Country Operations Business Plan. Armenia October 2015

Transcription

1 Country Operations Business Plan October 2015 Armenia This document is being disclosed to the public in accordance with ADB's Public Communications Policy 2011.

2 CURRENCY EQUIVALENTS (as of 31 August 2015) Currency unit dram (AMD) AMD1.00 = $ $1.00 = AMD ABBREVIATIONS ADB Asian Development Bank ADF Asian Development Fund COBP country operations business plan CPS country partnership strategy NOTE In this report, "$" refers to US dollars. Vice-President W. Zhang, Operations 1 Director General S. O Sullivan, Central and West Asia Department (CWRD) Country Director D. Dole, Armenia Resident Mission, CWRD Team leader Team members G. Gyurjyan, Economics Officer, CWRD A. Barseghyan, Senior Portfolio Management Officer, CWRD F. Catacutan, Programs Officer, CWRD G. Mousaelyan, Senior Project Officer, CWRD L. Sabyrova, Principal Regional Economist, CWRD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

3 CONTENTS Page I. CONSISTENCY OF BUSINESS PLAN WITH THE COUNTRY PARTNERSHIP STRATEGY 1 II. INDICATIVE RESOURCE PARAMETERS 1 III. SUMMARY OF CHANGES TO LENDING AND NONLENDING PROGRAMS 2 APPENDIXES 1. Updated Country Partnership Strategy Results Framework 3 2. Indicative Assistance Pipeline 6 3. Assistance Program for Current Year 10

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5 I. CONSISTENCY OF BUSINESS PLAN WITH THE COUNTRY PARTNERSHIP STRATEGY 1. The country operations business plan (COBP), of the Asian Development Bank (ADB) for Armenia is aligned with the government s Armenia Development Strategy, and the government s program for The COBP is consistent with the strategic priorities set out in ADB's Midterm Review of Strategy 2020, 3 and is in line with the main directions and strategic priorities outlined in ADB's country partnership strategy (CPS) for Armenia, The COBP also takes into account Armenia s graduation from Asian Development Fund (ADF) concessional financing in The overarching goal of the CPS is to help Armenia integrate its economy regionally and rebalance it toward more resilient, inclusive, and environmentally sustainable growth. This COBP supports the CPS s strategic directions on (i) transport, by focusing on improving regional roads and urban roads in Yerevan and in secondary cities; (ii) water and other urban infrastructure and services, by focusing on urban environments and on supporting targeted interventions in secondary cities; and (iii) energy, by helping enhance energy security through the diversification of energy sources, rehabilitation and upgrading of electricity transmission and distribution networks. Also promoted under this COBP are the main cross-cutting CPS strategic priorities of private sector development, regional cooperation, knowledge solutions, environmental sustainability, disaster risk management, gender, governance, and institutional strengthening. 3. In consultations with ADB during May August 2015, the government confirmed the assistance pipeline in this COBP. II. INDICATIVE RESOURCE PARAMETERS 4. Armenia is currently a Group B developing member country and has access to Asian Development Fund (ADF) and ordinary capital resources (OCR). 6 The indicative resources available during for sovereign operations amount to $364.6 million in market-based OCR. In addition, cofinancing and funding from other sources, including the ADF subregional pool and OCR regional cooperation and integration set-aside, will be actively explored. The total firm lending pipeline proposed for Armenia in amounts to $325 million from marketbased OCR. Projects included in the indicative pipeline as standby in 2017 and in 2018 can be reclassified as firm upon reaching project readiness and availability of resources. 5. ADB will consider supporting key sectors of the economy through private sector financing. Such support will aim to help the private sector play a greater role in export-oriented industry, trade, logistics, and infrastructure development, and to introduce international best practices in corporate responsibility and performance. 1 Government of Armenia Armenia Development Strategy for Yerevan. 2 Government of Armenia Republic of Armenia Government Program for Yerevan. 3 ADB Midterm Review of Strategy 2020: Meeting the Challenges of a Transforming Asia and Pacific. Manila. 4 ADB Country Partnership Strategy: Armenia, Manila. 5 In August 2014, the ADB Board of Directors approved the reclassification of Armenia for the purpose of access to ordinary capital resources, and its graduation from the ADF resources, effective 1 January Effective on 1 January 2017, Armenia is reclassified as a group C country for the purpose of access to marketbased OCR. Armenia retains access to ADF resources until 31 December 2016.

