreme poor has deteriorated to 20.1 and 3.6 percent respectively from 12.6 and programs Target: A fall in poverty headcount by 2012 after 1.6 percent a year ago. Income inequality slightly decreased with Gini coefficient went Baseline: n/a in 2009 a crisis-related rise in 2009-10. down to 0.389 during 2007-2008 (2007 baseline 0.395). Target: 60,000 person/months of temporary jobs created by 2013 The above poverty estimates correspond to the new methodology and measurement of poverty. In 2009 the World Bank's TA on Programmatic Poverty Assessment included revision of the poverty lines to reflect current consumption and expenditures patterns Indicator 2. Reduction of ineligible of the population and re-construction of welfare aggregate. Thus the new poverty line families benefiting from the Poverty (per adult equivalent) is determined at 30,920 AMD, the line for very poor – at 25,217 Family Benefit program AMD, and for the extreme poor (food line) - at 17,483 AMD. Thus the Poverty line Baseline: 28.8% in 2007 has been increased by 8.7 percent in nominal terms (extreme poverty line – by 9.4 Target: 20% in 2012 percent World Bank Group Program: Lifeline Road Improvement Project, DPO-II-III program, SIF III (with additional financing), Programmatic Poverty Work Outcome 2: Increased utilization of basic health services by the poor, with a decline in out-of-pocket payments. 18    FY09-FY12 CPS Results Areas and Progress during the period of FY09-FY11 Revised FY09-FY13 Results Outcomes Areas and Outcomes Indicator: Increased utilization of basic health The utilization of Primary health Care Services has increased from 2.8 (visits per Indicator 1: Increased utilization of services by the poor. Increase of NCD service person/per year) to 3.3 in 2008 and further increased to 4.0 in 2010. basic health services by the poorest volume at primary care level. quintile. Baseline: Access hindered by high informal The MOH has developed the NCD strategy framework, which provides the NCD Baseline: Integrated Survey of payments. Non-communicable disease incidence situation analysis and identifies the priority diseases to be addressed in the short and Living Standards (ISLS) 2008 - rising medium term. Strategies for cardiovascular disease and diabetes have also been 3.5% for poorest quintile Target: Greater use of primary care facilities, developed with the support of international expertise. ISLS 2009 - 4.9% for poorest especially by the poor. Preventive measures taken quintile on non communicable diseases (NCD). Target: Target: ISLS 2011- 5.5% by poorest quintile Indicator 2. Reduction in OOP payments for essential health services Baseline: NHA 2008 - 50.9%, NHA 2009 – 51% (preliminary data) Target : NHA 2011- 46% World Bank Group Program: Health Systems Modernization Project (APL2) Outcome 3: Urban households and schools employ safe gas-based heating Indicator: According to the monitoring survey conducted under the Urban Heating Project, 70% Indicator: % of households in Baseline: 96 schools with safe gas-based heating of urban households in multi-apartment buildings used safe gas-based heating in 2009- multi-apartment buildings with safe (2007); 45% of households in multi-apartment 10 heating season; during the same period 112 urban schools had safe gas-based gas-based heating; number of urban buildings have safe gas-based heating (2007). heating. schools with safe gas-based heating. Target: At least 50% of households in multi- Baseline: 96 schools with safe gas- apartment buildings have safe gas-based heating based heating (2007); 45% of (2012); the number of urban schools with safe gas- households in multi-apartment based heating is at least 104 (2012). buildings have safe gas-based heating (2007). Target: 119 urban schools have safe gas-based heating (2012). World Bank Group Program: Urban Heating Project RESULTS AREA 3: RURAL AND ENVIRONMENTAL RISKS DECREASE Outcome 1: Area returned to irrigation rises as institutions for water management develop. 19    FY09-FY12 CPS Results Areas and Progress during the period of FY09-FY11 Revised FY09-FY13 Results Outcomes Areas and Outcomes Indicator: All 82.4 km long identified sections of the two main irrigation canals (Armavir and Indicator: Area returned to Baseline: Irrigated area comprises 130,000 ha Talin) have been rehabilitated. As a result, the water losses were reduced by about 20 irrigation (2008). percent, which implies that the area returned to irrigation may reach 7,300 ha as Baseline: Irrigated area comprises Target: Irrigated area increased to 134,000 ha estimated based on the data received from WUAs and based on available water 128,750 ha (2009). (2011) volumes. Target: About 7,300 ha returned to irrigation bringing the total irrigated area in the country to about 136,050 ha 2012. World Bank Group Program: Irrigation Rehabilitation Emergency Project, Note on Irrigation Sector Outcome 2: Rural output and employment is supported. Indicator: Agricultural and food exports. Recent expansion of exports of live sheep is a welcome opportunity. Armenia Indicator: Livestock disease prevalence. EU/Russia exported around 115,000 of live sheep to Iran and Arab countries in 2009. In 2010, Livestock disease prevalence. compliant food safety certification to producers the export was at around 100,000. However, with the increased prevalence of Livestock productivity. and agro-processors. livestock diseases the exports of live animals might be jeopardized. Effectiveness of communal pasture Baseline: Processed and high value agri-food management. exports are limited, high prevalence of livestock The progress during the period of FY09 –FY11 is that the Government is making Baseline: diseases. efforts for adopting a new brucellosis control strategy. The proposed strategy calls Brucellosis prevalence is estimated Target: Export opportunities improve for several for mandatory vaccination for all sheep and goats, and test-and-slaughter for all at 1.32% in cattle and sheep and agri-food products to EU, Russia and CIS affected cattle. Along these line, the Government is also preparing a community goats. Village level prevalence is countries; National comprehensive control pasture management pilot, supported through the CARMAC project which will around 36.3%. program is being implemented for brucellosis and introduce more effective pasture management practices in 50 communities. Livestock productivity is below its other zoonotic diseases. potential. Effective community pasture management is not practiced. Target: Disease control strategies are being implemented. Milk productivity increase 7% for cattle and 5% for sheep. Pasture management effectiveness index increases from baseline 0 to mid-term value of 25. World Bank Group Program: RESCAD, AIP and CARMAC (forthcoming), Life stock sector study, Outcome 3: International best practice compliant mining sector under implementation. Indicator: The new Mining Code adhering to the best international practice requirements (for Indicator 1. New mining code and Baseline: Deficient mining code hindering permitting, fiscal regime, social and environmental safeguards, etc) was developed, implementation decrees approved. 