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Armenia: Human Capital Investments are the Key to Resilient Growth in the Era of COVID-19

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Photo Credit: World Bank Office Yerevan

Following the launch of the Human Capital Project in 2018, the government of Armenia and the World Bank undertook a systematic diagnosis of the constraints to human capital development. We report our findings in Survive, Learn, Thrive: Strategic Human Capital Investments Toward a More Prosperous and Inclusive Armenia, which identifies catalytic investments that can help Armenia’s children and youth compete in the global marketplace of tomorrow.

Fadia M. Saadah, World Bank Human Development Regional Director for Europe and Central Asia, reflects on the opportunity to build back better in the era of COVID-19 through human capital formation and activation in Armenia.

Q. What do you see as the main challenges facing human capital formation and activation in Armenia?

In many ways, Armenia has made significant improvementsin ensuring health and learning through access to services. Enrollment in primary and middle school is above 90 percent, 100 percent of childbirths are attended by a skilled health care provider, and improvements in targeting of social transfers have helped reduce poverty and increased access to education and health care in low-income households. Between 1990 and 2017, life expectancy increased from 73.3 years to 78.7 years for women and from 66.7 years to 72.4 years for men.

There is still room for improvement, however. Armenia’s Human Capital Index is 0.58, meaning that a child born today in Armenia would be 58 percent as productive as she could have been as an adult if she had enjoyed full health and had benefited from a complete education. Learning outcomes also vary widely by gender and income, high out-of-pocket payments reduce access to health care services, and labor market programs that are necessary to activate human capital are few and small-scale.

The gains of the past two decades are at risk because of the COVID-19 pandemic, which is projected to lead to a contraction of real gross domestic product of 6.3 percent in 2020. Poverty rates are projected to rise and competing needs for public spending will reduce fiscal space for health and education.

Q. What strategic investments do you recommend in the short and medium term for Armenia to confront the challenge of recovering from the COVID-19 pandemic while investing in human capital development?

The report highlights the importance of human capital investments for economic growth in Armenia. Given the COVID-19 pandemic, the objective of reforming health, education, social protection, and jobs systems is linked to the urgent task of increasing resilience to future shocks.

In the health sector, doing so will involve establishing comprehensive surveillance systems, investing in quality primary health care, and reforming health financing to ensure that people have access to services through a financing scheme that provides incentives to reduce out-of-pocket payments and improve health. COVID also revealed the important role for technology in the social sectors. Telemedicine and other digital tools, for example, offer opportunities to close gaps in physical access to care during and after the pandemic.

The COVID pandemic created challenge for and risks to learning outcomes, which will have long-term impact on human capital. There is an urgent need to recover the losses in learning. Health protocols that prevent the spread of infections will need to be implemented so that schools can reopen safely.

At the same time, Armenia will need to support teachers with training and other tools to provide high-quality distance learning. Counselling, academic remediation, and financial incentives can help keep children and young people enrolled in schools and improve learning outcomes.

To ensure that no families are left behind, Armenia can build on the successes of the social protection system through the integrated social case manager program, which links poor and vulnerable households with social services. Jobs are another vehicle for activating human capital. Continued efforts to equip the workforce with skills that match evolving labor demand and job-matching interventions are important. A range of mechanisms, including web-based jobs portals, can link job seekers to employers in high-productivity sectors.

The report follows the narrative of a hypothetical family, the Harutyunyan’s, whose health, learning, and employment outcomes significantly improve with the implementation of catalytic human capital investments. It shows that if Armenia ensured complete education and healthcare, long-run per capita gross domestic product could be 1.75 times higher than it is today. Armenia is an early adopter of the Human Capital Project, an indication of the strong political commitment to rise to the challenge.

Q. The World Bank has partnered with Armenia on landmark reforms since independence. How do you see the engagement evolving over the next few years?