6 2 III. SUMMARY OF CHANGES TO LENDING AND NONLENDING PROGRAMS 6. Changes in the lending program from the CPS and COBP for are as follows: (i) Transport. The allocation for tranche 2 of the multitranche financing facility (MFF) of the Sustainable Urban Development Investment Program 8 planned for 2015 increased from $80 million to $113.0 million to realign the program with the government s emerging priorities. The allocation for the tranche 3 of the MFF for improving the urban environment in secondary cities increased from $49 million to $80 million, and the project was rescheduled from 2016 to 2017 (standby in 2016). A new project ($45 million) for rehabilitation of the Armenia-Georgia Border Road was added for 2016 at the request of the government. The allocation of $100 million for the MFF North South Road Corridor Investment Program 9 planned for 2018 in the CPS was increased to $170 million and was included as a standby in 2016, 2017 and 2018, subject to availability of OCR resources. (ii) Water supply and other municipal infrastructure and services. A new results-based loan for the Seismic Safety Improvement Program is proposed for The $88.5 million ADF allocation for will be fully utilized for the program. The program will support the government in seismic strengthening and renovating priority school buildings and in improving seismic safety planning and management competencies. The Solid Waste Management Project ($20 million) was deferred to firm in 2017 from standby in 2015 and in 2016, and is pending the government s review and approval of the feasibility study for a landfill near Gyumri. 10 The $45 million Water Supply and Sanitation Improvement Project was moved from 2017 to 2018 (standby in 2017). The allocation for the tranche 4 of the MFF Sustainable Urban Development Investment Program (scheduled as firm in 2018) was decreased from $43 million to $20 million due to constraints on resources in (iii) Energy. The $20 million Renewable Energy Project, planned as firm for 2016, has been renamed the Utility-Scale Solar Photovoltaic Project and deferred to standby for 2017 and firm for 2018 at the request of the government. The phase 2 of the Power Transmission Rehabilitation project was rescheduled from 2017 firm to 2018 firm (standby in 2017) due to delays in implementation of phase 1 of the program. (iv) Finance. Phase 2 of the Women Entrepreneurship Support Sector Development Program was moved from firm in 2017 to standby in 2018, due to delays in implementation of phase The indicative nonlending technical assistance program is about $6.9 million for The nonlending program was prioritized and realigned to support the lending program. The main focus will be on supporting project preparation and on providing capacity building and advisory support for implementation of related reforms. 8. The summary of changes to the lending and nonlending programs is reflected in the revised results framework in Appendix 1, and in Appendix 2, Tables A2.1 and A ADB Armenia: Country Operations Business Plan, Manila. 8 ADB Report and Recommendation of the President to the Board of Directors: Proposed Multitranche Financing Facility to the Republic of Armenia for the Sustainable Urban Development Investment Program. Manila. 9 ADB Report and Recommendation of the President to the Board of Directors: Proposed Multitranche Financing Facility to the Republic of Armenia for the North South Road Corridor Investment Program. Manila. 10 ADB Technical Assistance to Armenia for the Solid Waste Management Improvement Investment Program. Manila

7 Appendix 1 3 UPDATED COUNTRY PARTNERSHIP STRATEGY RESULTS FRAMEWORK (Board endorsement of the CPS: January 2015; COBP: October 2015) Country Development Goals The main objective of the Armenia Development Strategy 2025 is the increase in employment through creation of quality and high-productivity jobs. The Armenia Development Strategy sets the following four priorities: (i) growth in employment, (ii) development of human capital, (iii) improvement of the social protection system, and (iv) institutional modernization of the public administration and governance. Sectors Selected by ADB Government Sector Objectives Sector Outcomes that ADB Contributes to and Indicators ADB Areas of intervention Transport (Core area 1: Infrastructure, and Core area 3: Regional integration) Improved internal and external transport links Outcome: Increased, more efficient, and safer movement of goods and people Indicator 1: Road freight traffic increases to million ton-km by 2018 Baseline (2012) : million ton-km Current value (2014): million ton-km Indicator 2: Road passenger traffic increases to 2,770 million passengerkm by 2018 Baseline (2012) : 2,611 million passenger-km Current value (2014): 2,536 million passenger-km Indicator 3: Number of road collisions falls to 2,400 by 2018 Baseline (2012): 2,602 Current value (2014): 3,156 Interstate and local roads Road transport policies and reforms Pilot projects and other KPS on road safety ADB Indicative Resource Allocation in the Next Pipeline and Thematic Priorities $423.0 million for , of which: ESG 46% RCI 51% PSD 27% $12.0 million approved in 2014 Changes from CPS or Last COBP No change from the CPS or last COBP. Changes from CPS or Last COBP ADB s resource allocation for increased from $244.0 million to $423.0 million. Allocation for Tranche 2 MFF Sustainable Urban Development Investment program increased from $80 million to $113.0 million. Allocation for Tranche 3 MFF Sustainable Urban Development Investment program increased from $49 million to $80 million. A new road project ($45 million) for rehabilitation of Armenia-Georgia Border Road was added for 2016 at the request of the government. Allocation for Tranche 4 MFF North South Road Corridor Investment program increased from $100 million to $170 million.

