Commission staff working document - Accompanying the Communication from the Commission to the European Parliament and the Council - Taking stock of the European Neighbourhood Policy (ENP) - Implementation of the European Neighbourhood Policy in 2009 - Progress Report - Armenia {COM(2010) 207 final} {SEC(2010) 513 final} {SEC(2010) 514 final} {SEC(2010) 515 final} {SEC(2010) 517 final} {SEC(2010) 518 final} {SEC(2010) 519 final} {SEC(2010) 520 final} {SEC(2010) 521 final} {SEC(2010) 522 final} {SEC(2010) 523 final} {SEC(2010) 524 final} {SEC(2010) 525 final}
Date: 2010-05-04
Institutions: European Commission
Subjects: Armenia, European neighbourhood policy, democracy, economic integration, energy policy, environmental protection, geographical mobility, human rights, legal system, political cooperation, report, settlement of disputes

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EUROPEAN COMMISSION 

Brussels, 12.5.2010 
SEC(2010) 516 final 

COMMISSION STAFF WORKING DOCUMENT 

Accompanying the 

COMMUNICATION FROM THE COMMISSION  
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 
Taking stock of the European Neighbourhood Policy (ENP) 

Implementation of the European Neighbourhood Policy in 2009 
Progress Report Armenia 

{COM(2010) 207 final} 
{SEC(2010) 513 final} 
{SEC(2010) 514 final} 
{SEC(2010) 515 final} 
{SEC(2010) 517 final} 
{SEC(2010) 518 final} 
{SEC(2010) 519 final} 
{SEC(2010) 520 final} 
{SEC(2010) 521 final} 
{SEC(2010) 522 final} 
{SEC(2010) 523 final} 
{SEC(2010) 524 final} 
{SEC(2010) 525 final}  

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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 approved in November 2006 for a period of five years. 

EU-Armenia  meetings  took  place  at  the  level  of  the  Cooperation  Council,  Cooperation 
Committee,  and  the  subcommittee  on  Trade,  Economic  and  related  Legal  matters.  The 
strengthening  of  the  EU  Delegation  in  Yerevan,  established  in  2008,  further  facilitated  the 
enhancement  of  EU-Armenian  bilateral  relations.  The  first  meeting  of  the  EU-Armenia 
Human Rights Dialogue took place in December 2009. 

This  document  reports  on  progress  made  on  the  implementation  of  the  EU-Armenia  ENP 
Action Plan between 1 January and 31 December 2009, although developments outside this 
period are also taken into consideration when deemed relevant. It is not a general review of 
the political and economic situation in Armenia. In addition, for information on regional and 
multilateral sector processes, please refer to the sectoral report. 

The  EU  and  Armenia  agreed  to  move  forward  with  deepening  and  broadening  of  the  EU-
Armenia  relations.  In  parallel  and  within the  Eastern  Partnership  framework  the  EU  started 
preparations for upgrading contractual relations with Armenia. Negotiating  directives for an 
Association Agreement were adopted by the EU in May 2010. In the framework of the future 
Association Agreement, negotiations on a deep and comprehensive free trade area (DCFTA) 
will start once the necessary conditions have been met. 

The EU Advisory Group to the Republic of Armenia started its activities in April 2009 with 
the aim of supporting the Armenian authorities in the implementation of the key areas of the 
ENP  Action  Plan  such  as  strengthening  democratic  structures  and  human  rights,  anti-
corruption, trade and customs, and fiscal policy including debt management.  

Overall, Armenia made progress in several areas of the ENP Action Plan. The launching of a 
regular human rights dialogue with the EU constituted good progress in the area of political 
dialogue  with  the  EU.  Positive  steps  were  taken  to  address  the  internal  political  crisis 
following the aftermath of the Presidential elections in February 2008, including the Amnesty 
issued in June, the amendments to the Criminal Code and the publication of the report by the 
Parliamentary Ad Hoc Inquiry Committee. Good progress was made regarding improving the 
legislative framework in the area of anticorruption and strengthening the role of the Human 
Rights Defender. 

The global economic crisis had a deep impact on Armenia, and led to a significant economic 
regression. Overall, the authorities acted rapidly to adopt measures to mitigate the effects of 
the crisis. However, the reduction of state revenues put some restraints on the overall internal 
economic  and  social  reform  process  in  Armenia,  including  the  implementation  of  the  ENP 
Action Plan.  

Progress  was  made  in  the  area  of  customs  and  taxation.  Armenia  continued  to  implement 
reforms in the fields of financial services and competition policy. Limited progress was noted 
on  key  reforms  recommended  by  the  EU  and  endorsed  by  the  Armenian  authorities  after  a 
fact-finding  mission  in  the  context  of  preparations  for  the  DCFTA  negotiations.  With 

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substantial additional efforts on its side, Armenia would become prepared for the start of the 
DCFTA negotiations.  

Armenia took a major step in regional cooperation and dialogue with Turkey, resulting in the 
historic  signature  of  the  two  protocols  on  the  establishment  and  development  of  bilateral 
relations in October 2009. In April 2010, Armenia suspended the ratification procedure of the 
two protocols. The EU was pleased to note Armenia’s continued commitment to pursue the 
process  of  normalization  of  Armenian-Turkish  relations  but  at  the  same  time  expressed 
concern  about  the  loss  of  momentum  in  this  process.  Regarding  dialogue  with  Azerbaijan, 
negotiations  on  a  peaceful  resolution  of  the  Nagorno-Karabakh  conflict  intensified 
considerably at the highest level.  

Armenia  widely  aligned  itself  with  CFSP  declarations  and  is  generally  very  active  in 
cooperating on CFSP-related issues. 

The  Armenian  authorities  and  civil  society  representatives  participated  actively  in  the 
multilateral  framework  of  the  Eastern  Partnership,  in  particular  through  open  dialogue  and 
their contribution to the working programmes for the four thematic platforms. Together with 
the bilateral elements of the Eastern Partnership, this contributed to the overall strengthening 
of  EU-Armenian  relations  and  reinforcement  of  the  follow-up  on  the  priorities  of  the  ENP 
Action Plan. 

In  order  to  fulfil  the  Action  Plan  commitments,  Armenia  needs  further  efforts  to  ensure 
thorough  follow-up  of  the  recommendations  of  the  report  by  the    Ad  hoc  Parliamentary 
Inquiry Committee on the events of March 2008, improve electoral standards and strengthen 
media  freedom.  In  addition,  further  reforms  in  the  justice  sector  and  the  area  of  the  rule  of 
law, notably the independence of judiciary, the reform of the Prosecutor's  office  and  proper 
implementation  of  adopted  legislation  in  all  areas  will  be  of  key  importance.  Enhanced 
dialogue  between  the  ruling  political  forces  and  the  opposition  would  contribute  to  the 
democratic development of the country.  

2. 

POLITICAL DIALOGUE AND REFORM 

Democracy and rule of law 

The first elections to appoint the Mayor and Council of Elders of the City of Yerevan were 
held in May 2009. The Council of Europe (CoE) Congress of Local and Regional Authorities 
concluded  that  while  the  organisational  framework  of  the  elections  had  been  broadly  in 
compliance  with  European  standards,  the  improvement  of  the  electoral  conduct  and  of  a 
genuinely democratic culture remained unaddressed by the authorities. Media coverage in the 
period  leading  to  the  elections  was  overall  balanced  but  irregularities  during  the  conduct  of 
the  elections  occurred,  including  pre-election  violence,  instances  of  ballot  stuffing,  multiple 
voting, and voter intimidation. The opposition boycotted the newly elected Council of Elders.  