The report provides a starting point for developing, planning, and financing an intersectoral agenda to harness human capital. The World Bank Group remains committed to providing technical and financial support for operationalizing and implementing this ambitious strategy. We highlight important areas of engagement in education, health, social protection, and jobs below.

Education: The ongoing Education Improvement Project (EIP) is supporting the government’s efforts to create a network of stakeholders for accelerating knowledge creation and innovation; teach students job-relevant skills; and remove barriers to labor market participation, through increased access to early childhood education and care in rural areas to support working mothers.

A project funded by the European Union (EU4Innovation Project) that is being implemented with World Bank support contributes to the government’s efforts to develop and pilot modern teaching approaches, with the potential to be scaled up where successful. The project will also help identify cost-efficient interventions to address bottlenecks that prevent students from enrolling and performing well in STEM (science, technology, engineering, and math) subjects.

Health: World Bank Group engagement in health dates to 1997, with the Health Financing and Primary Health Care Development Project. The ongoing Disease Prevention and Control Project (DPCP) supports the government’s efforts to strengthen the prevention, early detection, and management of selected noncommunicable diseases at the primary health care level and increase the efficiency and quality of selected hospitals.

The DPCP also facilitates the emergency procurement of equipment and supplies for case management, as part of the COVID-19 response. Officials at the highest levels of government in Armenia recognize the urgent need for investments in health services to improve quality and ensure that every citizen has access to essential health care.

Toward that end, the World Bank Group has worked closely with counterparts to engage on policy issues and provide technical support in areas such as reforms to improve purchasing decisions and public financial management, strengthen primary healthcare, ensure integration between primary and specialist care, and inform efforts to expand fiscal space for health. This support can inform the next generation of reforms in Armenia, a country that is considered an innovator in health reforms among the former Soviet republics.

Social Protection and Labor: The ongoing Social Protection and Administration Project (SPAP II) supports the government’s efforts to create integrated service centers; develop monitoring and evaluation systems to administer social protection programs; and establish a unified information system to facilitate program management, monitoring, and evidence-based policy and decision making.

Through the Japan Social Development Fund, the World Bank Group is working with the government to upgrade Armenia’s social case management methodology and operational procedures. It is also providing small business grants to poor and vulnerable individuals to facilitate their graduation from public support and self-sufficiency.

Ongoing technical assistance and policy dialogue will continue to support better targeting of social assistance; the digitalization of social protection payment systems; and policies to support the integration into the labor market of returning migrants, women, and other vulnerable groups. 

World Bank

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Eastern Europe

Prospects of Armenia-Turkey Rapprochement

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Potential Armenia-Turkey rapprochement could have a major influence on South Caucasus geopolitics. The opening of the border would allow Turkey to have a better connection with Azerbaijan beyond the link it already has with the Nakhchivan exclave. Moscow will not be entirely happy with the development as it would allow Yerevan to diversify its foreign policy and decrease dependence on Russia in economy. The process nevertheless is fraught with troubles as mutual distrust and the influence of the third parties could complicate the nascent rapprochement.

Over the past month Armenian and Turkish officials exchanged positive statements which signaled potential rapprochement between the two historical foes. For instance, the Armenian PM Nikol Pashinyan said that he was ready for reconciliation with Turkey “without preconditions.” “Getting back to the agenda of establishing peace in the region, I must say that we have received some positive public signals from Turkey. We will assess these signals, and we will respond to positive signals with positive signals,” the PM stated. Turkey’s President Recep Tayyip Erdogan said Ankara could work towards gradual normalization if Yerevan “declared its readiness to move in this direction.”

On a more concrete level Armenia has recently allowed Turkish Airlines to fly to Baku directly over Armenia. More significantly, Armenia’s recently unveiled five-year government action plan, approved by Armenia’s legislature, states that “Armenia is ready to make efforts to normalize relations with Turkey.” Normalization, if implemented in full, would probably take the form of establishing full-scale diplomatic relations. More importantly, the five-year plan stresses that Armenia will approach the normalization process “without preconditions” and says that establishing relations with Turkey is in “the interests of stability, security, and the economic development of the region.”

