ARMENIA MCA BI-WEEKLY REPORT -- JUNE 15, 2004

UNCLAS SECTION 01 OF 02 YEREVAN 001343

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DEPT FOR EUR/CACEN, EUR/ACE, EUR/PGI, DRL, EB
DEPT PLEASE PASS USAID AND MCC

SENSITIVE

E.O. 12958: N/A
TAGS: PREL PGOV EAID AM
SUBJECT: ARMENIA MCA BI-WEEKLY REPORT -- JUNE 15, 2004

REF: YEREVAN 1293


1. (U) Sensitive But Unclassified. Please treat
accordingly.

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GOAM MCA BOARD CONVENES FIRST "CONSULTATIVE" MEETING
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2. (U) Minister of Finance and Economy Vardan Khachatryan
hosted the GOAM's first "consultative session" with the
public regarding the MCA on June 4. Approximately fifty
representatives from the GOAM, NGOs, businesses and donor
organizations attended the meeting. Khachatryan opened the
meeting by emphasizing the need for any future MCA funds to
reach vulnerable populations living outside Yerevan
(estimated at 90 percent of Armenia's poor). Khachatryan
echoed MCC Chairman Applegarth's statements during his early
June visit to Yerevan that a successful MCA compact must
contribute to sustainable economic growth, involve broad
consultation with civil society and positively affect MCA
eligibility criteria. Khachatryan previewed the structure
and function of the GOAM's MCC Board (headed by Prime
Minister Andranik Margaryan) and said that NGOs, businesses
and local government officials would have a role in the
board's deliberations. Press representatives from a wide
variety of newspapers and agencies were present during the
meeting.


3. (SBU) In a surprising move that broke with his
traditional meeting style, MinFE turned the floor over to
Post, donor organizations and NGOs for comments after only
these brief introductory remarks. Ambassador Ordway
underscored the fact that MCA funding was not guaranteed for
Armenia and emphasized the fact that MCA compacts would have
to be competitive in order to win MCC funding. He also
encouraged the GOAM to take its time in conducting the
consultative process, echoing MCC delegation comments that a
quality consultative process was one of the key elements for
a successful MCA compact.


4. (U) IFI and Multilateral Organization representatives
made brief presentations as part of the meeting. UN
Resident Representative Lise Grande congratulated meeting
participants for proposing projects that complemented
Armenia's Poverty Reduction Strategy Paper (PRSP). She
urged GOAM leadership not to allow any future MCA funding to
eclipse ongoing economic growth projects (specifically job
creation efforts). World Bank Representative Roger Robinson
said the World Bank would not reduce funding for Armenia
even if a successful MCA compact involved sectors in which
his organization already sponsored ongoing projects. He
offered World Bank technical support for any projects
involving rural water accessibility and road rehabilitation.
IMF Resident Representative James McHugh said that private
sector growth should not be ignored during the formulation
of a successful MCA compact. According to McHugh, private
sector growth remains key to accomplishing MCA objectives
and should be part of the GOAM's focus when designing its
compact.

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PRESIDENT'S CHIEF ADVISOR ON CONSULTATIVE PROCESS
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5. (SBU) President Kocharian's Chief Economic Advisor Vahram
Nercissiantz told us June 11 that he, as part of the GOAM's
MCC Board, was anxious for feedback on the GOAM's
consultative process with the public regarding an MCA
compact. He said that the GOAM was planning to
institutionalize the involvement of the business community
by formalizing the activity of the High Business Council (a
business forum consisting of important local private sector
representatives) as part of the consultative process.
Nercissiantz said that the Prime Minister had appointed
someone from his office to act as MCA recorder. This person
would record notes and compile recommendations from the
various consultative meetings for use by the GOAM MCA Board.
The Ambassador and Nercissiantz discussed the utility of
following a model similar to the June 4 meeting (allowing
NGOs to present ideas before GOAM representatives and
allowing press to be present and document the event) during
subsequent consultations with the public. Nercissiantz
agreed that the consultative process should move beyond
Yerevan and include the widest possible range of local NGOs.
Both sides discussed the need for the consultative process
to serve as more than mere "cover" for a GOAM-backed
proposal. They discussed ways for the GOAM to incorporate
public feedback during the compact design phase.


6. (SBU) Nercissiantz stood by earlier forecasts that the
GOAM would be ready to submit an MCA compact proposal to the
MCC by the end of July. He mentioned upcoming travel by
GOAM representatives (including FM Oskanian's June 14-15
trip to Washington and Nercissiantz' own plans to visit
Washington in July) as an opportunity to meet with MCC
officials and other stakeholders in advance of officially
submitting the GOAM's first draft compact proposal.
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WIDE PRESS COVERAGE, INCLUDING SOME INCORRECT RUMORS
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7. (U) There was wide press coverage of the MCC delegation
visit to Armenia and MCC Chairman Applegarth's June 1 press
conference. Nearly all television outlets and newspapers
carried footage of Applegarth's statements, including clear
indications that there was neither a pre-arranged guarantee
of MCA funding for Armenia nor a tentative agreement
regarding funding levels for countries.


8. (SBU) Subsequent press reports regarding MCA included
wide coverage of the June 4 consultative meeting and were
mostly objective. Among the most notable themes of the
press coverage of the first consultative meeting was the
fact that well-known political figures (including GOAM
National Minorities and Regional Issues Representative
Hranush Kharatian and "Dignity" Party founder Lyudmila
Harutyunian) used the forum not only to discuss MCA but to
voice concern over the effectiveness of the GOAM's long-term
economic strategy in rural areas.


9. (SBU) A problematic statement made by Minister of Finance
and Economy Vardan Khachatryan on June 9 to the ARKA news
agency, however, has clouded otherwise objective and on-task
reporting regarding MCA. According to the statement,
reportedly made to an individual journalist and not as part
of an MCA-related meeting or press availability, Khachatryan
previewed the GOAM's intention to rollout an MCA compact
involving a five-year schedule of projects in multiple
sectors totaling over USD 600 million. Khachatryan
reportedly told reporters that while the GOAM would support
any "worthy" proposal suggested by the public as part of its
MCA compact submission, the GOAM was looking primarily at
rural water accessibility and road rehabilitation.
(Comment: The context of Khachatryan's reported comments
remains unclear and Post has been unsuccessful in obtaining
official clarification from him or his office. End
comment.)
ORDWAY