Source: EURLEX
Language: en
Format: md

*|*

# 52013SC0079

**JOINT STAFF WORKING DOCUMENT Implementation of the European Neighbourhood Policy in Armenia Progress in 2012 and recommendations for action Accompanying the document JOINT COMMUNICATION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS European Neighbourhood Policy: Working towards a Stronger Partnership /\* SWD/2013/079 final \*/**

  

1.         Overall assessment and recommendations

This
document reports on the progress made in implementation of the EU-Armenia
European Neighbourhood Policy (ENP) Action Plan between 1 January and 31
December 2012, although developments outside this period are taken into
consideration when deemed relevant. It is not a general review of the political
and economic situation in Armenia. For information on regional and multilateral
sector processes, readers should also refer to the Eastern Partnership (EaP)
Implementation Report.

Political dialogue with
the Armenian Government intensified in 2012, and a number of high-level
encounters took place: President Serzh Sargsyan was received in Brussels in
March and a number of visits to Armenia by high-level EU officials also took
place: these included visits by President of the European Council Herman Van
Rompuy in July, by Commissioner Štefan Füle in September by President of the
European Commission José Manuel Barroso in November. Negotiations on an
EU-Armenia Association Agreement (AA), including a Deep and Comprehensive Free
Trade Area (DCFTA), progressed at a good pace. Visa Facilitation and
Readmission Agreements were initialled in October and a Visa Facilitation
Agreement was signed on 17 December. As a result of progress in relation to
reforms in the area of deep democracy and respect for human rights, Armenia has been allocated an additional EUR 15 million under the Eastern Partnership
Integration and Cooperation (EaPIC) programme in 2012. In December, the EU and Armenia signed the Protocol to the Partnership and Cooperation Agreement on
the general principles for the participation of Armenia in EU programmes.

While Armenia made a serious effort to address issues related to human rights and fundamental
freedoms, further work needs to be done, especially in the implementation and
enforcement of legislation. Regarding democracy, the May 2012 parliamentary
elections and the February 2013 presidential elections were observed as having
been well-conducted, but some specific reforms still needed to be taken
forward, in conformity with recommendations of the Organization for Security
and Cooperation in Europe’s Office for Democratic Institutions and Human Rights
(OSCE/ODIHR),  in particular regarding the legislative framework.

In
addition, despite ongoing reform efforts, public trust in the judiciary
continues to be low, and the perception of corruption is still high. The
National Preventive Mechanism under the Optional Protocol to the UN Convention
against Torture needs to be further strengthened. Cases of torture and
ill-treatment among military conscripts, in prison facilities and at police
stations, are not adequately investigated.

Armenia continued to implement sound
macroeconomic policies and structural reforms. It made further progress towards
meeting the objectives of the Action Plan in the areas of macroeconomic policy,
poverty reduction and social cohesion. Economic activity continued to grow, due
to expanding exports and good weather conditions. Further growth and economic
development will depend on improvement of the business environment, sustainable
fiscal consolidation and the global economic situation.

The EU
continues to request the earliest possible closure of Medzamor nuclear nower
plant (NPP), as it cannot be upgraded to meet internationally recognised
nuclear safety standards. It is a matter of concern that Armenia has not yet drawn up a detailed decommissioning plan for Medzamor. Following the Fukushima nuclear accident, Armenia undertook with the EU a comprehensive risk and safety
assessment (‘nuclear stress test’) of the plant, the report of which will have
to be submitted in early 2013. Armenia is an active observer of the Energy
Community.

There
has been no progress in the talks mediated by the OSCE Minsk Group co-chairs
aimed at settling the Nagorno Karabakh conflict. Front-line incidents, the
Safarov case and the opening of the airport in Nagorno Karabakh have shifted
priorities towards defusing tension rather than seeking a solution. There was
also no progress on the incident investigation mechanisms supported by both
sides at the Sochi Summit in January 2012. The European Union Special
Representative on the South Caucasus and the crisis in Georgia visited the
region on three occasions to support the work of the OSCE Minsk Group, and the
EU funded project 'European Partnership for the Peaceful Settlement of the
Conflict in Nagorno Karabakh', aimed at developing confidence-building
measures, entered its second phase. There were no positive moves towards rapprochement
between Armenia and Turkey. The EU continues to support the rapprochement
process without preconditions.

Armenia addressed some of the key
recommendations contained in the last year's ENP progress report. It prepared a
roadmap to improve the electoral process, adopted a National Human Rights
Strategy and took some measures to fight corruption, to reform the judiciary
and public administration, and to advance sectoral reforms and regulatory
approximation to the EU acquis. Progress is needed also on other key
recommendations. On the basis of this year’s report and with a view to
sustained implementation of the ENP Action Plan in 2013,[1] Armenia is invited to:

·
Further address the shortcomings identified by
the OSCE/ODIHR concerning the May 2012 parliamentary elections and February
2013 presidential elections, by implementing all OSCE/ODIHR recommendations,
including changes to the legislative framework after the presidential
elections.

·
Fully investigate the deaths that occurred
during clashes following the March 2008 presidential elections and the
allegations of ill-treatment in police custody and violation of due process.

