Commission staff working document accompanying the Communication from the Commission to the European Parliament and the Council - Implementation of the European Neighbourhood Policy in 2008 - Progress Report Armenia {COM(2009) 188 final} {SEC(2009) 512} {SEC(2009) 513} {SEC(2009) 514} {SEC(2009) 515} {SEC(2009) 516} {SEC(2009) 517} {SEC(2009) 518} {SEC(2009) 519} {SEC(2009) 520} {SEC(2009) 521} {SEC(2009) 522} {SEC(2009) 523}
Date: 2009-04-23
Institutions: European Commission
Subjects: Armenia, European neighbourhood policy, impact study, the EU's international role

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 23.4.2009 
SEC(2009) 511 

COMMISSION STAFF WORKING DOCUMENT 

Accompanying the 

COMMUNICATION FROM THE COMMISSION  
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Implementation of the European Neighbourhood Policy in 2008 

Progress Report Armenia 

{COM(2009) 188 final} 
{SEC(2009) 512} 
{SEC(2009) 513} 
{SEC(2009) 514} 
{SEC(2009) 515} 
{SEC(2009) 516} 
{SEC(2009) 517} 
{SEC(2009) 518} 
{SEC(2009) 519} 
{SEC(2009) 520} 
{SEC(2009) 521} 
{SEC(2009) 522} 
{SEC(2009) 523} 

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1. 

BACKGROUND AND OVERALL ASSESSMENT 

Armenia and the EU first established contractual relations in 1996 through a Partnership and 
Cooperation  Agreement  which  entered  into  force  in  1999.  On  this  basis,  the  EU-Armenia 
ENP Action Plan was adopted in November 2006 for a period of five years. A first progress 
report was adopted in April 2008.  

Institutional  cooperation  through  the  EU–Armenia  Cooperation  Council,  the  EU–Armenia 
Cooperation Committee and the EU-Armenia subcommittee on trade and related legal issues 
enabled both sides to move forward and follow the implementation of the ENP Action Plan 
closely. The opening of a full-fledged Delegation of the European Commission in Yerevan in 
February 2008 contributed to the further strengthening of EU-Armenia bilateral relations.  

This  document  reports  on  overall  progress  made  on  the  implementation  of  the  EU-Armenia 
ENP Action Plan between 1 January and 31 December 2008, although developments outside 
this  period  are  also  considered  when  deemed  relevant.  It  is  not  a  general  review  of  the 
political and economic situation in Armenia. 

Overall, Armenia made progress in several areas of the ENP Action Plan. However, Armenia 
is still struggling with the consequences of the internal crisis in the aftermath of Presidential 
elections in February 2008 which led to the introduction of a state of emergency and a number 
of  restrictions  of  democratic  freedoms  and  human  rights,  affecting  in  particular  freedom  of 
expression, freedom of assembly and media freedom.  

Nonetheless,  Armenia  made  some  progress  in  implementing  reforms  which  constitute  key 
priorities  under  the  ENP  Action  Plan.  Progress  was  made  in  particular  on  tax  and  customs 
reforms,  financial  services  and  competition  policy.  Armenia  also  entered  into  a  new  IMF-
supported  Poverty  Reduction  and  Growth  Facility  which  aims  to  enhance  Armenia’s 
macroeconomic stability and economic performance. Important steps were taken in improving 
transparency  of  the  government’s  decision-making  process  and  cooperation  with  NGOs  and 
civil  society,  although  more  remains  to  be  done,  including  in  building  dialogue  with  the 
opposition. Armenia also took steps to strengthen the Human Rights Defender by increasing 
its  range  of  activity  and  independence.  Armenia  made  progress  in  regional  cooperation  and 
dialogue  with  neighbouring  countries,  in  particular  with  Turkey.  Furthermore,  Armenia 
widely  aligned  itself  with  CFSP  declarations  and  is  generally  very  active  in  cooperating  on 
CFSP-related issues. 

A  positive  step  on  the  Nagorno-Karabakh  conflict  was  taken,  despite  the  prevailing  high 
tensions, with the first document jointly signed by the Presidents of Armenia and Azerbaijan 
since 1994. 

Of key importance for 2009 will be proper implementation of adopted legislation, as already 
pointed out last year for this reporting period. Further overall progress is needed on political 
dialogue  and  reform,  including  on  effectively  addressing  corruption,  on  respecting  human 
rights and on freedom of expression.  

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2. 

POLITICAL DIALOGUE AND REFORM 

Objectives  in  this  area  include:  strengthening  the  stability  and  effectiveness  of  institutions 
guaranteeing democracy and the rule of law through: strengthening democratic institutions, 
reform of the judiciary, civil service reform and fight against corruption. 

Democracy and the rule of law 

Political  dialogue  between  the  EU  and  Armenia  has  intensified.  In  September  2008,  a  new 
interdepartmental  commission  to  oversee  the  implementation  of  the  ENP  Action  Plan  was 
established, chaired by the Secretary of the National Security Council. The establishment of 
an EU Advisory Experts Group to assist Armenia in the implementation of the ENP Action 
Plan was agreed by the EU and Armenia in November 2008.  

The  presidential  elections  held  in  February  2008  and  the  post-election  events  slowed  down 
the  adoption  of  legislative  amendments  to  comply  with  the  requirements  of  the  new 
constitution.  Adoption  of  legislative  amendments  regarding  the  separation  of  powers,  the 
independence of the judiciary and the freedom of the media is still ongoing.  

Following  the  elections,  Armenia  slid  into  political  crisis.  While  the  elections  mostly  met 
OSCE commitments and international standards in the pre-election period and during voting 
hours,  serious  challenges  to  some  commitments  emerged  after  the  election  day.  The  vote 
count  demonstrated  deficiencies  of  accountability  and  transparency  and  complaints  and 
appeals  procedures  were  not  fully  effective,  which  displayed  an  insufficient  regard  for 
standards essential to democratic elections and devalued the overall election process. This set 
in motion a chain of events that culminated in the clashes of March 1-2, which left 10 people 
dead and led to more than one hundred arrests and a state of emergency which remained in 
force until 20 March. Despite international calls to release all persons “detained on seemingly 
artificial and politically motivated charges who did not personally commit any violent acts or 
serious  offences”,  many  of  them  were  still  imprisoned  by  the  end  of  the  year.  The 
Parliamentary Assembly of  the Council of Europe (PACE) adopted two resolutions in 2008 
(1609, 1620) on the functioning of the democratic institutions in Armenia, raising in particular 
the  issue  of  the  arrests  of  opposition  supporters  and  members  of  Parliament,  of  the  control 
over  the  electronic  medias  and  of  the  freedom  of  assembly  as  well  as  of  a  number  of 
prosecution cases and convictions based solely on police testimony. The Armenian authorities 
took  some  measures  to  address  the  political  crisis.  The  implementation  of  the  PACE 
recommendations was considered not satisfactory by the PACE Monitoring Committee in its 
draft  resolution  of  December  2008.  Several  steps  were  taken  by  the  authorities  in  January 
2009;  after  which  the  PACE  decided  in  January  2009  not  to  suspend  the  Armenian 
delegation’s  voting  rights  and  did  not  put  forward  this  sanction  for  consideration  at  a  later 
stage, while calling on authorities to continue the process of reforms. 

After the entry into force of the new judicial code in January 2008 (see last year’s report), the 
main reforms of which are a re-organisation of the judiciary, establishment of the specialised 
courts  and  self-governing  bodies  of  the  judiciary  and  a  change  of  the  role  of  the  Court  of 
Cassation,  additional  amendments/revisions  of  different  legal  acts  related  to  the  judiciary 
were  adopted,  however,  the  main  challenge  for  Armenia  remains  to  implement  all  adopted 
legislation and to fully safeguard the independence of the judges.  

