The Transition in Armenia

USAID/E&E/POProgram Office

Bureau for Europe and EurasiaU.S. Agency for International Development

February 2005

Economic and Democratic Reforms in 2004

Eco

no

mic

Ref

orm

s

Democratic Reforms

EU-15

EU-15

Ratings are based on a 1 to 5 scale, with 5 representing most advanced. USAID drawing from Freedom House, Nations in Transit 2004 (2004), and EBRD, Transition Report 2004 (November 2004).

Mac

Alb

Cro

SerBos

Bul

Rom

Southern Tier CEE

Kos

Mont

Northern Tier CEE

Hun

Pol Lat

CzeEst

SlnSlkLit

Eurasia

Rus

Tkm

MolKyr

Kaz

Uzb

Taj

Bel

Ukr

1

2

3

4

5

1 2 3 4 5

GeoArm

Aze

First Stage Economic Reform

Infrastructure, 2.3

Non Bank Financial

Reform, 2.0Banking

Reform, 2.3

Competition Policy, 2.0

Enterprise Reform, 2.3

012

34

5Second Stage Economic Reform

Average of Northern TierAt Graduation

Large Scale Privatization,

3.3

Price Liberalization ,

5.0

Small Scale Privatization,

4.0

Trade and Foreign

Exchange, 5.0012345

First Stage Economic Reform

Average of Northern TierAt Graduation

Economic Reform in Armenia in 2004

Ratings are based on a scale from 1 to 5, with 5 representing the best score. USAID, Monitoring Country Progress in CEE & Eurasia #9 (2004 forthcoming) drawing from EBRD, Transition Report 2004 (November 2004).

Average of Romania &

Bulgaria(2002)

Large Scale Privatization,

3.3

Price Liberalization ,

5.0

Small Scale Privatization,

4.0

Trade and Foreign

Exchange, 5.0

12345

Average of Romania &

Bulgaria(2002)

Second Stage Economic Reform

Infrastructure, 2.3

Non Bank Financial

Reform, 2.0Banking

Reform, 2.3

Competition Policy, 2.0

Enterprise Reform, 2.3

12

34

5

Private Sector Share of GDP 1990-2004%

of

GD

P f

rom

Pri

vate

Sec

tor

EBRD, Transition Report 2004 (November 2004 and earlier editions).

10

15

10 9

15

0

10

20

30

40

50

60

70

80

Azerbaijan Georgia Armenia Eurasia Northern TierCEE

1990

20 20

40

25

54

1994

45

60 60

48

70

1998

60

65

70

55

76

2002

60

65

75

56

76

2004

Democratic Reforms in Armenia in 2003

Ratings are based on a scale from 1 to 5, with 5 representing the best score. USAID, Monitoring Country Progress in CEE & Eurasia #9 (2004) drawing from Freedom House, Nations in Transit 2004.

Average of Romania

and Bulgaria(2002)

Civil Society, 3.5

Independent Media, 2.3

Governance / Public Admin,

2.6

Rule of Law, 2.4

Corruption, 1.9

Electoral Process, 1.9

1

23

4

5

Average of NT CEE

at graduation

Civil Society, 3.5

Independent Media, 2.3

Governance / Public Admin,

2.6

Rule of Law, 2.4

Corruption, 1.9

Electoral Process, 1.9

1234

5

Democratic FreedomsD

emo

crat

ic F

reed

om

sg

rea

ter

fre

ed

om

s

Ratings from 1 to 5, with 5 representing greatest development of political rights/civil liberties. The data are an aggregation of Freedom House’s political rights and civil liberties indices; Freedom House, Freedom in the World 2005 (2005 and previous editions).

Northern Tier CEE

Armenia

Georgia

Southern Tier CEE

Eurasia

Azerbaijan

1

2

3

4

5

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Economic and Democratic Reforms in Armenia

Eco

no

mic

Ref

orm

s

Ratings are based on a 1 to 5 scale, with 5 representing the most advanced. USAID drawing from EBRD, Transition Report 2004 (November 2004) & Freedom House, NIT (2004).

Democratic Reforms

1

2

3

4

5

1 2 2 3 3 4 4 5 5

1995

1992

93-94

19971996

1991

20002001

1998-99

0320042002

Microsoft PowerPoint

Presentation

Freedom House, Nations in Transit 2004 (2004); Ratings from 1 to 5, with 5 representing greatest progress in democratic reforms.