So far it has been just an exchange of positive statements, but the frequency nevertheless indicates that a certain trend is emerging. This could lead to intensive talks and possibly to improvement of bilateral ties. The timing is interesting. The results of the second Nagorno-Karabakh war served as a catalyzer. Though heavily defeated by Azerbaijan, Armenia sees the need to act beyond the historical grievances it holds against Turkey and be generally more pragmatic in foreign ties. In Yerevan’s calculation, the improvement of relations with Ankara could deprive Baku of some advantages. Surely, Azerbaijan-Turkey alliance will remain untouched, but the momentum behind it could decrease if Armenia establishes better relations with Turkey. The latter might not be as strongly inclined to push against Armenia as it has done so far, and specifically during the second Nagorno-Karabakh war. The willingness to improve the bilateral relations has been persistently expressed by Ankara over the past years. Perhaps the biggest effort was made in 2009 when the Zurich Protocols were signed leading to a brief thaw in bilateral relations. Though eventually unsuccessful (on March 1, 2018, Armenia announced the cancellation of the protocols), Ankara has often stressed the need of improvement of ties with Yerevan without demanding preconditions.

Beyond the potential establishment of diplomatic relations, the reopening of the two countries’ border, closed from early 1990s because of the Nagorno-Karabakh conflict and Turkey’s solidarity with and military and economic support for Azerbaijan, could also be a part of the arrangement. The opening of the 300 km border running along the Armenian regions of Shirak, Aragatsotn, Armavir, and Ararat could be a game-changer. The opening up of the border is essentially an opening of the entire South Caucasus region. The move would provide Armenia with a new market for its products and businesses. In the longer term it would allow the country to diversify its economy, lessen dependence on Russia and the fragile route which goes through Georgia. The reliance on the Georgian territory could be partially substituted by Azerbaijan-Armenia-Turkey route, though it should be also stressed that the Armenia transit would need considerable time to become fully operational.

Economic and connectivity diversification equals the diminution of Russian influence in the South Caucasus. In other words, the closed borders have always constituted the basis of Russian power in the region as most roads and railways have a northward direction. For Turkey an open border with Armenia is also beneficial as it would allow a freer connection with Azerbaijan. Improving the regional links is a cornerstone of Turkey’s position in the South Caucasus. In a way, the country has acted as a major disruptor. Through its military and active economic presence Turkey opens new railways and roads, thus steadily decreasing Russian geopolitical leverage over the South Caucasus.

As mentioned, both Ankara and Yerevan will benefit from potential rapprochement. It is natural to suggest that the potential improvement between Turkey and Armenia, Russia’s trustful ally, would not be possible without Moscow’s blessing. Russia expressed readiness to help Armenia and Turkey normalize their relations, saying that would boost peace and stability in the region. “Now too we are ready to assist in a rapprochement between the two neighboring states based on mutual respect and consideration of each other’s interests,” the Russian Foreign Ministry spokeswoman, Maria Zakharova, said. Yet, it is not entirely clear how the normalization would suit Russia’s interests. One possibility is that the Armenia-Turkey connection would allow Russia to have a direct land link with Turkey via Azerbaijan and Armenia. However, here too the benefits are doubtful. The route is long and will likely remain unreliable. For Russia trade with Turkey via the Black Sea will remain a primary route.

Presenting a positive picture in the South Caucasus could however be a misrepresentation of real developments on the ground. The Armenian-Turkish rapprochement is far from being guaranteed because of ingrained distrust between the two sides. Moreover, there is also the Azerbaijani factor. Baku will try to influence Ankara’s thinking lest the rapprochement goes against Azerbaijan’s interests. Moreover, as argued above, Russia too might not be entirely interested in the border opening. This makes the potential process of normalization fraught with numerous problems which could continuously undermine rapport improvement.