The  authorities  took  a  number  of  steps  to  address  the  political  crisis  linked  to  the  2008 
Presidential  elections  and  the  subsequent  violent  events  of  March  2008.  An  amnesty  was 
adopted by the National Assembly in June 2009, which impacted on a large majority of cases 
related  to  the  March  2008  events.  The  Parliamentary  Assembly  of  the  Council  of  Europe 
(PACE)  welcomed  the  amnesty  while  expressing  concern  over  the  charges  and  sentences 
based  solely  on  police  testimony,  without  substantial  corroborating  evidence.  The  amnesty 
released  a  large  majority  of  persons  related  to  the  March  2008  events  but  some  persons 

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detained  on  charges  linked  to  these  events  still  remain  in  detention.  Amendments  to  the 
Criminal  Code  relating  to  mass  disorders  and  usurpation  of  power  were  adopted  in  March 
2009 in line with recommendations from the CoE’s Venice Commission.  

In  June  2009,  as  a  result  of  significant  tensions  between  its  members  which  included  the 
opposition  and  the  Human  Rights  Defender,  the  President  decided  to  dissolve  the  Fact-
Finding  Group  on  the  March  2008  events  after  the  publication  of  its  report.  In  September 
2009 the Ad hoc Parliamentary Inquiry Committee on the events of March 2008, boycotted by 
the  opposition,  submitted  its  final  report  to  the  National  Assembly.  While  the  report  was 
considered by PACE co-rapporteurs as presenting a largely one-sided description of events, it 
provided a comprehensive set of recommendations, including urging the authorities to step up 
efforts to identify and prosecute the individuals responsible for the deaths. More efforts need 
to  be  made  by  the  authorities  to  follow  up  the  implementation  of  the  report’s 
recommendations.  

The  monitoring  of  trials  related  to  the  March  2008  events  identified  various  shortcomings 
regarding the right to a fair trial and the right to liberty, including excessive use of pre-trial 
detention, the lack of impartiality and independence of judges, the use of incriminating police 
testimonies  and  of  unlawfully  obtained  evidence,  and  holding  of  a  number  of  trials  in 
absentia. Four police officers involved in the March 2008 events were sentenced in December 
2009. The investigations into the 10 deaths have not led to any indictments yet.  

Reforms of the judiciary, including amendments to the Judicial Code, Law on Procuracy and 
law on Academy of Justice continued in 2009. A Strategic Action plan for the implementation 
of  judicial  reforms  2009-11  was  adopted  in  April  2009.  Good  progress  was  made  with  a 
considerable  increase  in  judges’  salaries  in  2009.  However,  the  independence  of  judiciary 
remains of concern and further efforts should be made to strengthen it. Overall, more efforts 
are  needed  to  ensure  the  proper  enforcement  of  legislation  in  all  areas.  The  domestic 
protection  of  the  right  to  property  remains  of  concern,  with  the  majority  of  cases  currently 
pending  against  Armenia  before  the  European  Court  of  Human  Rights  relating  to  alleged 
violations of the right to property. The EU provides considerable support in the area of justice 
reforms  through  a  sector  budget  support  programme  for  Justice  Reforms  (EUR  18  million) 
and  a  joint  project  with  the  Council  of  Europe  on  enhancing  Access  to  Justice  (EUR  4 
million).  

Important  steps  were  taken  to  improve  the  legislative  framework  in  the  area  of  anti-
corruption.  An  Anti-Corruption  Strategy  and  its  action  plan  for  2009-2012  was  adopted  in 
October 2009, which includes the establishment of a monitoring and evaluation system. The 
strategy  envisages  the  establishment  of  an  anti-corruption  secretariat  to  support  the 
implementation  and  the  monitoring  of  the  action  plan.  The  drafting  process  included  civil 
society  organisations  and  relevant  international  organisations.  In  September  2009,  Armenia 
became  a  signatory  to  the  OECD  Astana  Declaration  on  Good  Governance  and  Fighting 
Corruption.  The  Prime  Minister’s  Office  elaborated  a  concept  note  on  the  transparency  of 
political  activities,  regulating  conflicts  of  interest  and  creating  a  public  register  for  income, 
property  and  interest  declarations  of  high  ranking  officials  and  their  close  relatives.  Efforts 
were  made  regarding  training  of  civil  servants  on  anticorruption.  However,  despite  good 
legislative  progress,  no  reduction  of  perceived  corruption  was  reported  by  international 
surveys in 2009, demonstrating the need for effective enforcement in this area.  

Steps  were  taken  to  strengthen  local  democracy.  As  reported  above,  the  Mayor  and  the 
Council of Elders of the City of Yerevan were for the first time elected through a proportional 

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system  in  May  2009,  replacing  the  earlier  system  of  presidential  appointment  of  them.  An 
inter-ministerial commission was set up in May 2009 to develop an action plan for creating 
inter-municipal  unions  and  enlarging  communities  to  strengthen  local  self-government  and 
develop networks between municipalities, with a view to rationalize the delivery of services. 
In  October  2009  a  Working  Group  on  Civil  Service  Reform  was  established  under  the 
Presidential Administration with the aim of elaborating a Civil Service Reform Programme.  

Human rights and fundamental freedoms 

A regular EU-Armenian Human Rights Dialogue was launched in December 2009. Work is 
ongoing  to  draft  the  first  Armenian  National  Human  Rights  Action  Plan,  with  a  Working 
Group established in autumn 2009 to prepare a concept paper and define its scope. However, 
civil society involvement is still pending.  

The independence of the institution of the Human Rights Defender (HRDO) in the political 
system and its role for the protection of human rights was further strengthened. Overall, the 
trend in the number of complaints received by the HRDO is increasing, confirming growing 
credibility of this institution. The Human Rights Defender prepared a trial monitoring report 
on the prosecution of cases linked to the March 2008 events and assessing the implementation 
of  fair  trial  standards  in  the  Armenian  judicial  system  in  December  2009.  Apart  from  the 
annual report, in 2009 the HRDO also published reports on the implementation by domestic 
courts of the UN Convention against torture, on respect of social rights and on the application 
of disciplinary sanctions in the armed forces. In October 2009 a twinning project started with 
the aim of supporting the technical and organisational capacity of the HRDO.  

In  2009,  Armenia  submitted  a  number  of  reports  to  UN  Treaty  Bodies,  including  on  the 
implementation  of  the  International  Covenant  on  Economic,  Social  and  Cultural  Rights,  the 
Convention on the Elimination of All Forms of Racial Discrimination, the Convention against 
Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment. The reports on the 
implementation  of  the  International  Covenant  on  Civil  and  Political  Rights  and  the 
Convention on the Rights of the Child were prepared and are expected to be submitted to the 
UN in 2010. The country is late in submitting a total of five mandatory periodic reports to UN 
treaty bodies. In May 2009 Armenia submitted its third report on the implementation of the 
European Social Charter. The conclusions by the Committee were published in January 2010. 
The  third  periodic  report  on  the  implementation  of  the  CoE  Framework  Convention  for 
National  Minorities  was  submitted  in  November  2009.  Armenia  has  issued  a  standing 
invitation to UN Special Procedures. 

Cases  of torture and ill-treatment in detention facilities and by the police continued to be 
reported in 2009, including in connection with detentions related to the events of March 2008 
and  among  military  conscripts,  in  prison  facilities  and  in  police  stations.  No  data  on  torture 
and ill treatment are available and lack of investigations of ill treatment allegations is a matter 
of  concern.  Armenia  continued  to  take  steps  towards  the  implementation  of  the  Optional 
Protocol  to  the  Convention  against  Torture  (OPCAT)  and  submitted  the  first  report  on 
OPCAT  implementation  in  December  2009.  The  legislative  basis  for  civil  society’s 
involvement  in  the  OPCAT  National  Preventive  Mechanism  should  be  ensured.  Further 
amendments  to  the  Law  on  Alternative  Military  Service  are  necessary  to  fully  comply  with 
applicable Council of Europe standards and to provide for a genuine civil service.  