Democratic Reforms in ArmeniaD

emo

crat

ic R

efo

rms

grea

ter

refo

rms

1

2

3

4

5

Civil Society Independent MediaGovernance &Pub. Admin.

Rule of Law Electoral Process Anti-Corruption

1996 1998 2000 2002 2003

Transparency International, Corruption Perceptions Index 2004 (2004). Ratings on a 1 to 10, with 10 representing least amount of corruption.

Corruption Perceptions in 2004C

orr

up

tio

n P

erce

pti

on

s In

dex

(Transparency International)

10

9

8

7

6

5

4

3

2

1

3.1

AR

ME

NIA

2.0

GE

OR

GIA

1.9

AZ

ER

BA

IJA

N

1.51.5

2.22.3

2.8

3.94.2

4.8

7.5

9.7

Fin

land

US

A

Italy

El S

alva

dor

Bra

zil

Moz

ambi

que

Sie

rra

Leon

e

Sud

an

4.0

4.6

6.06.0

Slo

veni

a

Est

onia

Lith

uani

a

Latv

ia

2.52.72.7

2.93.1

3.5

4.1

Bul

garia

Cro

atia

Bos

nia

& H

erz

Rom

ania

Mac

edon

ia

Ser

bia

& M

ont

Alb

ania

2.02.22.22.22.3

2.8

4.6B

elar

us

Rus

sia

Uzb

ekis

tan

Kaz

akhs

tan

Ukr

aine

Kyr

gyzs

tan

Taj

ikis

tan

Hai

ti

Ban

glad

esh

World Bank, Anticorruption in Transition 2, Corruption in Enterprise-State Interactions in Europe and Central Asia 1999-2002 (2004).

Bribes in Businesses in Europe &Eurasia%

3.8

3.3

2.8 2.8

1.4

0.9 0.9

0.4

3.43.3

2.83.0

3.3

2.32.4

2.2

0

1

2

3

4

5

Kyrgy

zsta

n

Albania

Azerb

aijan

Georg

ia

Russia

Armen

ia

Czech

Rep

ublic

Estonia

1= N

ever

, 6=

Alw

ays

0

1

2

3

4

5Bribes as Share of

Revenue 2002Bribe Frequency

1999 & 2002

3.33.4

3.9

2.9 2.8

3.1

2.8

2.4

Kyrgy

zsta

n

Albania

Azerb

aijan

Georg

ia

Russia

Armen

ia

Czech

Rep

ublic

Estonia

4.2

1999 2002

World Bank, Anticorruption in Transition 2, Corruption in Enterprise-State Interactions in Europe and Central Asia 1999-2002 (2004).

Share of Captor Firms in 1999 & 2002%

0

10

20

30

40

50

60

Azerbaijan Georgia Lithuania Bosnia &Herz

Russia Bulgaria Armenia

World Bank, Anticorruption in Transition 2, Corruption in Enterprise-State Interactions in Europe and Central Asia 1999-2002 (2004).

Degree of Impact of State Capture in 2002

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Armen

ia

Kazak

hsta

n

Russia

Hunga

ry

Belaru

s

Estonia

Poland

Sloven

ia

Czech

Rep

ublic

Azerb

aijan

Lithu

ania

Ukrain

e

Roman

ia

Croat

ia

Kyrgy

z Rep

ublic

Slovak

Rep

ublic

Mol

dova

Uzbek

istan

Georg

ia

Latvi

aSaM

Tajikis

tan

Albania

Bulgar

iaBiH

FYR M

aced

onia

Ind

ex

World Bank, Doing Business in 2005 (2004).

Starting and Closing a Business

Days to Start a Business

Years to Close a Business

0

25

50

75

100

125

150

175

200

225

2 5

Austra

lia

United

Sta

tes

25

Armen

ia

25

Georg

ia

36

61

Russia

Sloven

ia

123

Azerb

aijan

152 155

203

Brazil

Congo

Haiti

01

Irelan

d

Canad

a

2

Armen

ia

3

Azerb

aijan

3

United

Sta

tes

3

Georg

ia

2

6

9

Russia

Belaru

s

Czech

Rep

ublic

10

India

0

1

2

3

4

5

6

7

8

9

10

Days to Register a Business

Years to go Through Bankruptcy

Economic Performance and Human Capital in 2002-2004

USAID, MCP#9 (2004) drawing from World Bank, World Development Indicators 2004 (2004); UNICEF, Social Monitor 2004 (2004); EBRD, Transition Report (November 2004); Ayyagari, Beck, and Demirguc-Kunt, Small and Medium Enterprises across the Globe: A New Database, World Bank Policy Research Working Paper 3127, (August 2003).