8 4 Appendix 1 Sectors Selected by ADB Government Sector Objectives Sector Outcomes that ADB Contributes to and Indicators ADB Areas of intervention ADB Indicative Resource Allocation in the Next Pipeline and Thematic Priorities Water and other urban infrastructure and services (Core area 1: Infrastructure, and Core area 2: Environment; Other areas of operations: disaster and emergency assistance) More even (balanced) urban development Outcome: More people use improved water supply, sanitation, and municipal services Indicator 1: Share of population connected to the centralized water supply system increased to 50.0% by 2020 (2013 baseline: 44.7%) Indicator 2: Share of the population connected to centralized sewerage system increased to 50.0% by 2020 (2013 baseline: 44.7%) Indicator 3: 90% of solid waste generated disposed of in sanitary landfills by 2018 (2012 baseline: 0%) Baseline (2012): 0% Current value (2013): 0% Indicator 4: 7,750 pupils in seismically strengthened schools by 2016 (2012 baseline: 0) Urban infrastructure (water supply, solid waste management, urban transport) Urban governance, planning, and environmental policies Pilot projects and other KPS on seismic safety and rural waste management $170.8 million for , of which: ESG 93% $12.0 million approved in 2014 Energy (Core area 1: Infrastructure, Core area 2: Environment, and Core area 3: Regional integration) Enhanced energy security through, in particular, greater utilization of domestic renewable energy and improved reliability of the electricity system Outcome: Increased and more efficient use of energy (including renewable energy) Indicator 1: Unplanned power interruptions reduced to 4 5 times per year in 2018 (2011 baseline: average of 8 10 times per year); Electrical power transmission Renewable energy subsector development Rehabilitation work and dams $55.0 million for , of which: ESG 100% PSD 36% RCI 64% $37 million approved in 2014, of which: ESG 100% Changes from CPS or Last COBP ADB s resource allocation increased from $123.0 million to $170.8 million. A new results- based program for seismic safety improvement (total $88.5 million, of which, water supply and other municipal infrastructure and services $70.8 million and education $17.7) has been added for Allocation for Tranche 4 MFF Sustainable Urban Development Investment program decreased from $43 million to $20 million. No changes

9 Appendix 1 5 Sectors Selected by ADB Government Sector Objectives Deeper regional integration, with expanded cross-border electricity trade Sector Outcomes that ADB Contributes to and Indicators Indicator 2: Per capita consumption of power increases to 2,500 kwh by 2018 Baseline (2011): 1,950 kwh Current value (2012): 1,838 kwh ADB Areas of intervention Energy trade ADB Indicative Resource Allocation in the Next Pipeline and Thematic Priorities Changes from CPS or Last COBP Indicator 3: Annual CO 2 emissions (tco 2 per year) decreased by 20,000 tons by 2018 Baseline (2008): 5.5 million tco 2 Current value (2011): 5.0 million tco 2 Indicator 4: Exports of electricity increased to 2.5 billion kwh by 2018 Baseline (2011): 1.6 billion kwh Current value (2013): 1.2 billion kwh ADB = Asian Development Bank; CO 2 = carbon dioxide; COBP = country operations business plan; CPS = country partnership strategy; ESG = environmentally sustainable growth; km = kilometer; KPS = knowledge products and services; kwh = kilowatt-hour; MFF = multitranche financing facility; PSD = private sector development; RCI = regional integration; tco 2 = tons of carbon dioxide. Sources: Asian Development Bank estimates; Government of Armenia Armenia Development Strategy 2025 (April). Yerevan. National Statistical Service of Armenia (for current values of baseline data, accessed 30 July 2015).