Efforts  were  made  towards  improving  prison  conditions.  The  Concept  for  the  Penitentiary 
Service  Infrastructure  Reform  was  adopted  in  December  2009,  as  well  as  a  plan  on  a  new 

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penitentiary  institution.  The  construction  of  a  new  penitentiary  institution  is  ongoing. 
However, overall conditions in places of detention and the excessive use of pre-trial detention 
as  well  as  the  rising  number  of  the  prison  population  remains  of  concern.  Civil  society 
representatives are guaranteed access to detention facilities but not to police stations. 

Legislation  was  amended  in  the  area  of  freedom  of  expression  and  media.  In  April  2009, 
four laws were adopted to amend the statutes of the National Commission of the Television 
and  Radio  and  Public  Television  and  Radio  Council,  with  most  recommendations  by  the 
Council of Europe incorporated. However, the composition and the means of appointment of 
members  of  the  broadcasting  regulatory  bodies  raise  questions  regarding  their  full 
independence. Following the 2008 moratorium on the issuing of radio and television licenses 
until  July  2010  on  the  basis  of  the  ongoing  process  of  digitalisation  of  TV  and  radio 
broadcasting,  the  Government  released  in  November  2009  a  Draft  Concept  on  Switching  to 
Digital  Broadcasting,  focusing  on  technological  and  economic  aspects  of  the  digitalisation 
process.  

The number of reported incidents of violence against and intimidation of journalists decreased 
in 2009 but their investigations did not lead to any conviction. 

In 2009, a few applications to organise rallies submitted by the opposition were rejected by 
the authorities. The Law on Rallies and Demonstrations is broadly compliant with Council of 
Europe  standards  but  some  of  the  provisions  concerning  the  grounds  for  prohibiting 
conducting  an  assembly  need  further  clarification.  However,  cases  of  police  interference  in 
dispersing participants during the rallies and the partial unavailability of public transportation 
from the regions to Yerevan in coincidence with opposition rallies were reported on a number 
of occasions in 2009. 

A Public Council for consultation with civil society organisations was established in March 
2009, aiming at providing a forum for public consultation on matters of public interest. The 
independence  of  the  Public  Council  remains  questioned  by  the  opposition  and  a  number  of 
NGOs.  Overall,  consultation  with  NGOs  by  the  government  on  draft  legislation  and  their 
participation in parliamentary hearings increased but still occurs on an ad hoc basis. However, 
civil  society  organisations  were  not  consulted  on  new  amendments  to  the  Law  on  Public 
Organisations, which were prepared by the government. Given the criticism from NGOs, i.a. 
related  to  the  planned  obligatory  publication  of  annual  reports  of  NGO  activities,  the 
amendments were temporarily suspended in Parliament. 

Implementation of the National Action Plan 2004-2010 on “Enhancing Women’s status and 
empowering  Women  in  Society”  continued  over  the  reporting  period.  However,  the  revised 
law on equal rights and equal opportunities is not yet adopted and the draft law criminalizing 
domestic  violence  is  still  under  discussion.  An  appropriate  gender  equality  legislation,  to 
effectively address domestic violence and to improve women’s participation in political and 
economic life is needed. 

In  September  2009,  Armenia  signed  the  Optional  Protocol  to  the  International  Covenant  on 
Economic,  Social  and  Cultural  Rights.  Continued  efforts  are  needed  to  ensure  the  rights  of 
trade  unions  and  collective  bargaining.  Drafting  of  legislation  on  labour  rights  continued. 
The  draft  law  on  amendments  to  the  Labour  Code  was  sent  to  the  Parliament  in  December 
2009 after the Government’s approval. 

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

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Armenia continued to align with CFSP declarations on a case by case basis. In 2009, Armenia 
aligned  with  108  out  of  138  CFSP  declarations.  There  was  good  political  dialogue  with  the 
Armenian  government  in  2009,  including  through  two  Political  and  Security  Committee 
Troika meetings in February and December 2009, and an EU Foreign Ministers' Troika visit 
to Armenia in July 2009. 

Armenia pursued cooperation  with  the  UN, participated in the NATO Partnership for Peace 
programme  and  cooperated  with  experts  from  United  Nations  Office  on  Drugs  and  Crime 
(UNODC),  INTERPOL,  the  World  Customs  Organisation,  CIS  and  CoE,  in  exchanging 
information  on  terrorism  issues.  Armenia  cooperated  successfully  with  the  United  Nations 
Counter-Terrorism Committee (CTC) established under UNSC Resolution 1373.  

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

Strengthening regional cooperation  

In  October  2009,  the  Armenian  and  Turkish  Foreign  Ministers  signed  two  protocols  on 
establishment  of  diplomatic  relations  and  development  of  bilateral  relations,  including 
prospects  for  opening  a  common  border,  which  was  a  major  step  towards  a  normalisation 
between  the  two  countries.  The  protocols  were  submitted  for  ratification  to  the  National 
Assembly in February 2010. In April 2010, Armenia suspended the ratification procedure of 
the  two  protocols  but  confirmed  its  commitment  to  pursue  the  process  of  normalisation  of 
relations with Turkey.  

The Southern Caucasus Integrated Border Management (SCIBM) promoted by the EU among 
Armenia,  Azerbaijan  and  Georgia  was  to  start  in  January  2009  but  was  delayed  to  address 
issues  raised  by  Azerbaijan.  The  conditions  for  implementation have  now  been  accepted  by 
all three countries and implementation started in March 2010 (See chapter 5 on cooperation 
on justice, freedom and security). 

The South Caucasus Anti-Drugs Programme (SCAD V) came to an end in 2009. Discussions 
continue on how best to bring forward the results of the action and pursue regional efforts in 
the fights against illegal drugs. 

The new management (a Troika consisting of Armenian, Azerbaijani and Georgian executive 
directors) of the Regional Environmental Centre for Caucasus (REC) took office in January 
2009. It consolidated the REC both financially and in terms of internal organisation. The REC 
carried  out  regional  activities  in  2009  notably  in  the  fields  of  information  and  public 
participation,  environmental  policy  and  local  environmental  action  plans,  the  protection  and 
sustainable  development  of  mountain  regions.  It  is  an  important  tool  to  promote  regional 
cooperation and stability for the future of the South Caucasus.  

In  the  area  of  higher  education,  universities  from  Armenia,  Azerbaijan  and  Georgia 
cooperated  on  a  distance  and  e-  learning  project.  This  is  the  first  time  that  such  regional 
cooperation emerged under the Tempus programme. 

Contribute to a peaceful solution of the Nagorno-Karabakh conflict 

Negotiations  within  the  Minsk  Group  on  the  peaceful  settlement  considerably  intensified  in 
2009  and  contributed  to  enhanced  dialogue,  with  the  Presidents  of  Armenia  and  Azerbaijan 
holding six bilateral meetings during the year. In  addition, the Foreign Ministers of the two 

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countries met a number of times, including during the OSCE Ministerial Council in December 
2009 in Athens. Courageous steps by both sides will be necessary to find a resolution to the 
conflict. 

A joint statement by the OSCE Minsk Group at presidential level during the G8 Summit in 
L’Aquila  in  July  2009  urged  "the  presidents  of  Armenia  and  Azerbaijan  to  resolve  the  few 
differences  remaining  between  them  and  finalize  their  agreement  on  these  Basic  Principles, 
which  will  outline  a  comprehensive  settlement."  However,  overall  tensions  remain  and  the 
situation continues to be fragile. Incidents of exchanges of fire and casualties on the line of 
contact continued to be reported and are cause for concern. 

3. 

