ARMENIA MCA BI-WEEKLY REPORT -- JULY 2, 2004

UNCLAS SECTION 01 OF 02 YEREVAN 001507

SIPDIS

SENSITIVE

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

E.O. 12958: N/A
TAGS: PREL PGOV EAID AM
SUBJECT: ARMENIA MCA BI-WEEKLY REPORT -- JULY 2, 2004

REF: YEREVAN 1343


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

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GOAM MCA BOARD MEETINGS CONTINUE
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2. (SBU) GOAM sources tell us that the GOAM MCA Board has
met a total of seven times to date. This number, however,
includes five consultative sessions in which GOAM MCA Board
members participated as well as internal meetings of the
Board. According to the Prime Minister's Office, the Board
will meet at least once per month and will likely convene
more often in the weeks preceding submission of Armenia's
MCA compact proposal. MCA Board meetings have not been open
to the press but have included press availability
immediately following the session. In contrast,
consultative sessions have been open to the press and
public. The Prime Minister's office invited an Embassy
representative to attend the next MCA Board meeting.

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CONSULTATIVE PROCESS WILL MOVE TO REGIONS
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3. (SBU) The Prime Minister and GOAM MCA Board instructed
the governors of Armenia's eleven provinces, who attended
the most recent GOAM MCA Board meeting in mid-June, to
sponsor a series of consultative sessions within their
respective regions within the next month. GOAM sources told
us that the instructions included a charge to hold meetings
in their regions' poorest, largest and most remote cities
and towns. Villages and towns in border areas will receive
special consideration as venues for these meetings. The
Prime Minister reportedly told governors that, in order to
qualify as bona fide sessions, these meetings must include
the press, be open to the public, and be properly announced
in the local media. The first of these meetings will be
held during the first two weeks of July. We plan to attend
some of these meetings as observers.

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GOAM MCA STRUCTURES TAKE SHAPE
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4. (SBU) GOAM officials in the office of the Prime Minister
reported that the GOAM's MCA Board, Secretariat and related
structures have taken shape during the past two weeks
(reftel). Sergey Balassanyan, Chair of the Ministry of
Finance and Economy's Poverty Reduction Strategy Paper
(PRSP) Coordination Division, will head the Secretariat.
Balassanyan will continue to answer to Deputy Minister of
Finance and Economy Tigran Khachatryan, who appears to be
doing the majority of the legwork on MCA issues for the MFE.
Reportedly in an effort "to create internal checks and
balances and distribute everyday responsibilities," the
Economic Affairs Division within the Office of the Prime
Minister will serve as MCA Board Recorder. Division Chief
Simon Ghonaghchyan was eager to show us volumes of notes of
GOAM MCA Board meetings, consultative sessions and by-laws
that have been produced to date. While still available
neither to the public nor in languages other than Armenian,
the Prime Minister's Office assured us that these materials
would shortly be available for public use and distributed
among the international community. The Embassy has
requested advance copies of these materials (in particular
GOAM MCA Board by-laws) and will forward them to MCC
Washington when available.

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PRESIDENT'S CHIEF ADVISOR ON WASHINGTON MEETINGS
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5. (SBU) Following recent meetings in Washington, President
Kocharian's Chief Economic Advisor and GOAM MCA Board Deputy
Chairman Vahram Nercissiantz reported to GOAM colleagues
that the sessions were productive and that he came away from
meetings with the MCC Board and State Department with new
ideas regarding the consultative process. He told
USAID/Armenia Mission Director (also in Washington) that the
GOAM might push back its MCA compact proposal submission to
August. Nercissiantz has tentative plans to visit
Washington in late July or early August.

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MORE PREDICTIONS: RURAL WATER AND ROADS
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6. (SBU) In private and public statements, high-ranking GOAM
officials told us that they predict that the GOAM's MCA
compact proposal will involve improvement for rural water
access and road rehabilitation. While mindful that the
consultative process is far from over, they point to studies
(including the PRSP and feasibility studies by international
donor organizations) as strong indicators that these sectors
will offer the best use for MCA funding. GOAM officials
representing the urban areas in and around Yerevan have
reportedly "given up hope" that the GOAM's compact proposal
will include projects in the capital. We continue to hear
rumors that municipal leaders in Yerevan are disgruntled by
what they perceive as an "unfair concentration on rural
improvement."

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PRESS REPORTS ON REGIONAL CONSULTS, OSKANIAN MEETINGS
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7. (U) Recent press reports regarding MCA concentrated on
Foreign Minister Vartan Oskanian's June meetings in
Washington and reported that USG officials congratulated
Oskanian regarding Armenia's MCA eligibility. The media
also included wide coverage of the GOAM's plans to take the
MCA consultative process to the country's regions. A June
17 RFE/RL report carried by Azbarez on-line (an English-
language newspaper related to Armenian Revolutionary
Federation media outlets in Armenia with considerable
distribution among Diasporan communities and expatriates in
Yerevan) included statements by Minister of Finance and
Economy Vartan Khachatryan that only two formal proposals by
Armenia-based NGOs had been received by the GOAM MCA Board.
(Note: GOAM sources later contradicted this report but the
MFE has not yet released clarification of the statement nor
an update. End Note.)

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COMMENT: GOAM INTEREST IN BEST PRACTICES
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8. (SBU) Judging from conversations with GOAM
representatives at all levels, there is a sense among some
bureaucrats that the clock is ticking and that the success
of Armenia's compact proposal could depend as much on timing
as it does on quality. Post continues to echo the message
of MCC CEO Applegarth that proposal substance, including the
consultative process, is key. As with other foreign policy
considerations, Armenians are extremely sensitive to where
they stand in relation to other countries in the MCA
process. During discussions about what would constitute a
successful compact proposal, GOAM contacts within the MFE,
MFA and Prime Minister's Office have expressed interest in
what, if any, successful practices Washington can share with
Armenia from other MCA eligible countries.
ORDWAY