Nations in Transit - Armenia (2005)

  • Author: Anna Walker
  • Document source:
  • Date:
    15 June 2005

Capital: Yerevan
Population: 3,200,000
Status: Partly Free
PPP: $790
Private Sector as % of GNI: na
Life Expectancy: 73
Religious Groups: Armenian Apostolic (94 percent), other Christian (4 percent), Yezidi (2 percent)
Ethnic Groups: Armenian (93 percent), Azeri (1 percent), Russian (2 percent), Kurd and others (4 percent)

NIT Ratings19971998199920012002200320042005
National GovernanceN/AN/AN/AN/AN/AN/AN/A5.00
Electoral Process5.505.755.255.505.505.505.755.75
Civil Society3.503.503.503.503.503.503.503.50
Independent Media5.255.254.754.754.755.005.255.50
Local GovernanceN/AN/AN/AN/AN/AN/AN/A5.50
Judicial Framework and IndependenceN/AN/AN/AN/AN/AN/AN/A5.25
Democracy RatingN/AN/AN/AN/AN/AN/AN/A5.18

Executive Summary

Armenia's democratic development has proceeded haltingly in the 13 years since independence. Although successive governments have established the framework for a democratic market economy, their commitment to the implementation and enforcement of legislation has been weak. The absence of an effective system of checks and balances has resulted in widespread corruption throughout the political hierarchy and has left the legislature powerless to hold the executive to account. In addition, close links between the country's political and business elites have impeded the development of a more transparent political system. Elections have generally failed to meet international standards, contributing to public cynicism toward the authorities and skepticism about the value of participating in political and civic activities.

The unresolved conflict with Azerbaijan over Nagorno-Karabakh remains a potential source of instability in the region and has deterred foreign investors and hampered trade diversification. Nevertheless, adherence by successive governments to the policy prescriptions of international financial institutions has ensured macroeconomic stabilization. Since 1998, the average annual growth in real gross domestic product has exceeded 9 percent, inflation has generally been in the low single digits, the currency has stabilized, and the current account deficit has gradually narrowed. However, though poverty rates are declining, the popular perception is that most Armenians have yet to benefit from these macroeconomic successes. This has contributed to disillusionment in Armenia's political and economic transition.

Widespread corruption and weak governance remained defining features of Armenia's political system in 2004. Little progress was made in introducing measures to reduce the powers of the presidency and ensure a more even distribution of these powers among the executive, legislative, and judicial branches, despite pressure from international sources to make the necessary changes to the Constitution. The opposition continued to press for a referendum vote of confidence in President Robert Kocharian, but its weak parliamentary position and the general public's disillusionment with the political class prevented it from achieving its aim. There was a disturbing rise in the number of assaults on journalists, political actors, and human rights activists critical of the government. However, one positive development in 2004 was an increase in civil society activism.

National Democratic Governance. Armenia's long-term political stability is threatened by weak governance. The concentration of power in the presidency, the lack of accountability in the central government, and the state's weak financial resources remained serious obstacles to good governance in 2004. Constitutional amendments were under discussion throughout 2004, but no date for a referendum on these changes was set, nor was it clear whether the amendments would result in a more balanced distribution of power. Political stability was tested by the continued standoff between the government and the opposition over the legitimacy of the 2003 presidential election. Armenia's new rating for national democratic governance is set at 5.00, reflecting the absence of an effective system of checks and balances among the branches of government.

Electoral Process. Opposition parties continued to protest the conduct of the 2003 presidential election throughout 2004, maintaining a parliamentary boycott and organizing a series of street demonstrations. The authorities clamped down harshly on one demonstration, arresting many protesters and raiding the headquarters of several opposition parties. The opposition hoped to secure international backing for a referendum vote of confidence in the president, but the Parliamentary Assembly of the Council of Europe did not endorse a referendum, thereby weakening the opposition's campaign. Armenia's rating for electoral process remains unchanged at 5.75.

Civil Society. A 2004 survey by the U.S. group World Learning revealed that Armenia's civil society has strengthened since the previous survey in 2001. Positive findings included a growing level of public participation in private voluntary activity, an increase in the number of nongovernmental organizations (NGOs) undergoing professional training, and a sharp rise in advocacy training. However, civil society groups remain heavily reliant on external funding, particularly from diasporic organizations. Armenia's rating for civil society remains at 3.50 while noting the increase in voluntary activity, improved organizational capacity and advocacy skills of civil society groups, and the rise in professional training of such groups, principally among diasporic groups.

Independent Media. Press freedom remained under threat in 2004 when several attacks on journalists served to highlight the difficult and often dangerous working conditions for Armenia's independent media. Investigations by the judicial system yielded few results, with lenient sentences imposed on those convicted of assaulting journalists. Other crimes against journalists remained unsolved. The government has signed a Council of Europe Declaration on Freedom of Political Debate in the Media, but libel remains an offense punishable by a prison sentence. Armenia's rating for independent media worsens from 5.25 to 5.50 owing to a rise in the number of attacks on journalists and their implications for press freedom.

Local Democratic Governance. Although the Constitution and national legislation provide a framework for local self-government, there has been little real decentralization of authority. The autonomy of local governments is limited by their weak financial resources, and they remain reliant on the national budget for much of their funding. Several international organizations are working with local governments to strengthen their capacity to manage their own affairs and better represent public interests. Citizen participation in local government decision making is low, although NGOs have reported that local governments are more responsive to their suggestions than national governments. Armenia's new rating for local democratic governance is set at 5.50 owing to the limited authority enjoyed by the country's local administrations.

Judicial Framework and Independence. Despite constitutional provisions guaranteeing a full range of basic human rights, in practice there remain substantial barriers to effective protection of said rights. The judiciary enjoys little independence and is unable to fulfill its role as a guarantor of law and justice. The use of so-called administrative arrests, torture within the police system, and a new Law on Demonstrations remained particular areas of concern for human rights groups in 2004. One positive development was a new Law on Military Service, which came into effect in July and provides for alternative service. In conjunction, the Ministry of Justice has permitted Jehovah's Witnesses whose religion prevents them from participating in military service to register as a religious group. Armenia's rating for judicial framework and independence deteriorates from 5.00 to 5.25 owing to the violent dispersal of opposition demonstrations in early 2004 and a new Law on Demonstrations that leaves no room for spontaneous mass events.

Corruption. Widespread corruption at all levels of government remains a substantial obstacle to Armenia's political and economic development. The close links between the political and economic elite and the lack of effective law enforcement procedures have fostered official corruption. Government efforts to address the issue are focused on an anticorruption strategy adopted in late 2003. In June 2004, the government established the Council for Combating Corruption, which subsequently charged a coordinating committee with overseeing implementation of the strategy. However, doubts remain whether the authorities have sufficient political will to make genuine inroads into reducing corruption. Armenia's rating for corruption remains unchanged at 5.75.