Eco

no

mic

Per

form

ance

Human Capital

Southern Tier CEE

Ser

CroAlb

Rom

Bos

MacBul

Mont

Northern Tier CEE

Lat

Lit

Est Hun

Slk

Cze

Pol

Sln

Uzb

Taj

Kyr

Tkm

Kaz

Rus

Ukr

Mol

Eurasia

Bel

1

2

3

4

5

1 2 3 4 5

Aze

Geo

Arm

Ratings are based on a scale from 1 to 5, with 5 representing the best score. USAID, Monitoring Country Progress in CEE & Eurasia #9 (2004) drawing from World Bank, World Development Indicators 2004 (2004); EBRD, Transition Report (November 2004), M. Ayyagari, T. Beck, and A. Demirguc-Kunt, Small and Medium Enterprises across the Globe: World Bank Policy Research Working Paper 3127, August 2003. SME data no later than 1998.

Economic Performance Index in Armenia in 2002 - 2004

External Debt % GDP, 3.5

Share of employment in

SMEs, 0.5

Export share of GDP, 1.0

FDI pc cumulative,

1.5

GDP as % 89 GDP, 3.0

3 Year Avg Inflation, 4.5

Private Sector Share, 4.5

12345

Average of NT CEE

at graduation

External Debt % GDP, 3.5 Share of

employment in SMEs, 0.5

Export share of GDP, 1.0

FDI pc cumulative,

1.5

GDP as % 89 GDP, 3.0

3 Year Avg Inflation, 4.5

Private Sector Share, 4.5

1

2

3

4

5

Average of Romania

and Bulgaria(2002)

1989

= 1

00Real GDP as % of 1989 GDP

EBRD, Transition Report (November 2004).

Georgia

Northern Tier CEE

Southern Tier CEE

Eurasia

Armenia

Azerbaijan

20

30

40

50

60

70

80

90

100

110

120

130

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Employment, Real Wages and GDP in Armenia(as % 1989)

1989

=10

0

EBRD, Transition Report 2004 (November 2004 and earlier editions); UNICEF, Social Monitor 2004 (October 2004); and UNECE, Economic Survey of Europe, 2004 No. 2 (2004).

GDP

Employment in Industry

Employment

Real Wages

0

20

40

60

80

100

120

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

0

10

20

30

40

50

60

70

80

25

Northern Tier CEE

Less Baltics

37

Southern Tier CEE

38

Baltics

44

Eurasia

Informal Economy in 2002-03%

of

the

Siz

e o

f G

DP

Schneider, Friedrich, “The Size of the Shadow Economies of 145 Countries all over the World: First Results over the Period 1999 to 2003 (December 2004).

8

UnitedStates

15

Canada

49

Armenia

61

Azerbaijan

68

Georgia

48

El Salvador Bolivia

68

Peru

61

Cumulative Foreign Direct Investment 1989-2004

US

$ p

er c

apit

a

EBRD, Transition Report (November 2004).

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Czech

Rep

ublic

Estonia

Hunga

ry

Slovak

ia

Sloven

ia

Latvi

a

Poland

Lithu

ania

Croat

ia

Bulgar

ia

FYR Mac

edon

ia

Roman

ia

Albania

Serbia

& M

onte

negr

o

Bosnia

-Her

zego

vina

Azerb

aijan

Kazak

hsta

n

Russia

Turkm

enist

an

Mold

ova

Belaru

s

Ukrain

e

Kyrgy

zsta

n

Uzbek

istan

Tajikis

tan

Georg

ia

Armen

ia

World Bank, World Development Indicators (2004); UNICEF, Social Monitor 2004 (October 2004).

Remittances as % GDP%

GD

P

World Bank

0.2

UNICEF

1617

13

6

4

0

5

10

15

20

25

30

17

12

1.3

Yemen El Salvador Mexico

1413

9

32

0.6

Albania Bosnia Serbia &Montenegro

Georgia Macedonia Armenia EMU

9

IMF10

National Statistics Survey of Republic of Armenia

25USAID Funded Study

In Migration and Out Migration in the World

World Bank, World Development Indicators (2004). Migration and emigration are calculated as residuals from total population change less the natural change in population.