20    FY09-FY12 CPS Results Areas and Progress during the period of FY09-FY11 Revised FY09-FY13 Results Outcomes Areas and Outcomes efficient and transparent allocation of resources approved by the Government and passed the hearings at the Standing Committee on Indicator 2. Secondary legislation (2008). Economic Issues. for implementation of the Mining Target: Fiscally, environmentally and socially Code in place to comply with the sound mining code adopted and enforced (2012) requirements of the new Mining Code Baseline: Deficient Mining Code hindering efficient and transparent allocation of resources (2009). Target: Fiscally, environmentally and socially sound Mining Code adopted and enforced (2012) World Bank Group Program: DPO series Outcome 4: Preparedness for handling natural disasters is developed. Indicator: GoA develops a prioritized plan to The GoA developed criteria for retrofitting at-risk key public facilities (under the Indicator: Adequate financing retrofit at-risk key public facilities/buildings. GFDRR activity) with the advice of Bank consultants. Based on those criteria the provided for short and medium term Development of an institutional framework for Ministry of Urban Development prepared and submitted to the Bank a priority list of actions on disaster risk management establishment of catastrophe insurance facility. schools and hospitals requiring immediate action for retrofitting (both long and short and emergency preparedness as per Baseline: Weak institutional framework for lists). the recommendations of the study. disaster risk management and duplication of Baseline: Financing allocated from responsibilities. Absence of a comprehensive The Bank study recommended actions for short, medium and long term interventions state budget and/or loans form IFIs disaster risk management strategy. to reduce the risks of disasters that Armenia is facing. In the area of seismic risk allocated on strengthening disaster Target: Institutional framework for disaster risk reduction retrofitting of key public facilities such as schools and hospitals is a risk management is inadequate. management strengthened. A comprehensive priority intervention based on the discussions with the Government at the High-Level Absence of a comprehensive disaster disaster risk management strategy developed. Workshop on Disaster Risk Management in December 2009. risk management strategy. Most of the key public facilities, such as While the government started works directed to the establishment of national schools, are highly vulnerable platform for disaster risk management, there is still need for development of a structures to earthquakes. comprehensive disaster risk management strategy for the country. Target: A comprehensive disaster risk management strategy developed. Both the Bank study and Government agreed on the importance of establishing a Government develops and launches disaster risk insurance framework in the country and jointly appraised a regional a program on retrofitting of schools project on catastrophe risk insurance (the South Eastern European Countries and other key public facilities. Catastrophe Risk Insurance Facility). However, the Government subsequently declined joining this facility. World Bank Group Program: GFDRR project “Institutional Arrangements for Disaster Risk Management in Armenia” 21    FY09-FY12 CPS Results Areas and Progress during the period of FY09-FY11 Revised FY09-FY13 Results Outcomes Areas and Outcomes CPS OBJECTIVE 2: STRENGTHENING COMPETITIVENESS FOR POST-CRISIS GROWTH RESULTS AREA 4: STRENGTHENING GOVERNANCE WITH RESULTING RISE IN PUBLIC SECTOR EFFICIENCY Outcome 1: Conflict of interest among public officials is substantially diminished; and fair competition in commerce is established. At least 60 percent of firms agree that implementation of laws is consistent and predictable. Baseline: Conflict of interest pervasive in the The new 2009-2012 Anti-Corruption Strategy has been approved in end 2009. The Indicator: Number of individuals public sector. Vested interests distort competition conflict of interest regulation rules and approaches, acceptable to the Bank, are submitting an income and asset and business environment. Anti-corruption reflected in the relevant chapter of draft RA Law on Public Service waiting for declaration form expressed as strategy weak and ineffective. National Assembly approval. Nevertheless, there is an ongoing debate on whether percentage of the number required to Target: Sound progress towards elimination of the to-be-established high level commission should cover only executive branch of submit (DPO indicator). ministerial, parliamentarian and civil servant power or serve also legislative and judicial branches. Baseline: data not available involvement in business. Enforcement of Target: 100% (2013) corporate governance rules (see below). Competition Commission exercises new powers without hindrance; and certifies de-monopolization in key markets. World Bank Group Program: DPO Series. Institutional and Governance Review (IGR), PSMPII Outcome 2: Business surveys show near-elimination of complaints of revenue agency behavior. Baseline: Revenue-agency related complaints a In 2010 the Parliament approved the Law on e-signature which made available the Indicator 1 The absolute number major black spot in governance. Revenue-raising introduction of e-filing of tax returns. The government targeted to make the e–filing (and share in total) of tax returns agency (customs, tax) particular source of obligatory for large taxpayers and optional for the SME sector. filed electronically. discretionary behavior. “Behind the border” Baseline: None practices are not transparent and fall short of EU In 2010 the Parliament approved amendments to the Customs Code to have legal Target: 3000 taxpayers (15 percent standards. stipulation for introduction of e-declaration. To make it functional the government of total) file tax returns Target: Modern business processes providing for contracted an international firm to make necessary modifications in the customs electronically integration of information base and management (TWM) software to allow e-declaration, e-signature and e-payment. across customs and tax. Reliance solely on risk- Indicator 2 The share of green based management methods. Behind the border IFC’s project for Regulatory Simplification and Doing Business Reform is working channel in total customs clearance reforms as EU FTA is negotiated. Business surveys with the Government in the areas of business entry, taxation, trading across borders, declarations show near-elimination of complaints of revenue inspections and constructions permits. The objective of the project is to decrease Baseline: None agency behavior. Self-assessment of taxes rises. both the monetary and time cost to the private sector in dealing with each of these Target: 30 percent share of fully Automatic green channel use in customs rises. areas and to increase transparency in these processes. Related to revenue agencies in functioning green channel in total Judicial Decision Database (JDD), Case particular, the project conducted 4 diagnostic exercises: declaration Management (CAST) and Case Recording Systems - Trade Logistics Brief Mapping; (CRS) used in all rehabilitated courts. - Tax Procedures Mapping; Indicator 3 Number of courts that - Tax Compliance Cost Survey; and are: 22    FY09-FY12 CPS Results Areas and Progress during the period of FY09-FY11 Revised FY09-FY13 Results Outcomes Areas and Outcomes - Import/Export Process Mapping. - connected to JDD/CAST, - equipped with DataLex kiosk, The set target on automation of judicial administration is met for all the rehabilitated - equipped with CRS. courts. 