ECONOMIC AND SOCIAL REFORM 

Macroeconomic framework and functioning market economy 

The  global  economic  downturn  and  particularly  the  rapid  deterioration  of  the  Russian 
economy had a deep impact on the Armenian economy in 2009. Economic activity which had 
started to fall in the last quarter of 2008 contracted by around 15.4% in 2009 representing a 
massive turnaround compared to strong growth rates of the previous years. This was the result 
of the collapse of the construction sector by around 38%, as an immediate consequence of the 
reduction in remittances by around 28%, and the strong contraction of the industrial output by 
around 10%. 

The  authorities  acted  rapidly  and  adopted  measures  to  mitigate  the  effects  of  the  sharp 
downfall  in  output.  In  March  2009,  they  reverted  to  a  fully  floating  exchange  rate  regime 
allowing a de facto devaluation of the Armenian Dram of around 22 % against the euro and 
the USD. This step helped to improve competitiveness without threatening financial stability 
as  the  negative  effects  of  the  devaluation  were  largely  absorbed.  At  the  same  time  they 
reached  an  agreement  with  the  IMF  for  a  USD  790  million  (EUR  553  million)  Stand-by 
Arrangement  while  securing  additional  funding  from  other  multilateral  and  bilateral  donors 
(including  USD  500  million  -  EUR  350  million  -  stabilisation  loan  from  the  Russian 
Federation) to meet the increasing financing needs.  

Fiscal policy was supportive to the economy with expenditure plans focusing on wide-ranging 
anti-crisis  measures,  increasing  foreign-financed  capital  spending  and  protecting  social 
spending. Partly owed to external borrowing, the authorities accommodated largely the fall in 
tax  revenues  by  about  15%  without  cutting  significantly  the  expenditures,  while  taking  into 
account financing constraints and debt sustainability concerns. As a result the fiscal deficit is 
expected to increase to 7.5% of GDP and public debt to 37% of GDP in 2009. At the same 
time  the  fiscal  structural  reform  agenda  advanced  through  improvements  in  VAT  refund 
processing and introduction of e-filling of tax returns for large tax payers.  

Monetary  policy  eased  and  the  Central  Bank  of  Armenia  (CBA)  lowered  its  policy  rate 
gradually from 7.75% in April to 5% in September 2009 to contribute to the recovery of the 
economy.  It  also  injected  Dram  liquidity  through  various  channels,  including  purchases  of 
government  securities  and  increasing  the  maturity  of  its  repo  operations.  However,  due  to 
weaknesses of the transmission mechanism, banking lending rates remained at 18% causing 
additional  action  by  the  authorities  like  on-lending  of  credit  resources  provided  by 
donors/creditors  to  targeted  SMEs  and  vulnerable  industries  through  the  Central  Bank  and 

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commercial  banks.  The  weakness  in  the  transmission  mechanism  is  the  high  deposit 
dollarisation, which remained at around 70%. 

Average  inflation  remained  at  around  3.4%  on  the  back  of  the  weak  demand,  despite  the 
depreciation of the Dram in March 2009. However, inflation increased to 6.5% in December 
2009  owing  to  rising  international  prices,  the  ongoing  expansionary  policies,  rigidities  in 
domestic prices, and speculative exchange rate pressures stemming from excess liquidity. At 
the end of 2009, CBA signalled the end to the easing cycle and its readiness to act under the 
inflation  targeting  framework  if  inflationary  pressures  emerge.  It  is  however  expected  the 
inflation will come down in 2010. 

External  trade  turnover  contracted  by  around  28%  in  2009.  Export  revenue  contracted  by 
around  37%  influenced  by  the  drop  in  prices  of  metallurgical  products,  while  imports 
contracted  to  a  lesser  extent  by  around  26%.  As  a  result,  the  current  account  deficit  is 
estimated to have widened in 2009 to 13.7% of GDP. Combined with the collapse of FDI, this 
raises serious concerns about the competitiveness of the Armenian economy. 

Employment and social policy 

As a result of the economic crisis which seriously affected Armenia, the Government decided 
to temporarily suspend the Sustainable Development Programme on poverty reduction.   

The official unemployment rate was estimated at 7.1% at the end of 2009 Young people and 
women  continued  to  be  particularly  affected  with  respectively  20.7%  and  70.7%  of  official 
unemployment.  The  State  employment  services  continued  training  activities  of  the 
unemployed over the reporting period. 

As  regards  social  dialogue,  collective  agreements  with  social  partners  were  signed  in  May 
2009. A tripartite committee with representatives of the Government, the trade unions and the 
employers was subsequently established in the same month. The implementation of the 2007-
2011 Decent Work Country Programme continued over the reporting period. 

On  social  inclusion  and  protection,  the  introduction  of  the  new  pension  system  was 
postponed to 2011. 

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.  

In  January  2009  the  National  Council  on  Sustainable  Development  (NCSD)  met  for  the 
second  time  in  accordance  with  the  “Sustainable  Development  Programme  2008-2021”. 
Further  actions  were 
the  2009-2012  Sustainable  Development 
programme, especially in the water sector. 

implement 

taken 

to 

4.  TRADE-RELATED ISSUES, MARKET AND REGULATORY REFORM 

As regards bilateral trade, in 2009, as a result of the global slow-down in economic activity 
due  to  the  financial  crisis,  EU  exports  to  Armenia  declined  by  20.6%  compared  to  the 
previous year, while exports of Armenian products to the EU decreased by 49.3%. In terms of 
commodity structure, Armenian exports to the EU still remain quite undiversified and of low 
value added – in 2009, almost two third (64.3%) of them consisted of base metals and almost 
one fifth (18.8%) of pearls and precious stones. 

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Armenia benefits from the EU Generalized System of Preferences Plus (GSP+) for the years 
2009-2011,  aiming  at  further  diversifying  its  export  structure  and  improving  its  export 
performance.  Armenian  exporters  were  also  trained  during  the  reporting  period  in  using  the 
EU  Export  Helpdesk  to  allow  them  to  make  full  use  of  the  GSP+  preferences.  Since  April 
2009, the EU Advisory Group supported the Government in a number of trade-related areas, 
in  particular  the  efforts  to  make  the  best  possible  use  of  the  GSP+  arrangement  and  in 
preparing for a future EU-Armenia Deep and Comprehensive Free Trade Area (DCFTA).  

The  European  Commission  carried  out  a  fact-finding  mission  to  Armenia  in  February  2009 
and  established  a  detailed  assessment  of  Armenia's  preparedness  for  a  DCFTA.  It  made 
recommendations on key reforms which Armenia would need to undertake to become ready 
for the DCFTA negotiating process ("key recommendations"). This assessment was endorsed 
by  the  Armenian  authorities  in  June  2009.  In  November  2009  Armenia  established  an 
institutional  structure for the preparatory and future negotiating process which still needs to 
become  operational.  As  concerns  other  key  recommendations  limited  progress  was  noted. 
With substantial additional efforts on its side, in order to achieve the necessary progress in the 
key  regulatory  areas  including  enhancement  of  administrative  capacity,  Armenia  would 
become prepared for the start of the DCFTA negotiations.   

in 

the  customs  area.  The  comprehensive  “Customs 
Good  progress  was  recorded 
Administration Strategy for 2008-2012” was further elaborated through the development and 
introduction  of  a  Strategic  Action  Plan  in  December  2009,  which  details,  for  each  strategic 
objective,  the  actions  to  be  taken,  success  criteria,  performance  indicators,  and  target  dates. 
Following the introduction of a code of ethics in 2008, the Customs administration launched 
an internal corruption risks assessment, with a view to prepare an action plan for combating 
corruption  risks.  A  network  of  Customs  brokers  was  established,  and  125  brokers  received 
training.  The  Customs  administration  prepared  several  staff  manuals  on  subjects  such  as 
customs clearance, classification, passenger controls, customs fees, and post-clearance audit, 
and  distributed  them  to  all  Customs  offices.  During  the  reporting  period,  the  Customs 
administration  worked  on  the  development  of  a  “risk  management  directive”  defining  the 
activities  of  Customs  officials  in  headquarters,  regional  Customs  houses  and  other  Customs 
offices,  as  well  as  at  the  border.  This  directive  will  cover  not  only  the  clearance  and 
examination  systems  but  also  warehousing,  other  customs  regimes,  and  post-clearance 
control; it will link with the investigation function and will incorporate the use of risk profiles 
in  all  areas.  Further  improvements  are  needed  in  areas  such  as  risk  management,  integrity, 
cooperation  with  other  enforcement  agencies,  accession  to  the  main  international  customs 
instruments, abolition of administrative fees, verification of certificates of preferential origin, 
customs valuation practice, as well as the role of customs in IPR protection. 

