The Public Sector Reform Commission (PSRC) was established on 3.09.99 by the Prime Minister of the republic of Armenia according to the decree N544 on "Primary activities of Public Administration System Reforms of RA" (decree N544 - 3.09.99.). PSRS is responsible for implementing public administration reforms in RA. The phases of the mentioned function include restructuring the ministries, departments, as well as territorial administration and local self-government bodies.

The reforms are carried out in 3 directions:

1. public administration system structural and functional reforms
2. establishment of civil service, www.csc.am
3. financial management reforms, www.mfe.am

In fact, all 3 directions are integrated into one unified public administration system with new structure and organization.

In order to implement public administration reforms there has been established "public administration organizational reforms concept paper of RA" according to which;

- Functional analysis was carried out in all ministries, government agencies to identify and eliminate overlaps and redundancies, as well as disharmony in functions and structural units.
- Civil service was placed in all ministries (with the exception of the Ministry of Foreign Affairs of RA and Ministry of Defense of RA) and local self-government bodies by diverging the political, discretional and technical posts from the staff of civil servants recognizing as head of staff of ministries, regional administrations, government subsidiary agencies. Unlike the ministers and deputy ministers, civil servants will not be affected by political instabilities.
- Special public management units were established in the ministries, government subsidiary agencies and legally established commissions, which are managed by heads of staffs. Thereby, the functions of organization director are diverged from the functions of the head of state bodies.
- Based on the type of functions, different agencies and inspectorates were formed within the ministries as separate units based on functional criteria to provide for service provision, streamlining, monitoring and inspection activities.
- "Collegiate" governing entities in the ministries were substituted with various non-administrative commissions and consultative bodies created by the ministers,
- Considerable part of government agencies - over 21 entities - were merged within relevant ministries or integrated with them as a separate agency, inspectorate or a structural subdivision,
- Several entities within ministries and government subsidiary bodies were re-organized into state non-commercial organizations. Public administration functions were delegated to corresponding governing bodies.
- The management structure of the ministries was unified to include the secretariats and different units within ministry departments and divisions. A minimum level of staffing was defined for structural units in the ministries - secretariats, departments and divisions,
- ministry by-laws were finalized in line with the strategic tasks and functions vested in them by RA laws and legal acts.

The reforms in the above-mentioned areas may be broken down into the following two stages:

Stage One (1999-2003) - It was originally decided to include the entities under the central government and ministries in the management system of relevant ministries by giving them a status of agency, inspection, state non-profit organization by not modifying the current structure of the government. This was supposed to allow ministers, in their capacity of Cabinet members, to concentrate upon the decision of strategic matters, as well as to ensure verticality in public governance and to lay down terms of reference for each member of government, to specify the range of those bodies where civil service was due to be introduced.

Subsequently, in accordance with the RA law on civil service, all of civil service job titles were to be described, classified and assessed by separating the political, discretional and technical functions and setting apart the maintenance staff. Facilities should be created for smooth operations of civil service, civil servants re-training, their attestation and the introduction of a remuneration system. A newly formulated office of chief of staff was to be introduced in the public sector.

Stage Two (2003-2008) Improvements are planned in the public services management models and mechanisms. This stage will have the key task of ensuring the transition to a more efficient system of management by streamlining the whole range of matters regarding the distribution of powers and duties within the public sector, the de-centralization of functions and their classification.

For the first stage of public sector reform implementation on the basis of legislation in 1999-2001 the Commission drafted and / or assisted in the preparation and the National Assembly adopted the following laws on;

- public administration establishments
- state non-commercial organizations
- civil service
- the remuneration of civil servants
- customs services
- military service
- the service in the police
- tax services

In the effort of ensuring effective application of these laws, the President of RA first ratified the February 4, 2002 Order PO-1045 specifying the priority issues generated due to RA Law on Civil Service, and the August 5, 2002 Order PO-1158 specifying the priority issues generated due to RA Law on "Military Service", "Police Service", "Tax Service", "Customs Service", "Remuneration of Civil Servants".