·
Step up efforts with Azerbaijan to reach
agreement on the Madrid Principles, in accordance with the commitments made by
the Presidents of Armenia and Azerbaijan within the Minsk Group.

·
Ensure unimpeded access to representatives of
the EU to Nagorno Karabakh and surrounding regions in support of conflict
transformation activities in full complementarity with the Minsk Group
activities.

·
Promote an environment conducive to progress in
conflict settlement, encourage and support related peace-building activities.

·
Ensure implementation of the National Human
Rights Strategy, formulate, adopt and implement the related Action Plan.

·
Adopt amendments to the legislation on
broadcasting in compliance with the recommendations of the OSCE and the Council
of Europe, and ensure pluralism in the broadcasting media.

·
Finalize the draft law on Conscience and
Religious Freedoms, in line with international standards, as well as the
legislation on alternative civilian service, in conformity with Venice
Commission and OSCE recommendations.

·
Adopt comprehensive anti-discrimination
legislation, including further steps leading to the harmonization of
legislation with the EU acquis in the areas of gender equality and
non-discrimination.

·
Intensify the prevention of and the fight
against corruption, including implementation of laws adopted in 2012 and
reinforcement of capacities, independence and transparency of the State
Commission on the Ethics of High-Ranking Officials.

·
Strengthen the implementation of governance
reforms, including measures to reform the law enforcement and judicial sectors
(especially to increase public trust in and the independence of the judiciary,
improve the training of judges and review the code of criminal procedure).

·
Continue the reform of public administration, in
particular through strengthening merit-based career and pay paths in the civil
service, strengthening institutional capacity of local governments and
continuing with reform of the public finance management sphere.

·
Continue to advance sectoral reforms and
regulatory approximation to the EU acquis in trade and trade-related
areas, in parallel to the ongoing negotiations on a DCFTA, in particular in the
areas of Sanitary and Phytosanitary Measures, Technical Barriers to Trade,
Intellectual Property Rights and Customs.

·
Enhance efforts to provide for a competitive
economic environment, including through improvements in
contract enforcement, ease of paying taxes and trading across borders.

·
Work towards the earliest possible closure of
the Medzamor nuclear power plant and adopt a detailed decommissioning plan for
this plant, taking into account the result of the 2012 stress tests report.

2.         Political dialogue and reform

Towards deep and sustainable democracy

The Armenian authorities
delivered relatively transparent and competitive parliamentary elections
in May 2012. An EU project to support the election
processes in Armenia implemented by the OSCE helped improve the technical
capacities of election commissions and the election observation capacity of
civil society. At the same time, the OSCE/ODIHR
election observation mission identified a number of issues which still needed
to be addressed before presidential elections in February 2013. In September,
local elections took place in most Armenian regions: a delegation from the
Congress of Local and Regional Authorities of the Council of Europe observed
the election days only and expressed moderate satisfaction. In December, two candidates from the ruling
party won parliamentary by-elections which their opposition challengers
condemned as fraudulent. In February 2013, presidential elections took place,
with OSCE/ODIHR pointing to further improvements in terms of administration of
the election process, including better quality of voters' lists, but also
reporting cases of pressure on voters and multiple ballot casting. Public trust
in the electoral process remained low.

In 2012, the freedoms
of expression, and assembly were generally respected. In May, the Human
Rights Defender and the police established a working group to review the Law on
Public Gatherings. The proposed revisions aimed to clarify the imprecise
language of the current law.

Media independence remained insufficient. Armenia’s broadcasting law,
amended several times, continued to raise concerns about media pluralism. The
legal basis for possible withdrawal of broadcasting licences is currently too
broad, which may lead to arbitrariness. The authorities have not taken any
further steps to reform legislation in order to adequately protect media
outlets against politically biased abuses in civil defamation cases. Print
media outlets were relatively diverse and some progress was registered in electronic
media, with ArmNews TV channel devoting a slot to the newscasts of the
opposition-related A1+ TV channel, whose licence had been revoked in 2002. The
OSCE/ODIHR election monitoring mission found that all major political parties
generally had access to the media.

In July, President
Sargsyan signed the Strategic Programme for Legal and Judicial Reforms
2012-2016. The reforms in this area do not sufficiently
address issues pertaining to the independence of the judiciary, including
limited influence of the Council of Justice (courts’ self-governing body) on
the adoption of the budget, termination of judicial powers on the grounds of
temporary incapacity to work and participation of the Minister of Justice in
disciplinary proceedings against judges. Lack of
transparency in the work of the Court of Cassation led to an unprecedented day-long
strike by 500 lawyers representing the Lawyers’ Chamber of Armenia in May.

Some progress was made in
the area of access to justice, in particular through the introduction of the
Random Case Assignment Procedure in the courts, incorporation of accelerated
pre-trial procedures for minor cases into the draft Criminal Procedure Code,
and a draft law on amendments to the Civil Procedure Code to establish the
procedure for class action suits. The EU programme supporting the reform of the justice sector allowed
Armenia to increase the number of Public Defenders from 32 to 52, which also
helped enhance access to justice. A School of Advocates was established with EU
support and is now operational. A new EU sector support programme of EUR 20
million to support further justice reforms was approved in 2012, with a top-up
of EUR 9 million from the EaPIC programme.