Thus, realism drives Turkish policy toward Armenia. Ankara needs better connections to the South Caucasus. Reliance on the Georgian transit route is critical, but diversification is no less important. The results of the Second Nagorno-Karabakh war present Turkey and Armenia with an opportunity to pursue the improvement of bilateral ties. Yet, the normalization could be under pressure from external players and deep running mutual distrust. Moreover, the two sides will need to walk a tightrope as a potential blowback from nationalist forces in Turkey and Armenia can complicate the process.

Author’s note: first published in caucasuswatch

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Tighter Ties with China Signal Ukraine’s Multi-Vector Foreign Policy

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Image source: Wikimedia Commons

Ukraine is eager to cut deals with China as it confronts the West’s moves to allay Russian concerns. Whether Kyiv’s moves are a sign of a larger foreign policy adjustment or just a bluff aimed to mitigate faltering ties with the EU and the US, they could beget big consequences.

‘Chinese Card’

On June 30, Ukraine touted an agreement with China, which proposes revamping the country’s decrepit infrastructure. The decision comes following a US-German resolution to finish the Nord Stream 2 pipeline, despite longstanding concerns of Kyiv and other CEE nations. Yet, perhaps the biggest motivation was the growing unwillingness in the West to advance Ukraine’s NATO/EU aspirations.

The current state of affairs pushes Ukraine to find alternatives in foreign policy. China, with plenty of cash and political clout, comes as an obvious choice resulting in the signing of the bilateral agreement in June. The document outlines China’s willingness to invest in railways, airports, and ports, as well as telecommunications infrastructure across Ukraine. But otherwise, the agreement details few specifics.

The available details from the deal fit comfortably into the pattern China has been following across Eurasia. For example, China signed similar deals with Iran, Egypt and Saudi Arabia among others, demonstrating its willingness to penetrate those states’ vital infrastructure. Still, the documents can be also characterized as an umbrella agreement that serves as a roadmap rather than an accord listing concrete details and commitments.

The China-Ukraine agreement is all the more surprising as Kyiv rebuffed earlier this year a Chinese proposal to buy a Ukrainian aerospace company, Motor Sich.

Nevertheless, there are several reasons behind the rapprochement. First and foremost, it is about Ukraine adjusting its foreign policy stance to the state of economic relations. China is now Ukraine’s biggest single-country trade partner outstripping Russia and having a 14.4 percent share of the country’s imports and 15.3 percent of its exports. Perhaps fearful of possible Chinese countermeasures over the Motor Sich decision, Kyiv has been open to mending ties with Beijing with the June agreement.

Secondly, it paves the way for a more active role in China’s near-trillion-dollar Belt and Road Initiative (BRI), which aims at connecting China with the European market across the heart of Eurasia. Ukraine was among the first to endorse the initiative but has avoided signing memorandums on cooperation similar to what China has done with many others.

More immediately, the tilt toward China follows Kyiv’s decision to remove its name from an international statement about human rights abuses in China’s Xinjiang. While Ukraine initially joined the initiative, together with 40 other states, Kyiv abruptly changed its mind on June 24. It has been confirmed that the withdrawal followed Chinese threats to limit trade and deny access to COVID-19 vaccines for which Ukraine had already paid.

Multi-Vector Policy

Some larger geopolitical dynamics are also at play, such as Kyiv’s attempt to acclimate to the changing world order and the growing global competition between Beijing and Washington. In this environment, Ukraine might want to carve out an equidistant place between the two powers so as to avoid possible backlash from siding clearly with either of them.

As such, Ukraine appears to be embarking on a multi-vector foreign policy. It would allow Kyiv to alleviate its dependence on the West and seek lucrative economic and political ties with large Eurasian states. Put simply, relations with the West did not deliver on the expected benefits. The country was not offered NATO or EU accession, while the collective West’s consistent concessions to Russia undermine Ukraine’s interests. Ukraine has also often tended to look at China and other Eurasian powers from the ‘Western perspective’, which limited its options.