Outlook for 2005. Tension between the government and the opposition will remain high in 2005, although the opposition will be unsuccessful in its aim to force a referendum vote of confidence in the president. A ballot on constitutional change is likely to be held in the first half of the year, but it is questionable whether the amendments will achieve the intended result of a more balanced redistribution of power. Vested interests in the political hierarchy will prevent substantive improvements in governance, and the government will need to show greater political will if it is to make progress in tackling corruption.

National Governance (Score: 5.00)

Armenia's postindependence governments have generally adhered to the economic reform measures prescribed by international financial institutions. This has ensured continuity in macroeconomic policies and a steady improvement in economic and financial indicators. However, the concentration of power in the presidency, the centralized system of government, and the lack of an independent civil service have fostered weak governance and widespread corruption. This has been exacerbated by the close links between the country's political and business elites, which have created a powerful body of vested interests intent on preserving the status quo.

The Constitution enshrines the principle that Armenia "is a sovereign, democratic state, based on social justice and the rule of law" and provides for the separation of powers and the rule of law. However, it has failed to ensure an effective system of checks and balances among the branches of government. Extensive powers are vested in the presidency, including the power to appoint and dismiss the prime minister and government and to dissolve the Parliament practically at will. Furthermore, the president wields control over most judicial appointments, which has precluded the development of an independent judiciary. Although the process of drafting and amending laws is comparatively straightforward, implementation and enforcement are weak.

This imbalance of power has prompted repeated calls for constitutional reform from the domestic opposition and international bodies. In May 2003, a referendum on a package of constitutional amendments was held simultaneously with the parliamentary election. The amendments would have reduced the powers of the presidency (for example, restricting its power to dissolve the Parliament). However, the ballot was deemed invalid as it failed to receive support from the majority of voters, who had to make up at least one third of the electorate. New constitutional amendments were under discussion by the Parliament throughout 2004, but no final version of the proposed changes had been approved by the end of the year. The government is under pressure from the Council of Europe to hold a new referendum by June 2005, but a lack of awareness of the proposed changes could once again lead to insufficient voter turnout.

Legislative authority is vested in the Parliament, which is empowered by the Constitution to dismiss the government by majority vote and to remove the president from office with a two-thirds majority if the Constitutional Court judges him guilty of serious offenses. In actuality, however, the Parliament has little power to hold the executive to account and enjoys substantially less authority than the presidency, particularly regarding judicial and government appointments. The government determines the Parliament's legislative agenda, which is a major constraint on its lawmaking capacity, and most government-sponsored initiatives tend to be approved.

The effectiveness of both the government and Parliament is impeded by their weak financial resources. Armenia has a poor tax collection record, owing in part to the scale of the shadow economy (estimated at 60 percent of the official gross domestic product (GDP) in 2000 by the United Nations Development Program). Central government tax revenue was equivalent to just 14 percent of GDP in 2003, according to International Monetary Fund data, but is estimated to have risen slightly in 2004, thanks in part to the implementation of measures to reduce tax evasion.

Armenia's political stability in 2004 was threatened by ongoing disputes among the country's political groups over the conduct of the 2003 elections. The opposition continued to challenge the legitimacy of President Robert Kocharian's reelection in March 2003 and kept up pressure on the Parliament to call a referendum vote of confidence in the president. However, neither a 10-month parliamentary boycott by the opposition nor a campaign of street demonstrations persuaded the pro-government parliamentary majority to call a referendum. The standoff highlighted the dominance of the president's supporters within Armenia's political structures.

A parliamentary Oversight Chamber audits government budget performance, assesses its compliance with budget targets, and evaluates its borrowing and privatization policies. The chamber submits annual reports to the Parliament and has frequently criticized the executive's handling of public finances. For example, in May 2004 it accused the government of misusing a World Bank loan aimed at strengthening the judiciary. However, its role as a watchdog over the government is limited owing to the legislature's weakness relative to the executive branch. In addition, the existence of other audit and investigative bodies within ministries creates a duplication of functions and the absence of clearly separated roles, further reducing the effectiveness of the chamber as an oversight body.

Citizen participation in decision making is limited, although civil society groups are becoming increasingly involved in political processes. The Parliament has a Web site, debates are usually open to the public and are widely reported in the media, draft legislation is generally made available to the public, and all legislation approved by the Parliament is published in an official bulletin. Deputies rarely canvas the opinion of their constituencies, although government officials made a greater effort to hold public meetings in early 2004 in the months prior to the opposition demonstrations.

The Law on Freedom of Information, adopted in September 2003, aims to improve public access by obliging government bodies and public service providers to release official information relating to their activities within 30 days. They are permitted to refuse the release of information in only a few cases, and failure to comply with the law is a criminal offense. However, imperfect enforcement of the legislation has hampered the effectiveness of the new law.

Reform of the civil service and public administration is under way. The civil service is a professional body, in theory independent of the executive and legislative branches of power, and is not subject to change after general elections. A seven-member Civil Service Council, appointed by the president on the recommendation of the prime minister, is charged with selecting staff for government agencies on a competitive basis and monitoring the performance of government officials. By November 2004, the council had hired more than 1,350 civil servants since its establishment in 2002 and dismissed some 350 others. Critics of the council argue that because it is appointed by the president, it lacks independence and is vulnerable to political influence. Moreover, although adoption of the Law on Civil Service in 2001 was a first step toward improving the quality of state institutions, enforcement of the legislation has been problematic, and issues such as low wages have prevented the civil service from attracting and retaining skilled staff.

The National Police and National Security Service are responsible for Armenia's domestic security, intelligence activities, border control, and police force. The Parliament's weakness relative to the presidency and government results in its having little control over the country's military and security services. The president is the supreme commander of the armed forces and is entitled to deploy the army without seeking parliamentary approval. The defense minister, the head of the police, and the head of the National Security Service are all presidential appointees. The president dismissed the head of the National Security Service in November 2004, in circumstances that remain unclear.

The ongoing dispute with Azerbaijan over Nagorno-Karabakh remained a potential source of instability in 2004. The unresolved conflict has had wide-ranging economic repercussions on the region as a whole, and for Armenia specifically it has proved a deterrent to foreign investors. In addition, the dispute has led to substantial expenditures for defense to the detriment of other sectors such as health care and education. Negotiations between Armenia and Azerbaijan resumed in 2004 having stalled in 2003 as both countries held elections with signs of a possible compromise solution emerging toward the end of the year. However, even if the two sides reach an agreement at the highest political level, persuading the respective electorates of the need for compromise is likely to prove difficult given the level of public mistrust toward the authorities.