10 6 Appendix 2 Project/Program Name 2016 Firm Infrastructure Sustainability Support Program, Phase 2 b Sector PSM, TRA, WUS, Poverty Targeting GI INDICATIVE ASSISTANCE PIPELINE Table A2.1: Lending Products, Strategic Agendas and Drivers of Change IEG, GCD, KNS, PAR Division Year of PPTA/ PDA Market -based OCR ADF Loans/Conce ssional OCR Loans Cost ($ million) ADB a ADF ADF Grants Gov t Cofinance CWPF Armenia-Georgia Border Road TRA GI IEG, RCI, CWTC (EIB) Rehabilitation Project GCD, PAR Standby MFF Sustainable Urban Development Investment Program, Tranche 3 (Secondary Cities) TRA GI IEG, ESG, GCD, KNS, PAR CWUW Solid Waste Management Project WUS GI IEG, ESG, GCD, KNS, PAR CWUW MFF North South Road Corridor TRA GI IEG, RCI, GCD CWTC Improvement Project, Tranche Firm MFF Sustainable Urban Development Investment Program, Tranche 3 (Secondary Cities) TRA GI IEG, ESG, GCD, PAR CWUW Solid Waste Management Project WUS GI IEG, ESG, GCD, KNS, PAR CWUW

11 Appendix 2 7 Strategic Agendas and Drivers of Change Project/Program Name Sector Poverty Targeting Division Market -based OCR ADF Loans/ Concessional OCR Loans ADF Grants Gov t Cofinance 2017 Standby MFF North South Road Corridor TRA GI IEG, RCI, CWTC Improvement Project, Tranche 4 GCD Utility Scale Solar for ENE GI IEG, ESG, CWEN Photovoltaic Project (formerly PSD, GCD, (IBRD, Renewable Energy Project) KNS, PAR SREP) Power Transmission ENE GI IEG, ESG, CWEN Rehabilitation Project, Phase 2 GCD, RCI Water Supply and Sanitation WUS TI-M IEG, ESG, CWUW Improvement Project RCI, GCD Year of PPTA/ PDA Cost ($ million) ADB a ADF 2018 Firm Power Transmission ENE GI IEG, ESG, CWEN Rehabilitation Project, Phase 2 GCD, RCI MFF Sustainable Urban WUS GI IEG, ESG, CWUW Development Investment Program, Tranche 4 GCD, KNS, PAR Water Supply and Sanitation WUS TI-M IEG, ESG, CWUW Improvement Project RCI, GCD Utility Scale Solar for Photovoltaic Project (formerly Renewable Energy Project) ENE GI IEG, ESG, PSD, GCD, KNS, PAR CWEN (IBRD, SREP) Standby MFF North South Road Corridor TRA GI IEG, RCI, CWTC Improvement Project, Tranche 4 GCD Women Entrepreneurship Support Sector Development Program, Phase 2 FIN GI IEG,GEM, PSD, GCD, PAR CWPF 2017/ ADB = Asian Development Bank; ADF = Asian Development Fund; CWEN = Energy Division; CWPF = Public Management, Financial Sector, and Trade Division; CWTC = Transport and Communications Division; CWUW = Urban Development and Water Division; EIB = European Investment Bank; ENE = energy; ESG = environmentally sustainable growth; FIN = finance; GCD = governance and capacity development; GEM = gender equity and mainstreaming; GI = general intervention; Gov t = government; IBRD = International Bank for Reconstruction and Development; IEG = inclusive economic growth; KNS = knowledge solutions; MFF = multitranche financing facility; OCR = ordinary capital resources; PAR = partnerships; PSD = private sector development; PDA = project design advance; PPTA = project preparatory technical assistance; PSM = public sector management; RCI = regional integration; SREP = Scaling Up Renewable Energy in Low Income Countries Program; TI-M = MDG targeting; TRA = transport; WUS = water and other urban infrastructure and services. a Reflecting the approved combination of ADF lending operations with the OCR balance sheet that will become effective on 1 January b Currently planned as two $30 million tranches, one for 2016 and one for The exact amounts and timing are pending final development of the reform program.

12 8 Appendix 2 Table A2.2: Nonlending Products and Services, Sources of Funding ADB Others Assistance Name Sector Division Assistance Type Source Amount ($ 000) Source Amount ($ 000) ($ 000) 2016 Firm Infrastructure Sustainability Support Program, PSM, TRA, CWPF CDTA TASF Phase 2 WUS Power Transmission Rehabilitation Project, Phase 2 ENE CWEN S-PPTA TASF Utility-Scale Solar Photovoltaic Project ENE CWEN PPTA TASF Water Supply and Sanitation Improvement WUS CWUW PPTA TASF Innovation and Export Promotion for Industrial IND CWPF PATA TASF Development 2, , Standby Capacity Building for Implementing Complex TRA CWTC S-PATA TASF Transport Projects Promoting Civil Society s Monitoring of Public Works TRA, WUS, CWUW CDTA 0.0 TBD PSM Firm National Strategy and Pilot Project for Environmental WUS CWUW PATA TASF Remediation Support for Sustainable Development in the Energy Sector ENE CWEN PATA TASF Promoting Civil Society s Monitoring of Public Works TRA, WUS, PSM CWUW CDTA 0.0 TBD Capacity Building for Implementing Complex TRA CWTC S-PATA TASF Transport Projects 1, , Standby Preparing Women Entrepreneurship Support Sector FIN CWPF PPTA TASF Development Program, Phase