In Kyiv’s understanding, elimination of this obstructive dependence would enable it to find new partners able to bring in investments and ideally political support in multilateral organizations. China undoubtedly can be such a partner.

Kyiv’s calculations are more understandable when taken in view of its larger diplomatic readjustment in the region. For example, Ukraine recently began building closer relations with another Eurasian power in Turkey. When Ukrainian president Volodymyr Zelensky visited Istanbul in April 2021, nascent bilateral military ties were seen as a new chapter in the countries’ relations. Most indicative of this shift, a memorandum was signed on the creation of joint defense-industrial projects, which includes joint development of unmanned aerial vehicles in Ukraine.

The story of Turkey could serve as a microcosm, whereby Kyiv displayed that it is more interested in balancing the pressure from Russia and mitigating the failures in its pro-Western foreign policy course. Ukraine thus foreshadowed its increasingly multi-vector foreign policy as a solution to its geopolitical problems. In Kyiv’s understanding, rapprochement with China and Turkey could mitigate threats emanating from Russia as both Beijing and Ankara enjoy closer ties with Moscow, but nonetheless consider it a competitor.

The multi-vector foreign policy for Ukraine however does not mean abandoning its pro-Western cause. It rather involves seeing its NATO/EU aspirations as complementary with the closer economic ties with China and others. It will require an agile foreign policy and leveraging the country’s geopolitical assets.

New Type of Bilateral Relations 

Ukraine’s behavior might herald the birth of what could be characterized as a Eurasian model of bilateral relations. Across the continent, the notion of traditional alliances is being gradually replaced by partnerships. Devoid of formal obligations, China, Iran, Turkey and Russia find more space for interaction and see a larger pool of opportunities across the vastness of the supercontinent. Bigger maneuverability makes their foreign policy more agile in finding a common ground for cooperation.

The Eurasian model is a byproduct of an evolving global order in which each state with geopolitical influence recalibrates its foreign ties to fit into the post-unipolar world. Russia and China officially refuse to have an alliance – indeed, they claim an alliance would undermine their purportedly benevolent intentions toward one another. More specifically, the concept relates to how China sees the future world order. It opposes alliances – the ‘relic’ from the Cold War era.

Thus, the shift in Kyiv’s foreign policy could be part of this Eurasian trend where Ukraine seeks to construct its Asia policy which would better correspond to the unfolding China-US competition, Asia’s economic rise, and most of all, the failure to become a NATO or EU member state.

Reality Check

However, closer ties with China and most of all the dependence on Beijing’s investments also involves risks. China’s infrastructure projects are mostly financed through loans, which poorer and weaker countries are unable to repay. Often, ownership of the sites ends up in Chinese hands.

Chinese involvement in Ukraine’s critical infrastructure could also risk giving control over strategic technologies to Beijing, which would be channeled to China and successfully used to advance Chinese interests.

For Kyiv, dependence on Beijing also involves risks because of China’s close partnership with Russia. Dangers could be manifested in a concerted pressure on Ukraine in international organizations, or even China heeding Russian fears and abandoning infrastructure projects which would harm Russian interests.

The June agreement is an umbrella deal that lays out the foundation for deeper cooperation, but in no way guarantees its fulfillment. This could mean that Ukraine only sought to restore worsening bilateral relations with China following the Motor Sich saga. Alternatively, Kyiv might merely be trying to raise stakes in its stagnated relations with the West and hold Washington to account, signaling that it can successfully navigate between geopolitical poles if need be. One way or another, China looks set to play a bigger role in Ukraine‘s foreign policy.

Author’s note: first published at chinaobservers

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Ukraine’s independence: Shaping new political narratives through art

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Ukraine’s 30th Independence Anniversary brings forth a discussion on forming a modern cultural identity in the wake of political instability.  

Despite gaining independence 30 years ago, Ukraine is still facing consistent attacks on its sovereignty, both political and cultural. From the ongoing war with Russia in Eastern Ukraine, where 10,000 people have lost their lives since 2014, down to the root of oversimplification of Ukrainian issues in the media, Ukraine’s story is often being told by opponents attempting to distort the modern Ukrainian cultural identity.