One legacy of the war with Azerbaijan over Nagorno-Karabakh has been that the armed forces and security services have played a large role in the country's political development. For example, military leaders, through the Yerkrapah parliamentary faction of Nagorno-Karabakh veterans, were instrumental in forcing the resignation of President Levon Ter-Petrossian in 1998, having rejected his apparent willingness to negotiate a stage-by-stage resolution of the conflict with Azerbaijan. Although the influence of military leaders has lessened since then, 2004 was notable for the emergence of a new, unofficial security force in Armenia: many opposition rallies were disrupted by what opposition members have described as the bodyguards of the country's business oligarchs.

In theory, legislators, the media, and civil society groups are entitled to information relating to the police service, but as in other areas, citizens face difficulties obtaining this information. Armenia's security and military doctrines are classified documents and therefore unavailable for public scrutiny. Nevertheless, issues such as corruption in the police force and poor conditions in the armed forces, including mistreatment of conscripts, are frequently covered in the media.

Electoral Process (Score: 5.75)

Armenia's constitutional and electoral framework enshrines the principle of universal and equal suffrage by secret ballot and provides for the holding of regular, free, and fair elections. Since independence, however, the authorities have failed to ensure free and fair elections, as vested interests within the political and business elites have sought to preserve their privileges. This has contributed to political tension, voter disillusionment, and legislative paralysis.

Direct presidential elections are held every five years, while elections to the Parliament are held every four years. Of the 131 deputies, 75 are elected by proportional representation on the basis of party lists, while 56 are elected from single-mandate constituencies. Talks on amendments to the electoral code were under way throughout 2004 and were to be debated in the Parliament in early 2005, following examination of the proposed changes by the Council of Europe. These were likely to include a reduction in the share of seats allotted to single-mandate constituencies, which could help reduce electoral fraud by lessening the potential for bribery. Another issue of concern is the way in which election commissions are formed. Currently, the president appoints three of the nine members of both central and local commissions, while the remaining six are appointed by parties represented in the Parliament most of which support the president. This gives the president extensive influence over the electoral process.

Political parties are regulated by the Law on Political Parties and must be registered with the Ministry of Justice. The electorate has a wide range of parties to choose from, although political parties are generally driven more by personality than policy. Of the more than 110 parties registered at the time of the May 2003 parliamentary election, only 6 exceeded the 5 percent vote threshold required to win parliamentary representation. The number of registered parties has dropped sharply since the introduction in July 2002 of new registration requirements that stipulate political parties must have at least 200 members and maintain branches in at least one third of Armenia's regions. According to the Ministry of Justice, there were 49 parties in December 2003.

The Republican Party of Armenia (RPA) is the dominant party at both national and local levels. Headed by Prime Minister Andranik Markarian, the RPA is the leading party in the coalition government, controlling several ministries and the majority of subministerial posts. Under a power-sharing agreement concluded after the May 2003 parliamentary election, the nationalist Armenian Revolutionary Federation (ARF) and the center-right Country of Law Party make up the other two parties in the coalition. Each of these has two cabinet-level positions and several subministerial posts. The Ministries of Defense, the Interior, and National Security are headed by presidential loyalists. Together with leading businesspeople, often termed oligarchs, these parties and ministers form the so-called power class.

As in other former Soviet republics, political and economic circles are closely linked in Armenia. This stems partly from inadequate party funding legislation, which leaves parties heavily reliant on private financial sources and therefore susceptible to donor influence. The immunity from prosecution enjoyed by parliamentary deputies has also encouraged business monopolists to seek election.

Armenia held presidential and parliamentary elections in 2003. The presidential election was won by the incumbent, Kocharian, who beat Stepan Demirchian in a second-round runoff on March 5, winning 67.5 percent of the vote, according to the Central Election Commission (CEC). A total of nine parties formed the Justice Alliance bloc, headed by Demirchian, to contest the parliamentary election held on May 25. However, the RPA and other pro-presidential parties retained their majority in the Parliament, with the Justice Alliance and the National Unity Party of Artashes Geghamian (who secured third place in the first round of the presidential election) winning just 24 seats.

Both elections were monitored by the Organization for Security and Cooperation in Europe/Office for Democratic Institutions and Human Rights (OSCE/ODIHR) and were found to be below international standards for democratic elections, although international monitors judged the flaws insufficient to negate the results. Many of the deficiencies that have characterized Armenia's electoral process since independence were repeated in 2003, including media bias in favor of Kocharian, ballot box stuffing, and evidence of voter intimidation. Inaccurate electoral rolls also resulted in the disenfranchisement of many voters. To help prevent this in future elections, the CEC has established a Web site for voters to verify their inclusion on electoral rolls. Positive developments in the 2003 elections included television debates among the presidential candidates, use of transparent voting boxes, and active participation of domestic nongovernmental organizations (NGOs) in monitoring the elections.

Opposition attempts to challenge the legitimacy of the 2003 elections dominated the political scene in 2004. Buoyed by the success of their counterparts in Georgia in ousting President Eduard Shevardnadze in November 2003, Armenia's opposition parties maintained their demand for a vote of confidence in Kocharian. Protesting the parliamentary majority's refusal to debate the issue, deputies from the Justice Alliance bloc and the National Unity Party began a boycott of parliamentary sessions in February 2004. They subsequently organized a series of demonstrations in the capital, Yerevan, in March June. One such protest, on April 12 and 13, was violently dispersed by the security forces and military police when demonstrators attempted to approach the president's residence. Although the police maintained that they came under assault from the protesters, eyewitnesses asserted that the demonstration had been peaceful until the police moved in. The authorities justified the crackdown on the need to prevent what they termed a coup d'état, but the action raised serious doubts about their commitment to observing the right to protest peacefully.

After the crackdown, many opposition supporters were arrested, including prominent figures such as Shavarsh Kocharian, one of Armenia's delegates to the Parliamentary Assembly of the Council of Europe (PACE). The headquarters of several of the opposition parties were raided by the police a move later criticized by the government, which launched a criminal investigation. PACE issued a resolution in which it urged the government to end the crackdown on the opposition and release all political prisoners to avoid sanctions. However, it did not support the call for a referendum, thereby weakening the opposition's campaign. The conclusion by a PACE monitoring mission that the authorities had met many of the terms of the resolution was criticized by the opposition as evidence of bias. The opposition called a formal end to the street demonstrations in June, saying that it needed to rethink its tactics.

The failure of authorities to ensure democratic elections has contributed to a lack of confidence in the electoral process and Armenia's progress toward a functioning democracy. Turnout for the 2003 parliamentary election was 52.2 percent, according to the CEC, down from 68.4 percent in the second round of the presidential election although the OSCE judged these figures to be inflated. According to a Citizens Awareness and Participation in Armenia (CAPA) survey carried out by the International Foundation for Election Systems (IFES) in August and September 2003, the number of Armenians with an interest in politics declined from 58 percent in 2002 to 50 percent in 2003. Furthermore, 75 percent of those surveyed believed that the 2003 parliamentary election was unfair to some degree, and 74 percent had a similar opinion of the presidential election.

