Millennium Challenge Account dollars are hard at work in Armenia’s rural areas

CEO Ara Hovsepyan says the work is fast paced

by Armen Hakobyan

Published: Saturday October 20, 2007

Ara Hovsepyan, the chief executive officer of the MCA-Armenia.
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Under a compact between the governments of the United States and Armenia, the U.S. Millennium Challenge Corporation (MCC) is funding a five-year, $235 million program to reduce rural poverty in Armenia. The funding is contingent on Armenia’s continuing compliance with MCC eligibility criteria of ruling justly, investing in people, and economic freedom. The compact went into force on September 29, 2006.

The program is being implemented by the Millennium Challenge Account - Armenia (MCA-Armenia). One element of the program is an Irrigated Agriculture project, which will rehabilitate and expand Armenia’s irrigation system.

As part of its ongoing operations, the MCA-Armenia on September 14 entered into a four-year, $1.5 million agreement with the HayJrNakhagitz Institute. HayJrNakhagitz will help design and manage the construction and rehabilitation of six major irrigation canals.

The canals serve around 120,000 hectares of farmland. This constitutes more than half of the area served by Armenia’s water users’ cooperatives. But about half the water that flows through the canals is lost. The program will rehabilitate some 200 km (124 mi) of the main canals, which will significantly reduce water loss.

The Armenian Reporter had some questions for Ara Hovsepyan, the chief executive officer of the MCA-Armenia.

Reporter: How many projects has MCA-Armenia already launched?

Hovsepyan: I would like to distinguish two groups of activities set by our program. The first and larger group includes the rehabilitation, reconstruction, and construction of major irrigational waterways and roads. The second, relatively small block, is conditionally called Water-to-Market. It is a little bit out of the line of our usual activities. It has more of a consulting and instructional nature and is aimed at a more effective implementation of our program.

Reporter: Could you elaborate on the individual parts in more detail?

Hovsepyan: We have not started any construction yet. However, we are already in the middle of the design stage. What does that mean? The overall length of the road segments provided for in our program is 943 km. That is divided into three packages. Now we are almost finished with the design work for the first package, comprising around 311 km. Taking into account the procurement process, we expect that construction based on these designs will start in spring of 2008. Until then we are planning to organize a tender, and find the organizations that will build this 311 km segment.

Reporter: Are these roads between village communities we are mainly talking about?

Hovsepyan: The roads being constructed through the MCA-Armenia project must all match one main standard: They have to connect the rural or town communities to the main road. So, it is important for us that a given community have at least one decent road leading to a major artery.

Working with Lincy

The realization of the first package of road construction is expected to cost approximately $35 million. In addition to that first package of design work, we have certain agreements with the Lincy Foundation, which already has some projects ready. We have taken two ready projects from them and have already announced a construction tender. I’m talking about a 25 km segment of the Armavir-Isahakyan-Gyumri road, which is divided into two parts.

In the irrigation sector we currently have two agreements with design companies, one for Armenia’s seven water-storage tanks and the other for the six main canals. When the design work is finished, we will start work on construction. Construction is to start by late spring of 2008, by about the end of May.

The other irrigation projects, including the design work and construction of 18 gravity flow systems, the observation, design, and reconstruction of 68 water-pump stations, and purchasing of the designs of tertiary (intercommunity) water canals are in progress. Using the same example we used in the road construction sector, we also have three completed intercommunity network projects from the World Bank in the irrigation sector.

Reporter: How much money has been received at this point and what has it been spent on?

Hovsepyan: We have received $8 million so far. It has been spent mainly on design work. The other part of the money was given for initial expenses for the two segments of road construction and the construction of the three intercommunity network projects.

We planned to spend $12 million this year, but have spent $8 million. We planned to spend $60 million next year, but are hoping for even more – around $65 million. All in all, as you know, by 2011 we must spend $235 million.

Inflationary worries

Reporter: Does the rise of the dram affect the planned projects?

Hovsepyan: It is gradually beginning to have an effect. It is not like we are actively worried about it now, because this is just the first year of the program. We have four more years in front of us, and dram can be fall as well. We have just identified that issue and discussed it once in our Governing Council and Stakeholders’ Committee. We are aware of the issue and I believe that by the end of the second year we will start looking for solutions. I think that now it is too early to think about urgent solutions for four years, because we have other problems to solve yet. But one thing is clear, and it was approved by the Governing Council as well – that we took on responsibility of reconstructing a road segment or an irrigation network of a certain length and we have to accomplish these works. How they will be implemented will become clear in process, and if there will be a lack of finances, we have to find them from somewhere.

Reporter: What you can say about the Water-to-Market project?

Hovsepyan: The aim of the Water-to-Market component is a transition to the more efficient agricultural production in areas where the irrigation systems are being reconstructed. The project also aims to connect farmers with local and international markets by installing post-harvesting technologies and strengthening processing enterprises. It also seeks to strengthen abilities of credit organizations to finance viable proposals in production and post-harvest activities. This is one of the main projects through which we raised part of the finances received.