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ARMENIA ONE OF WORLD'S BEST USERS OF WB CREDITS: WB REGIONAL DIRECTOR

 

YEREVAN, OCTOBER 29. ARMINFO. Armenia is one of the world's best

users of WB loans provided upon IDA terms, says WB regional director

Donna Dowsett-Coirolo.

 

Such a conclusion was recently made by a group of WB experts who

assessed the effect WB projects have had on Armenia's economy in the

last decade. Economic reforms in Armenia are more effective than in

Georgia and Azerbaijan. Nevertheless in Georgia and Azerbaijan the

economy is quickly improving due to Mikheil Saakashvili's tough

anti-corruption steps and pipeline projects respectively.

Dowsett-Coirolo thinks that in Armenia one should not fight

corruption so toughly as in Georgia as the situation is much better

here.

 

Dowsett-Coirolo says that the best proof of active WB-Armenia

cooperation is 6 credit programs ($85 mln) considered by the WB board

of directors this year. These are credits for social sector, health

care, education, pension reforms, state sector reforms and

irrigation. The WB is also considering its $20 mln involvement in the

Armenian Government's project to overcome poverty to be consider by

the WB directors in Nov 2004. Two $20 mln programs to credit

agriculture and to restore water supplies in Yerevan are under

preparation. As for the situation with Armenia's servicing its

foreign debt consisting mostly of WB loans Dowsett-Coirolo says that

the country will manage to repay its debt considering its growing

economy and potential to attract external and internal revenues. In

any case in Armenia this problem is not as alarming as in other

countries.

 

To remind, 36 WB programs worth a total of $820.80 mln has been

implemented in Armenia since 1992.-0-

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  • 5 months later...

my apologies if this was posted earlier. i have some questions/comments at the end of this article that hopefully some people can answer/respond to:

 

--

 

http://www.projectcommunis.org/articles/000315.html

 

posted by rob on Monday, June 28, 2004 @ 16:54

 

The Power Politics of Poverty: Privatization and the World Bank in Armenia

by Rob Maguire, project communis

 

In a country crippled by scarcity and want, a poverty alleviation group has been encouraging higher utility tariffs, despite the greater adversity this places on the poor. Ironic as this situation may be, it becomes clearly understandable and quite unsurprising once it is revealed that the organization in question is the World Bank, operating in Armenia, one of many developing countries suffering from the Bank’s neoliberal policies.

 

As part of its bid to complete the privatization of publicly owned enterprises, the Government of Armenia, on recommendations by the World Bank, sought to make public utilities more attractive to private foreign takeover by restructuring the sector and increasing the cost of life's basic necessities. The privatization of electricity generation and distribution began in 1998 with a new law (USDE 2004) designed to bring about the desired changes in ownership, as well as to satisfy World Bank loan and credit conditions that insisted on tariff increases and higher collection rates (Lampietti 2001).

 

A major government initiative taken to induce privatization in the energy sector was to increase electricity tariffs by nearly 50 percent in January of 1999. The existing block electricity tariff was promptly scrapped in favour of a flat rate tariff of 25 drams (ARD) per kilowatt hour (kWh). The government believed that this change would amount to an average consumer price increase of 30 percent (Lampietti:16).

 

The implications of such an increase in price alone could be quite severe, given that it is being done in a country where roughly half the population is living in poverty. Impact assessment, however, did not seem to be a government forte, for the reality of the price hike was far more severe than expected. The government had miscalculated the prior average cost of electricity, and having done so misjudged the increase the new tariffs represented. In actuality, the new price signified a 47 percent increase in electricity costs, driving the average cost up from 17 to 25 ARD/kWh (Lampietti: 16).