The criminal code was revised in the first half of 2008 to include relevant articles on active 
and passive corruption in line with the standards of the Council of Europe (CoE) and the UN 
Convention  against  Corruption  (UNCAC).  Some  practical  steps  to  fight  corruption  were 
implemented mainly in the customs service, see section 4, but further steps should be taken. 

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Despite the fact that the national anti-corruption strategy expired at the end of 2006, the new 
strategy to ensure better alignment with Council of Europe Group of States against Corruption 
(GRECO) recommendations has not yet been adopted. The civil service council continued its 
efforts  to  improve  the  recruitment  procedure  of  the  civil  service,  in  particular  through 
cooperation with civil society organizations.  

On  local  self-government,  the  National  Assembly  adopted  in  December  2008  the  new  law 
for the City of Yerevan providing for indirect elections of the city’s Mayor. The Government 
also  adopted  the  concept  on  approaches  for  the  consolidation  of  communities  and  the 
formation of intercommunity unions aimed at enlarging communities and strengthening their 
capacities. 

Human rights and Fundamental Freedoms 

The objectives in this area include: strengthening respect for human rights and fundamental 
freedoms,  ensuring  the  independence  of  the  media  by  strengthening  the  independent 
regulatory body for public and private broadcasters, installing freedom of assembly, further 
reform of the penitentiary system to improve detention conditions; continue efforts to ensure 
trade  union’s  rights  and  core  labour  standards,  ensure  respect  for  the  national  minorities; 
continue efforts to ensure the equality of men and women in society and economic life.  

The State of Emergency between 1 March and 20 March entailed restrictions on freedom of 
expression and freedom of assembly, including restrictive amendments to the law on rallies, 
as well as restrictions to civil society activities. 

Armenia has not adopted a national action plan on human rights. During 2008, the Armenian 
Human Rights Defender institution increased its range of activity and its independence. The 
Human Rights Defender has been active in reported cases of torture, on social issues, and in 
ensuring changes to the law on alternative military service and military service for minorities 
in line with CoE recommendations. The Human Rights Defender has also been empowered to 
deal with complaints from military staff. 

By  the  end  of  the  reporting  period,  Armenia  had  extended  a  standing  invitation  to  all  UN 
Special Procedures. However, the country had nine overdue reports of UN Treaty Bodies. 

Cases  of  torture  and  ill-treatment  were  reported,  including  among  military  conscripts,  in 
prison facilities and in police stations. Four criminal cases were opened in 2008, but no one 
has so far been convicted for offences related to torture and ill treatment. Armenia continued 
to take steps towards the implementation of the Optional Protocol to the Convention against 
Torture (OPCAT). In that respect the Human Rights Defender office of Armenia was awarded 
a grant of EUR 300,000 under the European  Instrument for  Democracy and  Human Rights. 
The  law  on  alternative  service  was  amended  in  2008  to  ensure  the  civilian  nature  of  the 
service  but  further  amendments  are  still  necessary  in  order  to  fully  comply  with  CoE 
standards.  Conditions  in  places  of  detention  and  the  excessive  use  of  pre-trial  detention 
remain  a  source  of  concern,  but  efforts  were  made  by  the  Government  to  improve  the 
situation. Two prisons were reconstructed and refurbished in the course of 2008 contributing 
to the improvement of the conditions for inmates. The Ministry of Justice adopted a plan of 
action to support further reform of the penitentiary system. The European Committee for the 
Prevention  of  Torture  and  Inhuman  or  Degrading  Treatment  or  Punishment  (CPT)  visited 
Armenia  in  March  2008.  Armenia  has  not  yet  authorized  publication  of  the  report  from  the 
visit. 

Concerns  remain  regarding  the  freedom  of  expression,  in  particular  the  continued  lack  of 
independence  of  the  regulatory  bodies  and  the  insufficient  pluralism  in  the  media.  The 
implementation of the law on freedom of information remains incomplete. In September 2008 

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the  Armenian  Parliament  adopted  legal  amendments  according  to  which  the  national 
commission on television and radio (NCTR) will be unable to hold tenders for broadcasting 
licences until July 2010. In November 2008, the Government set up a new body tasked with 
monitoring  and  regulating  the  work  of  the  local  media  outlets.  Seven  cases  of  violence  and 
intimidation of journalists were registered in 2008. Further amendments improved the law on 
rallies adopted in March 2008 but there is room for additional legislative changes. Its proper 
implementation  remains  a  matter  of  concern.  In  2008  only  few  applications  submitted  by 
opposition forces were approved by the authorities. 

NGOs are more frequently invited to participate in drafting legislation or to discuss legislative 
initiatives by governmental institutions. They also observe recruitment procedures for public 
administrations and in the elaboration of the new anti-corruption strategy. A formal procedure 
has been established to ensure continued involvement of all relevant stakeholders.  

Some progress can be noted in the implementation of the national action plan 2004-2010 on 
“Enhancing  Women’s  Status  and  Empowering  Women  in  Society”.  The  Law  on  gender 
equality is being revised. The draft law criminalizing domestic violence is under discussion. 
Police  programmes  were  initiated  to  implement  guidelines  for  police  responsibilities  in 
responding to domestic violence, but domestic violence is still widespread as Armenia lacks 
the capacity to prevent and effectively sanction domestic violence and protect its victims. 

Armenia  further  decentralised  the  National  Commission  and  regional  departments  on  the 
rights  of  Children.  However,  the  effectiveness  of  these  institutions  needs  further 
improvement. 

On labour law and rights at work, Armenia qualified for the special incentive arrangement 
for  sustainable  development  and  good  governance,  the  GSP+  scheme,  for  the  years  2009-
2011, see section 4. The amendments to the Labour Code regulating rights of employees for 
strikes  were  developed  by  the  Ministry  of  Labour  and  Social  Affairs  and  submitted  to  the 
Government  for  approval.  In  April  2008  Armenia  submitted  its  report  on  the  application  of 
the revised European Social Charter to Council of Europe on issues dealing with employment, 
training and equal opportunities. 

Cooperation on foreign and security policy, conflict prevention and crisis management  

Armenia aligns itself with CFSP declarations on a case-by-case basis. It has done so on most 
opportunities (more than 80%)1. Armenia is cooperating with UN and NATO as well as with 
experts  from  the  United  Nations  Office  on  Drugs  and  Crime  (UNODC),  INTERPOL,  the 
World Customs Organization, CIS and CoE, in exchanging information  on  terrorism  issues. 
Armenia  cooperates  successfully  with  the  United  Nations  Counter-Terrorism  Committee 
(CTC) established under SC Res.1373. 

No  progress  has  been  made  on  the  signature  and  ratification  of  the  Rome  Statute  of  the 
International Criminal Court. 

Strengthening regional cooperation 

Armenia  participated  in  a  programme  on  integrated  border  management  in  the  Southern 
Caucasus (SCIBM), see section 5. 

Armenia is participating in the South Caucasus Anti-Drugs programme (SCAD V) with the 
overall  objective  "to  encourage  the  gradual  approximation  of  drug  policy  legislation,  norms 

1 

Information from the Council Secretariat  

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and standards between Armenia, Azerbaijan and Georgia and between these countries and the 
EU", see section 5.  

The  Regional  Environmental  Centre  for  the  Caucasus  (REC-Caucasus)  became  fully 
operational  under  its  new  charter  with  the  approval  of  national  representatives  of  the  three 
Caucasus  countries  for  the  new  executive  body  in  December  2008.  Armenia  supported  the 
establishment  of  its  new  management  structure.  The  REC  is  an  important  tool  to  promote 
regional cooperation and stability for the future of South Caucasus.2 

Armenia participates in the Black Sea Synergy regional cooperation initiative and participated 
in the TRACECA ministerial conference held in Baku on 4 December 2008 which took two 
important  decisions:  to  link  TRACECA  to  the  South-Eastern  Axis  of  the  trans-European 
networks, and to strengthen the existing TRACECA structures. 