There are still no
concrete results from the investigation of ten deaths that occurred during the clashes
of March 2008; the EU is also concerned that allegations of ill-treatment
in police custody and violations of the right to due process have not been
adequately addressed in the aftermath of these events. The
vote in the Armenian National Assembly on setting up an ad hoc
commission to focus on the 2008 post-election unrest will not be held until
after the February 2013 presidential election.

In 2012 there was limited
action against high-level corruption, as demonstrated by several
corruption-related dismissals. Allegations of corruption throughout state
institutions continue to undermine public trust. A
number of legal acts, which could, if implemented properly, reduce the risk of
corruption, were adopted in 2012, including amendments to the Law on the
National Assembly Procedure, to the Law on Public Service and to the Law on
Political Parties. In January, a State
Commission on the Ethics of High-Ranking Officials was set up. There are
concerns about shortcomings regarding the capacity and powers of this
Commission and the transparency of its work. The
December 2012 Compliance Report by the Council of Europe’s Group of States
against Corruption (GRECO) is positive as regards implementation of
recommendations for legislation. GRECO concludes that Armenia has implemented satisfactorily 16 out of 19 recommendations contained in its Third Round
Evaluation Report, covering aspects related to incriminations and political
party funding.

In an opinion dated 28
December 2012, Transparency International Armenia alleged that large-scale
corruption occurred during the reconstruction of Yerevan city centre.

In September, the Government
adopted amendments to the decree on Procurement Process Management, aimed at
increasing the efficiency of procurement exercises on the ground, ensuring
transparency and reducing corruption risks. The Head of the State Procurement
Assistance Centre was dismissed after a report highlighted instances of
mismanagement in the procurement process. One positive development was the
launch of an 'e-payments' website to reduce the cost of service fees and to
minimise the amount of cash handling by civil/municipal servants, thus reducing
one of the corruption risk factors. In October, the National Assembly voted in favour of a request by
the Prosecutor General to revoke the immunity of a prominent Member of Parliament
who was subsequently charged with misappropriation of funds and money
laundering. The case raised concerns about its possible political motivation. Armenia ranked 105th out of 176 countries and
territories around the world in the Transparency International Corruption
Perception Index 2012.

Other human rights and governance-related issues

A National Strategy for
Human Rights Protection was signed into law in October. The Strategy and the
relevant Action Plan should ensure the implementation of a unified,
targeted and coordinated policy for the protection of human rights in Armenia.

In April, six offices of
the Human Rights Defender (ombudsman) were opened in the regions, with EU financial
support, in an effort to strengthen the capacities and accessibility of this
essential institution.

Armenian legislation
criminalising torture presents a difficulty as it does not conform to
the definition of torture in the UN Convention against Torture (it does not
include crimes committed by public officials, but only by individuals acting in
a private capacity). Accordingly, no public official has ever been convicted on
torture charges in Armenia. The Human Rights Defender, who has been designated as
the national preventive mechanism under the UN Optional Protocol to the
Convention against Torture, still lacks adequate resources to carry out his tasks
effectively.

Armenia made some efforts to improve conditions of detention in prisons,
including the refurbishment of some facilities and work on the construction of
a new prison. However, concerns remain about continued reports of severe
overcrowding, understaffing and inadequate food rations and healthcare. Hardly
any of the recommendations made on the detention of prisoners serving life
sentences have been implemented, according to the report by the Council of
Europe’s Committee for the Prevention of Torture and Inhuman or Degrading
Treatment or Punishment.

There is continuing public
anxiety about suspicious deaths in the Armenian Armed Forces under non-combat
conditions, as well as concern over the practice of hazing and other mistreatment
of conscripts by officers and fellow soldiers. Investigations into these
crimes rarely produce results. In March 2012, the National Assembly adopted a
new Military Disciplinary Code, which should improve discipline in military
establishments and enforce the rights of soldiers.

There was no significant
progress on freedom of religion and belief, in terms of proper
legislation and practice. Jevohah's Witnesses in particular have complained
about victimisation as far as provisions for alternative military service are
concerned: the Alternative Military Service Act, as amended in 2004 and 2006,
still does not guarantee conscientious objectors a genuine alternative service
of a clearly civilian character. Conscientious objectors are still imprisoned
when they refuse to perform either standard military service or the existing
'alternative' military service. A draft amendment of the law to address the
issue has not been considered yet by parliament. The Human Rights Defender, after consultations with civil society, proposed
amendments to the draft law on Freedom of Conscience and Religion, aiming
mainly to bring the draft law into line with international standards.

Regarding women's rights,
Armenia still has not adopted legislation criminalising domestic violence.
The latest reports reveal that the practice of pro-male sex-selective abortions
is on the increase. Legislation on prohibition of sex selection has not yet
been developed.