 

Such a steep and immediate price increase cannot be without dramatic consequences. Although detailed accounts of the effects of this increase are not readily available outside of Armenia, the World Bank has shed some light onto this issue with their conservative, yet highly revealing, look into the human costs of utility pricing. World Bank technical paper number 497, “Utility Pricing and the Poor: Lessons from Armenia”, was made available in May 2001, two years after the electricity tariff hikes. It details, in quantitative terms, the consequences of the utility increase on the poor in the country. The qualitative reality, however, is not difficult to imagine.

 

Naturally, as the price of electricity was drastically increased, people cut their consumption. Among the population sampled by the World Bank, electricity consumption dropped 17 percent on average, while collection rates fell nine percent and accumulated arrears multiplied by a factor of four. While the new electricity tariffs were difficult enough for the general population, those living in poverty found the higher prices much more demanding. According to the World Bank, “relative to the non-poor, the poor cut consumption more, the percentage of households with arrears was higher, and the average size of arrears increased more.” In other words, higher tariffs led to greater impoverishment of the most economically disadvantaged citizens of Armenia, as well as further complicating their lives by significantly reducing the amount of energy that is conveniently available to them (Lampietti: 17-18).

 

Granted, once the government realized that the tariff increases were far steeper than they supposedly had planned, they did initiate a subsidy program to help the poor cope with the increased cost of electricity. Monthly subsidies ranged from 370 to 2500 ARD per capita (US$0.70 to $4.75). The main subsidies, however, were designed to reach only 28 percent of those household that were below the poverty line, leaving most impoverished families behind. Furthermore, households receiving smaller subsidies were unable to depend upon them, as they arrived only six times per year on average, as opposed to the regular monthly payments that the government had planned (Lampietti: 22).

 

Aside from the direct impact on the poor and “non-poor”, the electricity price hike had indirect consequences that were perhaps equally as devastating. While the tariff increase was allegedly designed to increase the attractiveness of the utilities to the private sector, they certainly had the opposite effect on Armenia’s environment. As electricity became less affordable as a source of energy, many were forced to make up the difference through increased consumption of alternate fuel sources, the most frequently used material being wood. This increase in wood burning has led to increased deforestation as well as higher and more dangerous levels of indoor air pollution, increasing the risk of respiratory illnesses.

 

Considering the significant impact the tariff increase has had on poverty, health, and the environment, one would perhaps seek to find some justification in a substantial increase in energy sector revenues, thus fulfilling the government’s goal of improving the utility’s attractiveness to private corporate interest. This, however, was simply not the case. Despite the extreme price jump, the net revenue increase for the utility was a mere 6 percent, a relatively small increase to justify the further impoverishment of Armenians (Lampietti: 17).

 

The World Bank’s own research had made it clear that the price restructuring of the Armenian electricity utilities – undertaken in the name of privatization – did not work. The poor, the alleged beneficiaries of World Bank projects, were delivered greater adversity, meanwhile the price increase was a fiscal flop. In light of these conclusions, however, did the report have any lasting effect upon World Bank policy? According to the Wall Street Journal, the study “landed with a thud at the World Bank; it implied that free-market ideology had trumped clear thinking when the World Bank had prodded the Armenian government to commercialize the power company,” (Phillips, 2003).

 

Despite the self-criticism, however, we may be hard pressed to find significant change within the World Bank, as they continue their agenda of large-scale privatization. Commenting on tariff increases for clean water, the report suggests that “utility revenue would be maximized at approximately 500 ARD per m3”, a change reflecting a ten-fold increase in the cost of water, a commodity far more fundamental to human life than electricity. The consequences that such a tariff increase would have on poverty, human health, and the environment are too painful to imagine (Lampietti: 38).