Armenia  supported  the  Turkish  initiative  of  a  Caucasian  platform  for  stability  and 
cooperation.  While  Turkey  kept  its  land  border  with  Armenia  closed,  the  prospect  of 
establishing bilateral relations improved following the visit of Turkish President Abdullah Gül 
to Yerevan in September 2008, upon the invitation of his Armenian counterpart. 

Armenia  maintained  a  neutral  and  constructive  attitude  towards  the  conflict  in  Georgia  in 
August 2008.  

Regional youth cooperation in the South Caucasus was carried out with the assistance of the 
Helsinki  Citizens’  Assembly  within  the  framework  of  the  South  Caucasus  Youth  Network. 
Armenian-Azerbaijani  youth  peace  brigades  were  set  up  in  October  2008  to  organize  a 
peacekeeping process in South Caucasus. 

Contribute to a peaceful solution of the Nagorno-Karabakh conflict 

Although tensions are still high, some progress was made in the context of the resolution of 
the  Nagorno-Karabakh  conflict.  The  Presidents  of  Armenia  and  Azerbaijan  held  two 
meetings to negotiate a solution to the Nagorno-Karabakh  conflict, in St  Petersburg in  June 
and  in  Moscow  in  November  2008.  The  two  Foreign  Ministers  also  met,  including  in  the 
margins of the OSCE Ministerial Council in Helsinki in December 2008. 

The  meeting  in  Moscow  in  November  resulted  in  the  signing  of  a  joint  declaration  on 
contributing  “to  the  improvement  of  the  situation  in  the  South  Caucasus  by  means  of  the 
political  settlement  of  the  Nagorno-Karabakh  conflict”,  “agreeing  that  the  peace  settlement 
should  be  accompanied  by  legally  binding  international  guarantees  of  all  its  aspects  and 
stages”  and  “considering  important  encouraging  the  establishment  of  conditions  to  realize 
measures  on  consolidating  trust  in  the  context  of  efforts  on  settlement”.  This  is  the  first 
jointly-signed  document  between  the  two  countries  since  1994.  These  developments 
complement the ongoing efforts for the peaceful resolution of the Nagorno-Karabakh conflict 
in the context of the OSCE Minsk Group. 

3. 

ECONOMIC AND SOCIAL REFORM 

Macroeconomic framework and functioning market economy 

Macroeconomic development  

After  six  years  of  double-digit  non  inflationary  growth  accompanied  by  large-scale  foreign 
exchange inflows, GDP increased by only 6.8% in 2008. This was mainly the result of a sharp 

2 

The  REC  charter,  which  was  adopted  in  2006,  is  one  of  very  few  documents  signed  jointly  by 
government representatives of Armenia and Azerbaijan. 

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decrease  in  economic  activity  in  the  fourth  quarter  amid  the  deepening  global  financial  and 
economic crisis. Growth slowed down significantly in the construction and chemical sectors. 
The metallurgical and diamond sectors contracted signalling the competitiveness problems of 
the Armenian economy. The food sector recorded considerable growth despite the difficulties 
in exporting conditions. 

Inflation rose to an average 8.9% in 2008 on the back of the surge in the prices of fuel and 
food  products  some  of  which  are  subject  to  monopolistic  pricing  by  a  limited  number  of 
import  companies.  However,  the  inflation  level  inflation  remained  relatively  low  compared 
with  the  other  countries  in  the  area.  This  was  due  to  the  tightened  monetary  policy,  the 
moderate fiscal stance and the strong Armenian Dram which prevented imported inflationary 
pressures.  This  led,  however,  to  reduction  of  foreign  currency  reserves.  Credit  expansion 
remained  strong  with  the  credit/GDP  reaching  17.4%  at  the  end  of  2008.  This  could  be  the 
effect of the strong reserve money growth created by the foreign exchange rate intervention. 

Fiscal discipline was maintained throughout 2008, due to better revenue performance, a surge 
in V.A.T. collection and some expenditure under execution. As a result, the fiscal deficit was 
close to 1.2% of GDP. A series of measures were presented in 2008 aimed at strengthening 
revenues and addressing the weaknesses in tax policy and administration, as the tax revenue 
to  GDP  ratio  remains  low.  Measures  have  also  been  taken  to  improve  the  taxation 
environment  for  small  and  medium-enterprises  in  an  effort  to  reduce  the  cost  of  doing 
business, to raise export potential and to facilitate the diversification of the production base. 

Despite the surpluses in current transfers (e.g. remittances) and income accounts, the current 
account deficit deteriorated to around 12.6% in 2008 on the back of high oil and food prices 
and buoyant demand for imports. Export performance was also poor because of the decline in 
prices of many export products and the loss of competitiveness in diamond processing. The 
widening  of  the  current  account  calls  for  accelerated  structural  reforms  to  diversify 
production, increase productivity and raise export potential. 

The  financial  sector  has  not  been  severely  affected  by  the  financial  crisis.  Banking 
supervision  has  improved  and  the  Armenia  banks  present  satisfactory  indicators  concerning 
the profitability, capital adequacy and quality of their loan portfolio. Consumer protection has 
also improved. However, the limited access to external borrowing and the high interest rate 
margins  are  a  constraint  for  future  credit  growth  and  for  the  deepening  of  financial 
intermediation.  The  lag  in  the  growth  of  deposits  compared  to  the  recent  strong  credit 
expansion  has  also  increased  external  financing  which  could  become  a  source  of  potential 
risk. Armenian banks have also increased their mortgage portfolio, which makes them more 
vulnerable to fluctuations in property prices. 

After the successful conclusion of the previous IMF-supported Poverty Reduction and Growth 
Facility  (PRGF)  in  May  2008  and  the  marked  reduction  in  poverty  rates  (currently  around 
25%), Armenia entered into a new IMF-supported PRGF which aims at enhancing Armenia's 
macroeconomic  stability  and  economic  performance  and  creating  the  conditions  for  further 
reductions in poverty. 

Employment and social policy 

Key framework laws regulating social and employment policy are in place in Armenia but the 
labour  code  and  the  legislation  on  employment  and  social  protection  in  case  of 
unemployment, on social assistance and on state pensions, remain to be fully implemented. 

In October 2008, Armenia adopted, after public consultations, a poverty reduction strategy 
also  known  as  the  “Sustainable  Development  Programme  2008-2021”  which  followed  upon 
the  successful  conclusion  of  the  previous  IMF-supported  Poverty  Reduction  and  Growth 

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Facility in May 2008 and the marked reduction in poverty rates. The strategy aims to reduce 
poverty to 14% and extreme poverty to 2.1% by 2012. Moreover, the strategy foresees several 
reforms by 2010 to curb the shadow economy and to liberalize hiring and working conditions. 
According to the national statistical service, 25% of the population live below the poverty line 
and 4% are in extreme poverty. 

The  Ministry  of  Labour  and  Social  Affairs  is  implementing,  in  cooperation  with  donor 
organizations,  programmes  aimed  at  improving  the  administrative  capacity  of  the  State 
Employment  Services.  In  December  2008,  more  than  90.000  people  were  officially 
registered as unemployed (6.3%) with a large share (20%) of young people.  