10 additional courthouses have been rehabilitated under JRP2 and additional Baseline: N/A, 5 under parallel state funding. Court automation went beyond the rehabilitated courts - 5 out of 48 courts in 2008 and the indicator is traced for all courts: Target: All 48 courts country-wide - All 48 courts connected to JDD/CAST; by 2013 - 20 courts equipped with DataLex kiosk; and - 30 courts equipped with CRS. World Bank Group Program: IFC activity, Judicial Reform Project, DPO series Outcome 3: Program budgeting leads to efficient expenditure allocations; and civil service performance appraisal is introduced. Judicial decisions are rule-bound. Strengthened accountability, transparency and efficiency in the use of public funds. Baseline: Judiciary not sufficiently rule-bound.In Judicial decisions are available through DataLex kiosks to facilitate application of Indicator 1: Decisions of the public administration and expenditure judicial precedent and progress is being made towards better implementation of the Cassation court serve as a precedent management, lack of strategic planning, policy Judicial Code. Efforts are being made towards introducing systems for evaluation of for the lower instance courts. formulation and performance management judges and random case assignment, which will facilitate achievement of relevant Baseline: Judges lack capacity and capacity; public procurement outdated. Incentives targets. Performance appraisal system is introduced. incentives to produce and apply for better performance of civil servants are weak. judicial precedent conceptually Public financial decisions rely on command- Contract for the e-Tendering system is implemented and the system is being introduced in Armenian legal system oriented management and financial controls, and introduced. Interactive budget, a IT module that post information of treasury through 2005 Constitutional undeveloped audit systems. Complete and transactions on GoA website, was introduced and made available on the Amendment. consolidated government financial statements Government’s e-government portal. The new Law on public procurement has been Target: Application of judicial absent. Fiduciary controls over NCOs are weak. developed by the government and approved by the Parliament. precedent makes courts more rule bound and consistent in Target: Use of precedent in judicial practice. A good progress made in transitioning to program budgeting practice. After the interpretation of Law. Implementation of the new judicial code. PEFA self-assessment report, in November of 2008, the government approved a Transition to program budgeting. A performance Concept Paper on Further Advancement of Program-Based Budgeting in Armenia. Indicator 2: Improved performance appraisal and performance based pay system is The PFM integrated strategy has been approved as a good input for the PFMCAP and financial management of effective across the civil service. Phased project design. The new Law on internal audit has been developed and approved by corporate entities. implementation of e-procurement reforms. the Parliament. The Law on internal audit complies with the modern best practice Baseline: The corporate sector Government financial position and performance is and is in line with international standards on internal auditing. The internal auditing accounting and auditing framework reliably reported in the consolidated financial standards and manual have been developed based on the IIA standards and is weak and outdated. statements. Strengthened system of accountability international best practice, which are now being piloted in the various public sector Target: Action Plan for Corporate and increased transparency and efficiency in the agencies. Accounting and Auditing is adopted management of public funds. and enforced resulting in improved Public Sector Accounting Standards of the Republic of Armenia have been performance and reporting of the Amendments are made to the Law to incorporate developed based on IPSAS supporting new chart of accounts, accounting policy, corporate entities. 23    FY09-FY12 CPS Results Areas and Progress during the period of FY09-FY11 Revised FY09-FY13 Results Outcomes Areas and Outcomes program budgeting. 2011 budget is prepared in accounting manual, transition chart from the current to the new chart of accounts.. programmatic format. Performance appraisal The fiduciary control framework over NCOs, to improve monitoring of their introduced. Public e-tendering system operational. operations and to control the fiscal risk, has been designed and is being piloted in Public internal financial control and audit system various types of NCOs. based on EU model established. Accrual standards in line with IPSAS are adopted. The government is preparing amendments to the laws on accounting, and on audit The fiduciary control methodology is introduced activities to enhance the oversight over the profession and provide the legal basis for for non-commercial entities. enforcement of IFRS. For the first time, the Government produced the 2010 State Budget in programmatic format. The 2011 State Budget also contained an annex with program-based budget format. World Bank Group Program: DPO Series, PSMP, PSMP2, PFMCAP, JRP2, AA ROSC follow up, IPSAS IDF grant RESULTS AREA 5: STRENGTHENING KNOWLEDGE AND COMPETITIVENESS Outcome 1: In support of a knowledge-based economy with the necessary infrastructure, strategy being implemented for increased internet penetration, amidst the laying of a national ICT broadband backbone network. Indicator: Increase computer and internet E-Society Project, to raise computer and internet penetration was approved by the Indicator: (Unchanged) penetration. Build, equip & operate techno-parks, Board in November 2010. E-government services and information available from Baseline: business incubators, and university-based both executive and judicial branches of power grew after introduction of e-kiosks and Target: Technology Transfer Centers. respective e-government portals (www.e-gov.am and www.datalex.am, both still Baseline: emerging). a) home computer penetration - 25%; b) low share of e-services provided by state IFRS have been translated. The government is developing Country Strategy and entities Action Plan to cover ISA translation and development of IFRS and ISA supporting c) population internet penetration – 18%; accounting and auditing methodologies and quality control over the accounting d) absence of IFRS and ISAs supporting profession. accounting and auditing methodologies e) IT workforce – 5,000 Target: to be met by 2012: a) home computer penetration - 35%; b) increased share of e-services provided by state entities c) population internet penetration – 40%; d) introduction of IFRS and ISAs supporting accounting and auditing methodologies e) IT workforce – 10,000 World Bank Group Program: E-Society and Innovation for Competitiveness project, PFMCAP, PSMP, PSMP2, JRP2, 24    FY09-FY12 CPS Results Areas and Progress during the period of FY09-FY11 Revised FY09-FY13 Results Outcomes Areas and Outcomes Outcome 2: PPP framework in operation. Commercially valuable spectrum available for private sector use; operational Universal Services Fund; and civil aviation fully liberalized. Indicator: The allocation of spectrum for commercial use has increased as reflected by the Indicator: Monthly cost of Baseline: Some of the commercially valuable growing number of wireless Internet service providers. The spectrum study, which broadband internet access reduced spectrum still not available for private use (2008); will assess the commercially attractive spectrum not available for commercial use Baseline: US$98 (2008) Around 100,000 people without basic telephony and recommend policy measures to further increase allocation of valuable spectrum Target: US$49 (2012) services (2006); competition constraints in civil for commercial use, is