In the effort to increase the work efficiency of Government of RA, functional and structural optimization of the ministries of RA for restructuring of ministries, government agencies, regional administrations and other public bodies there has been drafted and approved the following legal acts were by the President of RA;

- Presidential decree PD-1064 of March 16, 2002 on the "Government of RA structure"
- Presidential decree PD-1064 of March 16, 2002 on the "Establishing the system of functions of Government of RA"
- Presidential decrees PD-1065 and PD-1066 of March 16, 2002 on the "Amendments to the decrees on public administration in the regions of RA" and on "Public administration in Yerevan city".

Based on the above laws and presidential decrees, the Government of RA have signed:

- Government of RA decision on "Model statutes and organizational structures of RA ministries, agencies and inspectorates"
- Government decision on "model statutes and organizational structures of RA Regional Administrations (Yerevan city municipality)"
- Government decision on "The requirements to organizational and service units of RA Ministry staffs"
- Government decision on "The establishment of RA Government Staff public administration institution"
- Government decision on "The administrative procedure of Government of RA"

The following government decisions were approved by the decree of the Prime Minister of RA on;

- "The approval of the rules for control over the performance of Government of RA decisions and Prime Minister's decrees and instructions performance"
- "Introducing the office of chief of staff in central executive bodies, regional administrations and Yerevan municipality of RA"
- "the number of employees in the office of Government, central executive bodies, regional administrations and Yerevan municipality of RA"
- "cutbacks in the not yet re-organized public administration and regional administration bodies (over 750 people were made redundant), which was carried out in accordance with a number of decisions passed on March 20, 2002 on the basis of a functional analysis"
- "The approval of the time-tables set for the re-organization of relevant ministries and government agencies".

Public sector reforms were brought in line with the established time-table through submitting proposals on amendments to laws and regulations governing the activities of public administration bodies, according to which the new by-laws and organizational structures of central executive bodies were approved by the Government of RA.

The local offices of social services responsible to Yerevan city municipality and local governance administrations were re-organized into district centers for social services under local governments and, as a matter of fact, were included in the system of civil service.

As a result of the above-mentioned re-organizations;

- Considerable amount of time and money will be saved by centralizing similar functions assigned to currently autonomous entities and achieving cost-efficiency through reduced number of accounting, personnel, financial and economic management staff, in particular. Moreover, it will be possible to centralize the spending referred to as "agency expenditure," which are being made by the currently autonomous agencies
- the centralization of those agencies currently autonomous will make it possible to implement concerted policies in specific areas and ensure proper monitoring thereof
- highly-professional specialists will be engaged in the civil service to enhance the quality of public services and the approaches to problem solving. All staff employed in the agencies and inspections under ministries will be recognized as civil servants save those having legally established specificities of service: persons involved in tax, customs, police, diplomatic, emergency, military and other services who were provided different terms of service by law
- The centralization of administrative functions will make it possible for the bulk of budgeted expenditure to be made through the system of public procurements in contrast to the existing practice of wasteful spending by the autonomous public agencies. Now these agencies will focus on the fulfillment of such tasks as they were given by law, namely the delivery of public services and regulatory activities with the matters in relation to administrative, as well as human and financial resource management being the responsibility of the chiefs of staff acting via the respective units within the ministry staff. The ministers and their deputies, too, will be spared these duties and will have the possibility to concentrate entirely on the solution of strategic problems and the coordination of the activities of specialized units.

2. The introduction of civil service

To introduce a new system of civil service in public administration, the public sector reforms have included;

- the creation of a new structure for civil service management
- merit-based recruitment of civil servants and their promotion
- the introduction of a system for civil servants' training
- the description of the posts available in civil service and the determination of the terms of reference for each position
- the introduction of a system for civil servants remuneration and social insurance, as well as for personal incomes and assets statement

To this end, the RA Law on civil service was passed; the Civil Service Council was established as the supreme body for civil service management. The Council's statutes and organizational structure, as well as all of the relevant regulations were approved.