Ethnic minorities make up only about 3 percent of Armenia's population, and their participation in the political process is correspondingly low. No ethnic minorities are represented in the Parliament. Political parties and blocs are obliged to ensure that 5 percent of their party list candidates are women. According to the OSCE, women accounted for just 15 percent of the candidates on the proportional lists in the 2003 election and only 4 percent of the majoritarian candidates (allocated primarily to unwinnable seats). Seven women won seats in the new Parliament, up from four in the outgoing assembly.

Civil Society (Score: 3.50)

The number of civil society groups in Armenia grew rapidly following the breakup of the Soviet Union. However, their effectiveness has been hampered by deteriorating socioeconomic conditions due to the war with Azerbaijan over Nagorno-Karabakh and the collapse of the country's economic base. The result is that public participation in civil society activities has not been as high as the number of groups would suggest.

As of May 2004, about 3,300 NGOs were registered with the Ministry of Justice, of which just over 200 were registered during the previous year. The scope of NGO activities has widened in recent years, with the emphasis moving from humanitarian assistance to democracy building and broader development programs. Areas of focus include education, public policy, health care, ethnic minorities, and the disabled. Issues such as domestic violence and the trafficking of women, as well as campaigns to promote more active participation of women in politics, are gaining greater recognition. Moreover, opposition demonstrations in 2004 indicate a greater civil engagement in the political process than the decline in voter turnout might suggest.

Initially based primarily in Yerevan, NGOs are now well established throughout Armenia. Armenian NGOs have also created several regionwide networks across the South Caucasus and Commonwealth of Independent States, working in refugee issues, human rights, and the media. Most civil society groups remain dependent on international funding, as the income level of most Armenians is insufficient to permit charitable donations. According to a survey of 347 NGOs and 61 experts carried out in 2004 by the U.S. organization World Learning, 87 percent of the NGOs surveyed relied entirely on foreign donors. Nevertheless, the financial viability of NGOs is strengthening, owing partly to legislative improvements and more effective preparation of requests for funding by NGOs. The same survey reported that 9 percent of the NGOs surveyed would be financially viable if there was a reduction in international and bilateral grants, up from 2 percent in 2001. The dependence of most NGOs on foreign donations has led to concerns that this practice weakens the civic sector's incentive to establish strong links with Armenian society.

The survey was conducted as part of World Learning's 2000-2004 NGO Strengthening Program, which was funded by the U.S. Agency for International Development (USAID). USAID also provides most of the funding for an NGO Training and Resource Center, founded in 1994 by the Armenian Assembly of America, one of the largest lobbying groups in the United States. These programs strive to raise the organizational capacity of local NGOs, offering advice on management and financial issues and training in how to increase public and government awareness of their work. IFES has also been active in Armenia since 1996 running the CAPA program, which is funded by USAID. This project aims to encourage civic initiatives and advocacy and to raise citizen participation in local self-government. Organizations such as the UN, the World Bank, the Eurasia Foundation, the Soros Foundation, and the National Democratic Institute for International Peace also finance programs to develop civil society.

Grants and bequests from domestic sources are small owing to the low income level of most Armenians. The largest domestic charity is the Hayastan All-Armenian Fund, which raises most of its contributions from the Armenian diaspora. Since its creation in 1992, the charity has spent more than US$80 million much of it raised through annual telethons on infrastructure projects in Armenia and Nagorno-Karabakh. In conjunction with the local Center for Public Dialogue NGO, the fund launched its first civil society funding program in September 2004, a small grants project for NGOs.

Another important diasporic charity is the Lincy Foundation, established by the Armenian American Kirk Kerkorian. The foundation allocated US $150 million to infrastructure and cultural projects in Armenia in 2002 and 2003. The Armenian General Benevolent Union (the largest Armenian nonprofit organization in the world) and the Armenian Relief Society are also active diasporic charities. The World Armenian Organization, founded by Armenian-born businessman Ara Abrahamian, held its inaugural congress in Moscow in October 2003. The organization works to strengthen relations between Armenia and the diaspora.

Media coverage of civil society activity is generally positive, although it tends to be limited to one-off initiatives, without deep discussion of the civil society operations and background analysis, and is often dependent on personal contacts. Popular perception of NGOs is similarly favorable, although public knowledge of most NGO activities is still limited: IFES reported in its 2003 CAPA survey that 45.8 percent of adults questioned could not name a single NGO. Nonetheless, NGOs themselves have reported a growing level of public participation in private voluntary activity. According to World Learning, 53.6 percent of NGOs surveyed in 2004 had a core group of 10 or more volunteers, compared with 42.3 percent in 2001. In its 2002 CAPA survey, IFES reported that religious organizations attracted the largest number of participants, which reflects the strong position of the Armenian Apostolic Church in society. The Apostolic Church itself engages in charitable work, financed largely through diasporic donations, as do other domestic and foreign religious charities.

The state protects the rights of the independent civic sector, and civil society groups are generally able to carry out their work without interference either from the government or from extremist organizations. The Parliament adopted the Law on Charity in October 2002 and the Law on Foundations in December 2002. These regulate the establishment and activities of charities and NGOs and have been judged by the International Center for Not-for-Profit Law to be in compliance with international good practices of NGO regulation, although implementation of the legislation is at times patchy. The Ministry of Justice's registration process for NGOs is relatively straightforward.

Armenian nonprofit organizations are subject to taxation on property, vehicles, and employee wages, and NGOs must disclose their revenue sources in order to establish their tax liability. The Law on Public Organizations prohibits direct income generation, and public organizations are not permitted to participate in government tenders. This has serious implications for the financial sustainability of nonprofit organizations. The establishment of limited liability companies is one way in which NGOs are able to generate income, but these are subject to taxation in the same way as businesses. Moreover, Armenia's tax legislation does not contain provisions for charitable donations, which inhibits private sector philanthropy.

Officials rarely canvas public opinion in meetings or through surveys, but government engagement with civil society and policy research groups is nevertheless increasing. This is partly attributable to an improvement in the organizational capacity and advocacy skills of civil society groups, which have benefited from expanded training programs. According to the 2004 World Learning survey, 76 percent of NGOs reported that they had participated in professional training relevant to their organization's objectives and activities, up from 68 percent in 2001. The increase in those undergoing advocacy training was much higher, rising from just 2 percent in 2001 to 51 percent in 2004. This has coincided with the growing success of NGOs in lobbying the government and influencing national legislation, such as the amendments to the December 2003 Law on Mass Media, in which the government was forced to drop the requirement that media outlets register with the Ministry of Justice. NGO members are also participating increasingly in the drafting and monitoring of government initiatives (for instance, the Poverty Reduction Strategy Paper).