underway. As of January 2010, the number of households aviation (2008) without access to basic telephony is estimated to have reduced to 85,000. Target: More commercially attractive spectrum available for private use (2012); access to basic telephony services improves (2012); fully liberal civil aviation regime (2012) World Bank Group Program: DPO series Outcome 3: In transport management, road network is improved. Indicator: A total of 290 km of lifeline roads with lengths of 1 to 14 km. have been rehabilitated Indicator: Length of secondary and Baseline: Some sections of the primary road and under the Lifeline Road Improvement Project and its Additional Financing. The primary road network rehabilitated significant share of the secondary road network proposed Road Asset Preservation Project will rehabilitate some sections of the Baseline: Some sections of the need rehabilitation (2008) major road link to Georgian border (an important international transport route for primary road and significant share of Target: 100 km of secondary road network Armenia) by use of Output and Results Based Performance Contract, which will also the secondary road network need rehabilitated (2012); 150 km of primary road increase efficiency of the road sector. rehabilitation (2010) network rehabilitated (2012) Target: 400 km of secondary road network rehabilitated (2013); 100 km of primary road network rehabilitated (2013) World Bank Group Program: Lifeline Road Improvement Project and its Additional Financings Outcome 4: In energy, financing for new renewable energy based generation capacity; improved energy efficiency and transmission losses reduced. Indicator: As of the end of December, 2010, the total installed capacity of small renewable Indicator: Installed capacity of Baseline: 134 MW installed capacity of renewable based generation added to the grid was 130MW. The transmission component of the renewable based generation; energy based generation (2008); transmission losses of project, among other benefits, will increase the power transmission capacity of the consumption of public buildings. 1.5% (2008); public buildings are energy high voltage network; .; the energy efficiency component of the project will lead to Baseline: 134 MW installed inefficient (2008) reduction of energy consumption in public buildings and support creation of enabling capacity of renewable based Target: Increase in installed capacity of renewable environment for energy efficiency in the country. generation (2008); transmission based energy generation; Transmission losses losses of 1.5% (2008); public below the baseline (2012); reduction of energy IFC’s project with Ameriabank has financed 8 small-hydro projects with a total buildings are energy inefficient consumption of public buildings (2012) capacity of 19.58 MW. The annual generation of these projects will be 70 million (2008) 25    FY09-FY12 CPS Results Areas and Progress during the period of FY09-FY11 Revised FY09-FY13 Results Outcomes Areas and Outcomes kWh per year, resulting in a total CO2 reduction of 20,000 tons of CO2 per year as Target: Increase in installed compared to alternate means of power production. capacity of renewable based energy In FY10, IFC lent $15 million to a local bank (Ameriabank) for on-lending to small generation (2013); transmission hydroelectric projects along with provision of advisory services to the bank within network capacity increase of 60 the framework of the Armenia Sustainable Energy Finance Project. MW; reduction of energy consumption of public buildings IFC has conducted a study on energy efficiency to identify potential efficiency gains (2013). to the Armenian economy. Discussions are underway with two other banks to implement a program of financing for energy efficiency and renewable energy investments. World Bank Group Program: Renewable Energy Project, IFC activity, Electricity Supply Reliability and Energy Efficiency Project, Geothermal Outcome 5: In water, improved service reliability and water quality, greater operating efficiency. Closer alignment of service tariffs with costs. Indicator 1: Share of consumers with continuous Share of consumers with continuous water supply in Yerevan has reached 89.6% Indicator 1: Share of consumers water supply rises in Yerevan and in AWSC (average daily duration is 21.5 hours); and in AWSC service area the share of with continuous water supply rises service area. consumers has reached to 55% (average daily duration is 13.2 hours). in Yerevan and in AWSC service Baseline: In 2008 - share of consumers with area. continuous water supply in Yerevan is 75.5% In Yerevan, percentage of water samples in compliance with bacteriological safety Baseline: In 2008 - share of (average daily duration in hours - 18.1 hour); and requirements increased to 99% in 2010, which has already met the end of project consumers with continuous water in AWSC service area is 50% (average daily target; and in AWSC service area it reached 96%. supply in Yerevan is 75.5% (average duration - 12 hours). daily duration in hours - 18.1 hour); Target: In 2011 - share of consumers with and in AWSC service area is 50% continuous water supply in Yerevan increases to Domestic water metering as a percentage of domestic subscribers provided with (average daily duration - 12 hours). 82.5% and in AWSC service area to 70%. water meters was 95% in Yerevan. Percentage of individual subscribers billed on the Target: In 2013 - share of basis of metered consumption in AWSC service area in 2010 was 76.5%. consumers with continuous water Indicator 2: In AWSC service area cost recovery supply in Yerevan increases to 89% improves. Target: The level of cost recovery in AWSC Indicator 2: Increased weighted service area increases and the budget subsidies are average water bacteriological safety phased out by 2012. compliance in Yerevan and in AWSC service area. Baseline: Percentage of water samples in compliance with bacteriological safety requirements in both Yerevan (in 2006) Target: In 2011- 98% of bacteriological safety compliance in 26    FY09-FY12 CPS Results Areas and Progress during the period of FY09-FY11 Revised FY09-FY13 Results Outcomes Areas and Outcomes both service areas. Indicator 3: Increased domestic water metering in Yerevan. Baseline: In Yerevan, percentage of domestic subscribers provided with water meters was 89.6% (in 2006), Target: In 2011 – the percentage of individual subscribers billed on the basis of metered consumption will reach 96% in Yerevan. World Bank Group Program: Yerevan Water and Wastewater Project, Armenia Municipal Water and Wastewater Project and Additional Financing Outcome 6: A growing private sector faces more open competition and access to finance. Indicator 1: Corporate transparency increases. The financial reporting standards for SME have been translated. The Country Indicator 2: Access to finance for Baseline: Corporate financial reporting framework Strategy and Action Plan will provided the roadmap of developing of the supporting SMEs is maintained is weak. SME lack relevant financial reporting methodologies and rolling out the reporting standards for SME. Baseline: There is no credit line standards to follow restricting access to finance. facility for SMEs. Target: The quality and public availability of full Progress to-date: AFSME Project makes available additional resources for banks to Target: Cumulative amount of financial statements for public interest entities lend SMEs. Since the AFSME project April 2009 launch already about US$ 18 medium term credit granted by the enhanced. Financial reporting standards for the million has been disbursed cumulatively to more than 1,150 borrowers, of which financial institutions under the SME are introduced and access to finance is about 50% addressed to widen the access to finance for SMEs in Marzes as of AFSME project is up to US$ 60 improved. November 2010 million. Indicator 2: Competition Commission’s capacity is strengthened. Baseline: Competition Commission’s enforcement capacity is weak. Legal framework needs to be strengthened. Target: Commission’s enforcement capacity strengthened and legal framework improved. World Bank Group Program: Access to finance for SMEs, PFMCAP Outcome 7: In education, increase of net preschool (5 years old) enrollment rate. Tertiary education financing expands through higher education financing reform and introduction of competitive innovation fund and student loan scheme. The national Quality Assurance system in line with European Higher Education Area is fully functional. 