In 1999-2002, a special questionnaire was drafted for the description of civil service job titles which was subsequently tested and appraised by the experts. A methodical handbook featuring the guidelines for the description and appraisal of civil service positions was issued to serve as a basis for the fulfillment of the foregoing work in public agencies. 2 representatives from personnel departments of those public agencies included in the system of civil service were given appropriate training.

Over 500 positions in different ministries have been described, assessed and analyzed on an experimental basis. Along with this, 15 positions of different categories in each regional administrations were described and classified. All the posts in the Office of Government were described, analyzed and assessed in accordance with the Guidelines for Civil Service Posts Description and Assessment.

With regard to the establishment of a civil servants re-training system, a concept for the training and re-training of RA civil servants was drafted and made available to the RA Civil Service Council. Re-training programs made up of 24 modules on public governance and public administration were developed and handed over to the RA Public Administration Academy and other educational institutions. Training was provided to the representatives of different ministries, agencies and regional administrations (trainers). 11 lecturers from the Public Administration Academy and other 4 lecturers engaged on a contractual basis have taken training of trainers in accordance with the mentioned 24 modules.

A special unit responsible for the training of civil servants has been set up in the Public Administration Academy, which is equipped with computers and other training facilities. A business plan was developed for the activities of Public Administration School / Academy.

A number of seminars were organized to teach and make clear the provisions of the RA law on civil service, as well as to comment the teaching materials relating to their application.

Following the introduction of the RA Law on Civil Service, the Civil Service Council of RA was provided with over 800 questionnaires in relation to the contest and attestation procedure for the selection of chiefs of staff in ministries, government agencies, regional administrations and the Yerevan municipality. The Council was also presented the list of candidates for the Prime Minister of RA and Government of RA representatives, the registration certificates of the Office of Government positions and office nomenclature.

4. Reforms in financial administration concerned civil servants remuneration, the process of estimation and substantiation of the funds needed for civil servants re-training, as well as issues bearing on the modernization of internal and external audit procedures. To this end, the Concept for Civil Servants Remuneration, the RA Law on Civil Servants Remuneration were drafted and surveys were carried out to establish the level of staffing, length of service and personnel turnover in the ministries of social security and health care, Vayots Dzor and Syunik Local Government Administrations.
5. RA Government decisions were drafted on the definition of the entity authorized by the Government of RA to submit yearly reports on the level of civil servants' salary base and remuneration system, on the size of additional remunerations payable to civil servants for the performance of special tasks, on the manner of providing civil servants with occasional privileges, as well as the reimbursement of specific expenses incurred.

At stage two - as from 2003 - "the cross-agency modernization program" started in both legislative and institutional areas. It is supposed to provide for the integration of the whole system of public administration and to address the existing problems, in particular:

1) the definition of mechanisms inherent in the delivery of public (State-provided) services, the design of structural models for the management of public services, development of proposal packages according to different types of public services, the formulation of relevant legislative frameworks, application of higher standards in the provision of public services, introduction of effective mechanisms of management:
- drafting of RA Law on public (State-provided) services
2) the submission of proposals regarding the de-centralization public services and the new functions and organizational schemes applicable in regional administrations, the testing of pilot models of de-centralized management, capacity building in regional administrations
- design of RA Law on territorial administration
3) the formulation of mechanisms and proposals concerning government agency and State inspection budget financing and the settlements due to the treasury from the proceeds of duties and payments charged for various types of public services
4) the definition of mechanisms for the delivery of municipal (community) services, the design of structural models for the management of municipal services, development of proposal packages according to different types of municipal services, the formulation of relevant legislative frameworks, application of higher standards in the provision of these services, introduction of effective mechanisms of management
- design of RA law on municipal services
5) regarding the application of stricter standards of accountability and reporting in public institutions:
- design of RA law on control necessitating the separation of external and internal control functions and the establishment of authorized entities
6) the implementation of reforms in the area public expenditure management , where:
- public expenditure should to be estimated in accordance with prospective sectoral development programs
7) the improvements in the decision-making and administrative processes are conditional on the continuity of public sector reforms and imply:
- the creation of pre-requisites necessary for the implementation of the anticorruption and poverty reduction strategic programs
- the optimization of the structure of government on the basis of the 2003-2008 development priorities
- the optimization of the terms of reference of those public non-profit organizations providing public services