Mig

ran

ts p

er 1

,000

per

son

s

E&E

High Income

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4

0.5

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

LAC

EMU

Net Migration Rates

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Mig

ran

ts p

er 1

,000

per

son

s

World Bank, World Development Indicators (2004). Migration and emigration are calculated as residuals from total population change less the natural change in population.

High Income

EMU LAC

Armenia

E&E

Kazakhstan

Albania

World Bank, World Development Indicators (2004). Missing values were interpolated.

Fertility Rates in E&EC

hild

ren

per

Wo

man

Tajikistan

Replacement Rate = 2.1

Kyrgyzstan

Slovenia

Uzbekistan

Albania

Armenia

Azerbaijan

Georgia

Russia

0

1

2

3

4

5

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

UNHCR, 2002 Statistics on Asylum-Seekers, Refugees and Others of Concern to UNHCR (2002).Refugees are foreign persons granted humanitarian status or temporary protection as recognized by the 1951 UN Refugee Convention. Internally Displaced Persons (IDPs) are citizens who have been displaced from their homes and are under the protection of the UNHCR.

Refugees and Internally Displaced Persons (IDPs) By Country of Origin

Ref

ug

ees

and

ID

Ps

per

1,0

00 P

erso

ns

0

50

100

150

200

250

300

350

400375

222

153

Bosnia

-Her

z

91

34

58

Croat

ia

51

46

4

Georg

ia

48

3612

Serbia

-Mon

t

31

2011

Tajikis

tan

348

175

172

Liber

ia

164

35

130

Afgha

nista

n

133

63

71

Somali

a

106

103

3

Leba

non

31

31

0

Colom

bia

IDPs Refugees

107

71

35

Azerb

aijan

60

18

42

Armen

ia

Human Capital Index in Armenia in 2002-03

Ratings are based on a scale from 1 to 5, with 5 representing the best score. USAID, Monitoring Country Progress in CEE & Eurasia #9 (2004) drawing from World Bank, World Development Indicators 2004 (2004); UNICEF, Social Monitor 2004 (2004).

Average of Romania

and Bulgaria(2002)

Secondary School

Enrollment, 2.0

Public Expenditure Education,

0.5Life Expectancy,

4.5

Under 5 Mortality, 3.0

Public Expenditure Health, 0.5

Per Capita Income, 1.5

12345

Average of NT CEE

at graduation

Secondary School

Enrollment, 2.0

Public Expenditure Education,

0.5Life Expectancy,

4.5

Under 5 Mortality, 3.0

Public Expenditure Health, 0.5

Per Capita Income, 1.5

12345

67

68

69

70

71

72

73

74

75

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Life Expectancy at BirthY

ears

fo

r to

tal P

op

ula

tio

n

a. World Bank estimate. b. UNICEF estimate. World Bank, World Development Indicators 2004 (April 2004). Missing data were estimated by interpolation.

Northern Tier CEE

Armenia

Southern Tier CEE

Georgia

Eurasia

Infant Mortality RatesP

er 1

,000

Liv

e B

irth

s

World Bank, World Development Indicators 2004 (April 2004). West NIS consists of Belarus, Moldova, and Ukraine.

1980 1990 1995 2002

23

15 1310

0

10

20

30

40

50

60

70

80

90

100

110

120

Northern TierCEE

43

28

2219

Southern TierCEE

35

21 22 21

Russia

35

27 2724

West NIS

43

29 29 29

Georgia

86 85 84 85

Central AsianRepublics

117

106102

96

Azerbaijan

80

60

49

35

Armenia

Poverty in Armenia%

IMF, Republic of Armenia: 2004 Article IV Consultation, Sixth Review Under the Poverty Reduction and Growth Facility, and Request for Waiver of Performance Criteria (December 2004).

5559

67

51

23

30

35

18

0

10

20

30

40

50

60

70

Total Yerevan Otherurban

Rural Total Yerevan Otherurban

Rural

98/99

51

45

60

49

16 17

21

14

2001 / 2002

43

48

8

2003

Extreme PovertyOverall Poverty

Tuberculosis IncidenceT

B C

ases

per

100

,000

per

son

s

WHO, European Health for All Database (2004).