On  the  free  movement  of  goods  and  technical  regulations,  some  progress  was  made.  A 
number  of  new  draft  laws  and  amendments  to  existing  laws  affecting  technical  barriers  to 
trade  were  prepared  and  discussed  throughout  2009,  including  laws  on  standardisation, 
conformity  assessment,  uniformity  of  measures,  accreditation  (amending 
the  2004 
accreditation  law).  The  selection  of  the  priority  sectors  is  still  on-going.  The  Ministry  of 
Economy  coordinated  the  efforts  of  various  development  partners  working  in  the  area  of 
quality  infrastructure.  An  awareness  event  on  establishing  a  national  quality  infrastructure 
was  organised  in  October  2009.  More  progress  will  be  required  to  consider  opening 
negotiations  for  an  Agreement  on  Conformity  Assessment  and  Acceptance  of  Industrial 
Products (ACAA) in a long-term perspective. 

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In  the  area  of  sanitary  and  phytosanitary  issues,  Armenia  drafted  a  programme  and  an 
action plan on the development of the food safety system for the period 2009-2013. Armenia 
adopted  amendments  to  the  phytosanitary  law.  It  prepared  a  law  on  the  registration  of  food 
establishments as well as amendments to the veterinary law and strengthened its laboratories. 
The European Commission’s fact-finding mission in February 2009 showed that Armenia will 
have to progress considerably in this sector. This is particularly the case as regards legislation 
and coordination among the relevant institutions.  

Armenia  has  in  place  a  number  of  relevant  laws  on  business  climate,  establishment  and 
company law including the Civil Code, the Law on Joint Stock companies and the Law on 
Limited  Liability  Companies.  However,  while  the  legislation  in  place  is  ranked  highly,  the 
issue  of  implementation  of  the  relevant  laws  remains  problematic.  Moreover,  shortcomings 
related  to  transparency  and  to  disclosure  requirements  as  well  as  the  absence  of  a  national 
Gazette have been identified. Compliance with OECD corporate governance principles should 
be  guaranteed,  functions  of  corporate  governance  bodies  as  well  as  rights  of  majority  and 
minority  shareholders  should  be  clearly  defined  and  appropriate  protection  of  investors, 
creditors  and  minority  shareholders  be  ensured.  Competent  and  independent  judicial  or 
administrative authorities should be designated to monitor incorporation or legality of certain 
acts. Good progress was seen with the ongoing work on effective implementation of laws in 
this area, as well as drafting a Corporate Governance Code. 

Armenia was affected by the financial and economic crisis in the field of financial services. 
The Central Bank of Armenia (CBA) continued its efforts to implement the Basel II principles 
for effective banking supervision. The IMF noted that the banking sector in Armenia is sound 
and well-capitalised, but the economic contraction may affect credit risk, as already reflected 
by  the  increase  in  non-performing  loans.  The  CBA  took  steps  to  ensure  that  these  risks  are 
well-managed.  The  banking  sector  represents  over  90%  of  the  financial  system  assets.  The 
main  actors  in  this  field  remain  foreign  owned  banks  with  about  65-70%  of  the  overall 
banking  capital.  In  the  field  of  deposit  guarantees,  in  2009,  amendments  to  the  Law  on 
Guarantee  for  Compensation  of  Bank  Deposits  of  Physical  Persons  were  prepared.  A 
legislative package on pension funds is under discussion by the Government and a draft law 
on  mandatory  insurance  ensued  from  responsibility  of  vehicle  use  is  discussed  by  the 
parliament.  

Other key areas 

Progress  was  recorded  in  the  area  of  taxation.  The  Ministry  of  Finance  worked  on  a 
Consolidated  Tax  Code.  The  Tax  Administration  already  implemented  several  of  the 
measures contained in the Tax Administration Strategy for 2008-2011. The Supreme Council 
on Revenue Collection was established to monitor progress in this area. Plans for introduction 
of  e-declarations  and  improvements  of  risk-based  controls  were  adopted.  The  process  of 
upgrading human resources is in progress and includes also creation of a new training centre 
(both  for  taxation  and  customs).  The  Tax  Administration  solved  the  problems  related  to 
delays on VAT returns and reabsorbed the existing backlog. Armenia developed and adopted 
a  plan  for  introducing  an  e-governance  system,  and  18  working  groups  were  set  up  to  deal 
with  the  automation  of  tax  administration.  In  2009  Armenia  reported  that  agreements  on 
avoidance of double taxation are in force with 13 EU Member States and others are signed or 
being negotiated. In line with its WTO commitments discriminatory practice regarding VAT 
and excise system on tobacco products needs to be eliminated.  

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The  State  Commission  for  the  Protection  of  Economic  Competition  continued  its  work  to 
strengthen the legal and institutional framework for competition policy in 2009. It prepared 
new  draft  amendments  to  the  legal  framework  which  are  expected  to  be  adopted  in  2010. 
Effective implementation of the previous amendments to the law on “protection of economic 
competition”, including provisions for state aid, requires further efforts in the establishment of 
secondary  implementation  mechanisms.  A  draft  law  for  the  implementation  of  a  leniency 
programme is being prepared. An EU twinning project concerning state aid and competition 
policy is foreseen in 2010.  

The  Government  approved  in  April  2009  a  Concept  Paper  on  Implementing  Reliable  and 
Effective Protection of Intellectual Property. A special committee for the implementation of 
this paper, led by the Minister of Economy and including representatives of right-holders and 
relevant NGOs, was set up in August 2009. Armenia also worked over the reporting period on 
amending its legislation on copyrights, geographical indications and trademarks. Armenia still 
needs  to  ratify  the  International  Convention  for  the  Protection  of  New  Varieties  of  Plants 
(UPOV Convention). A survey on piracy and counterfeiting was launched during the year and 
is on-going. However, further substantial efforts are needed to ensure sound enforcement of 
legislation  by  reinforcing  the  powers  and  the  administrative  capacities  of  the  enforcement 
bodies, including the judicial system and by raising awareness of intellectual property issues 
among the general public and the right-holders. 

Armenia continued to work on new legislation on public procurement. Once adopted, it is 
expected  to  enter  into  force  in  June  2010.  The  new  law  foresees  the  transformation  of  the 
State Procurement Agency into a Procurement Assistance Centre. Further efforts are needed 
in the area of training and provision of systems to implement e-procurement. 

Armenia  completed  the  translation  of  International  Financial  Reporting Standards  (IFRS)  in 
the area of accounting. Armenia also started negotiations with the International Accounting 
Standards  Board  with  a  view  to  signing  an  agreement  on  translation  of  the  accounting 
standards  for  the  small  and  medium-sized  enterprises.  No  progress  can  be  reported  on  the 
establishment  of  an  independent  regulatory  body,  separate  from  the  Ministry  of  Finance, 
responsible for accounting and auditing. 

As regards statistics, Armenia adopted in June 2009 the national classifier for the economic 
activity. Armenia also worked over the reporting period on developing the national version of 
the  classification  of  territorial  units  and  continued  translating  into  Armenian  key  EU 
regulations in the field of statistics. 