The UK Department for International Development (DFID) has been providing technical, methodological and advisory assistance to the Commission with the organization of the foregoing activities. DFID experts are working directly with the staff of ministerial task forces.

In March, 2003, DFID and the Government of Armenia launched Armenia-Public Sector Reform Programme (APSREP). APSREP's major counter-part is RA Public Sector Reform Commission. The programme is implemented by PricewaterhouseCoopers (PwC) LLP.

"Change for Better"
APSREP

The purpose of Armenia-Public Sector Reform Programme is to improve the efficiency, effectiveness, accountability, transparency and responsiveness of public administration in Armenia. In order to achieve its key objectives APSREP has been working in close cooperation with the staff of three pilot ministries. These include RA Social Ministries of Labour & Social Issues, Health and Education and Science. APSREP also works with 2 pilot marzpetarans in Tavush and Gegharkunik. Civil Service Council and Public Administration Academy are other change leaders in the reforms undertaken by Armenia's Government and APSREP.

Armenia Public Sector Reform Programme provides technical assistance, consulting and ongoing support to the Government of Armenia for implementing public sector reforms. The programme drafts and reviews laws and decrees, and trains the employees of Government of Armenia.

APSREP supports RA Government to reform Armenia's public sector particularly focusing on the following 3 components:

1. Component 1: Restructuring and rationalising the functions and structures of central & regional government

2. Component 2: Increasing effectiveness, accountability, and independence of civil service through Human Resources Management and Development.

3. Component 3: Connecting citizens to public services and policies

APSREP KEY COMPONENTS:

Component 1: Restructuring and rationalising the functions and structures of Central & Regional Government.

The structure & organisation component of the project is concerned with helping three pilot ministries and their associated institutions to find ways of delivering services more effectively to their customers, and to find ways of operating in a more transparent and accountable fashion.

Until recently it was not normal to think of public sector organisations as having customers, but it is now recognised internationally that the concepts of customer focus and customer care apply as much to a government ministry as they do to a private sector manufacturer.

APSREP is concentrating on opportunities to restructure and rationalise the functions trying to ensure that each organisation has the right functions, in the right place, doing the right things to be able to meet the needs of the customers for its services.

In 2003 APSREP undertook initial functional reviews of the pilot ministries and their associated institutions, and developed Technical Notes which presented recommendations for restructuring and rationalisation. These recommendations were discussed at length with Ministers, Deputy Ministers and senior civil servants. As a result of these consultations, a Memorandum of Understanding was signed with each Ministry which confirmed the Ministry's commitment to reforms and high level change plans were agreed and signed with each ministry containing on average eight initiatives to be taken forward between 2004 and 2007.
Initiatives include combining functions to avoid duplication of activities; introducing new functions which are needed to provide better service and redesigning the purpose and scope of functions to ensure they are properly focused on customer needs. APSREP continues to work in partnership with change leaders in the pilot ministries to assist with implementation and to assess the results achieved.