27    FY09-FY12 CPS Results Areas and Progress during the period of FY09-FY11 Revised FY09-FY13 Results Outcomes Areas and Outcomes Indicator 1: Better access to preschool education The implementation of 41 micro-projects on preschool education services in No change Baseline: only 31% of 5-years old are enrolled in Aragatsotn and Ararat marzes, respectively 19 and 22 micro-projects, is underway. preschool education services The grants delivered to the selected institutions cover the capital costs necessary for Target: established new public preschool establishment of the preschool classrooms included small repairing works, furniture, classrooms in 70 communities increasing 5-years equipment, educational materials, and kitchen facilities for kindergartens involved in old enrollment up to 37% enrollment the project, as well as the recurrent costs for one school year. The number of new Indicator2: More equitable and effective higher enrolled 4.5-5,5 years old children is about 1100. education financing system is developed. Baseline: merit-based scholarships are the only The TA implementing under DPO-2 has already resulted with a draft report and draft public funds that support students in higher government decree on revision of the financial and legislative frameworks of education preschool education provision. It is expected that the government will approve a Target: new student loan scheme is designed and decree on sustainable financing of already created 63 preschool classes as well as it piloted to support needy-students; merit-based will ensure opportunities for further enrollment of 4.5 to 5.5 years old children in scholarships are partly replaced with need-based preschool education in order to meet targeted 95 percent enrolment in preschool scholarships education by 2015. Baseline: no public funds provided for tertiary education institutions for quality improvement and The selected under DPO-2 TA international and local consultants have already innovation. delivered the first draft of the Higher Education Financing Strategy. The key findings Target: competitive innovation funds are and recommendations have been communicated and discussed at the stakeholders’ developed. conference held in September. The Armenia National Quality Assurance Agency (ANQA) has: (a) developed a three-year work plan, which has been approved by the Indicator3: The national Quality Assurance Government; (b) piloted and finalized the program accreditation self-evaluation form system is in line with European Higher Education for institutional audit and program accreditation and procedures of evaluation. Area. ANQA has also prepared the following three working documents: (i) Guidelines, Baseline: The National Quality Assurance Agency criteria and standards for quality assurance in the Armenian tertiary education; (ii) A is just established; guide to self assessment; and (iii) Glossary of quality assurance. All the above Target: The National Quality Assurance Agency is mentioned deliverables were presented and discussed at the stakeholder conference fully functional in line with the requirements of theheld on September 22-23. European Higher Education Area; Internal Quality Assurance units in all public universities are established and are functioning in accordance with the national QA standards. World Bank Group Program: Second Education Quality and Relevance Project-APL2, DPO-1         28    Annex 2: Standard CPS Annexes Annex B1 Armenia at a glance 6/2/11 Euro pe & Lo wer Ke y D e v e lo pm e nt Indic a t o rs Central middle A rmenia A sia inco me Age distribution, 2008 (2009) Male Female P o pulatio n, mid-year (millio ns) 3.1 403 3,767 75-79 Surface area (tho usand sq. km) 30 23,549 31,923 60-64 P o pulatio n gro wth (%) 0.2 0.3 1.2 Urban po pulatio n (% o f to tal po pulatio n) 64 64 40 45-49 30-34 GNI (A tlas metho d, US$ billio ns) 9.5 2,770 7,709 15-19 GNI per capita (A tlas metho d, US$ ) 3,070 6,876 2,046 GNI per capita (P P P , internatio nal $ ) 5,420 13,271 4,481 0-4 6 4 2 0 2 4 6 GDP gro wth (%) -14.2 4.1 7.5 percent of total population GDP per capita gro wth (%) -14.3 3.7 6.3 ( m o s t re c e nt e s t im a t e , 2 0 0 3 – 2 0 0 9 ) .25 P o verty headco unt ratio at $ 1 a day (P P P , %) 4 4 .. Under-5 mortality rate (per 1,000) P o verty headco unt ratio at $ 2.00 a day (P P P , %) 21 9 .. Life expectancy at birth (years) 74 69 68 60 Infant mo rtality (per 1,000 live births) 21 20 44 Child malnutritio n (% o f children under 5) 4 .. 25 50 40 5 A dult literacy, male (% o f ages 1 and o lder) 100 99 87 30 5 A dult literacy, female (% o f ages 1 and o lder) 99 97 73 Gro ss primary enro llment, male (% o f age gro up) 79 100 109 20 Gro ss primary enro llment, female (% o f age gro up) 81 98 105 10 0 A ccess to an impro ved water so urce (% o f po pulatio n) 98 95 86 A ccess to impro ved sanitatio n facilities (% o f po pulatio n) 91 89 50 1990 1995 2000 2007 Armenia Europe & Central Asia N e t A id F lo ws 19 8 0 19 9 0 2000 2009 a (US$ millio ns) Net ODA and o fficial aid .. 3 216 303 Growth of GDP and GDP per capita (%) To p 3 do no rs (in 2008): United States .. 0 103 94 20 Japan .. 0 9 58 10 Germany .. 0 9 28 0 -10 A id (% o f GNI) .. 0.1 1 1 .0 2.5 -20 A id per capita (US$ ) .. 1 70 98 -30 -40 Lo ng- T e rm E c o no m ic T re nds -50 95 05 Co nsumer prices (annual % change) .. 7.7 -0.8 3.4 GDP implicit deflato r (annual % change) .. 79.4 -1.4 1.3 GDP GDP per capita Exchange rate (annual average, lo cal per US$ ) .. 0.0 539.5 363.3 Terms o f trade index (2000 = 100) .. .. 100 59 19 8 0 – 9 0 19 9 0 – 2 0 0 0 2 0 0 0 – 0 9 (average annual gro wth %) P o pulatio n, mid-year (millio ns) 3.1 3.5 3.1 3.1 1.4 -1.4 0.0 GDP (US$ millio ns) .. 2,257 ,91 1 2 8,541 .. -1.9 10.8 (% o f GDP ) A griculture .. 17.4 25.5 18.6 .. 0.5 3.1 Industry .. 52.0 35.4 35.2 .. -7.8 12.5 M anufacturing .. 32.8 24.1 9.9 .. -4.3 0.1 Services .. 30.7 39.0 46.2 .. 6.4 14.1 Ho useho ld final co nsumptio n expenditure .. 45.9 96.7 81.5 .. -0.8 7.7 General go v't final co nsumptio n expenditure .. 18.3 1 1 .8 12.6 .. -1.5 13.5 Gro ss capital fo rmatio n .. 47.1 18.6 33.8 .. -1.9 20.2 Expo rts o f go o ds and services .. 35.0 23.4 15.7 .. -18.4 2.8 Impo rts o f go o ds and services .. 46.3 50.5 43.5 .. -12.7 7.3 Gro ss savings .. .. .. .. No te: Figures in italics are fo r years o ther than tho se specified. 2009 data are preliminary. .. indicates data are no t available. a. A id data are fo r 2008. Develo pment Eco no mics, Develo pment Data Gro up (DECDG).   