Armenia has not yet ratified the 2007 Council of Europe Convention on the
Protection of Children against Sexual Exploitation and Sexual Abuse. Since
its creation, the National Commission for the Protection of Children’s Rights
(NCCP) has not been adequately empowered. Its 2004-2012 National Plan of Action
has not been taken into account by line ministries. Progress is still lacking
in the promised “de-institutionalisation” reforms, despite the repeated
commitments of the Government to steadily reduce the number of children in
residential care and to develop a network of community social workers. Concrete
progress was however witnessed in broadening access of all children to schools,
with a progressive increase in the number of schools certified as inclusive and
the opening of pre-school facilities in many rural communities.

In its final report about
the conduct of the May parliamentary elections, the OSCE/ODIHR Election
Observation Mission stated that about 55% of polling stations observed were not
readily accessible for people with disabilities. Analysis of the UNICEF
research on access to services for children with disabilities (2012) reveals
that these children face high barriers in gaining access to services.

Comprehensive legislation
on discrimination is not yet in place, while discriminatory attitudes
are widespread. The current definition of discrimination does not cover all
forms of discrimination (race, colour, sex, language, religion, political or
other opinion, national or social origin, property, gender, sexual orientation
or other status). Moreover, efforts to ensure effective implementation of the
current laws are inadequate.

Efforts need to be stepped
up on ensuring non-discrimination in social life, in particular regarding the lesbian,
gay, bisexual and transgender community. The firebombing of a pub in Yerevan in May, the subsequent disruption of the Diversity March, cancellation of a film
screening on tolerance under pressure from unidentified entities, and
discriminatory statements from influential politicians are incompatible with
European values. This area has not been covered by the National Human Rights
Strategy.

The issues of teaching in, broadcasting in and use in courts of the minority
Assyrian, Yezidi, Kurdish and Greek languages still
need to be addressed, despite 2009 recommendations
by the Council of Europe Committee of Ministers.

The EU
has repeatedly stressed the benefits, for both policymaking and accountability,
of an active and continuous civil society dialogue. The current framework of
cooperation between government and civil society is insufficient. The
Public Council created in 2008 is inefficient and is ignored by many leading
civil society organisaions. However, dialogue with civil society started in
selected areas with the participation of the NGOs active in the EaP National
Platform. A non-paper on strengthening the role of the EaP Civil Society
National Platform in Armenia was handed over by the EU to the Armenian
authorities in December.

Cooperation on foreign and security policy, conflict prevention and confidence building

In 2012, Armenia aligned itself with
35 out of 62 EU CFSP declarations it was invited to support (40 out of 82 in
2011). Negotiations between Armenia and Azerbaijan to resolve the Nagorno-Karabakh conflict slowed down. The Armenian and
Azerbaijani Presidents have not reconvened since the Sochi meeting in January,
and the Foreign Ministers mostly limit their availability for meetings in the
OSCE Minsk Group Co-Chair format to separate approximation talks.

The security situation
remained volatile. In June, there were serious tensions at the
Armenian-Azerbaijani border with a minimum of eight servicemen reported killed.
This coincided with the visit of US Secretary of State Hillary Clinton to the
region.

The latest dynamics in
bilateral relations impact negatively on trust between the parties and run
counter to the Presidents' readiness, as expressed at the beginning of 2012, to
speed up agreement on basic principles on the basis of the work done thus far. The
EU has therefore repeatedly urged restraint in actions and public statements,
in order not to escalate an already difficult situation.

September saw the launch
of the second phase of the EU-funded civil society programme European
Partnership for the Peaceful Settlement of the Conflict over Nagorno-Karabakh
(EPNK). Its aim is to support peace-building efforts by facilitating dialogue
between civil society, the media and policymakers.

There were no positive
developments with regard to rapprochement between Armenia and Turkey. The EU continues to support the process without preconditions.

3.         ECONOMIC AND SOCIAL REFORM

Macroeconomic
framework and functioning market economy[2]

GDP growth accelerated to 7.2% in 2012, mainly driven by an increase in
private consumption and in exports, although investments continued to weaken.
Activity rose in mining, agriculture, services and construction.

Inflation remained moderate. After reaching 0.5% in May 2012, it rebounded
slightly following the increase in world energy prices. The average inflation
was 2.6% in 2012 and is expected to remain within the central bank's target of 4%
± 1.5 percentage points in the coming years. The central bank has kept the
policy interest rate steady at 8 % since September 2011.

The fiscal position
continued to improve. The budget deficit is expected to decline to 2% of GDP in
2012. According to the IMF, public debt is expected to reach 45% of GDP at the
end of 2012. Almost 90% of the debt is external, vulnerable to exchange rate
changes.

The current account
deficit is expected to remain above 10% of GDP in 2012. Remittances grew in the
first three quarters of 2012 by 7%, against 24.5% in 2011. Exports increased by
5.1% in the same period (in 2011 32.8%). The FDI in the first three quarters of
2012 was 23.5% lower than in the same period a year before. Foreign reserves
are expected to drop to 3.6 months of imports in 2012 (from 4.6 months in 2011)
due to the central bank's interventions to limit the exchange rate
fluctuations.

The economy was supported
by a financing arrangement with the IMF, expiring in mid-2013, and exceptional
donor assistance. The IMF is considering a new assistance arrangement together
with other donors, including the EU with a new Macro-Financial Assistance.