As regards social dialogue, the Ministry of Labour and Social Affairs is developing draft state 
collective  agreements  in  cooperation  with  social  partners.  Furthermore  a  working  group 
gathering representatives of the Government and social partners was established in May 2008 
with  a  view  to  reflect  on  the  establishment  of  a  tripartite  committee.  Armenia  continued 
implementing  its  Decent  Work  Country  Programme  for  2007  -  2011,  with  the  assistance  of 
the International Labour Organisation. 

With respect to social inclusion and protection, Armenia raised pensions by about 60% as of 
January  2008.  The  Government  approved  in  December  2008,  after  consultations  with  the 
international  financial  institutions,  a  white  paper  on  pension  reform.  The  system  foreseen 
introduces  a  mandatory  cumulative  pension  insurance  system  based  on  the  development  of 
pension funds by 2010. 

The  National  Council  on  Sustainable  Development,  which  was  established  in  2002  but 
which  had  remained  inactive,  was  activated  in  2008  and  held  two  meetings,  with  enhanced 
participation  of  civil  society.  Armenia  also  designed  an  action  plan  to  implement  a 
Sustainable Development programme for the years 2009 - 2012. The Ministry of Economy is 
in charge of implementing and coordinating the measures contained in the action plan. 

The  implementation  of  the Agricultural  Sustainable  Development Strategy  is  on-going  and 
upgrading of rural infrastructure is continuing with strong support by international donors and 
the Armenian Government. 

4. 

TRADE-RELATED ISSUES, MARKET AND REGULATORY REFORM 

In 2008 the EU exports to Armenia continued to grow (year-on year growth of 10,6%) while 
export of Armenian products to the EU decreased by 10,2% contrary to the general trend of 
the  last  five  years  (average  annual  increase  of  18.6  %).  The  EU  has  progressively  become 
Armenia’s main trading partner (a 38.5% share in Armenia's overall external trade in 2007, 
before Russia with a 15.8% share). Nevertheless bilateral trade remains very low in volume 
and  insufficiently  diversified  in  commodity  structure,  in  particular  as  regards  Armenia’s 
exports.  Under  the  EU  Regulation  concerning  the  application  of  the  Generalised  System  of 
Preferences (GSP) in 2006-2008 Armenia benefited from the general arrangement of the GSP 
while under the new GSP Regulation for 2009-2011 Armenia qualified in December 2008 for 
the special incentive arrangement for sustainable development and good governance (GSP+).  

In  May  2008  the  Free  Trade  Agreement  (FTA)  feasibility  study  on  a  possible  future  EU-
Armenia  FTA  foreseen  in  the  ENP  Action  Plan  was  finalised.  The  study  concluded  that  a 
genuinely  deep  and  comprehensive  FTA  (DCFTA)  would  be  economically  beneficial  for 
Armenia, but that Armenia was not yet ready for such a far-reaching liberalisation. Following 
the results of the study, a preparatory process aiming at creating the necessary conditions for a 
DCFTA  in  Armenia  was  launched.  During  the  reporting  period  Armenia  achieved  some 
progress  in  its  preparations  for  a  possible  future  DCFTA  but  Armenia  still  needs  to  make 

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additional progress in several key areas which are essential for a launch of such negotiations. 
With the aim  of  accelerating the preparatory process and assess which priority reform steps 
Armenia  needs  to  take  to  become  ready  for  starting  DCFTA  negotiations,  the  European 
Commission  carried  out  a  fact-finding  mission  to  Armenia  after  the  reporting  period,  in 
February 2009.  

In August 2008, the State Tax Service and the State Customs Committee were merged and a 
new  state  body  called  the  State  Revenue  Committee  (SRC)  was  established.  The  SRC  is 
responsible  for  state  budget  revenue  collection  and  tax  and  customs  administration.  A  new 
council  in  charge  of  overseeing  the  implementation  of  wide  scale  reforms  in  the  tax  and 
customs administrations to be chaired by the Prime Minister was created in June 2008. The 
SRC  initiated  a  long  awaited  trade  facilitation  reform  process.  A  comprehensive  Customs 
Administration Strategy for 2008-2012  based on the  Commission’s recommendation and on 
the  EC  Customs  Blueprints  was  approved  by  the  Chairman  of  the  SRC.  In  August  2008 
Armenia  adopted  some  amendments  to  the  Customs  Code,  introducing  inter  alia  new 
provisions on rights and responsibilities of customs brokers, customs control, simplifications 
of  customs  clearance,  the  introduction  of  the  selectivity  channels  for  border  crossing  points 
other than the airports, delayed payment and bank guarantee mechanism. The extension of the 
use of self-declaration and on-line declaration has obviously a positive effect on the reduction 
of corruption as well as on the implementation of WTO compatible customs valuation rules. 
Authorities  encouraged  the  use  of  customs  brokers  to  lodge  customs  declarations,  and 
facilities  for  customs  brokers  and  self-declaration  by  operators  were  created  in  several 
customs  houses  and  customs  warehouses.  Measures  were  taken  to  reduce  delay  at  some 
customs points. The procedure of calculation via the Trade World Manager (TWM) system, 
and the payment of customs duty were simplified. The duty is calculated automatically, thus 
reducing  the  number  of  documents  and  the  contacts  of  operators  with  customs  officials. 
Efforts were made to improve the representation of the private sector and other stakeholders 
within the consultative group under the Chairman of the SRC, and thus its transparency. To 
ensure  transparency,  the  official  Internet  website  of  the  customs  authority  was  improved 
including  by  allowing  on-line  questions/requests.  A  hot-line  was  set  up  in  April  2008  to 
collect proposals for improvement of the customs services and to receive complaints. A new 
code of ethics, based on the Arusha Declaration and on the experience of different developed 
countries, was adopted in 2008. The SRC has organized a number of staff trainings in foreign 
languages,  IT,  and  specific  topics  of  customs  legislation.  Armenia  has  to  complete  the 
strategic modernization of its customs administration and ensure that specific and important 
functions  of  customs  are  not  compromised  as  a  consequence  of  the  merger  with  the  tax 
administration  into  one  entity  –  the  SRC.  Armenia  should  also  continue  developing  a  risk 
analysis system, in particular post clearance and audit functions, take measures to implement 
important international instruments on customs, take steps to abolish customs administrative 
fees and improve verification of customs value in line with WTO standards. 

On the free movement of goods and technical regulations, Armenia continued the progress 
with  regard  to  the  adoption  of  the  EU’s  regulatory  and  standards  system.  Laws  on 
standardisation,  conformity  assessment,  accreditation  and  metrology  are  under  preparation. 
There was some progress in transposing sectoral EU directives and in adopting international 
standards.  Strategic  review  of  necessary  quality  infrastructure  reforms  is  on-going.  Overall, 
more  progress  in  translation  of  relevant  EU  standards,  approximation  of  the  legislation, 
building  of  quality  infrastructure  and  strengthening  of  human  resources  is  necessary.  Such 
progress could allow for considering opening of negotiations of an Agreement on Conformity 
Assessment and Acceptance of Industrial Products (ACAA) in a long-term perspective. 

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Regarding  sanitary  and  phytosanitary  issues,  Armenia  adopted  implementing  legislation, 
continued the preparations of a draft veterinary law and strengthened institutions including the 
capacities of laboratories. In order to fulfil the objectives of the Action Plan and to be able to 
increase exports to the EU, Armenia will have to progress considerably in the sector. Armenia 
participated in workshops under the European Commission’s “Better training for safer food” 
programme. 