Major structural & functional reforms include:

- Establishment and development of Labour & Education Inspectorates

- Establishment of PR Departments in the Ministries of Health, Education & Science

- Establishment of Legal Department in the Ministry of Health

- Establishment of Policy Councils in pilot ministries responsible for reviewing the performance of the ministry and identifying areas where service improvements are needed

- Reform on Provision of Free Medical Certificates in the Ministry of Health

- Reform on Provision of Socio-Medical Examination Services of RA Ministry of Labour and Social Issues. As a result the citizens will not need to provide duplicate information and the service will be delivered more quickly

- Strengthening Head of Staff Position

Component 2: Increasing effectiveness, accountability, and independence Civil Service through Human Resources Management and Development.

The overall purpose of the Civil Service Component is to increase the accountability, independence, and effectiveness of the civil service. In order to reach this objective, APSREP has been working in close cooperation with the staff of the three pilot ministries and two pilot marzpetarans toward this objective in two main directions-Human Resources Management and Human Resources Development.

In the area of Human Resources Development, the APSREP has been working towards the improvement of the quality and scope of training provided to civil servants by the Public Administration Academy. In addition, a series of training events have been conducted for different groups of civil servants and for discretionary post holders. A training of trainers was conducted to upgrade the level of training delivery.

The civil service component seeks to achieve the following:

- Improved policymaking process in Government of Armenia (GoA)
- Fully transparent recruitment and operation of civil service.

APSREP in all pilot ministries and marzpetarans has implemented the following toward this goal:

- Conducted HR training for introduction of new HR management models

- Technically equipped several departments of pilot ministries and marzpetarans

- Developed and installed Human Resources Information Management System (HRIMS). RA National Assembly also uses HRIMS software. APSREP installed this information management system software in the assembly upon its request.

- Implemented management development programme across all levels of senior management in ministries and marzpetarans, including discretionary post-holders & civil servants. A special emphasis has been put on strengthening Head of Staff positions.

- Implemented on-going projects with RA Civil Service Council on improving civil service system with special emphasis on recruitment process, management competencies development and strengthening HR units across the government.

Component 3: Connecting Citizens to Public Services and Policies

One of the key objectives of Armenia-Public Sector Reform Programme is to promote citizens participation in public policy development and evaluation. Citizen's access to information, their participation in policy debates and monitoring of the government's plans are all vital for improving the efficiency, effectiveness, accountability, transparency and responsiveness of public administration in Armenia. Consulting with citizens (especially with direct stakeholders/users) and ensuring consistent citizens' feedback collection can serve as a powerful tool for ensuring public service delivery improvement and accessibility.

In order to improve public services and make citizens part of public policy development process APSREP's activities initiated under component 3 are carried according the following main directions:

- Service delivery improvement and access to information
- Establishment and strengthening of PR departments in the state bodies
- Development and promotion of implementation of consultation and feedback mechanisms


Service delivery improvement and access to information

APSREP has undertaken series of activities for improving information provision and responding to the queries of users/citizens by its pilot ministries and marzpetarans. Particularly:

- Establishment of Information centres in Government Building 3 and in Tavush and Gegharkunik marzpetarans for citizens to find answers to their questions in a more efficient and effective way.

- Development and publication of citizens' charters and leaflets, and organising campaigns for raising citizens' awareness on available services and standards of pilot ministries and marzpetarans.


Establishment and strengthening of PR departments in the state bodies

The role of PR departments is crucial in developing and strengthening links between citizens and respective state bodies. In this regard APSREP has undertaken the following:

- Lobbying and promoting the process of establishment of PR departments in state bodies.

- PR departments staff capacity building through trainings and seminars, as well as provision of technical resources.

- Strengthening internal & external communication of RA Government by helping to develop communication strategy through consulting and training. PR units and departments have started a more collaborative efforts and drafted communication strategies. MoLSI, one of the pilot ministries leading the change, was the first to create a micro-cite for more effective internal communication. With support of APSREP GoA Information and PR Department has started on-going meeting with all PR Representatives of Ministries and other Bodies.

- Conducting surveys to review PR Units status, capacities, and needs in 36 Governmental Bodies.