Two major private think tanks are active in Armenia, but their public profile is low and their influence on government policy limited. The International Center for Human Development, chaired by former prime minister Armen Darbinian, focuses on projects such as poverty reduction, regional integration, and good governance. The Armenian Center for National and International Studies was set up by former foreign minister Raffi Hovannisian and concentrates on foreign and domestic public policy issues.

Armenia's Constitution guarantees the right to establish and join trade unions, although this right can be restricted for those serving in the armed forces and law enforcement agencies. The Confederation of Labor Unions unites about 30 individual unions, but most of these are relatively inactive and have limited power to guarantee workers' rights. Private sector employees enjoy little protection against dismissal this combined with the high rate of unemployment has meant that strikes in private enterprises are rare. Strikes in the public sector are more common, generally over issues such as wage increases or payment of back wages. The Union of Industrialists and Entrepreneurs represents the interests of Armenia's largest businesses.

Armenia's education system is generally free of political influence and propaganda. According to the Ministry of Education, there are about 90 institutes of higher education in the country, of which about three quarters are privately run. State-run universities are perceived as more prestigious and are considered to offer higher educational standards than private institutions. A shortage of funding has led to difficulties in attracting qualified staff. The government is reducing the number of teachers in order to fund a raise in average monthly salaries. These were scheduled to rise by about 60 percent in 2005, to 50,500 dram (US$100). However, the layoffs have provoked controversy by leading to teacher shortages in rural areas. The weak financial situation has also ended free higher education, with entrance fees or bribes often required to secure a university place. This now restricts access to education to those who are able to pay.

Independent Media (Score: 5.50)

Armenia's press freedoms are guaranteed in Article 24 of the Constitution, which asserts: "Everyone is entitled to freedom of speech, including the right to seek, receive, and disseminate information and ideas through any medium of information." However, this can be restricted "by law, if necessary, for the protection of state and public security, public order, health and morality, and the rights, freedoms, honor, and reputation of others."

In practice, press freedom has come under threat in recent years, prompting Freedom House to downgrade Armenia's press rating in its annual survey of press freedom from "Partly Free" in 2002 to "Not Free" in 2003. This rating was unchanged in 2004, a year in which several attacks on journalists highlighted the dangerous working conditions faced by the independent media. In October 2004, the editors of two regional newspapers were attacked, apparently for articles that had criticized aspects of regional government; and in December, a car owned by a prominent newspaper editor was destroyed in an apparent explosion. Reporters were also assaulted during opposition rallies earlier in the year, notably at a rally in Gyumri in April, when unidentified assailants broke journalists' equipment. A subsequent trial of the suspects in June imposed fines rather than prison sentences on those convicted, prompting journalists to condemn the court case as a farce. A six-month prison term was imposed on another person convicted of attacking a photojournalist in October the first time an individual has been jailed for assaulting a reporter. However, the judicial system's record in protecting journalists has been poor in the past. In 2003, the authorities suspended an investigation into a grenade attack on Mark Grigorian, a prominent independent journalist, citing a lack of suspects.

Armenia's libel laws have created a difficult legal environment for investigative journalists and have contributed to widespread self-censorship, particularly where corruption or national security is concerned. Libel is classified as a criminal offense punishable by up to three years in prison, while insulting a government official in the mass media is also deemed a crime punishable by a prison sentence. This seems to contradict the provisions of the Council of Europe's February 2004 Declaration on Freedom of Political Debate in the Media to which Armenia is a signatory which recognizes the media's right to "disseminate negative information and critical opinions concerning political figures and public officials." The authorities have rejected international criticism of Armenia's libel laws, justifying their stance by noting that many other European countries regulate defamation of character under criminal law.

Other media-related legislation is more favorable. This includes the Law on Freedom of Information, which was passed in 2003, and an amendment to the administrative offenses code that states that government officials who obstruct the gathering of news can be fined. In addition, the Yerevan Press Club (one of several press associations in Armenia) lobbied successfully for changes to the draft Law on Mass Media, before it was finally approved in December 2003. The amendments removed the requirement that media outlets register with the Ministry of Justice and rescinded the need for journalists to disclose their sources of information and funding, except in cases where judges are hearing related criminal offenses. This latter requirement nevertheless remains a concern, as demonstrated in October 2004, when the chairman of the Association of Investigative Journalists, Edik Baghdasarian, was warned that he could be imprisoned for failing to reveal his source relating to an assault on an opposition politician, Ashot Manucharian.

According to the Yerevan Press Club, as of November 2004 there were just over 60 television stations in Armenia, of which about 27 were based in Yerevan. There were also about 12 independent radio stations, which focus on entertainment and brief news reports. The programs of Radio Free Europe/Radio Liberty (RFE/RL) and the Voice of America are broadcast on state radio. A television program made by RFE/RL was also scheduled to be broadcast weekly on a private television station, Kentron, beginning in October 2004, but was suspended after just one week. Kentron refuted U.S. concerns that the decision was politically motivated, citing commercial reasons for the suspension.

The state-run Armenian Public Television is the country's most influential media outlet. Its output, along with that of the leading private stations for example, Prometevs, Armenia, ALM, and Shant is biased in favor of the authorities. Armenia's main independent television station, A1+, lost its broadcasting license in a controversial tender in April 2002 and failed to regain a broadcasting frequency in several tenders held in 2003. The National Commission on Television and Radio, whose members are appointed by Kocharian, cited a variety of financial and technical reasons for its decision not to award new frequencies to A1+ and another leading broadcasting organization, Noyan Tapan. However, A1+ believed that the decision was politically motivated owing to the investigative nature of its reporting. It is appealing the decision in the European Court of Human Rights. The failure by A1+ and Noyan Tapan to win broadcasting frequencies fueled the suspicions of international observers about the lack of impartiality in Armenia's media regulatory body.

Armenia's 80 or so newspapers (data from the Yerevan Press Club) offer more diverse opinions than the broadcast media, although total circulation is extremely low at about 40,000. The state-owned national daily is Hayastani Hanrapetutyun, and there are 6 privately owned national dailies. Pro-Kocharian papers include the dailies Azg and Hayots Ashkhar, the biweekly Golos Armenii, and the weekly Yerkir. Offering a more liberal, pro-Western perspective are Aravot and Haykakan Zhamanak. The left-wing biweekly Iravunk is also opposed to the current authorities.

Most broadcast and print media organizations in Armenia are privately owned and funded. Although the country's newspapers offer a plurality of views, their low circulation presents them with serious financial constraints. They are dependent on private sponsors, often with significant vested political or economic interests, and this affects their objectivity. More than half of Armenia's newspapers are distributed by the Haymamul agency, which is run by a government-appointed director. The government declared its intention to privatize the agency in 2001 but since then has sold off only the sales kiosks, leaving Haymamul with control over distribution (and hence able to influence circulation).