13 Appendix 2 9 Sources of Funding ADB Others Assistance Name Sector Division Assistance Type Source Amount ($ 000) Source Amount ($ 000) ($ 000) 2018 Firm Preparing Women Entrepreneurship Support FIN CWPF PPTA TASF Sector Development Program, Phase Standby Facility for Policy Reform and Poverty Reduction IND, PSM ARRM PATA TASF Women Entrepreneurship Support Sector FIN CWPF CDTA TASF Development Program, Phase 2 1, ,000.0 ADB = Asian Development Bank; ARRM = Armenia Resident Mission; CDTA = capacity development technical assistance; CWEN = Energy Division; CWPF = Public Management, Financial Sector, and Trade Division; CWTC = Transport and Communications Division; CWUW = Urban Development and Water Division; ENE = energy; FIN = finance; IND = industry and trade; PATA = policy and advisory technical assistance; PPTA = project preparatory technical assistance; PSM = public sector management; S-PATA = small-scale policy and advisory technical assistance; S-PPTA = small-scale project preparatory technical assistance; TASF = Technical Assistance Special Fund; TBD = to be determined; TRA = transport; WUS = water and other urban infrastructure and services. Source: ADB estimates.

14 10 Appendix 3 Project/Program Name 2015 Firm MFF Sustainable Urban Development Investment Program, Tranche 2 (Yerevan Bypass) Seismic Safety Improvement Program Sector ASSISTANCE PROGRAM FOR CURRENT YEAR Poverty Targeting Table A3.1: Lending Products, 2015 Strategic Agendas and Drivers of Change TRA GI IEG, ESG, PSD, GCD WUS, EDU GI IEG, ESG, GCD, KNS, PAR Division Year of PPTA/ PDA OCR Loans Cost ($ million) ADB ADF Grants Gov t Cofinance CWUW CWUW ADB = Asian Development Bank; ADF = Asian Development Fund; CWUW = Urban Development and Water Division; EDU = education; ESG = environmentally sustainable growth; GCD = governance and capacity development; GI = general intervention; Gov t = government; IEG = inclusive economic growth; KNS = knowledge solutions; MFF = multitranche financing facility; OCR = ordinary capital resources; PAR = partnerships; PDA = project design advance; PPTA = project preparatory technical assistance; PSD = Private Sector Development; TRA = transport; WUS = water and other urban infrastructure and services. Source: ADB estimates.

15 Appendix 3 11 Table A3.2: Nonlending Products and Services, 2015 Sources of Funding ADB Others Assistance Name Sector Division Assistance Type Source Amount ($'000) Source Amount ($'000) ($'000) 2015 Firm Solid Waste Management Solutions WUS ARRM CDTA 0.0 JFPR for Remote and Small Communities Preparing School Seismic Safety WUS CWUW PPTA TASF Improvement Program Project Management Support to the TRA CWTC CDTA TASF Ministry of Transport Preparing the Armenia-Georgia TRA CWTC S-PPTA TASF Border Road Rehabilitation Project Seismic Safety Improvement WUS CWUW CDTA TASF Preparing Infrastructure Sustainability PSM, TRA, CWPF PPTA TASF Support Program, Phase 2 WUS 2, , Standby Utility-Scale Solar Photovoltaic Project ENE CWEN PPTA TASF Innovation and Export Promotion for IND CWPF PATA TASF Industrial Development 1, ,450.0 ADB = Asian Development Bank; ARRM = Armenia Resident Mission; CDTA = capacity development technical assistance; CWEN = Energy Division; CWPF = Public Management, Financial Sector, and Trade Division; CWTC = Transport and Communications Division; CWUW = Urban Development and Water Division; ENE = energy; IND = industry and trade; JFPR = Japan Fund for Poverty Reduction; PATA = policy and advisory technical assistance; PPTA = project preparatory technical assistance; PSM = public sector management; S-PPTA = small-scale project preparatory technical assistance; TASF = Technical Assistance Special Fund; TRA = transport; WUS = water and other urban infrastructure and services. Source: ADB estimates.