KOCHARIAN ESTABLISHES MCA BOARD, DISCUSSES COMPACT

UNCLAS SECTION 01 OF 02 YEREVAN 001293

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SUBJECT: KOCHARIAN ESTABLISHES MCA BOARD, DISCUSSES COMPACT
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1. (U) Sensitive But Unclassified. Please treat
accordingly.

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SUMMARY
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2. (SBU) The GOAM has formed a Board of Trustees under the
authority of the Prime Minister Andranik Margaryan with
Chief Economic Adviser of the President of the Republic of
Armenia Vahram Nercissiantz as Deputy Chair, to oversee
Armenia's Millennium Challenge Account (MCA) compact
submission. Kocharian suggested during his June 1 meeting
with a Millennium Challenge Corporation (MCC) delegation led
by CEO Applegarth that Armenia's initial compact submission
would focus on large-scale infrastructure projects.
Presidential Chief Economic Advisor Vahram Nercissiantz
outlined initial plans to finalize MCA compact proposals,
solicit civil society input and submit the final product to
the USG by the end of July. Kocharian appeared to take on
board MCC admonitions regarding the importance of civil
society input when creating Armenia's MCA compact
submission. During a May 31 meeting with Prime Minister
Andranik Margaryan, GOAM officials including Minister of
Finance and Economy Khachatrian hinted that Armenia's
initial plans for an MCC compact proposal would likely
involve the agricultural sector and a large-scale water
project. End Summary.


3. (SBU) President Robert Kocharian announced by official
decree on June 1 that a GOAM Board of Trustees under the
authority of the Prime Minister Andranik Margaryan and led
by the Minister of Finance and Economy Vardan Khachatrian
would oversee Armenia's Millennium Challenge Account (MCA)
compact submission. According to the decree, the Board will
also include the Minister of Agriculture David Lokyan,
Minister of Transport and Communication Andranik Manoukian,
and the Chairman of the Water Resources Management Committee
Andranik Andreassyan. While short and general in nature,
the decree does include language empowering the Board to
establish working groups comprised of GOAM, donor community
and NGOs presumably for purposes of consultation in
coordination with a future MCA compact proposal.


4. (SBU) Kocharian suggested during his June 1 meeting with
a Millennium Challenge Corporation (MCC) delegation led by
CEO Applegarth that Armenia's initial compact submission
would focus on large-scale infrastructure projects. While
not going into detail, Kocharian revealed a confident
posture regarding the eventual viability of Armenia's
compact proposal. Following MCC Applegarth's delineation of
the three criteria against which the USG would scrutinize
compact proposals (a project's positive impact on long-term
economic growth, input from civil society in the compact
formulation process and a commitment to continued progress
on MCA indicators),Kocharian requested that Kchachatryan
and others at the meeting incorporate these elements into
Armenia's submission.


5. (SBU) Kocharian reported that long delays during the
implementation of Lincy Foundation projects in 2002 and 2003
had caused negative internal pressure within his
administration and from the general public and expressed
concern that any future MCA compact be negotiated and
implemented as quickly as possible. He underscored his
philosophy that in order to be successful, any MCA project
would need to impact a wide portion of the population, lest
it carry the perception of a program designed for the elite
and implemented by the elite.


6. (SBU) Presidential Chief Economic Advisor Vahram
Nercissiantz outlined initial plans to finalize MCA compact
proposals, solicit civil society input and submit the final
product to the USG by the end of July. Nercissiantz said
that a first draft of the compact proposal could be in
circulation among GOAM entities for comment as early as June

11. Kocharian appeared to take on board MCC's repeated
admonitions regarding the importance of civil society input
when creating Armenia's MCA compact submission. By the end
of the meeting, Kocharian and Nercissiantz made references
to initiating a new set of civil society consultations in
contrast to earlier suggestions that former consultative
processes (specifically those related to Armenia's Poverty
Reduction Strategy Paper) might already count toward this
exercise.


7. (SBU) During a May 31 meeting with Prime Minister
Andranik Margaryan, GOAM officials hinted that Armenia's
initial plans for an MCC compact proposal would likely
involve the agricultural sector and a large-scale water
project. The Prime Minister openly deferred to Minister of
Finance and Economy Khachatrian on detailed points of
substance, foreshadowing the June 1 presidential decree and
paralleling suggestions by various GOAM officials that the
Ministry of Finance and Economy would serve as the principal
ministry in charge of future MCA issues.


8. Begin text of the June 1 Presidential Decree:

EXECUTIVE ORDER OF THE PRESIDENT OF THE REPUBLIC OF ARMENIA
ON ESTABLISHING THE BOARD OF TRUSTEES FOR THE ARMENIAN
PROJECT OF THE MILLENNIUM CHALLENGE ACCOUNT

Based on Article 55(6) of the Constitution of the Republic
of Armenia and for the purpose of developing proposals for
submission to the Millennium Challenge Account of the U.S.
Millennium Challenge Corporation, getting assistance,
directing and coordinating the process of implementation of
the said project activities I decree:

To establish a Board of Trustees (hereinafter to be referred
as Board) for the Armenian Project of the Millennium
Challenge Account with the following composition:

--Prime Minister of the Republic of Armenia (Chairman of the
Board)
--Chief Economic Adviser of the President of the Republic of
Armenia (Deputy Chairman of the Board)
--Minister of Finance and Economy of the Republic of Armenia
--Minister of Agriculture of the Republic of Armenia
--Minister of Transport and Communication of the Republic of
Armenia
--Chairman of the Water Resources Management Committee of
the Government of the Republic of Armenia

To define that:
The Chairman of the Board is authorized to establish working
groups comprised of the representatives of central and local
governments, donor organizations and non-governmental units,
if necessary;

The Chairman of the Board regularly reports the President of
the Republic of Armenia on the activities of the Board;

The Board approves the procedures for organizing and
implementing the activities of the Board.

This order becomes effective on the next day following its
official promulgation.


R. Kocharian
President of the Republic of Armenia
May 31, 2004
Yerevan

End text.
ORDWAY