Access to the Internet is not formally restricted, but high connection costs render it unaffordable for most households. In September 2004,6.8 percent of the population used the Internet, according to the company World Internet Stats. Most users (about two thirds are in Yerevan) have access to Internet services at work, educational institutions, or Internet cafés. There are about 35 Internet service providers (ISPs) in Armenia, although only about one third are actually functioning. All ISPs rely on a monopoly provider, the national telecommunications operator ArmenTel, for connection to outside services.

Local Governance (Score: 5.50)

Armenia's Constitution and national legislation provide a framework for local self-government, but in practice the authority and activities of the local administrations are circumscribed by the presidency and the central government, which wield extensive control over local issues.

Chapter 7 of the Constitution covers issues relating to territorial administration and local self-government. Armenia has a two-tiered administrative structure. It is divided into 10 regions and the city of Yerevan, which has region status. There are no elective bodies at this level of government: regional governors are appointed by the central government and, in turn, appoint their own staff. The mayor of Yerevan (whose status is that of a regional governor) is appointed by the president. International organizations have urged the authorities to amend the Constitution to allow direct election of the Yerevan mayor, so far to no avail. Regional governors are responsible for administering policy in a wide range of fields (including finances, public utilities, and urban development), coordinating the activities of regional agencies of state administration, mediating between central and local governments, and regulating intercommunity issues.

The regions (excluding Yerevan) are subdivided into 930 rural and urban communities. Community heads (equivalent to a mayor) and councils of elders, made up of 5 to 15 members, are chosen for three-year terms on the basis of universal, equal, and direct suffrage by secret ballot. The community head is accountable to the council of elders but can be dismissed by the central government on the recommendation of the regional governor. The community head also sits on a regional council with the regional governor to coordinate regional policy. Yerevan is divided into 12 districts, each governed by a district head. These sit on the Yerevan council, which is chaired by the mayor.

Local governments are regulated by the 2002 Law on Local Self-Government. In theory they enjoy fairly broad powers, but their autonomy is limited by their weak financial resources. The council of elders (which acts as the representative body for communities) is responsible for approving community budgets and supervising their implementation. However, the central government has authority over budgetary loans, credits, and guarantees and establishes procedures for the collection and distribution of local taxes.

Land and property taxes are the only form of community tax revenue, but even these have to be collected in accounts in regional branches of the state treasury. Communities also receive revenue from state duties. They are therefore heavily dependent on financial transfers from the state budget, but disbursement delays are common, limiting the capacity of local governments to meet their spending requirements or ensure the timely payment of staff salaries. Moreover, the distribution of financial resources from central to local government is uneven and poorly targeted. The autonomy of local governments is further circumscribed by the powers of regional governors, who often use administrative resources as a means to influence local authorities. In theory, local authorities have the courts to protect their powers and defend the rights of the local community, but because of the dependence of the judiciary on the executive, its impartiality in such cases is questionable.

The inadequate legal framework regulating the powers and responsibilities of local governments is an additional factor inhibiting their ability to function effectively. This also enables the central government to interfere in decision making at the local level. Poor delineation of powers and the lack of legislation regarding conflict of interest and nepotism render local authorities' operations less than transparent.

Local governments have the right to form associations to protect and promote their interests. As of 2004, there were three main local government associations: the Community Union of Armenia, the Union of Yerevan Elders, and the Community Finance Officers Association. International organizations are working with local government associations to improve their effectiveness. The World Bank, United Nations Development Program, and Open Society Institute are coordinating a Fiscal Decentralization Initiative for the three countries of the South Caucasus, and a USAID-funded project, the Local Government Program, is operating in 12 pilot cities in Armenia to develop professional and municipal associations to represent and lobby the executive and legislative branches of the national government.

Although citizens are able to elect their community leaders, the composition of local election commissions renders their impartiality questionable. As with the CEC, three of the nine members of the local commissions are appointed by the president, while the remaining members are allocated to parties according to their distribution of seats in the Parliament. This reinforces the presidency's substantial influence over the local election process.

Political parties do not play a major role in local elections, although they are entitled to nominate candidates. More commonly, citizens are nominated as independent candidates through civil initiatives (having first collected a minimum number of signatures as specified in the electoral code), but they can state their party affiliation on the ballot papers. The most recent local elections were held in October 2002. Turnout was 46 percent, up from just 28 percent in 1999. As at the national level, candidates affiliated with the RPA won the most mayoral offices with control of 160 communities, followed by representatives of the ARF (28) and Country of Law (17). Most opposition parties declined to participate, preferring to concentrate on preparing for the presidential and parliamentary elections to be held the following year.

Independent monitors, including international missions and NGOs, are permitted to observe local elections. A Council of Europe monitoring mission concluded that "the [2002] elections were held almost corresponding to international standards," although there were irregularities, including multiple voting and the addition of deceased persons to the electoral rolls.

Citizen participation in local government decision making is low, owing in part to the limited authority of local governments. According to the CAPA 2003 survey conducted by IFES, only 36 percent of Armenians are interested in the activities of local governments, compared with 50 percent who take interest in general political events. Furthermore, the percentage of Armenians who describe themselves as at least somewhat knowledgeable about the activities of local government fell from 39 percent in 2001 to 31 percent in 2003. Just 8 percent had knowledge of the local community's budget. Corruption contributes to popular disillusionment with local governments. One example of corruption was the distribution in Gyumri of new homes built with financial assistance from the Lincy Foundation. A government commission revealed in March 2004 that the local authorities had not ensured the transparency of the process and had manipulated the lists of those families entitled to free housing.

Citizens are entitled to submit draft resolutions to local governments, and most meetings of the council of elders are open to the media and the public. The public is entitled to full access to information concerning the activities and decisions of regional and local governments, but a lack of funds restricts the capacity of these governments to publicize the information. Moreover, only 15 percent of those surveyed by IFES had been approached by local governments or officials to express an opinion on local issues. NGOs have reported a more positive experience interacting with local governments. According to the 2004 World Learning NGO survey, 74 percent of regional NGOs were interacting with local governments, and NGOs generally found them to be more responsive to their suggestions than the national government.

Judicial Framework and Independence (Score: 5.25)

Chapter 2 of Armenia's Constitution provides for fundamental political, civil, and human rights, but there are substantial barriers to protecting them effectively. These stem largely from the weak judiciary, which enjoys little independence. When questioned by IFES in 2003, only 18 percent of Armenians surveyed felt that the judiciary was free of influence from political figures, while almost 70 percent disagreed that the judicial system protects the population from unjust treatment by the state.