29    Armenia B a la nc e o f P a ym e nt s a nd T ra de 2000 2009 Governance indicators, 2000 and 2009 (US$ millio ns) To tal merchandise expo rts (fo b) 301 698 To tal merchandise impo rts (cif) 885 3,321 Voice and accountability Net trade in go o ds and services -519 -2,349 Political stability Current acco unt balance -278 -1,369 as a % o f GDP -14.6 -1 6.0 Regulatory quality Rule of law Wo rkers' remittances and co mpensatio n o f emplo yees (receipts) 87 769 Control of corruption Reserves, including go ld 314 2,004 0 25 50 75 100 2009 C e nt ra l G o v e rnm e nt F ina nc e Country's percentile rank (0-100) 2000 higher values imply better ratings (% o f GDP ) Current revenue (including grants) 16.7 21.7 Source: Kaufmann-Kraay-Mastruzzi, World Bank Tax revenue 14.8 19.6 Current expenditure 16.3 22.7 T e c hno lo gy a nd Inf ra s t ruc t ure 2000 2008 Overall surplus/deficit -4.9 1 -1 .9 P aved ro ads (% o f to tal) 96.8 89.8 Highest marginal tax rate (%) Fixed line and mo bile pho ne Individual .. 20 subscribers (per 1 peo ple) 00 18 120 Co rpo rate .. 20 High techno lo gy expo rts (% o f manufactured expo rts) 4.5 2.5 E xt e rna l D e bt a nd R e s o urc e F lo ws E nv iro nm e nt (US$ millio ns) To tal debt o utstanding and disbursed 916 4,805 A gricultural land (% o f land area) 47 57 To tal debt service 46 464 Fo rest area (% o f land area) 10.8 9.7 Debt relief (HIP C, M DRI) – – Terrestrial pro tected areas (% o f surface area) .. 8.2 To tal debt (% o f GDP ) 47.9 56.3 Freshwater reso urces per capita (cu. meters) 2,964 2,229 To tal debt service (% o f expo rts) 7.2 12.6 Freshwater withdrawal (billio n cubic meters) 3.0 .. Fo reign direct investment (net inflo ws) 104 935 CO2 emissio ns per capita (mt) 1.1 1.6 P o rtfo lio equity (net inflo ws) 0 -1 GDP per unit o f energy use (2005 P P P $ per kg o f o il equivalent) 3.5 5.7 Composition of total external debt, 2009 Energy use per capita (kg o f o il equivalent) 651 926 IBRD, 28 Short-term, 512 IDA, 1161 Wo rld B a nk G ro up po rt f o lio 2000 2009 (US$ millio ns) Private, 1401 IMF, 426 IB RD To tal debt o utstanding and disbursed 8 28 Other multi- Disbursements 0 24 lateral, 374 P rincipal repayments 0 1 Bilateral, 903 Interest payments 0 0 US$ millions IDA To tal debt o utstanding and disbursed 388 ,1 1 61 Disbursements 54 142 P riv a t e S e c t o r D e v e lo pm e nt 2000 2009 To tal debt service 3 21 Time required to start a business (days) – 15 IFC (fiscal year) Co st to start a business (% o f GNI per capita) – 2.6 To tal disbursed and o utstanding po rtfo lio 0 36 Time required to register pro perty (days) – 4 o f which IFC o wn acco unt 0 36 Disbursements fo r IFC o wn acco unt 0 3 Ranked as a majo r co nstraint to business 2000 2009 P o rtfo lio sales, prepayments and (% o f managers surveyed who agreed) repayments fo r IFC o wn acco unt 0 3 Tax administratio n .. 43.8 Tax rates .. 37.8 M IGA Gro ss expo sure 3 0 Sto ck market capitalizatio n (% o f GDP ) 0.1 1.6 New guarantees 3 0 B ank capital to asset ratio (%) 14.3 23.0 No te: Figures in italics are fo r years o ther than tho se specified. 2009 data are preliminary. 6/2/11 .. indicates data are no t available. – indicates o bservatio n is no t applicable. Develo pment Eco no mics, Develo pment Data Gro up (DECDG).   30    Millennium Development Goals Armeni With selected targets to achieve b etween 1990 and 2015 (estimate clo sest to date sho wn, +/- 2 years) A rm e nia G o a l 1: ha lv e t he ra t e s f o r e xt re m e po v e rt y a nd m a lnut rit io n 19 9 0 19 9 5 2000 2008 .25 P o verty headco unt ratio at $ 1 a day (P P P , % o f po pulatio n) .. 17.5 1 1 .0 3.7 P o verty headco unt ratio at natio nal po verty line (% o f po pulatio n) .. .. 50.9 .. Share o f inco me o r co nsumptio n to the po o rest qunitile (%) .. 5.4 7.6 8.6 P revalence o f malnutritio n (% o f children under 5) .. .. 2.6 4.2 G o a l 2 : e ns ure t ha t c hildre n a re a ble t o c o m ple t e prim a ry s c ho o ling P rimary scho o l enro llment (net, %) .. .. 91 74 P rimary co mpletio n rate (% o f relevant age gro up) .. 105 101 98 Seco ndary scho o l enro llment (gro ss, %) .. 90 90 88 Yo uth literacy rate (% o f peo ple ages 15-24) 100 .. 100 100 G o a l 3 : e lim ina t e ge nde r dis pa rit y in e duc a t io n a nd e m po we r wo m e n Ratio o f girls to bo ys in primary and seco ndary educatio n (%) .. .. 104 104 Wo men emplo yed in the no nagricultural secto r (% o f no nagricultural emplo yment) .. 51 47 46 P ro po rtio n o f seats held by wo men in natio nal parliament (%) 36 6 3 8 G o a l 4 : re duc e unde r- 5 m o rt a lit y by t wo - t hirds Under-5 mo rtality rate (per 1 ,000) 56 48 36 23 Infant mo rtality rate (per 1,000 live births) 48 42 32 21 M easles immunizatio n (pro po rtio n o f o ne-year o lds immunized, %) 93 96 92 94 G o a l 5 : re duc e m a t e rna l m o rt a lit y by t hre e - f o urt hs M aternal mo rtality ratio (mo deled estimate, per 1 00,000 live births) .. .. .. 76 B irths attended by skilled health staff (% o f to tal) .. 96 97 100 Co ntraceptive prevalence (% o f wo men ages 1 5-49) .. .. 61 53 G o a l 6 : ha lt a nd be gin t o re v e rs e t he s pre a d o f H IV / A ID S a nd o t he r m a jo r dis e a s e s P revalence o f HIV (% o f po pulatio n ages 1 5-49) .. .. 0.1 0.1 Incidence o f tuberculo sis (per 100,000 peo ple) 33 47 71 73 Tuberculo sis case detectio n rate (%, all fo rms) 50 77 61 74 G o a l 7 : ha lv e t he pro po rt io n o f pe o ple wit ho ut s us t a ina ble a c c e s s t o ba s ic ne e ds A ccess to an impro ved water so urce (% o f po pulatio n) .. 91 93 98 A ccess to impro ved sanitatio n facilities (% o f po pulatio n) .. 89 89 91 Fo rest area (% o f to tal land area) 12.0 1 1 .5 10.8 9.7 Terrestrial pro tected areas (% o f surface area) .. .. .. 8.2 CO2 emissio ns (metric to ns per capita) 1.2 1 .1 1.1 1.6 GDP per unit o f energy use (co nstant 2005 P P P $ per kg o f o il equivalent) 1.4 3.4 3.5 5.7 G o a l 8 : de v e lo p a glo ba l pa rt ne rs hip f o r de v e lo pm e nt 00 Telepho ne mainlines (per 1 peo ple) 15.8 18.1 17.3 20.3 00 M o bile pho ne subscribers (per 1 peo ple) 0.0 0.0 0.6 100.0 00 Internet users (per 1 peo ple) 0.0 0.1 1.3 6.2 00 P erso nal co mputers (per 1 peo ple) .. 0.3 0.8 9.7 Education indicators (%) Measles immunization (% of 1-year ICT indicators (per 100 people) olds) 125 100 140 100 120 75 100 75 80 50 50 60 25 40 25 0 20 2000 2002 2004 2006 2008 0 0 1990 1995 2000 2007 2000 2002 2004 2006 2008 Primary net enrollment ratio Armenia Europe & Central Asia Fixed + mobile subscribers Internet users Ratio of girls to boys in primary & secondary education No te: Figures in italics are fo r years o ther than tho se specified. .. indicates data are no t available. 6/2/11 Develo pment Eco no mics, Develo pment Data Gro up (DECDG).   