MILLENNIUM CHALLENGES CORPORATION SIGNS FIVE YEAR $235 MILLION COMPACT WITH ARMENIA

Armenpress
Mar 28 2006

WASHINGTON, D.C, MARCH 28, ARMENPRESS: On March 27 in a signing
ceremony at the State Department’s Benjamin Franklin room, Chief
Executive Officer of the Millennium Challenge Corporation, Ambassador
John Danilovich and Armenia’s Minister of Finance and Economy,
Vartan Khachatrian signed a $235.65 million Compact between MCC and
the Republic of Armenia.

MCC Chair Secretary of State Condoleezza Rice officiated and
witnessed the signing. She was joined by Armenia’s Foreign Minister
Vartan Oskanian. Over one million Armenians, about 35 percent of the
population, live in rural areas and are dependent on semi-subsistence
agriculture. Farmers operate on small plots of land and are constrained
by poor roads, inadequate irrigation and an under-developed market
economy.

To overcome these constraints, Armenia’s Millennium Challenge
Compact aims to reduce rural poverty through a sustainable increase
in the economic performance of the agricultural sector. The Compact
consists of two investments: a Rural Road Rehabilitation Project and
an Irrigated Agriculture Project. The program will directly impact
75% of the rural population and is expected to significantly increase
the annual incomes of rural poor.

“I congratulate the people of Armenia for developing a results-focused
and transformational program that will improve the lives of the
poor,” said MCC CEO John Danilovich. “MCC assistance will be used
to rehabilitate roads needed for Armenians living in rural areas to
access social services such as healthcare and markets to sell their
products. The Compact also includes funding for projects that will
increase the productivity of farm households through improved water
supply, higher yields, higher-value crops, and a more competitive
agricultural sector.

Armenia is a valued partner and we look forward to supporting
their efforts to build a better life for all Armenians.” Ambassador
Danilovich added, “Continued eligibility for Millennium Challenge
Account funds depends on adherence to our indicators measuring
performance in ruling justly, investing in people, and encouraging
economic freedom. MCC will continue to monitor Armenia’s policy
performance in these three categories throughout the life of the
Compact.”

Since its establishment in 2004, MCC has signed Compacts totaling more
than $1.5 billion with eight nations: Madagascar, Honduras, Cape Verde,
Nicaragua, Georgia, Benin, Vanuatu, and Armenia. MCC is also actively
engaging with other eligible countries in Compact negotiations. The
Armenia Compact is focused on one goal: the reduction of rural poverty
through a sustainable increase in the economic performance of the
agricultural sector. Armenia plans to achieve this goal through a
five-year program of strategic investments in rural roads, irrigation
infrastructure and technical and financial assistance to improve
the supply of water and to support farmers and agribusinesses. The
Program will directly impact approximately 750,000 people, or 75%
of the rural population, and is expected to reduce the rural poverty
rate and boost annual incomes.

Rural Road Rehabilitation The Compact includes a $67 million project
to rehabilitate up to 943 kilometers of rural roads, more than a
third of Armenia’s proposed Lifeline road network. When complete,
the Lifeline road network will ensure that every rural community has
road access to markets, services, and the main road network. Under
the Compact, the Government of Armenia will be required to commit
additional resources for maintenance of the road network.

Improved Irrigation The Compact also includes a $146 million project
to increase the productivity of approximately 250,000 farm households
(34% of which are headed by women) through improved water supply,
higher yields, higher-value crops, and a more competitive agricultural
sector. This project consists of two activities: An infrastructure
activity that aims to increase the amount of land under irrigation by
40% and will improve efficiency by converting from pump to gravity-fed
irrigation, reducing water losses and improving drainage; and A
water-to-market activity that will improve the efficiency of water
delivery to farmers and boost farm productivity and profitability
through technical assistance and credit support.

Administrative and monitoring and evaluation costs of the Program
are budgeted at approximately $23 million.

Engaging Civil Society In preparing its proposal for Millennium
Challenge Account assistance, Armenia engaged in a comprehensive
consultative process that reached out to a broad cross-section
of constituents, including rural community members, NGOs and the
private sector.

Meetings were held outside of city centers to seek input on
potential program components and various media outlets were used
to reach remote areas. To increase transparency, the Government
of Armenia sponsored a process that resulted in three NGOs being
named as observers to the Government’s MCA Board of Trustees –
an inter-governmental body, chaired by the Prime Minister, and
responsible for overseeing the Compact development process. Going
forward under the Compact, a Stakeholders’ Committee will be formed
to represent the beneficiaries of the Program. The Stakeholders’
Committee will be entitled to nominate voting members from Armenia’s
NGO sector to serve alongside the government’s representatives on the
Governing Council of MCA-Armenia, the entity that will be established
to oversee and implement the Compact.

Millennium Challenge Corporation (MCC), a U.S.

government corporation designed to work with some of the poorest
countries in the world, is based on the principle that aid is most
effective when it reinforces good governance, economic freedom, and
investments in people that promote economic growth and elimination
of extreme poverty.