Social situation, employment and poverty reduction

The unemployment
rate for the year is expected  to decrease to 15% down from 18.4% in 2011.
National data indicate that the activity rate remained
stable at 62.9% (in September), while youth
unemployment remained at a very high level, at 39.2%. Levels of social
inclusion remained low. About 55% of Armenia’s population is not actively included in the social and public processes; the level of
inclusion in provinces is even lower, according to the latest 2011 UNDP report
on social inclusion in Armenia.

The financial crisis
partly wiped out Armenia’s recent gains in living standards and progress in poverty
reduction. Around 36% of the population is below the poverty
line, with children particularly vulnerable. More than 70% of families with
at least four children lived in poverty. Salaries
were significantly affected by the economic crisis, with the minimum salary amounting
to AMD 32000 (approximately EUR 64) in 2012.

In July, the Government
approved a strategy for integrated social services, which envisages a
social workers' institute, and launched a pilot project in the Ararat region.  Armenia also approved additional legislation to
prepare for the launch of the new pensions system in 2014. The Sustainable Development Programme on poverty reduction remained
suspended as a result of the economic crisis, and a review was initiated at the
end of 2012. The EU started preparing a programme to support the regional development in Armenia aiming to reduce the
social and economic disparities among the regions.

In November, Armenia adopted a National Employment Strategy and Action Plan 2013-2018, which includes objectives
for the medium-term in the area of employment policy and a set of actions for achieving
them.

In the area of agriculture,
in June 2012 the EU and Armenia started negotiations on the protection of
Geographical Indications in the DCFTA framework.

4.         Trade-related issues, market and regulatory
reform

The EU is Armenia's main trading partner accounting for 32.5% of its trade volume in 2011[3]. Bilateral trade flows
decreased and during the first eleven months of 2012 amounted to EUR 874
million. EU exports to Armenia consisted mainly of mechanical appliances,
precious stones and electrical machinery. EU imports from Armenia consisted mainly of base metals (cooper, iron and steel) and mineral products (ores and
slag).

In February 2012, the EU
decided to launch negotiations on a Deep and Comprehensive Free Trade Area
(DCFTA) with Armenia. The start of this process is the result of significant
progress achieved by Armenia in the preparatory phase and its substantial
efforts directed towards the implementation of all necessary requirements.
Three negotiation rounds were concluded in 2012, showing a clear willingness
and readiness of Armenia to advance in these negotiations. In parallel, Armenia continued the process of internal reforms implementing the
DCFTA-related key recommendations as outlined below.

In the area of customs
and excise, the amendment to the Law on Excise Tax allowed excise stamps for
alcohol products to be affixed under customs control. Further reforms are
necessary in the areas of verification of customs value, post-clearance
controls and certification of origin. Armenia should increasingly harmonise its
Customs Code with the Community Customs Code.

In the area of free
movement of goods and technical barriers to trade, Armenia adopted in February 2012 four fundamental laws on technical regulation, standardisation,
accreditation and uniformity of measurements. Further implementing legislation,
complementary to the aforementioned laws, was in preparation, namely a law on
market surveillance, a law on general product safety and a law on liability for
defective products. Armenia prepared implementing regulations for the reform of
the standardisation and accreditation bodies in line with EU practices.
Regarding the Government’s programme for approximation with EU legislation,
there has been progress in the area of toy safety (law drafted), while other
priority sectors will start approximation in 2013; meanwhile new priority
sectors should be identified.

Armenia adopted, following a gap analysis, a programme
for approximation with EU standards in the field of sanitary and
phytosanitary (SPS) legislation. It strengthened the capacity of the State
Service of Food Safety. It established a centre for animal-sanitary and
phyto-sanitary laboratory services within the Food Safety Service, and drafted
a programme for the capacity building of its branches. Implementation of the
Food Safety Strategy and Action Plan continued with, for example, amendments to
the law on safety of food products. Training of SPS experts continued including
with TAIEX support. Armenia is encouraged to continue
approximation and to further build laboratory capacity.

Business climate in Armenia continues to suffer from corruption
and the lack of effective competition. The situation improved
in terms of getting electricity, protection of investors and abolishing fees
for the registration of companies. Armenia advanced to
32nd place (out of 185) in the ease of doing
business ranking in the World Bank's ‘Doing Business 2013’ annual report. Armenia ranked 35th in the Economic Freedom of the World 2012 report, marking an
improvement in freedom to trade internationally.
Improvements in contract enforcement, ease of paying taxes and trading across
borders could help attract further investment to Armenia.

In the area of financial
services, Armenia developed a draft concept on the main
recommendations for strengthening regulation of bank capital and liquidity,
established by Basel III. Measures were taken for introducing the Solvency II system. A draft law on accounting, and
harmonising financial reports of small and medium-sized enterprises (SMEs) with
international standards, was sent to parliament. Further implementation efforts
are essential for the reforms in this area. Movement of capital did not undergo substantial regulatory changes in 2012.

