Project Data Sheet

Project Data Sheets (PDS) contain summary information on the project or program: Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

PDS Creation Date
PDS Updated as of 30 Sep 2014

Project Name Investment Promotion
Country Armenia
Project/Program Number 47265-001
Status Approved
Geographical Location Yerevan
In preparing any country program or strategy, financing any project, or by making any designation of, or reference to, a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.
Sector Public sector management
Subsector Public sector management
Strategic Agendas Inclusive economic growth (IEG)
Drivers of Change Governance and capacity development (GCD)
Private sector development (PSD)
Gender Equity and Mainstreaming Categories

Financing

Type/Modality of Assistance Approval Number Source of Funding Approved Amount (thousand)
Technical Assistance8559Technical Assistance Special Fund750
Counterpart 250
TOTAL US$ 1,000

Summary of Environmental and Social Issues

Environmental Aspects
Involuntary Resettlement
Indigenous Peoples

Stakeholder Communication, Participation and Consultation

During Project Design
The TA has been discussed with the President of Armenia, the Prime Minister, the Ministry of Economy, the Armenia Development Agency and other key stakeholders. International financial institutions and other investment intermediaries have been consulted. Potential associate sponsors have been identified.
During Project Implementation
Participants from the private sector and international organizations will be actively involved in the TA activities.

Description

Project Rationale and Linkage to Country/Regional Strategy

a. Key Development issues to be addressed: After recording 12.2% average annual growth rates in 2003 2008, Armenian gross domestic product (GDP) contracted by 14.1% in 2009, largely due to a sudden stop in capital inflows that disrupted the real estate and construction sectors. Gross fixed capital formation declined from 39.8% of GDP in 2008 to 23.7% of GDP in 2012. GDP per capita has been recovering since 2010 and was $3,021 in 2012 but is still below 2008 levels ($3,606). Real GDP growth is expected to average 4.5% in 2013 2014. The national poverty rate stood at 35% in 2011 and is yet to recover from the 2009 economic crisis (the rate was 27.6% in 2008). Competition and productivity are constrained in many sectors, particularly in nontradable goods and services. Armenia continues to be highly dependent on external energy and financial resources. In 2013, the current account deficit is expected to slightly decline from its 2012 level of 11.2% of GDP. The large trade imbalance has been covered by growing remittances, official grants and loans, and market-based financing. Foreign direct investment (FDI) has been declining since the global financial crisis at only 4.8% of GDP in 2012 compared to 7.9% in 2008 largely due to a reduction of FDI in the construction sector. Overall, Armenia s country risk is high. Armenia's external trade can be volatile, because most of its exports are concentrated in a small number of product categories and are produced by a limited number of enterprises. Armenian firms export only 80 products with comparative advantage. The lack of strong institutions promoting nontraditional exports (heterogeneous goods to new markets) results in a heavy concentration of Armenia s non-mineral exports to only a few geographical destinations. The Russian Federation is the biggest export market for non-mineral goods and is the source of 80% 90% of remittances. Agro-processing products, such as beverages, spirits, and vinegar have significant backward linkages to agriculture but make up only about 12% of total merchandise trade. Other products that have demonstrated export potential include wine, fish and crayfish, cheeses, tomato paste, fresh and dried fruits, and vegetables. Many of these products are exported to members of the Commonwealth of Independent States (CIS), where historical ties and migration flows have built consumer awareness and distribution channels. Armenian products, however, remain largely unknown to the rest of the world. Their quality standards, for example in food safety, also require improvement to meet international standards. The country needs to diversify economic opportunities and productive capabilities to ensure sustainable economic development and poverty reduction. Success in this process will be determined by whether manufacturing firms can overcome the scale-related cost disadvantage of a small domestic market, and whether a more diversified and risk-taking manufacturing base targeted to higher-value markets can be established. Attracting committed and specialized foreign investors particularly from the large Armenian diaspora and global multinational corporations is critical for this endeavor, as they bring frontier knowledge and opportunities to integrate Armenian products into global value chains. The Armenian Development Agency (ADA) the official investment promotion agency (IPA) has been underperforming in attracting FDI compared with comparable countries. b. Link to Country Partnership Strategy/Regional Cooperation Strategy: The government s economic strategy foresees acceleration of structural transformation in 11 export-oriented industrial sectors to increase export diversification in products and destinations. Strategies and action plans for most of these strategic sectors have already been approved, and the remaining sector action plans are being finalized. Successful implementation of the action plans will help create jobs. The government is also developing an FDI strategy to attract committed foreign investors that are specialized in the strategic sectors. Free economic zones are being established to make investing in Armenia more attractive. The government will continue to pursue an economic reform agenda to simplify regulation and facilitate investments. Initiatives such as the elimination in 2011 of a large number of unnecessary regulations and the implementation of a program of tax and customs administration reforms planned for 2013 2015 will help improve the country s attractiveness to investors.

Development Impact

Increased net FDI inflows

Project Outcome

Description of Outcome
Improved capacity to bring committed investors to Armenia
Progress Towards Outcome

Outputs and Implementation Progress

Description of Project Outputs
1. Investment proposals and promotion materials upgraded 2. International investment forum successfully implemented Recommendations identified for improving the government s economic policy in strategic sectors
Status of Implementation Progress (Outputs, Activities, and Issues)
Pending govt reorganization Pending govt reorganization
Status of Development Objectives
Material Changes

Business Opportunities

Date of First Listing 2013 Oct 17
Consulting Services
The TA will require 10 person-months of international and 26 person-months of national consulting services. ADB will engage the services of an international consulting firm (professional event organizer) which will be recruited in accordance with ADB s Guidelines on the Use of Consultants (2013, as amended from time to time). The Quality and Cost-Based Selection (QCBS) procedure will be employed in recruiting the firm using biodata technical proposal. Individual consultants and resource persons will be recruited by ADB on an individual basis in accordance with ADB s Guidelines on the Use of Consultants (2013, as amended from time to time).
Procurement
All procurement will be done in accordance with ADB's Procurement Guidelines (2013, as amended from time to time). All equipment procured under the TA will become ADA 's property.
Procurement and Consulting Notices
http://www.adb.org/projects/47265-001/business-opportunities

Timetable

Concept Clearance 20 Sep 2013
Fact-finding 07 Oct 2013 to 14 Oct 2013
Management Review Meeting
Approval 13 Dec 2013
Last Review Mission

Milestones

Approval No. Approval Signing Effectivity Closing
Original Revised Actual
Technical Assistance 8559 13 Dec 2013 08 Jan 2014 08 Jan 2014 31 Dec 2015

Utilization

Date Approval Number ADB (US$ thousand) Others (US$ thousand) Net Percentage
Cumulative Contract Awards
Cumulative Disbursements

TA Amount (US$ thousand)

Approval Number Approved Amount Revised Amount Total Commitment Uncommitted Balance Total Disbursement Undisbursed Balance
Technical Assistance 8559 750 750 0 750 0 750

Contacts and Update Details

Responsible ADB Officer David Dole (ddole@adb.org)
Responsible ADB Department Central and West Asia Department
Responsible ADB Divisions Armenia Resident Mission
Executing Agencies

Links

Project Website http://www.adb.org/projects/47265-001/main
List of Project Documents http://www.adb.org/projects/47265-001/documents