Development and promotion of implementation of consultation and feedback mechanisms

Consultation and feedback collection is an important way of citizens' active engagement in public policy making. In this area APSREP undertook:

- Participatory development, publication and distribution of two issues of Guide to Participation . Guides provide practical information on different tools and mechanisms for effective communication and stronger relations between Armenia's Government and the public.
- Developed mechanisms for gathering citizens' feedback for consideration by policy teams in 3 pilot ministries for improving responsiveness of government policy to citizens' needs.

- Conducted National Opinion and a series of Exit Polls to determine public evaluation of services in health, education, and social security sectors.




Apart from this, since September 2000, PLS Consult has been extending TACIS-financed technical assistance in connection with the introduction of civil service in territorial administration and local self-government bodies. It has also assisted the RA School of Public Administration with the introduction of a civil servants re-training system, the development of re-training curricula etc. The Commission was given the support of the World Bank in 2003: proposals were prepared under the program of public sector external and internal control and financial audit which were subsequently submitted to the Ministry of Finance and Economy, the Office of Government, the RA Presidency and the Control Chamber of the National Assembly in the form of a report.

The National Assembly has already ratified the agreement between the Republic of Armenia and the International Development Association on a crediting program for the modernization of the Armenian public sector (Credit No. 3891-0AM).

A. PROJECT OBJECTIVES

The project has the main goal of supporting the fulfilment of the tasks set in RA government program of action and enhances efficiency in public sector management. Activities under this project will be targeted at the piloting of such innovations in selected institutions as the introduction of a cross-agency information system, the management of ministry staffs and the delivery of services on the part of local authorities, capacity building in audit and financial inspection institutions, as well as the enhancement of public awareness with a view to improving transparency in government decision-making and policy implementation.

B. PROJECT DESCRIPTION

Project components

The project will consist of six components:

1. Strengthening of civil service management,
2. Introduction of the system of electronic public procurement,
3. Capacity building of the National Assembly's Chamber of Control of RA
4. Improved policy management and policy implementation through capacity building with the staff of Government of RA, Ministry of Finance and Economy of RA, Ministry of Trade and Economic Development of RA
5. Capacity building in local self-government bodies
6. Project management, surveys and awareness rising

Component 1: Strengthening Civil Service Management (US$ 2.62 Million, IDA Contribution US$ 2.52 Million)

Activities under Component 1 will promote the development of a merit-based civil service system. The main emphasis will be placed on the development of systems and capacities to ensure a consistent application of merit-based recruitment and promotion processes across all institutions under the Civil Service Law.

Activities under Subcomponent 1A will support the drafting of a Civil Service Development Strategy and the completion of remaining elements Regulatory Framework for Civil Service Management.

Activities under Subcomponent 1B will strengthen the Civil Service Council to improve the testing and attestation instruments in furtherance of merit-based recruitment and promotion practices; equip the Council's offices, assist the Council to develop and implement a Civil Service Training Strategy and help develop a Communications and Public Relations Strategy and establish a Public Information Centre.
Subcomponent 1C will support the introduction of cross-ministerial systems for Human Resource Management and Assessment/Attestation. The introduction of government-wide IT systems for Human Resource Management and Assessment and Attestation will enable the CSC to monitor the consistent application of merit based procedures and develop a pro-active career management policy that would reward professional excellence through accelerated career growth.
Subcomponent 1D will help improve the quality of the training programs of the Academy of Public Administration (AAPA), as the main provider of Civil Service Training. This will be achieved by strengthening the Academy's ability to develop and implement training programs, by upgrading the Academy's training facilities in Yerevan and equipping the to-be-created regional branches in Vanadzor and Goris.

Project Component 2: Introducing E-Procurement (US$ 0.92 million, IDA contribution US$ 0.62 million)

Component 2 will support the establishment of information technology infrastructure for e-Procurement and establish the basis for the development of a full-fledged e-Procurement System.
Subcomponent 2A will assist the Government in creating the material base for the development of the e-procurement system that would include the Central Authorized Body, the State Procurement Agency as well as sixty state agencies, forty-four local Treasury units and the information centres in ten Marz administrations and Yerevan D.C.