Other key areas

Armenia adopted a tax policy strategy for 2013–15 following OECD
guidelines and a tax
administration strategy for 2012–14 that is focused on expanding the scope of
e-filing. A new compulsory income tax, merging social security deductions and
private insurance payments, entered into effect in January
2013. Armenia also introduced
software, integrating tax and customs information. A sizeable increase in Armenia’s tax revenue as envisaged by the 2012 budget was essential
for raising Government expenditure and at the same time cutting the budget
deficit. To ensure implementation of the Action Plan, Armenia is encouraged to implement further reforms in tax administration as well as in tax policy
and legislation.

No progress was made in
the area of competition. Amendments to the Competition Act and a draft State
Aid act were submitted to the Government, but were then returned for
further amendments. Four bylaws necessary for implementing the new State Aid
law were also drafted. If adopted, they would put the legislation fully in line with EU principles. Its effective implementation would still call
for appropriate resources and investigative powers for the competition
authority. Amendment of the
Competition Act is part of the Action Priority Plan of Armenia for 2012.

A new Unit on Intellectual
Property Rights (IPR) enforcement was created within the Customs Service to
deal with rightholders’
applications for customs action in respect of goods infringing IPR, indicating
progress in this area. In May, Armenia created a Trademark Association to
improve awareness and advocacy of the IPR system. Another positive development
was the change of status of the Collective Management Organisation ‘ArmAuthor‘,
which apart from authors’ rights and the obligations of the organisation, now
also addresses related rights. Armenia is drafting IPR
enforcement provisions to be included in the relevant codes. It is also drafting
a new copyright law. To encourage further IPR reform implementation,
administrative capacity should be strengthened and the creation of an IPR
enforcement centre is recommended. A twinning project is helping Armenia to enhance police enforcement capacity and to introduce EU best practice and
international standards on IPR protection and enforcement. Ratification of the
International Convention for the Protection of New Varieties of Plants was
pending and accession to the Patent Law Treaty and Trademark Law Treaty have
yet to happen.

Since January 2012 all open procurement state purchases are expected to be done through
e-procurement. However, technical difficulties are hampering the full introduction
of the new system.

In the area of statistics, Armenia published preliminary
results of the 2011 Population Census (final results are expected by the end of
2013). Preparations are under way for the Agricultural Census, with a pilot
planned for 2013. Armenia made significant progress in the implementation of
international classifications such as NACE Rev.2 (classification of economic
activities) and COICOP (classification of individual
consumption by purpose). A new user-friendly website
for statistical data was introduced to the public and significant progress was
made in developing metadata. Armenia began to approximate national legislation
with the EU regulations on data security and statistical confidentiality.

No significant progress was noted in 2012 in the area of enterprise
policy in Armenia after the recent extensive deregulation initiatives. The
Government regards SME development as a strategic priority, but the sector
still needs a strong and viable development strategy and effective policy
implementation mechanisms as well as effective implementation of the legal
framework for regulatory impact analysis (RIA). The EU continues to support
SMEs through projects such as East-Invest and the Small Business Support
programmes.

Armenia amended transparency-related regulations aimed
at ensuring standardisation and
harmonisation of information on retail services, in order to improve consumer protection.

In the area of public internal
financial control the implementation of the Government’s public finance
management reform strategy the number of internal audit functions reached 52
government entities, in addition to the City Hall of Yerevan and 46 city
communities, with the relative training underway.

No significant progress
was noted in the areas of company law, including accounting and auditing
and external auditing.

The EU continued to
provide considerable support to trade-related reforms through budget support,
the EU Advisory Group, the comprehensive institution building programme (CIB),
technical assistance, TAIEX and twinning (in the areas of IPR, SPS, market surveillance,
competition and State aid, statistics and customs, etc.). DCFTA reforms are the
main focus of sector budget support from the multi-annual programming budget 2011-2013
(NIP II).

5.         Cooperation on justice, freedom and
security

In early 2012 Armenia established an Interagency Committee responsible for the coordination,
implementation and monitoring of the EU-Armenia Mobility Partnership
signed in October 2011, as well as the National Action Plan on Migration.
An information system for migration flows would be beneficial for implementing
the plan. The EU is providing substantial support to migration and mobility in Armenia through sector policy support, the EU Advisory Group, several thematic projects, twinning
and the comprehensive institution-building programme (CIB). The EU-funded Mobility Partnership support project
"Strengthening Armenia's migration management capacities, with special
focus on reintegration activities in the framework of the EU-Armenia Mobility Partnership"
was signed in December 2012. Study visits and expert
missions on asylum procedures according to EU standards took place
through TAIEX.

The EU-Armenia
negotiations on visa facilitation and readmission agreements,
launched in February 2012, were conducted swiftly. Parties initialled both
agreements in October. The Visa Facilitation Agreement was signed on 17
December. In October the Government signed a decree that will lift the visa
obligation for EU citizens by January 2013. As of June, Armenia started issuing biometric passports.

The Government started an
ambitious project on the modernisation of Bagratashen, Bavra and Gogavan Border
Crossing Points between Armenia and Georgia in accordance with Integrated
Border Management (IBM) standards (approx. EUR 61 million). A grant of EUR 12
million from the EU Neighbourhood Investment Facility was approved, combined
with loans by the EIB and EBRD, and further support was
provided through the Eastern Partnership Integrated Border Management Flagship
initiative. In February, Armenia and FRONTEX signed a Working Arrangement.