31    Annex B2   Armenia CAS Annex B2 - Armenia Selected Indicators* of Bank Portfolio Performance and Management As Of Date 4/6/2011 Indicator 2008 2009 2010 2011 Portfolio Assessment Number of Projects Under Implementation a 17 19 17 17 Average Implementation Period (years) b 4.3 3.8 3.7 3.5 Percent of Problem Projects by Number a, c 5.9 0.0 0.0 0.0 Percent of Problem Projects by Amount a, c 3.5 0.0 0.0 0.0 Percent of Projects at Risk by Number a, d 5.9 0.0 0.0 0.0 Percent of Projects at Risk by Amount a, d 3.5 0.0 0.0 0.0 Disbursement Ratio (%) e 34.4 76.0 68.2 45.6 Portfolio Management CPPR during the year (yes/no) 1 Supervision Resources (total US$) Average Supervision (US$/project) Memorandum Item Since FY 80 Last Five FYs Proj Eval by OED by Number 33 9 Proj Eval by OED by Amt (US$ millions) 819.9 162.7 % of OED Projects Rated U or HU by Number 6.1 0.0 % of OED Projects Rated U or HU by Amt 9.0 0.0 a. As shown in the Annual Report on Portfolio Performance (except for current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: Investment projects only. * All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year.   32      Annex B3   IBRD/IDA Program Summary – Armenia    Proposed Base‐Case Lending Program      Fiscal Year  Project ID US$ (million)  2011  Agriculture 16    DPC‐2  25    Lifeline Roads AF‐2 40    Energy Transmission 39    E‐Armenia  24    Health‐ AF 2 19  2012  PFM and Tax 20    Irrigation 40    DPC‐3  30    Municipal Water and Wastewater 15  2013  DPC  25    Health APL 30    Lifeline Roads Improvement 40  33    Annex B3    Armenia: IFC Investment Operations Program 2008 2009 2010 2011** Commitments (US$m) Gross 25.39 5.32 35.4 60.69 Net** 25.39 5.32 35.4 55.69 Net Commitments by Sector (%) Construction and Real Estate 15 Finance and Insurance 100 89 82 94 Oil, Gas and Mining 11 3 6 Total 100 100 100 100 Net Commitments by Investment Instrument Equity 39 11 3 6 Guarantee 2 32 31 45 Loan 59 57 66 45 Risk product 0 0 0 4 Total 100 100 100 100 *As of March 31, 2011 **IFC's Own Account only                                         34    Annex B4   Product  Completion FY  Cost (US$000)  Audiencea  Objectiveb Recent completions          CPAR Update  FY09  177  G,D,B,P  K,PD,PS  Programmatic Poverty Analysis  Annual  100pa  G,D,B  K,PD,PS  Financial Sector Advisory  FY09  63  G,B  K,PD,PS  PEFA Follow Up  FY10  86  G.D  K,PD,PS  Poverty Monitoring TA  FY09  50  G,D,B,P  K,PD,PS  Designing Sustainable Institutional          …Arrangements for Disaster Risk Mngt  FY10  150  G,D,B,P  K,PD,PS  High Level Policy Forum  FY11  140  G,D,B,P  K,PD,PS  Underway/Planned          Designing  Sustainable  Institutional  FY11  150  G,D,B,P  K,PD,PS  …Arrangements for Road maintenance  Country Environmental Analysis  FY11  79  G,D,B,P  K,PD,PS  Programmatic Poverty Analysis  Annual  100  G,D,B,P  K,PD,PS  Programmatic Fiscal Work  FY11  115  G,D,B,P  K,PD,PS  Water Sector Note  FY11  40  G,B  K,PD,PS  Financial Sector Advisory  FY11  70  G,B  K,PD,PS  Public Expenditures Review  FY11    G,B    Regional  Study on  Job Creation, Labor  FY13    G,D,B,P  K,PD,PS  …Markets, and Skill Development  Policy Notes for the new Government   FY13    G,B  K,PD,PS  Higher Education Strategy  FY13    G,D,B,P  K,PD,PS  Agriculture Sector Note  FY12    G,D,B,P  K,PD,PS  Financial  Sector  Assessment  Program  FY12    G,B    …(FSAP) (Bank‐IMF)  Investment,  Growth,  and  Employment  FY13    G,D, B,P  K,PD,PS  Creation   Trade and Export Promotion  FY12    G,D,B,P  K,PD,PS  Sustainable Energy Finance (IFC)  FY14  1156  G,D,P  K,PS  Banking Market Development (IFC)  FY13  1188  G,D,B,P  K,PS  Regulatory Simplification/Doing  FY11  1539  G,D,B,P  K,PD,PS  …Business Reform (IFC)  MFI Program (IFC)  FY14  720  G,D,B,P  K,PD,PS                      a. Government, donor, Bank, public dissemination  b. Knowledge generation, public debate, problem‐solving  35    Annex B5 Armenia - Key Exposure Indicators Actual Estimated Projected Indicator 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total debt outstanding and 1842 2004 2874 3404 4805 4405 4939 5290 5336 a disbursed (TDO) (US$m) a Net disbursements (US$m) 74 101 587 384 1373 791 534 351 46 Total debt service (TDS) 138 150 188 399 286 411 454 608 858 a (US$m) Debt and debt service indicators (%) b TDO/XGS 78.1 72.0 83.9 89.5 172.9 149.0 151.6 148.0 137.4 TDO/GDP 37.6 31.4 31.2 29.2 56.3 49.7 54.8 56.3 54.0 TDS/XGS 5.9 5.4 5.5 10.5 10.3 13.9 13.9 17.0 22.1 Concessional/TDO 48.8 51.1 44.4 42.3 32.7 43.5 43.5 44.5 47.5 IBRD exposure indicators (%) IBRD DS/public DS 0.0 0.0 0.0 2.1 1.7 3.5 3.0 1.9 1.4 Preferred creditor DS/public .. .. .. 92.2 72.0 69.6 43.6 51.3 56.3 c DS (%) IBRD DS/XGS 0.0 0.0 0.0 0.0 0.0 0.1 0.2 0.2 0.3 d IBRD TDO (US$m) 6 6 5 5 28 86 162 256 321 Of which present value of 0 0 0 0 0 0 0 0 0 guarantees (US$m) Share of IBRD portfolio (%) 0.01 0.00 0.00 0.00 0.03 0.08 0.16 0.25 0.31 d IDA TDO (US$m) 746 841 973 1015 1161 1195 1206 1206 1200 a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMF credits and net short- term capital. b. "XGS" denotes exports of goods and services, including workers' remittances. c. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the Bank for International Settlements. d. Includes present value of guarantees. e. Includes equity and quasi-equity types of both loan and equity instruments. 36    Annex B6   Armenia - Key Economic Indicators Actual Estimate Projected Indicator 2005 2006 2007 2008 2009 2010 2011 2012 2013 National accounts (as % of GDP) a Gross domestic product 100 100 100 100 100 100 100 100 100 Agriculture 21 20 20 18 19 17 17 16 16 Industry 45 45 44 44 35 37 37 38 38 Services 34 35 36 38 46 46 47 46 46 Total Consumption 84 80 82 85 94 96 96 96 95 Gross domestic fixed investment 30 36 38 44 34 31 27 28 28 Government investment 4 4 7 4 6 6 4 4 4 Private investment 26 31 32 40 28 25 23 23 24 b Exports (GNFS) 29 23 19 15 16 16 16 16 16 Imports (GNFS) 43 39 39 41 44 41 39 37 36 Gross domestic savings 16 20 18 15 6 4 4 4 5 c Gross national savings 29 34 32 32 18 17 16 17 19 Memorandum items Gross domestic product 4900 6384 9206 11662 8541 8857 9020 9394 9888 (US$ million at current prices) GNI per capita (US$, Atlas method) 1470 1920 2580 3380 3070 3140 3090 3200 3310 Real annual growth rates (%) Gross domestic product at market prices 13.9 13.2 13.7 6.9 -14.1 2.1 4.6 4.3 4.2 Gross Domestic Income 13.5 13.3 12.8 8.6 -13.5 4.6 4.9 4.8 4.6 Real annual per capita growth rates (%) Gross domestic product at market prices 13.8 13.1 13.6 6.7 -14.3 1.9 4.4 4.1 4.0 Total consumption 8.2 8.7 16.5 8.6 -4.9 7.9 5.6 4.7 4.0 Private consumption 7.2 8.2 17.8 5.1 -6.3 13.3 6.7 4.4 3.9 Balance of Payments (US$ millions) b Exports (GNFS) 1416 1510 1777 1757 1338 1513 1720 1927 2124 Merchandise FOB 1005 1025 1197 1112 749 839 965 1080 1210 b Imports (GNFS) 2124 2536 3589 4748 3688 3889 4129 4383 4653 Merchandise FOB 1593 1921 2797 3776 2830 3014 3201 3399 3610 Resource balance -708 -1026 -1813 -2991 -2349 -2376 -2409 -2456 -2529 Net current transfers 524 694 945 1138 814 849 1021 1065 1176 Current account balance -52 -117 -589 -1382 -1369 -1289 -1112 -1072 -985 Net private foreign direct investment 233 450 701 925 725 569 620 651 684 Long-term loans (net) 79 85 390 564 1586 624 293 80 -178 Official 34 67 182 145 1044 261 311 301 250 Private 45 18 208 419 542 364 -18 -222 -428 Other capital (net, incl. errors & ommissions) -72 -30 58 -360 -345 -49 129 282 323 d Change in reserves -188 -388 -560 252 -597 145 69 60 156 Memorandum items Resource balance (% of GDP) -14.4 -16.1 -19.7 -25.6 -27.5 -26.8 -26.7 -26.2 -25.6 Real annual growth rates ( YR96 prices) Merchandise exports (FOB) 29.1 1.5 14.7 -8.6 -30.0 7.7 11.9 10.4 9.9 Primary 18.3 8.4 9.2 -42.6 -34.2 29.3 4.5 9.6 64.2 Manufactures 110.5 -12.6 41.4 50.6 -23.7 7.9 15.8 13.7 12.8 Merchandise imports (CIF) 29.2 14.3 48.0 24.5 -35.9 16.5 3.4 6.6 6.2 37    Annex B6 (Continued) Armenia - Key Economic Indicators (Continued) Actual Estimate Projected Indicator 2005 2006 2007 2008 2009 2010 2011 2012 2013 e Public finance (as % of GDP at market prices) Current revenues 16.2 16.0 21.0 21.3 21.7 18.1 18.3 18.4 18.6 Current expenditures 14.7 13.4 15.8 18.3 22.7 22.0 22.4 20.4 20.1 Current account surplus (+) or deficit (-) 1.5 2.6 5.2 3.0 -1.0 -3.9 -4.1 -2.0 -1.5 Capital expenditure 4.2 4.3 6.6 3.9 6.2 6.1 4.2 4.3 4.5 Foreign financing .. .. .. .. .. 