On enterprise policy, the Small and Medium-sized Enterprise Development National Centre 
(SME DNC) continued to support SMEs through the implementation of annual programmes 
with resources allocated from the state budget. Since its 2008 membership in the Enterprise 
Europe  Network  (EEN),  the  SME  DNC  has  been  hosting  an  EEN  Correspondence  Centre 
providing  business,  innovation,  technology  and  research  related  services  to  Armenian 
companies while also rendering assistance to European SMEs seeking business opportunities 
in the Armenian market. Several amendments in tax legislation for SMEs, adopted in 2009, 
entered into force just after the reporting period, in January 2010.  

In  the  area  of  public  internal  financial  control  (PIFC)  Armenia  continued  to  work  on  an 
internal audit law. The draft law includes provisions for establishing a central harmonisation 
function  for  internal  audit.  Following  a  detailed  gap  assessment  of  the  existing  PIFC 
environment,  the  Ministry  of  Finance  started  to  work  on  a  PIFC  Policy  Paper.  The 

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introduction  of  principles  of  managerial  accountability  is  still  at  a  very  early  stage.  With 
regard to external audit, the Chamber of Control has established contacts with the European 
SAIs in order to develop existing audit practices in line with INTOSAI standards.  

5.  COOPERATION ON JUSTICE, FREEDOM AND SECURITY 

Armenia  continued  participating  in  the  Southern  Caucasus  Integrated  Border  Management 
(SCIBM) regional programme, formally agreed between Armenia, Azerbaijan and Georgia in 
2007. The programme aimed at enhancing inter-agency cooperation, training and capacity of 
customs  and  border  guard  services  in  line  with  agreed  regional  standards  and  EU  norms. 
Despite  the  regional  character  of  this  programme,  Azerbaijan  chose  to  pursue  cooperation 
only through its bi-lateral component with Georgia, which delayed the start of implementation 
until March 2010. Nevertheless, in the framework of SCIBM, Armenia’s customs and border 
guard  services  participated  in  preparatory  training  sessions  in  Austria,  Croatia,  Italy  and 
Slovenia alongside representatives from Azerbaijan and Georgia. 

Further  training  was  provided  for  border  and  patrol  police  including  cross-border  seminars 
with border officials from both Georgia and Azerbaijan in cooperation with the OSCE.  

The State Migration service commenced started work on a National action plan on migration 
and asylum in cooperation with civil society and, with EU support, on a draft strategy on the 
regulation of migration.The draft law on the regulation of labour migration, prepared in 2008, 
has not been adopted yet. In addition an electronic database for the monitoring of migration 
flows  remains  to  be  established.  With  support  from  the  OSCE  and  the  International 
Organisation for Migration (IOM), Armenia is elaborating an action plan for the introduction 
of  an  electronic  passport  with  biometric  features  and  electronic  ID  Cards.  Improvement  of 
document  security  is  considered  by  the  authorities  as  a  necessary  step  to  benefit  from  visa 
facilitation with the EU. 

With  regard  to  the  fight  against  organised  crime,  Armenia  has  yet  to  accede  to  the  Third 
Protocol to the United National Convention on Transnational Organised Crime on the Illicit 
Manufacturing  and  Trafficking  of  Firearms,  their  Parts  and  Components,  and  is  also 
encouraged  to  sign  and  ratify  the  2007  Council  of  Europe  Convention  on  the  Protection  of 
Children against Sexual Exploitation and Sexual Abuse. 

On trafficking in human beings, the national budget allocated some EUR 100,000 to finance 
anti-trafficking  actions including the establishment  of  a  National  Referral  Mechanism  and  a 
special  shelter  for  victims  of  trafficking,  in  cooperation  with  civil  society  organisations.  11 
separate  prosecutions  for  crime  related  to  the  trafficking  of  human  beings  were  recorded  in 
2009. 

As  stated  above,  the  South  Caucasus  Anti-Drugs  Programme  (SCAD  V)  came  to  an  end  in 
2009. Discussions continue on how best to bring forward the results of the action and pursue 
regional efforts in the fight against illegal drugs. 

With  regard  to  the  fight  against  money  laundering,  Moneyval  approved  the  third  round 
mutual  evaluation  report  on  Armenia  in  September,  highlighting  improvements  to  the  legal 
framework to combat money laundering and the financing of terrorism achieved in 2008. The 
report  was  published  in  January  2010.  As  stated  last  year,  the  continuing  development  of 
human  and  technical  resources  with  regard  to  money  laundering,  corruption  and  terrorism 
financing remains an ongoing challenge  

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In the area of police and judicial cooperation Armenia ratified the 1997 Additional Protocol 
to  the  European  Convention  on  Mutual  Assistance  on  Criminal  Matters  in  March  2009. 
However, its effective implementation will require continued efforts to improve coordination 
and  cooperation  between  all  law  enforcement  agencies,  including  investments  in  training. 
Armenia  ratified  two  Additional  Protocols  to  the  UN  Convention  against  Transnational 
Organised Crime at an earlier stage, but the Third Protocol against the Illicit Manufacturing of 
and Trafficking in Firearms, Their Parts and Components and Ammunition remains unsigned. 
Two  important  Hague  Conventions  on  international  judicial  cooperation,  namely,  the  1965 
Convention on the service of documents and the 1970 Convention on the taking of evidence 
have not yet been signed by Armenia. 

As  regards  data  protection,  Armenia  has  neither  signed  the  1981  Convention  for  the 
Protection of Individuals with regard to Automatic Processing of Personal Data in 2009 nor 
the Additional Protocol on supervisory authorities and trans-border data flows. 

6. 

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

In October 2009 Armenia adopted a transport sector development strategy covering the years 
2009-2020.  The  strategy  foresees  improved  management,  infrastructure,  and  technology  to 
maximize the  transport  sector’s performance until 2020, and envisages long-term prosperity 
through  the  establishment  of  efficient,  cost-effective,  and  environmentally  and  socially 
sustainable  transport  infrastructure  and  services.  The  strategy  foresees  the  separation  of 
regulatory and oversight functions ensuring the independence of regulatory functions. Further 
short-term  policy  priorities  are  to  define  a  road  strategy  based  on  sound  asset  management, 
address worsening road safety as well as the deteriorating urban transport in Yerevan.  

As  regards  infrastructure  investments,  Armenia  started  in  2009,  with  the  help  of  the  World 
Bank, to upgrade roads belonging to the “Lifeline Road Network” (LRN). The capacity of the 
Armenia Road Directorate is being strengthened. Armenia decided already in 2004 that each 
community  should  have  at  least  one  connecting  road  to  an  interstate  road.  These  roads 
comprise some 3,014 km of Armenia’s 7,704 km of non-urban roads and are defined as the 
optimal road network connecting rural communities to the interstate highways.  

In the air sector, the transport strategy 2009-2020 foresees as a short-term priority to remove 
restrictive  commercial  and  regulatory  measures  in  order  to  improve  aviation  efficiency  and 
connectivity.  Following  the  signature  of  the  horizontal  air  services  agreement,  reported  last 
year,  a  further  important  step  towards  closer  relations  between  the  EU  and  Armenia  in  the 
transport  field  was  the  signature  of  the  working  arrangement  between  the  Armenian 
authorities and the European Aviation Safety Agency in July 2009 to strengthen its regulatory 
cooperation  with  the  Agency  and  progress  towards  convergence  with  European  safety 
standards.  Due  to  restricted  competition,  air  traffic  between  the  EU  and  Armenia,  although 
increasing, remained limited.  