The Council of Europe
published Armenia's first evaluation report on human trafficking,
welcoming efforts but noting a need to increase the awareness of vulnerable
groups and improve the identification of victims.

The national programme to
combat organised crime was approved in April and a timetable of measures
for its implementation was adopted. Armenia adopted a new strategy on money
laundering and financing of terrorism. Legislative amendments were prepared
for the licensing and control of the gambling business from the perspective of
combating money laundering. The amendments aim at penalising legal entities
involved in these activities and not only individuals.

Armenia should further implement the programme for combating drug addiction
and drug trafficking. In October, Armenia reiterated its willingness to
establish close cooperation with the European Monitoring Centre for Drugs and
Drug Addiction (EMCDDA).

The Ministry of Emergency
Situations established a 24-hour Situation Centre, intended to ensure effective
interagency coordination in crisis management, including response to terrorism.

In the area of police
and judicial cooperation, law enforcement authorities from Eastern Partnership
countries met in Yerevan in April in the context of a joint EU-Council of Europe project on cybercrime. The 2012-2014 police reform programme is still not finalised.

Armenia should further implement its programme for fighting illegal drugs. 
In October, Armenia reiterated its willingness to establish close cooperation
with the European monitoring centre for Drugs and Drug Addiction (EMCDDA).

Armenia ratified the Council of Europe Convention for the Protection of
Individuals with regard to Automatic Processing of Personal Data and the
Additional Protocol to this Convention in May.

6.         Transport, energy, environment, the information
society, research and innovation

Armenia made some progress towards approximation with EU and international transport
rules. Steps were taken to join the European Agreement concerning the
International Carriage of Dangerous Goods by Road (ADR) and the Convention on
Transit Trade of Land-locked States. In 2012, Armenia amended road traffic
offence legislation, increasing drivers’ responsibility for violations. Armenia pursued a policy to improve safety on its roads, but the level of accidents remains
very high compared to the EU average. The Eastern Partnership Road map 2012-13 includes
the objective of negotiating Common Aviation Area Agreements with the Eastern
Partnership countries. Achievement of this objective will depend on Armenia’s readiness and interest. With EU support, Armenia moved further towards approximation
with the EU aviation safety legislation. In infrastructure development, Armenia focused on developing the North-South road corridor. Through the Neighbourhood
Investment Facility, the EU helped Armenia to modernise road border crossings
with Georgia.

Armenia continued work on an updated energy
strategy. It was an active observer of the work of the Energy Community. Armenia decided to extend, for energy security reasons, operations at the second unit of
the Medzamor Nuclear Power Plant until a new unit is launched. Preparations
continued with a view to the construction, planned to start in 2013, of a new
nuclear power plant at the Medzamor site. In line with the EU-Armenia action
plan, the EU continues to request the earliest possible closure of Medzamor, as
it cannot be upgraded to meet internationally recognised nuclear safety
standards. Armenia is being encouraged to develop a detailed decommissioning
plan for Medzamor and to adopt a radioactive waste strategy.

Armenia pursued safety upgrading at Medzamor. The
country is also implementing a comprehensive risk and safety assessment (‘stress
tests’) at the plant, with EU technical support. The electric power output of
small hydropower plants increased. Armenia is encouraged to increase its
efforts on energy efficiency. Armenia continued upgrading the Abovyan
underground gas storage. Armenia is planning a North–South electricity grid
with its neighbours. The feasibility study for an electricity interconnection
with Georgia is underway, while the construction of such an interconnection
with Iran has started.

In the field of climate
change, Armenia announced that it would take voluntary measures to limit
greenhouse gas emissions. Seminars on energy efficiency
in housing, as well as climate change mitigation, were held throughout the year.
The Regional Environmental Centre for the Caucasus (REC-C) continued implementing
an EU-funded project on adaptation
to climate change. Armenia participated in preparations for the forthcoming regional EU Clima East project (EUR
18 million) that will be implemented in the period 2013-2016. Armenia is encouraged
to build capacity and engage in the new carbon market mechanism to be developed
following the 17th and 18th sessions of the United Nations Framework Convention
on Climate Change Conference of the Parties. Armenia is also encouraged to make
additional efforts to fully implement the Cancun and Durban agreements and
in particular devise a low-carbon development strategy.

As regards the environment, a working group including
participants from civil society continued developing a new law on environmental
impact assessment (EIA). The Nature Protection Ministry
migrated to an e-documentation system to promote transparency of activities. Deforestation
continued to be a concern, including illegal logging. Civil society
representatives questioned the ability of the revised
mining code to provide a framework for better management of mineral resources
and environmental protection, as it does not envisage any payment for resource
use or waste disposal. Armenia is encouraged to
strengthen its environmental legislation and administrative capacity, to apply EIA
procedures consistently and to pay particular attention to public participation.

The
REC-C continued its activities. Its financial and
institutional sustainability still need strengthening.