Armenia  developed  a  comprehensive  programme  to  improve  the  business  climate.  In 
September 2008, the Government adopted a concept paper aiming to develop Armenia into a 
investment  environment.  The  paper  gives 
centre  of  excellence  for  business  and 
recommendations  for  reforms  to  be  implemented  within  18  months,  such  as  reducing 
administrative  procedures,  ensuring  regulatory  awareness,  and  improving  the  administration 
of  implementation  of  legislation.  The  entry  into  force  in  January  2009  of  the  law  on 
Consumer Crediting contributes to further protecting consumers’ rights in the financial sector 
and  improving  the  overall  business  climate.  The  law  on  the  Financial  Ombudsman  was 
adopted  in  September  2008.  The  Ombudsman’s  activities  started  right  after  the  reporting 
period, in January 2009. 

Armenia developed and presented a comprehensive review of barriers to establishment with 
the  support  of  AEPLAC  (Armenian-European  Policy  and  Legal  Advice  Centre).  As  regards 
company  law,  the  Law  on  Bankruptcy  was  amended  in  December  2008.  Armenia  also 
continued simplifying the registration of companies and plans to put in place a one-stop shop. 
The  Government  is  also  working  to  reduce  the  number  of  activities  requiring  licences.  The 
corporate  governance  code  is  still  at  a  drafting  stage.  Armenia  elaborated  a  matrix  of 
proposals on strengthening the efficiency and reliability of its company law system and plans 
to revise it. Although the public register of companies is available, an official national Gazette 
is still absent. Transparency should be improved. Furthermore, the Sustainable Development 
Programme,  see  section  3,  contains  a  number  of  provisions  to  ease  establishment  and 
registration of company. 

Armenia  continued  to  progress  in  the  field  of  financial  services.  The  Central  Bank  of 
Armenia acts as the single supervisory authority for financial services since 2006. Work for 
the  adoption  of  the  regulatory  framework  to  implement  the  Basel  II  principles  for  effective 
banking  supervision  (as  adapted  to  the  Armenian  reality)  continued.  Amendments  were 
introduced to the second Regulation of the Central Bank aimed at making the management of 
risks,  such  as  the  price  risk,  the  interest  rate  risk,  and  the  exchange  risk,  more  flexible  and 
effective.  Armenia  started  implementation  of  the  2007  law  on  insurance  and  the  law  on 
securities.  

Other key areas 

The  Government’s  tax  reform  programme  is  comprehensive  but  will  need  to  incorporate 
additional elements and suggestions from IMF to comply with international and EU standards. 
The Unified Tax Code remains to be adopted. A package of draft laws on improving taxation 
environment  for  SMEs  was  adopted  by  the  Parliament  during  the  autumn  session  2008. 
Amendments were made to the laws VAT, taxes, profit tax, income-tax. According to the law 
on accounting, business with a turnover up to 100 M ARD (EUR 175.000) will be subject to a 
simplified form of taxation. The definition of this simplified taxation has not yet been agreed. 
Further  amendments  to  the  tax  legislation  are  currently  being  drafted,  mainly  aimed  at 
facilitating  SME  operations.  In  order  to  comply  with  WTO  obligations,  since  January  2009 
VAT  is  applicable  also  to  the  agricultural  sector,  with  a  minimal  threshold  of  58  M  ARD 
(EUR 102.000). The Government adopted a Tax Administration Strategy Paper 2008-2011 in 
August  2008.  The  main  goals  of  the  Strategy  are:  consistency  and  timeliness  of  large  tax-

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payers  taxation,  effective  “soft”  tax  administration  towards  small  businesses,  addressing 
corruption, voluntary compliance, new policy of tax audits, new management system for tax 
agency  and  tax  administration,  computerization.  An  action  plan  with  timeframes  and 
indicators  of  achievement  was  adopted  and  risk  factors  identified.  Work  to  further  improve 
the  tax  administration  in  line  with  the  Commission’s  fiscal  blueprints  is  on-going  with 
external support. Based on a new definition, large taxpayer files were transferred to the Large 
Taxpayer  Inspectorate  which  was  created  by  merging  the  four  existing  sectoral  tax 
inspectorates. In order to enhance transparency, all sessions of the Appeals Commission of the 
State  Tax  Service  (STS)  are  now  open  to  the  public.  Progress  was  made  concerning  VAT 
refunds, in terms of re-absorption of the existing backlog.  

With  regard  to  competition  policy,  the  legal  and  institutional  framework  is  relatively  well 
established although not yet fully harmonised with EU regulations. The State Commission for 
the Protection of Economic Competition (SCPEC) acts as an independent agency. However, 
its  inspection  powers  remain  limited.  The  main  challenges  remain  effective  enforcement  of 
regulations, adequate human resources and capacity of authorities to address the problems of 
monopolies  and  oligopolies.  The  2007  amendments  to  the  law  on  “protection  of  economic 
competition” reported on last year, were implemented and the SCPEC is now empowered to 
control the state aid. The implementation mechanisms are yet to be defined. 

In the area of intellectual property rights, the Parliament  adopted in June 2008 the law on 
inventions and design as well as the law on trade names which entered into force in January 
2009. No development took place as regards the ratification of the International Convention 
for the Protection of New Varieties of Plants (the UPOV convention). While the criminal code 
has been strengthened (up to 2-years imprisonment), enforcement of IP remains a challenge 
mainly  due  to  the  insufficient  training  of  lawyers  and  judges  and  the  lack  of  trust  in  the 
judicial system. Customs and police do not benefit from ex officio powers. 

The  Government  adopted  in  June  2008  the  secondary  legislation  to  the  Law  on  public 
procurement which entered into force in September. Further to the review of compliance of 
national legislation with EU standards carried out by the OCDE (SIGMA) in December 2008 
and  to  the  World  Bank  assessment  of  their  law,  Armenia  is  elaborating  a  new  strategy  on 
public  procurement.  Proposals  to  enhance  the  administrative  capacity  of  the  Procurement 
agency  are  currently  being  discussed  at  governmental  level.  Armenia  is  also  reviewing  its 
complaint system in order to move it from the Ministry of Finance to an independent appeal 
board.  Finally,  Armenia  is  working  closely  with  the  World  Bank  on  its  e-procurement 
strategy. 

Armenia completed preparations for the global statistical assessment foreseen in the first half 
of 2009 but lacks modern IT equipment. Armenia also continued its work to approximate its 
statistical system with EU standards.  

As  regards  accounting  and  auditing,  translation  of  International  Financial  Reporting 
Standards (IFRS) continued in view of their full application by the end of 2009. Banks apply 
IFRS  since  the  beginning  of  2009.  Other  financial  institutions  such  as  credit  organisations, 
insurance and investment companies will introduce International Accounting Standards (IAS) 
from January 2010. The official translation of IFRS is planned to be conducted by the Official 
Translating  Committee  for  standards,  which  is  currently  being  established.  The  Ministry  of 
Finance is also preparing legal reforms in order to ensure provisions in the legislation that will 
allow the companies to prepare their financial statements according to the IFRS, before 2010. 
To this end, the Ministry of Finance negotiated an agreement on a copyright waiver on IFRS 
with  the  International  Accounting  Standards  Bureau  (IASB/IASCF)  at  the  end  of  2007.  A 
Committee on accounting and audit reforms has been established with the aim of developing a 

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strategy and find mechanisms to keep standards up to date. Armenia is also reflecting on the 
establishment of an independent regulatory body for accounting and auditing, separate from 
the Ministry of Finance.  

In the area of public internal financial control, Armenia  continued to work  on an internal 
audit law. The draft law includes provisions for establishing a central harmonisation function 
for internal audit. Introduction of the principles of managerial accountability are still at very 
early stages.  

On  enterprise  policy,  the  Small  and  Medium-size  Enterprise  Development  National  Centre 
(SME DNC) continued to be the main agency for financial support to SMEs, stimulation of 
economic  activity  and  development  of  business  opportunities  in  Armenia.  The  Ministry  of 
Economy is also working on a financial support programme targeted at SMEs and based on 
equity  financing.  Initial  steps  were  also  taken  to  introduce  the  concept  of  public  private 
partnerships and develop an Action Plan. Since June 2008, Armenia is part to the European 
SME network. 