Armenia  further  implemented  its  energy  strategy,  inter  alia  by  completing  a  tender  for  the 
selection  of  a  company  that  will  oversee  the  construction  process  of  a  new  nuclear  power 
plant. In October 2009, Armenia adopted a law on constructing a new nuclear power unit. A 
tender  to  select  the  plant  constructor  is  under  preparation.  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 

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continued to ask closure before this date. Armenia continued the safety upgrading of MNPP 
on the basis of its 2009-2016 programme. It pursued work towards a spent nuclear fuel and 
radioactive management strategy and progressed on the expansion of a dry spent fuel storage 
facility. Armenia took further steps to prepare a detailed decommissioning plan for MNPP. It 
continued to fill the Nuclear Decommissioning Fund and to explore, jointly with the Russian 
Federation, uranium reserves. 

In  April  2009,  Armenia  raised  gas  and  electricity  tariffs  following  the  increase  of  the  gas 
price.  It  continued  the  construction  of  conventional  electricity  generation  units  (including 
hydro)  and  the  rehabilitation  of  electricity  and  gas  infrastructure.  Armenia  pursued 
preparatory work for additional electricity interconnections with Georgia and Iran. In March 
2009 Armenia agreed with Turkey to export  electricity once  the grid  has been upgraded. In 
May  2009,  the  Armenia-Iran  gas  pipeline  became  operational.  The  deal  between  the  two 
countries aims to export gas to Armenia and electricity to Iran. In April 2009, Armenia and 
Iran confirmed their plan to construct an oil refinery. Armenia pursued the development of an 
energy efficiency and renewable energy programme. 

In  the  field  of  climate  change,  Armenia  continued  preparing  its  Second  National 
communication  to  the  UN  Framework  Convention  on  Climate  Change  (UNFCCC),  which 
will  include  a  greenhouse  gas  inventory,  mitigation  and  adaptation  measures.  A  report  on 
vulnerability of water resources was prepared. Steps to address adaptation to climate change 
impacts in mountain forest ecosystems started. The socio-economic impact of climate change 
was assessed with regard to agriculture, energy and forestry, and policy recommendations and 
measures  were  developed.  The  UNFCCC  related  part  of  the  2004  Government  Decision  on 
measures  for  the  implementation  of  a  number  of  international  obligations  was  reviewed  in 
December 2009 and is in the process of approval. 

Armenia  took  steps  to  prepare  and  approve  further  Clean  Development  Mechanism  (CDM) 
projects.  One  new  such  project  was  registered  at  UN  level,  bringing  the  total  number  of 
registered  projects  to  five.  Armenia associated  itself  with  the  Copenhagen  Accord  and 
provided information on actions that it will implement. The European Commission continued 
to support Armenia to implement the Kyoto Protocol. 

Armenia  started  implementing  its  environment  action  plan  for  2008-2012,  inter  alia  with 
regard  to  the  development  of  the  legislative  framework,  capacity  building  for  environment 
monitoring  and  strengthening  of  management  of  waste  and  chemicals.  The  legislative 
framework  continues  to  require  further  development,  in  particular  as  regards  implementing 
legislation.  Amendments  and  changes  to  legislation  in  the  fields  of  air  quality,  water 
management  and  environmental  fees  were  adopted.  A  Government  decision  was  adopted  to 
regulate the process of registration of companies whose activities have a negative impact on 
the  environment  and  further  decisions  were  adopted  in  the  field  of  water,  nature  protection, 
chemicals  and  waste.  An  act  on  environmental  protection,  as  well  as  legislation  on 
environmental expertise, genetically modified organisms and self-monitoring of compliance, 
are still being prepared. 

A  national  profile  of  chemicals  and  waste  management  was  approved.  Preparations  for  a 
national  strategy  to  reduce  risks  of  hazardous  substances  on  human  health  and  the 
environment were launched. Continued attention is required to implement existing strategies 
and plans and to further enhance monitoring and enforcement. 

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Some  steps  were  taken  with  a  view  to  strengthening  water  resource  management.  Further 
strengthening of administrative capacity at all levels of the country remains a major challenge. 
Coordination  between  authorities  continues  to  require  attention.  Some  activities  were  taken 
promote  the  integration  of  environmental  considerations  into  other  policy  sectors  such  as 
transport. Some steps were taken to prepare legislation on integrated permitting. 

There  were  no  significant  developments  with  regard  to  preparations  of  state-of-the 
environment  reports.  Armenia  nevertheless  continued  to  carry  out  some  other  activities  to 
provide information to the public. (For the Regional Environmental Centre for the Caucasus, 
please see chapter 2) 

The draft legislation on self-monitoring of compliance, currently under preparation, contains 
provisions on environmental impact assessment, including with regard to public participation. 
Procedures  and  consultation  with  the  public  in  the  context  of  environmental  assessments 
continue  to  require  particular  attention.  The  Implementation  Committee  of  the  Espoo 
Convention  requested  Armenia  to  revise  its  environmental  impact  assessment  legislation  to 
align with the Convention as well as to report back on this. Armenia subsequently submitted a 
satisfactory implementation strategy.  

Armenia  took  some  steps  towards  accession  to  the  EMEP1  Protocol  to  the  UNECE 
Convention  on  Long-Range  Transboundary  Air  Pollution.  There  were  no  significant 
developments  as  regards  the  accession  or  ratification  with  regard  to  remaining  relevant 
UNECE  Conventions  and  Protocols2.  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 exchanges of information took place between the European Commission and 
Armenia,  including  on  water,  forestry,  waste  management,  environmental  data,  nature 
protection and air quality.  

In the field of civil protection, Armenia participated in the December 2009 launch event of 
the Eastern Partnership flagship initiative on prevention on, preparedness of and response to 
man-made and natural hazards.  

In order to help the preparation of a regulatory reform in the area of Information Society, a 
first  meeting  of  the  working  group  on  regulation  of  communication  issues  was  held  at  the 
premises of the Ministry of Transport and Communication in June 2009. Representatives and 
responsible executives from both public and private sectors participated in this meeting. 

In  February  2009,  eight  domestic  operators  were  granted  public  network  number  capacities 
and codes to offer fixed-line telephony in Armenia. Each company network will be connected 
to the current de facto monopolist.  

In  the  audiovisual  sector,  freedom  of  reception  and  retransmission  of  television  broadcast 
coming  from  other  countries  remains  difficult  as  Armenia  has  not  ratified  the  Council  of 
Europe Convention on Transfrontier Television. 

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2 

Protocol on Long-term Financing of the Cooperative Programme for Monitoring and Evaluation of the 
Long-range Transmission of Air Pollutants in Europe (EMEP) 
the  Protocol  on  Strategic  Environmental  Assessment  to  the  UNECE  Convention  on  Environmental 
Impact  Assessment  in  a  Transboundary  Context,  UNECE  Convention  on  the  Protection  and  Use  of 
Transboundary Watercourses and International Lakes and the other relevant Protocols  

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Armenia's  research 
investment  and  capacity  remains  relatively  modest.  However, 
participation  in  the  7th  Framework  Programme  (FP7)  has  increased  in  comparison  to  FP6, 
with 17 research organisations  being  successful in their applications, as of November 2009, 
receiving  EUR  690,000  of  EU  funding,  particularly  under  the  'international  cooperation' 
information and communication technologies and the 'Marie Curie' calls for proposals. 

Armenia continued to participate actively in the International S&T Cooperation Network for 
Eastern  European  and  Central  Asian  countries  (FP7  IncoNet  EECA  project),  which  aims  to 
support  a  bi-regional  EU-EECA  policy  dialogue  on  science  and  technology  and  to  increase 
EECA participation in FP7. 

7. 

PEOPLE-TO-PEOPLE CONTACTS, EDUCATION AND HEALTH 

In  the  area  of  higher  education,  the  Ministry  of  Education  and  Science  established  five 
working  groups  with  university  participation  to  promote  Bologna  Process  requirements 
covering  qualification  frameworks,  credit  accumulation,  financial  management,  quality 
assurance  mechanisms,  and  post-graduate  education.  The  Bologna  Process  Diploma 
Supplement,  providing  for  greater  transparency  on  higher  education  qualifications  was 
introduced in Armenian universities and higher education institutions in the course of 2009.  