Neither the Council of Justice (which has a supervisory and disciplinary role within the judiciary) nor the Constitutional Court (which interprets and enforces basic law and ensures the constitutionality of legislation) is free from political influence. The Council of Justice is appointed and chaired by the president, who also has the authority to appoint and dismiss judges and public prosecutors. Kocharian used this prerogative to sack the prosecutor-general and four Yerevan district prosecutors in March 2004, in what he described as an attempt to strengthen the rule of law. The move coincided with preparations by the authorities to combat opposition demonstrations held later that month.

Of the Constitutional Court's nine members, four are appointed by the president and five by the Parliament, in which pro-president deputies predominate. Moreover, access to the Constitutional Court is restricted to the president, one third of members of Parliament, election candidates, and, in limited cases, the government. Neither lower-level courts nor ordinary citizens are empowered to lodge appeals.

The flawed elections of 2003 resulted in several appeals to the Constitutional Court by the opposition. Although the court acknowledged that there had been irregularities, it concluded that these were not sufficient to annul the elections. In its ruling on the presidential election, the court endorsed an opposition proposal that a referendum vote of confidence in the president should be held in 2004, then later backtracked from this position, citing the easing of tensions within the country. This further contributed to the perception that the court enjoys little independence from the executive branch.

Armenia's judicial system guarantees the presumption of innocence, the right of persons not to incriminate themselves, and access to a public hearing by a fair and impartial court. Police officials are permitted to keep suspects in custody for up to 72 hours before filing criminal charges and require a court decision to turn detention into an arrest. Prosecutors' requests for arrests are rarely refused. According to the court of appeals, judges approved more than 96 percent of arrest petitions filed by prosecutors in 2003. Witnesses have no right to legal counsel while being questioned in police custody. A legal requirement stating that only the courts are permitted to authorize searches is often violated. Although Armenia's procedural justice code sets a one-year maximum for criminal inquiries, delays in the criminal justice system are common, owing in part to a shortage of qualified judges.

International human rights groups have continued to highlight abuses within the police system, which is reported to use force and psychological pressure to secure confessions. In July 2004, the Council of Europe's European Committee for the Prevention of Torture released a critical report documenting police brutality, based on a fact-finding mission in October 2002. The authorities responded by saying that they had taken adequate measures to curb abuses, but there has since been evidence of continued ill-treatment. Human Rights Watch noted in a May 2004 briefing paper on the April demonstrations that it had "documented several cases of torture and ill-treatment in police custody during the government crackdown against the opposition." Furthermore, many victims of abuse are reluctant to press charges for fear of the consequences. Human Rights Watch has also criticized the use of so-called administrative arrests. This Soviet-era practice permits courts to detain people without legal counsel for 15 days and to sentence defendants in closed hearings.

The classification of libel as a criminal rather than civil offense, carrying a punishment of up to three years in prison, has proved a particular source of controversy with respect to freedom of expression. Armenia's treatment of religious minorities has also come under scrutiny. The Armenian Constitution and laws guarantee freedom of religion but also provide for the legal authority of the Armenian Apostolic Church, which enjoys a privileged status. As such, the church uses its influence over the government to press for restrictions on nontraditional religious groups.

Under the terms of its membership in the Council of Europe, Armenia is committed to ensuring freedom from discrimination for nontraditional religious groups, of which about 50 are officially registered. Jehovah's Witnesses were finally permitted to register in October 2004. They had repeatedly been denied registration, primarily because of their opposition to compulsory military service. However, a new Law on Military Service came into effect in July 2004. This provides for civilian service, but those choosing this option must serve for 42 months almost twice as long as those carrying out military service. The legislation permits every male to opt for alternative service, not just those objecting on religious grounds. The government also introduced legislation in 2004 exempting from the draft those who have avoided conscription for five or more years on payment of a fine (estimated at about 5,000 people, according to official figures).

Government attempts to remove the exemption from military service for graduate students until they have completed their studies prompted university students to boycott classes in early 2004. The Ministry of Defense had argued that the ability to secure an exemption was contributing to bribery within the tertiary education system by enabling students to avoid the draft. However, lack of support for the proposal forced the government to withdraw the legislation.

The right to own and inherit property is guaranteed in Article 28 of the Constitution, which also states that no one can arbitrarily deprive a citizen of his property. Article 36 guarantees intellectual property rights. Noncitizens are prohibited from owning land, except under special circumstances. A lack of training for judges in commercial issues has left many investors disillusioned with the court system as a viable legal recourse. Moreover, government connections are still an important factor in the successful conduct of many forms of business, putting foreign investors without political links at a disadvantage.

Article 26 of the Constitution states that: "citizens are entitled to hold peaceful and unarmed meetings, rallies, demonstrations, and processions." However, opposition attempts to organize antigovernment demonstrations in 2004 met with a harsh response from the authorities, who placed restrictions on freedom of movement, including the closure of roads into Yerevan to prevent people from participating. Many demonstrators were arrested following the violent dispersal of a protest on April 12 and 13, and several journalists covering the demonstrations, as well as protesters, sustained injuries. Sentences imposed on those arrested included an 18-month prison term for one demonstrator who had thrown a water bottle at a policeman (although he was released in early September). The opposition and local human rights groups denounced the arrests as politically motivated, but the head of the OSCE in Armenia concluded that although they were controversial, they were not unfounded.

A new Law on Demonstrations has attracted criticism from the OSCE. In its assessment of the draft law (which was not subject to further changes before its approval in April 2004), the OSCE/ODIHR concluded that although the draft was much more acceptable than previous versions, it left no room for spontaneous mass events and therefore ran counter to the European Convention on Human Rights. The legislation removes the requirement that demonstration organizers secure permission, replacing it with a need simply to notify the authorities; but it permits law enforcement bodies to break up demonstrations by force in the event of violations of the law. The opposition regards the new law as an attempt to prevent it from organizing further street demonstrations, as under separate provisions most large public places in Yerevan are now off-limits to protesters. The government has come under pressure from the Council of Europe to amend the law by March 2005.

In 2004, there was a disturbing rise in the number of assaults on journalists, political actors, and human rights activists critical of the government. In March 2004, Mikael Danielyan, head of the Armenian Helsinki Association, and Victor Dallakian, a member of the Justice Alliance bloc, were attacked in separate incidents by unknown assailants; and in April, a prominent opposition politician, Ashot Manucharian, was beat up. Investigations into these attacks were suspended shortly afterward, ostensibly for lack of evidence, although the inquiry into Manucharian's assault was reopened in September when he was reported to have recognized one of his attackers.