My first-hand experience working with kids at the Ukrainian warzone has taught me a deep appreciation for cultural independence. For five years together with youngsters I wrote, directed and staged a performance piece titled ‘Contact Line’ about life at the warzone and personally witnessed the huge impact of arts and culture on the kids’ lives. This experience demonstrated that for too long Ukraine has let someone else present its identity to its youth, citizens and the world.

Shaking away the Soviet legacy

There’s no denying that the Soviet Union left a lasting legacy on Ukraine. The culture of Ukraine is to this day tainted by lingering ghosts of the Soviet past. Soviet authorities vigorously supressed the development of independent cultural identities in all the member states. In Ukraine’s case, simplistic rural folklore was imposed on society as a primary culture and was a means of suppressing creative or progressive thought. National collectives and one-dimensional traditional themes were presented as the essence of Ukrainian culture throughout the 20th century. Anyone who didn’t fit the Soviet mould was eliminated. A specific term, Executed Renaissance, is used to define a generation of Ukrainian artists who were repressed by the Soviet regime for their artistic non-conformism.

It has taken decades for Ukraine to regain its cultural voice and iron out its Soviet imprint. A key concept of postcolonial theory examines the creative resistance to the colonizers’ culture and the fraught slow development of a postcolonial identity. Ukraine has been struggling through this process for 30 years. However, since the 2014 Revolution of Dignity the country has been reimagining its culture, exploring its history and reconnecting with its identity. Ukraine is now striving to be on par with Western culture by ridding itself of remaining Soviet influences. Cultural institutions previously under government control or censorship are finding an independent voice and the population is discovering that authentic artistic expression is providing hope in difficult times. 

Looking at the future

Over the past 10 years, Ukraine has witnessed a robust change in the arts sector. The cultural scene has made a significant move away from a conservative ethos to a more contemporary one. Visual arts are the most progressive form of expression in Ukraine, with cinema rapidly catching up. Ukrainian filmmakers are winning awards at the Cannes Film Festival and Ukrainian artists are receiving praise at La Biennale di Venezia. The expectation is that this trend will not only magnify in the coming years, but also position Ukrainian artists as global creative trailblazers. 

Despite ballet being an extremely politicised art form during the Soviet period, it is now going through a revival and modernisation. The Ukrainain school of ballet is gaining recognition as one of the world’s best and Ukrainian ballet dancers are headlining the top ballet companies across the globe, showcasing their immense talent and training. British audiences will have an opportunity to watch the best Ukrainian ballet dancers from the world’s top theatres come together for a one-off unique performance at Sadler’s Wells Theatre in London on September 7th.

Georgian-American ballet choreographer George Balanchine famously said, “Ballet will speak for itself,” and the artform remains a true demonstration of the universal language of dance. The Ukrainian Ballet Gala will be a showcase of the innovation and traditions of the contemporary Ukrainian ballet school.

Global cultural promotion

In a globalised world it’s the wish of every country to promote and engage in cultural exchanges, and Ukraine is very much part of this movement. Ukraine wants to be an active player on the world stage, both politically and culturally, and to be a dynamic culture creator, particularly in Europe. Trust in soft diplomacy is growing and Ukraine’s international relations and diplomacy are benefiting from this trend. 

As a Ukrainian-born and British-educated theatre producer and director I appreciate the importance of bringing the best of Ukrainian culture to the world not just for Ukraine’s benefit, but to enrich global culture and share experiences through creative means. It is the job of people like me and my colleagues to tell Ukraine’s story through art and, thus, shape new political narratives about Ukraine internationally. We want to share our rich culture with the world and events, such as the Ukrainian Ballet Gala, are key to achieving this.

Ukrainians are now left with no choice but to stride forward – no outside force should ever again control the vibrant culture of Ukraine.

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