Armenia continued its active participation in the Erasmus Mundus scholarship programme as 
well as in the Tempus IV programme, increasing compared to Tempus III. 

Thirteen Armenian students and one scholar were awarded scholarships for Erasmus Mundus 
Masters  Courses  for  the  academic  year  2009-10  under  Erasmus  Mundus  Action  1  while 
academic and student mobility was further facilitated under Erasmus Mundus Action 2 during 
the  same  period  through  the  award  of  35  mobility  grants.  Armenian  universities  are 
encouraged to participate in the Jean Monnet programme. 

With  regard  to  vocational  education  and  training,  developments  in  2009  focused  on  the 
consolidation  and  continuation  of  reforms  initiated  in  2008  in  the  areas  of  teacher  training, 
refurbishment of vocational training colleges and the development of qualifications standards 
and  a  draft  national  qualification  framework  with  considerable  EU  support  (see  chapter  8). 
The concepts of social partnership in vocational education and training and life long learning 
were  endorsed  by  the  Government  in  October.  The  Ministry  of  Education  and  Science 
continued developing a national  qualifications  framework on the  basis  of competence-based 
standards  developed  by  the  National  Centre  for  Vocational  Education  and  Training 
Development.  

The  Ministry  of  Culture  pursued  implementation  of  the  four  year  Culture  Development 
Strategy  (2008-12)  focusing  on  effective  coordination  of  cultural  policy,  cultural  heritage, 
international  cooperation,  digitalization  of  non-material  culture  and  promotion  of  popular 
culture.  As  stated  in  2008  in  this  regard,  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. Armenian cultural organisations participated in 
the Call for Proposals of the 2009 ENP Special Action under the Culture Programme.  

Armenian young people and youth organisations continued benefiting from the opportunities 
offered by the Youth in Action Programme, through exchanges, voluntary service and youth 
cooperation activities in non-formal education.  

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Armenia pursued reform in the health sector, in particular as regards primary health care and 
health insurance. The reform should contribute to reducing out of pocket payments. In 2009, 
the Government endorsed a strategy and an action plan for Child and Adolescent Health and 
Development  for  the  period  2010-2015.  Communicable  diseases  such  as  HIV/AIDS  and 
tuberculosis  remained  challenges.  In  October  2009,  Armenia  participated  in  the  newly 
established EU enlarged health information committee. 

8. 

FINANCIAL COOPERATION – 2009 KEY FACTS AND FIGURES 

The European Neighbourhood Policy Instrument (ENPI) envelope for the Armenia under the 
National Indicative Programme 2007-2010 is EUR 98.4 million. The programme is focused on 
three  priority  areas:  1)  Strengthening  of  Democratic  Structures  and  Good  Governance,  2) 
Regulatory Reform and Administrative Capacity Building, and 3) Poverty Reduction Efforts. 

The 2007 Annual Action Programme on Vocational Education and Training (EUR 16 million) 
is in the final stages of its implementation. The 2007 sector programme progressed well, and 
its  planned  activities  were  concluded  in  late  2009.  The  final  verification  mission  for  the 
second  (and  final)  fixed  tranche  was  deferred  to  December  2009  due  to  supply  delays. 
Therefore  the  final  payment  is  being  processed  in  the  semester  of  2010.  Furthermore,  the 
TA/twinning  envelope  with  a  value  of  EUR  5  million  in  support  of  regulatory  reform  and 
administrative capacity building is currently being implemented.  

The implementation of the 2008 Annual Action Programme on Support for the Justice Reform 
programme (EUR 18 million) is underway. The initial fixed tranche of EUR 8 million of the 
2008 Justice  programme  was  processed in late 2009. The AAP 2008 TA/twinning envelope 
with a value of EUR 6 million is currently being prepared. 

The  first  twinning  project  was  launched  in  2009  (support  to  the  Ombudsman  and  Human 
Rights  Defender)  and  a  second  was  launched  in  2010  (support  to  the  introduction  of  the 
Standard  Cost Model  with  the Ministry of Economy).  Three twinning projects are currently 
published for Member State proposals (Civil Aviation, Competition, National Statistics). 

In  2009,  the  European  Commission  continued  to  support  the  national  reform  efforts  in 
Armenia and programmed assistance for a total amount of EUR 24.7 million under the ENPI. 
The 2009 Annual Action programme focused on the continued support for further economic 
development  and  social  cohesion.  Within  this  envelope,  EUR  15  million  was  allocated  to 
pursue the reform of Vocational Education and Training as a sector budget support operation. 
Another EUR 9.7 million was allocated to TA and Twinning operations.  

An  indicative  financial  envelope  of  EUR  157.3  million  will  be  available  to  support  co-
operation  activities  in  Armenia  in  the  period  2011-2013,  based  on  a  European  Commission 
decision of March 2010. 

In  addition  to  the  bilateral  allocation,  Armenia  also  benefited  from  cooperation  activities 
financed  under  the  ENPI  multi-country  and  regional  programmes,  as  well  as  horizontal 
thematic  programmes,  such  as  the  European  Instrument  for  Democracy  and  Human  Rights 
(EIDHR)  and  the  Non-State  Actors  and  Local  Authorities  in  Development  programme 
(NSA/LA).  Armenia  is  also  eligible  for  the  cooperation  under  the  ENPI  Cross-Border 
Cooperation (CBC) Black Sea Basin programme.  

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The  Instrument  for  Stability  provided  immediate  support  to  the  post-election  stabilization 
efforts  in  the  form  of  the  EU  Advisory  Group  for  a  total  budget  of  EUR  2  million. 
Furthermore,  in  2009  the  EU  took  a  decision  to  grant  the  Government  of  Armenia  Macro-
Financial  Assistance  to  alleviate  the  effects  of  the  global  financial  crisis.  The  package 
includes  a  EUR  65  million  loan  and  a  EUR  35  million  grant.  Disbursement  is  expected  to 
begin during the first half of 2010.  

Under  the  Neighbourhood  Investment  Facility  (NIF)  contributions,  two  projects  in  Armenia 
were  approved  in  2009,  committing  EUR  14.6  million  in  grants  and  technical  assistance, 
expected  to  leverage  EUR  23  million  in  loans  of  European  Finance  Institutions  in  the 
environment and transport sectors. Furthermore, three regional projects for which Armenia is 
eligible were also approved in 2009, committing EUR 24 million in grants, to leverage a total 
of EUR 372 million in loans/investment from European Finance Institutions in the energy and 
financial sectors. 

With regards to assistance in the area of Nuclear Safety, projects providing On-Site assistance 
and supply of equipment to the Nuclear Power Plant of Medzamor worth EUR 11 million are 
currently  being  implemented  in  the  framework  of  the  Instrument  for  Nuclear  Safety 
Cooperation  (INSC)  Action  Programme  2009  (including  the  support to the  National 
Regulator). Two other projects aimed at improving the safety culture of the Armenian Nuclear 
Regulatory Authority for the overall sum of EUR 2.3 Million, as programmed under previous 
Action Programmes, are still ongoing.  

The European Investment Bank did not sign any lending operations with the Government of 
Armenia in 2009.  

In 2009, the overall donor coordination was foremost done in coordination between the four 
main  donors  in  the  lead  (WB,  IMF,  USAID  and  EC)  with  participation  of  the  Armenian 
Ministry  of  Economy.  These  were  arranging  general  donor  coordination  meetings  at  least 
every three months, inviting also other donors. Increasingly, the Armenian side started to take 
the factual responsibility for the coordination of donor activities.  

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