7.9 6.3 5.8 4.2 Monetary indicators M2/GDP 16.3 18.3 22.0 19.8 26.3 27.0 27.8 27.8 27.8 Growth of M2 (%) 27.8 32.9 42.3 2.4 15.1 15.4 13.4 9.1 8.4 Growth of credit to private sector (%) 32.3 28.1 92.3 47.9 11.5 25.7 12.5 9.2 15.8 Price indices( YR96 =100) Merchandise export price index 96.5 96.2 98.1 98.5 92.8 103.6 106.5 108.0 110.1 Merchandise import price index 114.3 121.7 122.6 133.4 156.2 121.6 125.0 124.5 124.6 Merchandise terms of trade index 84.4 79.0 80.0 73.8 59.4 85.2 85.2 86.8 88.4 f Real exchange rate (US$/LCU) 97.5 106.4 122.7 137.0 125.7 125.7 125.7 125.7 125.7 Real interest rates Consumer price index (% change) 0.6 2.9 4.4 9.0 3.4 5.9 4.6 3.6 3.2 GDP deflator (% change) 3.2 4.6 4.3 6.0 1.2 9.9 5.5 4.6 4.0 a. GDP at factor cost b. "GNFS" denotes "goods and nonfactor services." c. Includes net unrequited transfers excluding official capital grants. d. Includes use of IMF resources. e. Central government. f. "LCU" denotes "local currency units." An increase in US$/LCU denotes appreciation. 38    Annex B7 Armenia Social Indicators Latest single year Same region/income group Europe & Low er- Central m iddle- 1980-85 1990-95 2003-09 Asia incom e POPULATION Total population, mid-year (millions) 3.3 3.2 3.1 404.2 3,810.8 Grow th rate (% annual average for period) 1.5 -1.9 0.1 0.2 1.2 Urban population (% of population) 67.1 66.3 63.9 64.0 40.9 Total fertility rate (births per woman) 2.5 2.1 1.7 1.8 2.5 POVERTY (% of population) National headcount index .. .. 23.5 .. .. Urban headcount index .. .. 23.8 .. .. Rural headcount index .. .. 22.9 .. .. INCOME GNI per capita (US$) .. 450 3,070 6,793 2,298 Consumer price index (2005=100) .. 68 142 134 130 INCOME/CONSUMPTION DISTRIBUTION Gini index .. .. 38.9 .. .. Low est quintile (% of income or consumption) .. .. 6.8 .. .. Highest quintile (% of income or consumption) .. .. 53.1 .. .. SOCIAL INDICATORS Public expenditure Health (% of GDP) .. .. 2.1 3.5 1.8 Education (% of GNI) .. .. 3.4 4.4 4.0 Net prim ary school enrollm ent rate (% of age group) Total .. .. 84 92 87 Male .. .. 83 93 88 Female .. .. 86 92 86 Access to an im proved w ater source (% of population) Total .. 91 98 96 87 Urban .. 99 99 98 95 Rural .. 75 96 89 81 Im m unization rate (% of children ages 12-23 months) Measles .. 96 94 96 80 DPT .. 98 89 95 79 Child malnutrition (% under 5 years) .. .. 4 .. 25 Life expectancy at birth (years) Total 70 69 74 69 68 Male 67 65 70 65 66 Female 72 72 77 74 70 Mortality Infant (per 1,000 live births) 54 42 21 19 43 Under 5 (per 1,000) 64 48 23 21 58 Adult (15-59) Male (per 1,000 population) 158 216 165 314 204 Female (per 1,000 population) 85 119 80 130 138 Maternal (per 100,000 live births) .. .. 36 32 230 Births attended by skilled health staff (%) .. .. 100 97 65 CAS Annex B5. This table w as produced from the CMU LDB system. 06/02/11 Note: 0 or 0.0 means zero or less than half the unit show n. Net enrollment rate: break in series betw een 1997 and 1998 due to change from ISCED76 to ISCED97. Immunization: refers to children ages 12-23 months w ho received vaccinations before one 39  year of age or at any time before the survey.     Annex B8 CAS Annex B8 - Armenia Operations Portfolio (IBRD/IDA and Grants) As Of Date 4/6/2011 Closed Projects 42 . IBRD/IDA * Total Disbursed (Active) 284.54 of which has been repaid 0.00 Total Disbursed (Closed) 472.72 of which has been repaid 66.29 Total Disbursed (Active + Closed) 757.26 of which has been repaid 66.29 Total Undisbursed (Active) 197.42 Total Undisbursed (Closed) 0.15 Total Undisbursed (Active + Closed) 197.57 Active Projects Difference Between Last PSR Expected and Actual Supervision Rating Original Amount in US$ Millions Disbursements a/ Development Implementation Project ID Project Name Fiscal Year IBRD IDA GRANT Cancel. Undisb. Orig. Frm Rev'd Objectives Progress P117384 PSMP II MS S 2010 9 8.7775 0.1441667 P083352 RENEW ENERGY S S 2006 5 0.207441 -0.131071 P115109 AM Access to Finance for SME S S 2009 50 19.875 18.208333 P116451 Armenia DPO 2 S HS 2011 4 21 24.93683 0.0083333 P120028 Community Agri. Res. Managem. and Comp. # # 2011 16 16.28523 P115647 E-SOCIETY & INNOVATION S S 2011 24 24 P107772 EDUC QUAL & REL (APL#2) S S 2009 25 24.43251 2.1855926 P114409 GEOFUND 2: Armenia Geothermal Project S S 2009 1.5 0.877531 0.8775307 P104467 HLTH SYS MOD (APL2) S S 2007 19 22 22.09929 1.7680425 P116681 IRRIGATION REHABILITATION EMERGENCY PROJ S S 2010 30 2.029527 -0.155473 P099630 JUDICIAL REFORM 2 S MS 2007 22.5 4.640493 -0.567367 P115486 LIFELINE ROADS IMPROVEMENT PROJECT S HS 2009 76.6 25 30.25069 -47.33304 -12.4972 P063398 MUN WATER & WW S S 2004 43 5.880258 -14.48386 5.516134 P090058 RENEW ENERGY (GEF) S S 2006 3 0.504916 0.5049162 P094225 SIF 3 S S 2007 7 33 6.059239 -10.11294 -2.58628 P087620 SOC PROT ADMIN S S 2004 5 5.15 4.7875 -0.595736 P057880 URBAN HEAT S S 2006 15 0.632442 0.3190952 P087641 YEREVAN WATER/WW SERVS S S 2005 20 2.527637 2.5400959 2.540096 Overall Result 224.6 252.65 4.5 198.804 -46.82338 -7.02725 40    Annex B8 IFC           International Finance Corporation Statement of IFC's Committed and Outstanding Portfolio Amounts in US Dollar Millions Accounting Date as of : 03/31/2011 R eg io n( s) :Euro p e & C ent ral A sia C o unt ry( s) : A rmenia Commitment Institution LN ET QL + QE GT RM ALL ALL LN ET QL + QE GT RM ALL ALL Fiscal Year Short Name Cm td - IFC Cm td - IFC Cm td - IFC Cm td - IFC Cm td - IFC Cm td - IFC Cmtd - Part Out - IFC Out - IFC Out - IFC Out - IFC Out - IFC Out - IFC Out - Part 2003/ 2010 ACBA Leasing 3.00 0 0 0 0 3.00 0 3.00 0 0 0 0 3.00 0.00 2011 ACBA Bank 20.00 0 0 0 0 20.00 0 20.00 0 0 0 0 20.00 0.00 2008/ 2010/ 2011 ASHIB 11.25 6.47 0 (0.00) 0 17.72 0 11.25 6.47 0 0 0 17.72 0.00 2010/ 2011 Ameriabank 15.00 0 0 7.08 1.84 23.92 0 15.00 0 0 7.08 0.25 22.33 0.00 2004/ 2007/ 2008/ 2009/ Armeconombank 5.76 0 0 0.38 0 6.13 5.00 5.76 0 0 0.38 0 6.14 5.00 2010/ 2011 2010 Elite Group 5.40 0 0 0 0 5.40 0 4.20 0 0 0 0 4.20 0.00 2001/ 2004 Hotel Armenia 0 0 0.44 0 0 0.44 0 0 0 0.44 0 0 0.44 0.00 2006/ 2007/ 2009/ 2011 Inecobank 3.13 1.30 0 0.10 0 4.53 0 3.13 1.30 0 0.10 0 4.53 0.00 2008/ 2009/ 2010/ 2011 Lydian Intl 0 6.52 0 0 0 6.52 0 0 6.52 0 0 0 6.52 0.00 2006 NAREK 1.63 0 0 0 0 1.63 0 1.63 0 0 0 0 1.63 0.00 Total Portfolio 65.16 14.29 0.44 7.56 1.84 89.28 5.00 63.96 14.29 0.44 7.56 0.25 86.49 5.00         41    43°E To T’bilisi To T’bilisi 46°E 47°E GEOR GI A 44°E G E OR G IA To Borjomi L e s s Tashir Tashir er C Alaverdi To Gäncä auc Ku asu ra Mingechevir 41°N Stepanavan s M To Gäncä Reservoir 41°N ou LORRI nt SHIRAK ai Ijevan n s Gyumri Vanadzor Vanadzor T AV U S H AV To Kars Dilijan Artik Artik Artsvashen Artsvashen Karmir Karmir Aragats Sevan To pa Gäncä Ar (4090 m) ARMENIA Hrazdan A R A G AT S O T N Hraz d a n KO KO KO Gavar Lake Ashtarak T UR KEY Sevan T TA T GEGHARK’UNIK’ YK YEREVAN YEREVAN Vardenis Vardenis ’ Aras AV A R M AV I R YEREVAN YEREVAN Armavir Armavir Martuni Martuni nge ni s Ra 40°N 40°N r de Artashat Artashat Va A R A R AT This map was produced by the Map Design Unit of The World Bank. VAY VAY O T S ’ Ar Ararat as The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Jermuk Jermuk Group, any judgment on the legal status of any territory, or any DZOR endorsement or acceptance of such boundaries. Yegegnadzor Yegegnadzor 43°E 44°E Arpa AZ E RB AIJ AN Vaik Vaik To Naxçivan Angekhakot ARM E NI A To Goris Qubadli Vo o tan r Z To Naxçivan A To ra a SELECTED CITIES AND TOWNS Qubadli s ng PROVINCE (MARZ) CAPITALS A ZERBA IJA N SYUNIK’ ez ez ez I SLA MIC REPUBLIC Kapan ur ur ur NATIONAL CAPITAL RIVERS O F IRA N Ra ng MAIN ROADS 0 10 20 30 40 50 Kilometers s e RAILROADS Ara 39°N SEPTEMBER 2004 IBRD 33364 PROVINCE (MARZ) BOUNDARIES 0 10 20 30 Miles To Füzili INTERNATIONAL BOUNDARIES Megri 45°E To Ordubad 47°E