Subcomponent 2B will finance the acquisition, adaptation, installation, configuration and testing of e-Procurement application software, including an automated internal procurement administration system. Subcomponent 2B will also finance a public awareness/outreach program to maximize the awareness and utilization of the e-Procurement System.
Parallel financing for this component is earmarked at US$ 0.25 Million through USAID, which will be providing additional advisory services and training to set up the e-Procurement system in the context of the Commercial Law and Economic Regulation (CLERP) program.

Project Component 3: Strengthening the Chamber of Control (US$ 0.74 million, IDA Contribution US$ 0.29 Million)

Component 3 will provide limited and focused support to the Chamber of Control (COC) in addressing key institutional development needs of the COC, including the development of audit standards and manuals, as well as the provision of related training. Limited support for the provision of essential equipment is also foreseen.
Parallel financing up to the amount of US$ 0.43 million is expected through GTZ, which will provide additional advisory services and training to the COC for the design and implementation of audit standards.

Project Component 4: Improving Policy Formulation and Implementation through Capacity Building (US$ 3.55 million, IDA contribution US$ 3.42 million)

Support provided under Component 4 will assist the government in addressing weaknesses in the policy formulation and implementation process in the central state administration, in particular through the development of electronic document management systems and systems for tracking policy implementation. Furthermore, the project will help enhance transparency and accountability and address priority capacity building needs in other government institutions, such as the Ministry of Finance and Economy of RA, the Ministry of Trade and Economic Development of RA, and the staff of Government of RA.
Subcomponent 4A will support the improvement of policy management in the above-mentioned public institutions, in particular document flow. Based on a diagnostic study of the policy process, the project will support the introduction of an integrated document management system.
The activities under Subcomponent 4B will enhance the capacity of the Ministry of Finance and Economy of RA in the areas of revenue policy, internal audit, and the Budget and Financial Management Training Centre. Though the structure of the Ministry of Finance and Economy of RA has recently been amended, a number of structural issues remain, including the clarification of the
division of labor between the Ministry and the Tax and Customs Services and weaknesses in cross-ministerial management of the budget process. Another key issue is the rationalization of the internal audit and financial control functions of the Ministry and the development of effective linkages between the Supervision Service of the Ministry and other key institutions involved in financial control and policy evaluation.
Subcomponent 4C will support the Ministry of Trade and Economic Development (MTED) to enhance its capacities in the areas of regulatory policy-making and external communications. The MTED underwent through a comprehensive restructuring process. However, a substantial capacity-building agenda remains, in particular in the areas of standardization, certification and metrology and copyright, as well as in respect of WTO accession.
The staff of Government of RA has also been re-organized recently. As a result, the Office is better positioned to focus on its core task, namely to support the Prime Minister and the Government of RA in the management of the government decision-making process. Notwithstanding the improved focus, substantial institutional development efforts are still to be made by the Office.
Subcomponent 4D will focus on strengthening its capacity in external communications and outreach and to improve the coordination of activities with other public agencies through modern information technologies.
In the context of WTO accession, the administration of standardization, metrological and certification functions takes on special significance for the Government. The Government plans to enhance the legislative and institutional framework in this area as well as to invest in the institutional development of key agencies.
Subcomponent 4E will help improve the regulatory framework and related technical standards; improve access to international technical standards and standards procedures; and address essential hardware needs through the provision of equipment for testing laboratories.