5. 

COOPERATION ON JUSTICE, FREEDOM AND SECURITY 

Armenia  participates  in  the  Southern  Caucasus  Integrated  Border  Management  (SCIBM) 
regional programme, agreed between Georgia, Armenia and Azerbaijan in October 2007. The 
programme  aims  at  enhancing  inter-agency  cooperation  while  strengthening  the  capacity  of 
customs and border guard services in line with agreed regional standards and EU norms. The 
implementing  consortium,  led  by  United  Nations  Development  Programme  (UNDP)  was 
selected by year end to start implementation in early 2009. 

In  the  area  of  migration,  a  law  on  Refugees  and  Asylum  was  adopted  in  November  2008 
aiming  at  the  approximation  of  national  legislation  on  asylum  and  refugees  to  international 
and  EU  standards.  TAIEX  supported  the  elaboration  of  a  national  action  plan  on  migration 
and  asylum  issues  and  a  seminar  on  international  law  on  refugees  in  Yerevan  in  November 
2008.  No  progress  was  made  with  regard  to  an  electronic  database  for  the  monitoring  of 
migration  flows.  In  July  2008  Armenia  prepared  a  draft  law  on  the  regulation  of  labour 
migration.  

Armenia  has  yet  to  accede  to  the  Third  Protocol  to  the  United  National  Convention  against 
Transnational  Organized  Crime  on  the  illegal  manufacture  and trafficking  of  firearms.  In 
addition  to  the  ratification  and  implementation  of  the  Convention,  further  efforts  are  also 
required  to  ensure  full  and  effective  operational  implementation  of  the  two  Protocols 
previously ratified.  

On the trafficking in human beings, the anti-trafficking commission received ministry status 
at the end of 2007, and became responsible for the implementation second two-year national 
plan  of  action  on  trafficking  (2007-2009).  Armenia  ratified  in  April  the  Council  of  Europe 
Convention  on  Action  against  Trafficking  in  Human  Beings  which  entered  into  force  in 
August  2008.  The  Anti-Trafficking  Commission  developed  draft  guidelines  on  assisting 
victims of trafficking. The national plan of action identified the Ministry of Labour and Social 
Affairs as the host agency for a victim-support resource centre. In 2009, for the first time, the 
state  budget  includes  provisions  for  the  financing  of  anti-trafficking  activities  including  the 
operation of special shelter for victims in cooperation with civil society actors.  

With  regard  to  the  fight  against  drugs,  amendments  to  the  criminal  code  in  June  2008 
provided legal definitions of the amounts and volume of narcotics trafficked which are subject 
to  criminal  sanctions.  However,  in  the  absence  of  a  comprehensive  national  anti-drugs 
strategy, balancing preventive and punitive measures and including adequate civil society and 

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international  input,  an  intensification  of  legal  sanctions  will  not  yield  the  expected  results. 
Armenia continues its active participation in the SCAD V programme which should assist in 
developing national demand reduction measures while encouraging regional cooperation with 
its neighbours on supply reduction and other law enforcement issues. 

In June 2008, Armenia ratified the Council of Europe Convention on the Laundering, Search, 
Seizure and Confiscation of the Proceeds of Crime and on the Financing of Terrorism (CETS 
198)  which  entered  into  force  in  domestic  law  in  October  2008.  In  May  2008,  the  National 
Assembly  passed  the  new  “Law  on  Combating  Money  Laundering  and  Terrorism 
Financing”  and  vested  the  Central  Bank  with  the  legal  authority  to  coordinate  the  national 
policy. Amendments to the Administrative Codes, adopted in September, included additional 
sanctions in relation to non-disclosure of financial reports by foundations and other non-profit 
actors and in relation to obstruction of the control and checking functions of mandated state 
bodies. The continuing development of human and technical resources with regard to money 
laundering, corruption and financing of terrorism remains an on-going challenge. 

Regarding police and judicial cooperation, the Second Protocol to the European Convention 
on  Mutual  Assistance  on  Criminal  Matters  was  signed  after  the  reporting  period,  in  March 
2009.  The  1980  Hague  Convention  on  Civil  Aspects  of  International  Child  Abduction 
remained  un-ratified.  In  this  regard,  further  improvements  in  cooperation  and  coordination 
between the police and other law enforcement agencies are necessary. Provision of adequate 
resources  for  such  training  should  be  addressed  as  an  immediate  priority.  Armenia  is  a 
signatory to 1993 CIS Minsk Convention on Legal Assistance and Legal Relations in Civil, 
Family  and  Criminal  matters.  Armenia  signed  but  did  not  yet  ratify  the  1997  Additional 
Protocol to the Council of Europe Convention on the Transfer of Sentenced Persons. 

6. 

TRANSPORT,  ENERGY,  ENVIRONMENT,  THE  INFORMATION  SOCIETY,  RESEARCH 
AND DEVELOPMENT 

As  regards  the  transport  administration’s  capacity,  a  special  department  ("transport 
inspectorate")  was  created  within  the  ministry  of  transport  to  deal  with  licensing,  mostly  of 
taxi  drivers  and  minibuses;  however  driving  licenses  are  still  granted  by  the  road  police. 
Driving schools were privatized in 2008. 

During  2008,  Armenia  strengthened  public  transport  by  deciding  on  the  construction  of  a 
number of new subway stations in Yerevan. In the road sector, Armenia started in April 2008 
to  prepare  a  National  Road  Safety  Strategy  and  a  five  year  action  plan  to  commence 
implementation of the National Road Safety Strategy under a project that sets out to improve 
the institutional structures and processes for managing traffic safety in Armenia. 

In the rail sector, the rehabilitation of the Yerevan-Tbilisi railway line was launched in mid-
October  2008.  Armenia  has  prepared  a  feasibility  study  for  the  possible  construction  of  a 
railway to Iran (the railway would cover a distance of about 540 km, of which about 480 km 
would be in Armenia). The Armenian railways have been reorganized by transferring freight 
and  passenger  operations  to  concessionary  management.  The  contracts  were  signed  in 
February 2008 and operations started in June 2008. The concession was given for 30 years, 
with an option for a further extension of 10 years after the first 10 years. All infrastructures 
remain  state-owned,  but  the  rolling  stocks  are  offered  for  privatization.  The  concession 
agreement  states  that  the  concessionaire  will  have  to  invest  at  least  EUR  0.5  billion  in  the 
network. 

Air  traffic  between  the  EU  and  Armenia,  although  increasing,  remained  limited  due  to 
restricted  competition.  An  important  step  towards  closer  relations  was  the  signature  of  the 

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horizontal  air  transport  agreement  between  Armenia  and  the  European  Community  in 
December 2008. Armenia should continue the process of harmonisation with EU standards in 
the field of aviation safety and start the harmonisation of licensing rules. A twinning project 
focusing on the implementation of the JAA (Joint Aviation Authorities) recommendations is 
being finalised, more specifically targeting the preparation for deepening relations of Armenia 
to the European Aviation Safety Agency (EASA).  