Legislation to enable the appointment of a human rights ombudsman by the president was approved by the Parliament in 2003. Larisa Alaverdian, formerly a member of the presidential human rights commission, was appointed Armenia's first ombudsman in February 2004 and pledged to focus on prison conditions and child protection as priorities. Concerns that the office would be subordinate to the executive had prompted opposition deputies and NGOs to urge the Parliament to delay passage of the bill until the Constitution has been amended, thus allowing the appointment to be the Parliament's prerogative. Although the Council of Europe is opposed to presidential appointment of the ombudsman, it said that passage of the legislation should not be delayed and that the appropriate constitutional amendments could be made subsequently.

Armenia's new criminal code, adopted by the Parliament in April 2003, came into effect in August 2003. The new code formally abolished the death penalty, providing instead for life imprisonment. Prisoners receiving the life sentence are entitled to apply for parole after 20 years, compared with the maximum prison sentence under the previous criminal code of 15 years. Most prison sentences were shortened under the new code.

Corruption (Score: 5.75)

Although Armenia scores better than most other former Soviet republics in international surveys on corruption, widespread corruption at all levels of government remains a substantial obstacle to the country's political and economic development. Not only has this fostered public cynicism toward the authorities, it has deterred foreign investors.

In its 2004 Corruption Perceptions Index, Transparency International rated Armenia 82 out of 146 countries, well above its neighbors in the Caucasus, Georgia, and Azerbaijan and, of the former Soviet republics, behind only Belarus. Armenia's score was 3.1, with 10 being the least corrupt.

Armenia joined the Council of Europe's Group of States Against Corruption in early 2004, although no evaluation of its progress has yet been published. The government's most recent initiative is an anticorruption strategy finalized in late 2003. The strategy sets out measures to combat corruption in the political sphere, the state bureaucracy, law enforcement agencies, and the judiciary, with the aim to overcome poverty. The Council for Combating Corruption was inaugurated in June 2004, headed by the prime minister and other high-ranking officials; the council subsequently set up a coordinating committee to oversee the implementation of the new strategy.

The opposition parties have declined to participate in the monitoring committee, citing its closeness to the executive, but several NGOs are represented. Nevertheless, local and international observers remain skeptical that the strategy will be effective, citing concerns at the lack of independence of the bodies set up to implement the strategy and doubts over the government's political will to tackle corruption.

An affiliate of Transparency International, the Center for Regional Development (CRD) operates a National Anticorruption Resource Center, with offices in Yerevan and five provinces, that aims to raise public awareness of corruption. The CRD published an assessment of Armenia's anticorruption institutions in October 2004, based on 2003 analyses, and concluded that none of the institutions evaluated is functioning effectively. Factors influencing this finding include the absence of political will, the lack of institutional autonomy, poor law enforcement, and the low level of public participation in policy making.

Skepticism over whether there is sufficient political will to address corruption stems partly from the fact that public officials encounter few limitations to economic participation. Although the state's formal involvement in the economy is low in comparison with that of other transition countries (the European Bank for Reconstruction and Development estimates the public sector contributed 30 percent to GDP in 2003), public officials at all levels have extensive business interests. Political and economic power has become increasingly concentrated among a small group of people. Moreover, parliamentary deputies enjoy immunity from prosecution, leading many wealthy businessmen to stand for election.

Armenia's business-related legislation, including registration requirements, is relatively sound. The country performed well in the Heritage Foundation/Wall Street Journal 2004 Index of Economic Freedom, scoring 2.63 ("Mostly Free"), which places it in joint 44th place (with France) out of 155 countries. However, weak implementation of the legislation has increased the opportunities for official corruption. There is a perception that it is difficult to run a successful business legally, particularly among entrepreneurs with small and medium-sized enterprises (SMEs). Often, bribes and the use of personal connections are the only way to ensure the viability of a business. Of those senior managers questioned for the World Bank's Investment Climate Survey, published in the World Development Report 2005,35.7 percent reported that bribes were paid to "get things done."

Corruption among tax authorities has proved an impediment to the development of SMEs. These frequently come under pressure to pay tax on their profits and revenue in advance, above what is required by law. The situation is exacerbated by the absence of an independent judiciary. As a result, businesses with political connections have an advantage over those without, while judges are reported to be susceptible to bribery in exchange for a favorable ruling in disputes.

Armenia's financial disclosure laws are insufficient to combat corruption. The 2001 Law on Declaration of Incomes and Assets requires senior government officials, including the president and government ministers, to annually declare revenue and property belonging to them and their families. The law came into effect in 2002, but many observers dismissed the income declarations made by officials as unrepresentative and far too low. Moreover, although amendments to the law in 2003 broadened the number of officials covered by the declaration requirement, they removed the provision that declarations be published. In addition, the law neither requires tax authorities to verify the financial statements nor provides strict punishment for reporting false information; it imposes only relatively lenient fines. Of the total 120,000 officials who should have filed declarations in 2003, only 47,000 complied, according to the state taxation service. Gaps in the legislation enable officials to register property in the name of relatives, thereby providing another means of tax evasion. Few officials have been punished for corrupt practices. Moreover, there is no legal protection for whistle-blowers, which acts as a strong disincentive to report corruption.

Corruption is also pervasive within the civil service, where the focus on inspections and audits as the main tools of legislation enforcement has increased the opportunity for bribe taking. Since mid-2003, the government has been raising salaries in the civil service to reduce the incentive for bribery. Nevertheless, average monthly wages, at 70,000 dram (US$140) in the state taxation service and the customs administration, are still insufficient to attract and retain high-caliber staff or deter them from seeking bribes. Bribery is also commonplace when dealing with the traffic police, universities, and other areas where official salaries are low.

The lack of independent media has precluded unbiased press coverage of official corruption, although the extent of official corruption is a constant theme of opposition parties and the ARF. However, as long as most print media are sponsored by wealthy business individuals, they have little incentive to draw attention to the scale of corruption in a system in which they play a part. Attempts to expose official corruption carry risks for the media. For example, A1+'s failure to win a new license is attributed to the investigative nature of its reporting, contend observers.

Public perceptions of official corruption are highly negative. According to IFES, 71 percent of those questioned in its 2003 survey considered corruption to be a serious problem (up from 68 percent in 2002), although the number believing it to be very serious had fallen from 20 to 16 percent. The pervasiveness of official corruption and the government's hitherto poor record in addressing it have led to the perception that it is too deeply entrenched to be eradicated: 81 percent of those questioned in the survey believed that Armenians accept corruption as a way of life. Another survey, conducted in September 2004 by the Armenian Center for National and International Studies, revealed that 62 percent of respondents believed that corruption exists at all levels and that health care institutions, followed by the courts, were the most corrupt structures. Corruption within the political sphere is also widespread: 63 percent of those surveyed were offered a bribe in the 2003 presidential or parliamentary elections.


Anna Walker is an analyst specializing in the Commonwealth of Independent States at the Economist Intelligence Unit in London.

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