# **Appendix E: Impact of harmonization of Armenian standards with the European Union**

In order to assess the National Quality Infrastructure<sup>35</sup> of Armenia, the World Bank, in collaboration with the EU Advisory Group in Armenia and the Armenian-European Policy and Legal Advice Centre (AEPLAC), conducted enterprise surveys and visited various National Quality Infrastructure institutions in October 2009 and February 2010. Their study, World Bank (2010), shows that the National Quality Infrastructure is very poorly developed in Armenia, imposes significant costs on Armenian enterprises, and will have to be significantly improved to meet the requirements of a Deep and Comprehensive Free Trade Agreement with the European Union. The study documents several problems. Among them are the following: (i) Laboratories in Armenia have poorly trained personnel, poor equipment and produce results that are subject to much skepticism; only one-quarter are accredited. Armenian enterprises complain about a shortage of certification bodies and testing laboratories. The Armenian legislative requirement that certification bodies must have their own testing laboratories limits the development of certification facilities. This is not a requirement in the EU.

(ii) There is no real industrial calibration system in place in Armenia.

(iii) “Armenian certificates are not recognized abroad, including in Russia. This is one of the main obstacles for Armenian companies wishing to export. This is directly linked to the quasinonexistence of internationally accredited certification bodies in Armenia, the lack of international recognition of the national accreditation system and the lack of international traceability in the national metrology system. Among the surveyed enterprises, the evaluation of NQI services varied from “very good” to “incompetent and corrupt”, but the majority expressed dissatisfaction with the NQI system.” World Bank (2010) (iv) “The mandatory nature of certain standards differs from the international practice of voluntary standards.’ This is a significant problem since mandatory requirements for products not subject to these requirements in export markets, limit that capacity to adapt to market needs in addition to imposing direct compliance costs.

Although Maliszewska et al., (2008) conducted a survey of Armenian exporters, they were not able to obtain estimates of their costs of compliance with EU standards. In the case of Ukraine, however, such estimates are available based on the survey of 500 Ukrainian firms that export to the EU. Those results shown in Jakubiak et al., (2006), and we shall base our estimate for Armenia on the Ukrainian data, with an adjustment for Armenian circumstances that we discuss below.

On average, the Ukrainian respondents reported that 13.9 percent of their production costs in the prior year were due to the costs of compliance with EU norms, regulations or product quality standards. One of the more significant expenditures in this regard was testing

> 35 The term ―National Quality Infrastructure‖ denotes the complete public and private infrastructure required to establish and implement the standardization, metrology, inspection, testing, certification, and accreditation services needed to prove that products and services meet defined requirements, whether demanded by authorities or the market.

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