EU-15

Georgia

Slovenia

ARMENIA

Azerbaijan

Kazakhstan

Kyrgyzstan

Romania

Russia

Ukraine

0

20

40

60

80

100

120

140

160

180

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

0

1

2

3

4

5

6

7

8

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Public Expenditure on Health%

GD

P Romania

Czech Republic

ARMENIA

Georgia

OECD

EMU

UNICEF, Social Monitor (2004); World Bank, World Development Indicators (2004).

Azerbaijan

Smoking Prevalence in Adults in 1999-01

World Health Organization; Tobacco Control Database 2004. E&E is a sample of 19 countries.

Per

cen

tag

e

33

21

0

10

20

30

40

50

60

70

80

France

45

16

E&E

Male Female

68

58

48

31

27

3

14

34

1

13

Armenia Ukraine Serbia-Mon. Azerbaijan Czech

Male Female Male Female Male Female Male Female Male Female Male Female

3229

Denmark

Male Female

29

25

UK

Male Female

0

20

40

60

80

100

120

140

160

180

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Tuberculosis IncidenceT

B C

ases

per

100

,000

per

son

s

WHO, European Health for All Database (2004).

EU-15

Armenia

Kazakhstan

Romania

Kyrgyzstan

Georgia

Ukraine

Slovenia

Russia

Azerbaijan

Public Expenditure on Education%

GD

P OECD

Developing Countries

UNICEF, Social Monitor (2004); World Bank, World Development Indicators (2004).

Romania

Poland

ARMENIA

Georgia

Azerbaijan

0

1

2

3

4

5

6

7

8

9

10

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Secondary School Enrollment%

of

15 -

18

po

pu

lati

on

Poland

Gross rates; general secondary plus vocational/technical secondary combined.UNICEF, Social Monitor (2004).

Tajikistan

GEORGIAARMENIA

AZERBAIJAN

Hungary

Croatia

Bulgaria

Russia

AlbaniaMoldova

20

40

60

80

100

120

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Economic Freedom and Ruling Justly in 2003-2004

Drawn from The Millennium Challenge Account dataset.  The sample consists of 82 countries. Ratings are based on a 1 to 5 scale, with 5 being the most advanced. Economic freedom consists of six indicators: (a) country credit rating; (b) inflation; (c) regulatory quality; (d) fiscal balance; (e) trade policy; and (f) days to start a business.  Ruling justly consists of six indicators: (a) control of corruption; (b) rule of law; (c) voice and accountability; (d) government effectiveness; (e) civil liberties; and (f) political rights.

Mol

Guyana

Haiti

Arm

Aze

GeoTkm

Kyr

TajUkr Benin

Bol

Ghana

Honduras

Burkina

Malawi

Paraguay

Angola

Zimbabwe

1

2

3

4

5

1 2 3 4 5Ruling Justly

Ec

on

om

ic F

ree

do

m

Economic Freedom and Investing in People in 2003 - 2004

Drawn from The Millennium Challenge Account dataset.  The sample consists of 82 countries. Ratings are based on a 1 to 5 scale, with 5 being the most advanced. Economic freedom consists of six indicators: (a) country credit rating; (b) inflation; (c) regulatory quality; (d) fiscal balance; (e) trade policy; and (f) days to start a business.  Investing in people consists of four indicators: (a) immunization rate (DPT and measles); (b) primary education completion rate; (c) public primary education spending; and (d) public expenditure on health.

Haiti

Arm

AzeGeo

Tkm

Mol

Kyr

TajUkr

Benin

Bol

Ghana

Honduras

Burkina

GuyanaMalawi

Paraguay

Angola

Zimbabwe

1

2

3

4

5

1 2 3 4 5Investing in People

Eco

no

mic

Fre

edo

m

Armenia & MCA in 2003- 2004

Ratings are based on a scale from 1 to 5, with 5 representing the best score. The Sample consists of 82 countries. Data are drawn from The Millennium Challenge Account dataset.

Days to Start a Business,

4.8

Regulatory Quality, 3.8

Trade Policy, 4.0

Fiscal Deficits, 4.2

Credit Rating, 2.0

Inflation, 3.6

012345

Economic Freedom

Median

Control of Corruption,

3.1

Rule of Law, 3.4 Govt

Effectiveness, 3.4

Voice and Accountability,

3.3

Political Rights, 2.9

Civil Liberties, 2.9

01

23

4

5Ruling Justly

Median

Immunization Rates, 4.8

Health expenditure as

% GDP, 2.2

Girls Education

Completion, 4.8

Primary Education

expenditure as % GDP, 1.9

012345

Investing in People

Median