 

Demonstrating the World Bank approach to poverty alleviation, the report concludes, “future electricity tariff increases should be closely coordinated with improved price response prediction and credible actions to mitigate the potential impact on the poor and the environment,” (Lampietti: 35). Although subtle, the language used is of utmost importance. Rather than aiming to improve the condition of the poor – the self-declared purpose of the World Bank – they talk about merely reducing the detrimental impact utility increases have on the poor. This damage-control approach is simply not acceptable

 

The bottom line is that the World Bank cannot make credible claims to be fighting world poverty while they simultaneously advocate policy that will further impoverish the poorest and most marginalized people. While this report on utility pricing in Armenia may have shocked the Bank, it certainly did not take their critics by surprise, but merely supports their claims that the World Bank’s agenda of privatization simply does not reflect the true needs of the poor. Once the Bank begins to fight the conditions that beget poverty, rather than simply softening the sharp blows of capitalism, the institution may be seen as living up to its mandate of improving the lives of the poor.

 

 

References:

 

Lampietti, J. and al. (2001) “Utility Pricing and the Poor: Lessons from Armenia”, World Bank Technical Paper No.497, May 2001.

 

U.S. Department of Energy (USDE) (2004)

Armenia Energy Overview:

http://www.fossil.energy.gov/international/armnover.html

 

Phillips, M. (2003) “The World Bank Wonders About Utility Privatization”, Wall Street Journal, July 21.

 

--

 

ok, so granted this kind of thing comes with a particular political slant. but my question is (for those who are familiar with life in armenia, and i was there for two months last summer), to what extent is the author's descriptions of the effects of utility industry restructuring on the poor in armenia accurate?

 

what exactly is armenia's relationship with the world bank/imf, and how aware is the average armenian citizen (or at least the educated class) of the criticisms that exist of wb/imf policies in the developing world (which armenia is a part of). obviously south american and african countries have experiences to share. last summer i had a chance to ask salpi ghazarian (assistant to oskanian in the foreign ministry) about this and her reply was just that armenia is in good standing with her loans and no adverse societal effects have been detected. that doesn't seem like a particularly satisfactory answer now given the claims that are being made in the above article. this just crossed my mind when i learned about the size of the new u.s. embassy and starting wondering about what it all means.

 

this leads me to my last question: does anyone know how many books are translated into armenian every year (from english, french, german, russian), and who decides what gets translated? i mean, it's great to have works of literature, philosophy, whatever translated, but, what about the current events-type books dealing with issues like globalization and international development? globalization and its discontents (stiglitz), confessions of an economic hit man (perkins), even fateful triangle (chomsky) and people's history of the u.s. (zinn) would be good to translate. problem is i doubt many armenian citizens will spend their hard-earned extra cash on books dealing with seemingly arcane topics like these, but what about university students? my relatives there spend most of their time watching tv. same problem as in the u.s. i guess.

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  • 3 weeks later...

I know you're gonna laugh at the irony of this thought... being the article discusses electricity in relation to WB/IMF policies.. but I have to throw it out there.. Errrr... Radio? In your opinion and experience,as well as those you know in ROA, how widespread is the radio listening audience? I heard that when electricity is cut, several listened to battery-operated radios.

 

How difficult would it be , to say, start up *micro-boadcasting/*low-bandwith/free radio type of situations in the ROA that cover these issues in an appealing, non-condescending, factual ( but interpersonal and interesting) way? Typically involves low capital input , but high social capital input of people pooling pre-existing technical and apparatus resources together .

 

Here's some links that are fairly centered in the Americas and North/West Europe region. I'm *not* an expert radio technician, just an ex-broadcaster/free radio collective volunteer. It's not pie in the sky. I've seen it happen , and the ppl who put it together were not $uper-funded. The technicalities of the following links ( like FCC legalities, how radio operates and such) are geographically specific.Surely, hayastdantzi radio djs , radio enthusiasts, engineers and all our guerilla engineers can apply it as brilliantly as they wish. I know people can do it online, but don't you think it's important to make it accessible - especially to those most affected by such policies- to all who don't have computers? I do.

 

http://www.radio4all.org/how-to.html Micropower Broadcasting - A Technical Primer

by Stephen Dunifer

 

http://www.frn.net/links/ Free Radio Network.

 

Maybe this helps, maybe not. Just a small thought.

 

Waiting for the laughs (o]-K)

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