Armenia  further  implemented  its  energy  strategy  inter  alia  through  the  completion  of  a 
feasibility study on a new nuclear power plant. Armenia plans to close the Medzamor Nuclear 
Power Plant (MNPP) by 2016 and is prepared to close the plant before the designed lifetime 
provided  that  alternative  replacement  capacity  is  available.  The  EU  asks  closure  before  this 
date.  In  2008  Armenia  pursued  safety  upgrades  at  MNPP  and  strengthened  the  nuclear 
regulatory authority. In September 2008, the third coordination meeting on the MNPP safety 
upgrading  programme  took  place  in  Yerevan  with  the  involvement  of  the  International 
Atomic  Energy  Agency  and  donors.  The  Russian  Federation  joined  this  upgrading 
programme.  The  Nuclear  Regulatory  Authority  further  developed  a  spent  nuclear  fuel  and 
radioactive management strategy. Armenia advanced on the construction of a dry spent fuel 
storage facility. On the basis of the 2007 MNPP decommissioning strategy, Armenia started 
the  preparation  of  a  detailed  decommissioning  plan.  It  continued  to  provision  the  Nuclear 
Decommissioning Fund and initiated, jointly with the Russian Federation, a new assessment 
of uranium reserves. 

Armenia  adopted  implementing  legislation  in  the  electricity  and  gas  sectors.  It  pursued  the 
construction  of  conventional  electricity  generation  units  (including  hydro)  and  the 
rehabilitation of electricity and gas infrastructure. Armenia, which is interested to develop a 
regional  electricity  market,  continued  reflections  on  additional  electricity  interconnections 
with Iran and Georgia. Armenia stopped gas price subsidies as from May 2008. Armenia and 
Iran started the construction of a second gas pipeline between them. Armenia worked on the 
expansion of underground gas storage facilities. It pursued reflections on the construction of 
an oil refinery. Armenia initiated the development of an action plan on energy efficiency and 
renewable  energy.  It  continued  participation  in  the  regional  “Baku  Initiative”  for  EU-Black 
Sea/Caspian energy cooperation.  

Armenia  continued  preparing  its  second  national  communication  on  climate  change,  which 
will  also  include  a  greenhouse  gas  inventory,  a  climate  strategy,  legislation,  and  national 
adaptation  measures.  An  assessment  of  vulnerability  and  adaptability  of  the  Marmarik  river 
basin  was  carried  out.  Armenia  took  steps  to  prepare  and  approve  Clean  Development 
Mechanism  (CDM)  projects,  as  well  as  to  address  their  shortcomings.  Four  of  the  16 
Armenian  CDM  projects  have  been  registered  at  the  UN  level.  The  European  Commission 
continued to support Armenia to implement the Kyoto Protocol. Armenia has not yet adopted 
a formal position regarding the post-2012 regime. 

Armenia adopted its second national environment action plan for 2008-2012. The sustainable 
development  programme,  see  section  3,  contains  some  objectives  with  regard  to  the 
environment.  The  legislative  framework  continues  to  require  further  development,  in 
particular  as  regards  implementing  legislation.  Amendments  were  adopted  to  laws  on  flora 
and  fauna,  as  well  as  Government  decisions  on  specially  protected  areas,  hunting,  waters, 
natural monuments, air pollution, Lake Sevan and its national park. An act on environmental 
protection as well as legislation on environmental expertise, genetically modified organisms 
and self-monitoring of compliance are still under preparation. No issue-specific strategies or 
plans were adopted during 2008. A draft national profile of chemicals and waste management, 
as well as a national strategy to reduce impacts of chemicals are under preparation. Work is 

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on-going  to  develop  and  implement  existing  strategies  and  plans,  but  continued  attention  is 
required. Efforts are also needed to enhance monitoring as well as enforcement.  

Further  strengthening  of  administrative  capacity  at  all  levels  of  the  country  is  still  a  major 
challenge. Coordination between authorities requires attention. Some activities took place to 
integrate  environment  considerations  into  other  policy  sectors  such  as  energy.  Armenia  has 
not published reports on the state-of-the environment lately. Concerning access to information 
and  public  participation,  an  inter-ministerial  commission  on  implementation  of  the  Aarhus 
Convention on Access to Information, Public Participation in Decision-making and Access to 
Justice in Environmental Matters met for the first time in December 2008. Armenia’s Aarhus 
Centres continue to be operational. Procedures and consultation with the public in the context 
environmental impact assessment however continue to require particular attention. Some steps 
were  taken  to  promote  implementation  of  strategic  environmental  assessment.  For  the 
Regional Environmental Centre for the Caucasus, please see section on regional cooperation. 

Armenia  is  preparing  for  the  ratification  of  the  Protocol  on  Strategic  Environmental 
Assessment  to  the  UNECE  Convention  on  Environmental  Impact  Assessment  in  a 
Transboundary Context. It did not however make significant progress in signing the UNECE 
Convention  on  the  Protection  and  Use  of  Transboundary  Watercourses  and  International 
Lakes.  Furthermore,  the  implementation  of  several  already  ratified  agreements  requires 
particular  attention.  Armenia  participated  in  the  EU  Water  Initiative,  including  a  national 
policy  dialogue.  Cooperation  and  information  exchange  took  place  between  the  European 
Commission  and  Armenia, 
including  on  water,  forestry,  waste  management,  and 
environmental data. Other topics, such as air quality and civil protection were identified for 
possible closer cooperation. 

Armenia has not yet developed a national policy for the development and use of Information 
Society applications. There is a need to strengthen the administrative capacity of the “Public 
Services  Regulatory  Commission”  with  a  view  to  ensuring  a  fully  functioning  independent 
regulatory  authority  in  the  field  of  electronic  communications.  Competition  in  the  markets 
increased  when  in  October  2008  a  third  GSM  license  and  a  licence  for  Third  Generation 
mobile  services  (3G)  were  issued.  Three  licenses  for  Internet  telephony  were  awarded  in 
March 2008. Furthermore in April 2008, about 30 licenses for fixed communications services 
were issued. In August 2008, the fixed network operator Armentel was fined about 1 million 
US dollars by the State Commission for Protection of Economic Competition for abuse of its 
dominant  position  in  the  Internet  market:  Armentel  created  favourable  conditions  for  its 
Internet service "Hi-line" by refusing to lease lines to the competitors. It has digitalized the 
network by 80% and intends to expand the current fibre optic network by 100% in 2009. 

In  the  audiovisual  sector,  the  fact  that  Armenia  still  has  to  ratify  the  Council  of  Europe 
Convention  on  Transfrontier  Television  makes  it  still  very  difficult  for  Armenia  to  ensure 
freedom of reception and retransmission of television broadcast coming from other countries. 
Armenia adopted a national plan in the audio-visual field that sets out some of the legislative 
requirements required in order to approximate to EU legislation. In June 2008, the European 
Court  of  Human  rights  held  unanimously  that Armenia  had  violated  Article  10  (freedom  of 
expression) of the European Convention on Human Rights because of the authorities’ refusal 
to grant the applicants’ requests for broadcasting licences.  

As regards research and innovation activities, Armenia's research capacity and investments 
remain  very  modest.  Participation  in  the  7th  Research  Framework  Programme  (FP7) 
increased in comparison to FP6. Main progress was achieved under 'Marie Curie' actions and 
R&D  capacity  development  (Research  Infrastructures).  However,  the  overall  number  of 
applications is still comparatively low. The participation of the Armenian Centre of Ideas and 

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Technologies in the IncoNet EECA (the S&T International Cooperation Network for Eastern 
European  and  Central  Asian  countries),  launched  in  January  2008,  allows  Armenia  to 
potentially benefit from on-going regional cooperation activities. 

7. 

PEOPLE-TO-PEOPLE CONTACTS, EDUCATION AND HEALTH 

A draft General Education Reform Programme for the period 2008-15 is still to be adopted, 
aiming  to  enhance  and  improve  educational  provision  at  all  levels  and  promote  life  long 
learning within a context of a commitment to increase public expenditure on education in the 
coming  years.  In  this  regard,  attention  will  need  to  be  given  to  developing  adequate 
mechanisms to address issues of access and equitable financing as well as targeted policies to 
promote  early  child  education  and  tackle  the  high  rate  of  school  drop-out.  Additional 
measures  will  be  needed  to  improve  governance  and  accountability  and  tackle  corruption 
within secondary and tertiary education while integration of civic and human rights into the 
curriculum would be advised. 