Project Component 5: Developing Capacity in Local Governments (US$ 2.85 million, IDA contribution - US$ 2.76 million)

Component 5 is aimed at improving local self-government capacity to deliver public services, which is one of the main priorities of the Government of RA in the context of the PRSP implementation.
Subcomponent 5A will support the development of the legal and policy framework for Inter-Community Unions to mitigate the impact of administrative fragmentation. The Government sees the voluntary formation of Inter-Community Unions as the best way to circumvent the hurdles of administrative fragmentation represented by the Communities' weak capacity and resource base.
The development of capacities to effectively raise revenues at the local level is a key government priority to improve local governance. The local collection of property and land tax is a major challenge, in particular in rural areas.
Subcomponent 5B will finance international and local technical assistance and trainers to advise the Ministry of Territorial Administration and Infrastructure Coordination of RA on building local capacity to properly implement local tax administration.
The draft Law on Municipal Civil Service aims to create more attractive employment conditions and introduce career development based on merit principles for local government staff. The Law, once adopted, will require significant implementation support.
Subcomponent 5C will help design and implement a human resource management system for the municipal civil service to facilitate the introduction of the new system.
Subcomponent 5D focuses on strengthening municipal data management to improve local governance. This will be carried out through the development and deployment of an integrated, computer-based Management Information System, and by the strengthening of the national centre for technical support and systems development in Charenstsavan.

Project Component 6. Project Management, Surveys and Communication (US$ 0.59 million, IDA contribution US$ 0.54 million)

Components 1-5 above represented a set of complementary but distinct public sector management reform initiatives. Each needs to be managed as a specific undertaking. Yet, each must be orchestrated in the overall country context and within unified project governance and administrative arrangements.

The funds provided will finance the activities of the Project Manager and essential support staff, as well as the incremental costs incurred by the Foreign Financial Projects Management Centre (FFPMC) of the Ministry of Finance, which will perform the project's financial management and procurement functions.

This component implies funding of periodic surveys of households, firms, NGOs and public officials to collect data on key performance indicators and obtain stakeholders' feedback on the reform process. It will also finance a communication campaign to explain project objectives and activities to managers, staff and other stakeholders

C. PROJECT IMPLEMENTATION AND MANAGEMENT

Implementation Units

In view of the extended scale of the proposed reforms, the Public Sector Reform Commission (PSRC) was appointed to serve as the Project Management Board. The PSRC was set up by Prime Minister's decree No. 544 of September 3, 1999. It is integrated with the Office of Government of RA and acts under the commands of the Minister-Head of the Office of Government RA with the latter being responsible to the Prime Minister. The Commission is made up of senior public officials from the RA Presidency, different ministries, the Civil Service Council, the Academy of Public Administration and non-governmental organizations.

Project management will be the responsibility of a Project Manager who will report to the inter-ministerial Public Sector Reform Commission. The Project Manager will be supported by an IT expert and a lawyer. The Project Manager and her/his team will oversee project implementation, provide advice and support to the agencies participating in the project and report to the Public Sector Reform Commission on project implementation.

Each Ministry will create an internal working-group that will coordinate the implementation of its project activities.

Financial management and procurement for the project will be carried out by the FFPMC at the Ministry of Finance and Economy which has already gained extensive experience in managing WB programs. The FFPMC will be directly accountable to the PSRC. Its responsibilities will include the timely procurement of goods and services, the management of project funds in accordance with the guidelines set by the World Bank, the keeping of accounts and drafting of financial reports, as well as the performance of regular financial audits.

Those FFPMC staff responsible for project implementation will work in close cooperation with the Project Manager and will provide him with regular reports by keeping ready all the necessary documents and accounts.

Credit conditions and covenants

Loan/credit effectiveness:
- The Borrower shall have set up the Office of the Project Manager with Staff under ToRs acceptable to the Association
- The government will open the project account at project effectiveness and deposit an AMD equivalent of US$ 60,000 into this account

Covenants applicable to project implementation:
- The PSRC shall prepare and adopt by November 30 of each year, commencing from year 2004, Annual Project Implementation Plans, as well as plans of activities for each project component and working group
- The Borrower shall, through the PSRC, require each government ministry or agency involved in the project to establish a Working Group with composition and responsibilities acceptable to the Association.