On civil protection,
an EU financed-project on disaster risk reduction was launched in June as a
follow-up to previous initiatives. Armenia also continued
to participate in the EaP flagship project on prevention, preparedness and
response to natural and man-made disasters (PPRD East). As a part of the
programme Armenia is contributing to the development of Electronic Regional
Risk Atlas. Relevant Armenian institutions are involved in respective
activities and the development phase of the atlas is close to completing in the
country.  Armenia is encouraged to take advantage of the guiding document on
Risk Assessment Policy for the EaP region produced under the PPRD East
programme.

Armenia has established National Disaster Risk Reduction Platform with
regards to the implementation of the "Hyogo Framework for Action: Building
the Resilience of Nations and Communities to Disasters" and submitted a national
progress report covering 2011 and 2012.

The Armenian market for electronic
communications grew steadily in 2012. Positive dynamics were observed in
the take-up of both fixed and mobile broadband services in the country, thanks
to the development and expansion of data transmission networks. At the time of
writing, there are three mobile operators operating mobile cellular networks
based on the 3G standard; one operator has launched commercial 4G/LTE-based
services in Yerevan. In 2012 the regulatory authority introduced mandatory
shared use of the main fixed-line operator’s ‘passive’ infrastructure to
increase competition. In December 2012, the regulatory
authority decided on the principles and schedule of mobile number portability,
which is due to be launched in January 2014.

As regards audio-visual
policy, according to Armenia’s Human Rights Defender annual report, the
National Commission on Television and Radio did not carry out sufficient
oversight functions for prevention of concentration and monopoly in the
broadcasting market.

Within the EU’s Seventh
Framework Programme for Research and Technological Development (FP7) and
its ERA-WIDE Call for Proposals on Reinforcing Cooperation with Europe’s
Neighbours, three projects focused on Armenia were approved for funding in the
fields of information and communication technologies, ecology and physics. This
increased the number of ongoing FP7-funded projects that include Armenian
partners to 25. The total EU contribution to these projects amounts to EUR 70
million, more than EUR 2 million of which went to the 17 Armenian institutions
participating in these projects.

7.         People-to-people
contacts, education and health

Implementation of Armenia’s National Education Development Strategy 2011-2012 progressed, including
through the preparation of legislative changes to reflect the special
educational needs of young people with disabilities and the training of 1,000
teachers on new teaching methodologies.

In this context, higher
education in Armenia moved decisively towards implementation of the Bologna principles, though additional accompanying measures are still needed. Challenges
remain in the development of internal and external mechanisms for quality
assurance, in reforming the financing mechanism for higher education, in integrating
with international networks and in establishing links between the higher
education sector and the labour market. Armenia assumed the Secretariat of the
Bologna Follow-up Group in July for three years; Armenia will be the host country
of the next Ministerial Conference of the European Higher Education area, which
is to take place in 2015.

In July, the Armenian Government adopted a Concept Paper for the
reform of vocational education and training (VET) and a related Action
Plan for 2012-2016. The National Training Fund on Vocational Education and
Training established its board of trustees, including representatives of public
institutions and social partners. Armenia plans to introduce a monitoring and
evaluation system in VET institutions in 2013. The EU’s budget support to VET
reform was increased by additional funds from the EaPIC programme.

Armenia continued to be actively engaged in the Tempus and Erasmus
Mundus programmes. Nine Armenian projects were selected for Tempus IV
programme support. Armenia also benefited from 13 new
scholarships for Erasmus Mundus joint Masters courses and two for Erasmus
Mundus Doctorates, together with a further 259 grants for short-term mobility
organized within a university consortium. Ten institutions and thirteen individual
researchers from Armenia participated in Marie Curie Actions to support researchers’
training, mobility and career development.

Armenian youth and youth
organisations continued benefiting from the opportunities offered by the Youth
in Action Programme. For 2012 and 2013, the ENPI provides additional funds
to the Youth in Action Programme to increase cooperation among young people,
youth workers and youth organisations from the EU and the Eastern Partnership
neighbouring countries. In 2012, the setting up of the Eastern Partnership
Youth Window within the Youth in Action Programme boosted the number of young
Armenian participants in this programme. 365 projects were selected in
2012 targeting 1022 young Armenians. In March, Armenia hosted the Eastern Partnership Platform 4 'Contacts between People' youth
event organised by the European Commission; the event focused on
increased opportunities for support, European Voluntary Service and training
and networking in the region.

Preservation
of cultural heritage and promotion of culture were strengthened thanks
to support from the Eastern Partnership Culture Programme. In 2012, 11 projects
were started in Armenia with activities centring on cinema, cultural spaces,
preservation, and equal treatment of national minorities involving a variety of
culture stakeholders.

In September, the President instructed the Ministry of Health
to prepare an urgent action plan to improve quality of care and to address
corruption in the sector including regarding public drug procurement. Armenia continued developing a new health strategy. Armenia is preparing a law on 'Medicines
and biologically active additives' which it plans to approximate with EU
standards.

[1] The Action Plan should be replaced by the Association Agenda in the
course of 2013.

[2]
Figures on GDP, inflation, trade and employment are generally from Eurostat
based on data supplied by the national statistical offices; or IMF or Commission
Staff estimates, as indicated in the Statistical Annex. When other data sources
are used these are then indicated.

[3] Data for 2012 was not available at the time of writing.

[Top](#document1)