On  higher  education,  a  task  force  was  set  up  in  November  2008  to  prepare  for  the 
establishment of a National Quality Assurance Centre in line ENQA standards and Bologna 
principles. A draft legislative proposal was presented to the Parliament in the autumn session. 
In September 2008, Armenia hosted a conference on qualifications frameworks in cooperation 
with  the  Council  of  Europe  which  was  attended  by  representatives  from  Moldova  and 
Ukraine.  Furthermore,  Armenia  participated  in  a  Council  of  Europe  Bologna  Process 
conference  on  the  European  qualifications  frameworks  and  the  issue  of  self-certification  in 
Georgia  in  November  2008.  Armenia  became  a  full  member  of  the  European  Quality 
Assurance Register (EQAR) in March. 

Armenia participated actively in the Tempus programme, benefiting from four projects under 
the  first  Call  for  Proposals  of  Tempus  IV.  The  Ministry  of  Education  and  Science  selected 
four  Higher  Education  Reform  Experts  (HERE)  in  cooperation  with  the  European 
Commission as part of Tempus actions for the period 2008-10 in order to effectively promote 
higher education reforms. 

Seven  Armenian  students  and  two  scholars  benefited  from  Erasmus  Mundus  scholarships 
under Erasmus Mundus. Armenian students and academic mobility was facilitated under the 
External Cooperation Window. In addition, twelve Armenian students received scholarships 
in  European  integration  studies  at  masters  level  for  students  from  the  ENPI  region  under  a 
special pilot project for the academic year 2008-9. 

With regard  to vocational education and  training, the VET Task Force of the  Ministry of 
Education and Science with EC assistance, selected 12 colleges as regional multi-functional 
VET  centres  for  delivery  of  new  competence-based  curricula  in  line  with  labour  market 
needs.  A  National  Centre  for  VET  Development  was  established  under  the  auspices  of  the 
National Institute of Education which in February 2008 adopted a decision on approving the 
charter,  structure  and  functions  of  the  Centre.  A  decree  on  the  establishment  of  a  new 
tripartite National VET Council was adopted in December 2008. The Council met for the first 
time  that  same  month.  Work  continued  on  social  dialogue  and  the  development  of 
competence-based  qualification  standards  while  a  draft  law  on  adult  education  was  also 
prepared.  However,  further  energy  needs  to  be  invested  to  transform  vocational  training  in 
order  to  attract  and  supply  a  qualified  and  competent  workforce  adapted  to  international 
competitiveness.  This  is  as  much  an  issue  of  structural  and  attitudinal  change  as  it  is  of 
resource mobilization. 

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In 2008, the  European Youth Foundation in cooperation  with civil society  actors organized 
education  and  information  seminars  for  youth and  funded  a  number  of  projects  focusing  on 
topics  such  as  the  Presidential  elections,  intercultural  dialogue,  gender,  peace  and  conflict 
resolution. Under the Youth in Action programme, several youth projects involving Armenian 
young  people  and  youth  workers  were  supported,  including  a  project  on  youth,  peace  and 
media,  which  was  organized  in  July  2008.  The  Ministry  of  Sports  and  Youth  Affairs  also 
actively supported youth dialogue and initiatives.  

The  Ministry  of  Culture  developed  a  four  year  Culture  Development  Strategy  (2008-12) 
focusing  on  effective  coordination  of  cultural  policy,  cultural  heritage,  international 
cooperation, digitalisation of non-material culture and promotion of popular culture. Armenia 
still has to ratify the UNESCO Convention on the Protection and Promotion of the Diversity 
of  Cultural  Expressions.  Attention  would  need  to  be  directed  at  facilitating  effective 
decentralization of cultural policy while ensuring maximum civic and youth participation in 
the strategy’s implementation. 

Armenia  continued  health  sector  reform  inter  alia  by  improving  primary  health  care  and 
health insurance. The Government increased, under its 2008-2012 programme, state financing 
for the sector. The Armenian objective, as reflected recently in the Sustainable Development 
Programme,  is  to  reduce  informal  payments,  improve  quality  and  enhance  access  to  health 
services. Armenia prepared a Healthcare Law, which is yet to be adopted. Armenia continued 
to put emphasis on combating communicable diseases including HIV/AIDS and tuberculosis. 
Like in 2007, the country participated in the EU Network of competent authorities in health 
information and knowledge.  

8. 

FINANCIAL COOPERATION – 2008 KEY FACTS AND FIGURES 

The  ENPI  financial  envelope  for  Armenia  under  the  National  Indicative  Programme  2007-
2010 is EUR 98.4 million. The programme is geared towards supporting the achievement of 
key  policy  objectives  as  outlined  in  the  EU-Armenia  ENP  Action  Plan  and  pursues  three 
priorities: Support for strengthening of Democratic Structures and Good Governance, Support 
for Regulatory Reform and Administrative Capacity Building, Support for Poverty Reduction 
Efforts. 

In  2008,  the  European  Commission  continued  to  support  the  national  reform  efforts  in 
Armenia and programmed assistance for a total amount of EUR 24 million under the ENPI. 
The 2008 Annual Action programme included a sector budget support operation on Support to 
Justice Reforms.  

Twinning and TAIEX offered flexible interventions specifically geared towards support to the 
implementation  of  the  ENP  Action  Plans  in  the  field  of  institution  building  and  legislative 
approximation.  Twinning  projects  on  Support  to  the  Human  Rights  Defender's  Office,  and 
Support to the Department of Foreign Economic Cooperation and Investment were launched 
in 2008. A third twinning project on Strengthening the Capacity of the General Department of 
Civil  Aviation  was  prepared  and  will  be  launched  in  2009.  SIGMA  missions  in  2008  have 
identified  public  procurement  and  civil  service  reforms  as  areas  for  future  SIGMA 
interventions. 

Sector  budget  support  for  Vocational  Education  and  Training  under  the  Annual  Action 
Programme  2007  was  satisfactory.  Overall,  Armenia  presents  a  satisfactory  commitment  to 
the EC assistance and presents good absorption capacity for the EU funding. 

Armenia  also  benefits  from  cooperation  activities  financed  under  the  ENPI  multi-country 
(including  the  Neighbourhood  Investment  Facility),  regional  programmes,  as  well  as 

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horizontal thematic programmes, such as the European Instrument for Democracy and Human 
Rights  and  the  programme  “Non  State  Actors  and  Local  Authorities  in  Development”.  In 
2008  the  EC  Delegation  contracted  EUR  1.5  million  under  NSA  and  Local  Authorities  in 
Development (2007 budget) and EUR 1.2 million under EIDHR CBSS (combined 2007 and 
2008 budgets).  

Armenia participates in the Black Sea CBC Sea Basin programme (EUR 17,306 million for 
the  whole  programme  in  the  period  2007-13)  which  was  adopted  in  2008.  Through  this 
programmes  the  populations  of  the  maritime  regions  bordering  the  Black  Sea  will  receive 
funding  for  joint  co-operation  projects  aimed  at  fostering  sustainable  development  and 
enhancing human contacts. 

Further  support,  amounting  to  EUR  7.2  million,  was  provided  within  the  Action  Plan  2007 
under  the  Instrument  for  Nuclear  Safety  Cooperation,  as  the  EC  continued  to  assist  in 
ensuring minimum safety standards for the Medzamor Nuclear Power Plant (2006 budget). 

Within the Armenian Government, the Ministry of Economic Development is responsible for 
the coordination of EC assistance and for the coordination among donors. 

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