Decentralization in Armenia: Local Governance Reform and the Need for Functional Decentralization

Abstract

Armenia has witnessed an impressive amount of local governance reforms, which have established larger, more functional and better financed municipalities. Yet, despite the successes established so far, further reform efforts will be needed. In addition to strengthening the financial capacities of municipalities, it will be vital to ensure that they are also capable of delivering direct services to the citizens. In order to do so, further reforms are needed, which focus on functional and fiscal decentralization. Furthermore, a proper decentralization strategic framework for the next phase of the local governance reform process should be developed by the Ministry of Territorial Administration and Infrastructure (MTAI) in consultation with the municipalities and other stakeholders.

 

 Introduction: Political Background of Armenia

Following the dissolution of the USSR, the Republic of Armenia (RA), a small landlocked country located in the South Caucasus region, gained independence from the Soviet Union on September 21, 1991. It marked a significant turning point in the country’s history and set the stage for the establishment of its own political system.

With the adaptation of its first Constitution in 1995, the country laid the foundations of its political structure. Afterward, Armenia implemented two further constitutional amendments, restructuring its political system and introducing new mechanisms for governance and representation (RA Constitution, 2005; RA Constitution, 2015). As a result the current political landscape in Armenia operates under a parliamentary model, where the President serves as the head of state, the Government is a supreme executive body, and the Prime Minister, elected by the parliamentary majority, is appointed by the President of the Republic and acts as the head of the government with most executive powers.

Over the years, Armenia has witnessed a series of political changes, most notably the “Velvet Revolution,” which unfolded in 2018 and brought about changes to the country’s leadership and political landscape.[i] Alongside these transformative events, it is imperative to recognize the substantial challenges that Armenia confronts, including the long-standing Nagorno-Karabakh (Artsakh) conflict, continuous territorial encroachments by Azerbaijan, and persistent internal political turbulence. Despite of its relatively successful democratic transition in a neighborhood of authoritarian states and continued political instability, many challenges therefore remain. These complex and multifaceted issues have profound implications, shaping not only the political trajectory of the country but also exerting a considerable impact on the ongoing reform process, including the advancement of effective local self-government.

 

The Local Self-Government System and the Territorial and Administrative Reform of Armenia: Advancing Local Governance

The establishment of the Local Self-Government (LSG) system in Armenia began in 1995 with the adoption of the country’s first Constitution in which the administrative-territorial units were defined as marzes (regions) and communities/municipalities, and categorized as rural and urban municipalities (RA Constitution, 1995, articles 104-105). The Law on Administrative-Territorial Division of the Republic of Armenia (1995, article 2) was enacted in the same year, dividing Armenia into ten marzes and 915 communities/municipalities.

Armenia took steps towards political decentralization with the adoption of the Law on Local Self-Government (1996, article 8), empowering local governments to address municipal issues and emphasizing the democratic foundation of the state system through municipalities. The country has since implemented measures to enhance local autonomy, strengthen local governance structures, and improve coordination between central and local governments. In 2002 Armenia also ratified the European Charter of Local Self-Government, reaffirming its commitment to local democracy and citizen participation, while simultaneously signing up to the standards and regular evaluations by the Council of Europe. In the ensuing years, political and administrative decentralization efforts have been carried out at various scales and stages to enhance local governance structures. The need for community consolidation and administrative-territorial reform became evident, leading to the approval of the Concept Paper on the Enlargement of Communities and the Establishment of Inter-community Unions in 2011. These concept papers focused primarily on the size and related ineffectiveness of some municipalities in providing effective service-delivery to the population. However, it is also important to highlight that reform initiatives were driven by the central government, and mainly the relevant Ministry for Territorial Administration, which at times lacked a coherent communication and consultation strategy with the effected municipalities.

Meanwhile, the Congress of Local and Regional Authorities (CoE, 2014) highlighted challenges in the state of local democracy in Armenia, too, including limited participation, insufficient capacities and resources of local authorities, and the presence of small and fragile municipalities. To address these issues, the Armenian government initiated the Territorial and Administrative Reform of Armenia (TARA) in 2014, led by the Ministry of Territorial Administration and Infrastructure (MTAI). The reform aimed to establish functional and responsive local structures, enabling local governments to serve their communities effectively. The initial focus was on the enlargement and restructuring of municipalities, laying the foundation for further decentralization efforts. The amalgamation process began in 2015, with three pilot municipalities consolidating 22 previously existing communities through local referendums. However, following the 2015 constitutional amendments, later local governance reforms and amalgamations did not use referendums. The second phase took place in 2016, merging 118 former municipalities into 15, and the third phase- in 2017, resulted in 34 new communities, absorbing 325 former ones. The enlargement process experienced a temporary pause in 2018 but resumed in 2020, continuing through subsequent phases in 2021 and 2022. The final round of enlargement occurred from September 2022 to March 2023,[ii] bringing the total number of municipalities in Armenia to 71, with 64 being enlarged municipalities. The remaining 7 communities are Yerevan and Gyumri, the two largest cities, and five smaller municipalities populated by ethnic minorities, which were not included in the reform process.[iii]

 

The Current State of Reform

While the new government after the Velvet Revolution of 2018 has reconfirmed its commitment to territorial and administrative reform, the process remains driven by the Ministry of Territorial Administration and Infrastructure (MTAI) and at times coordination (with municipalities and other Ministries) and the pace of implemented reforms have been challenging. For instance, there is yet to be a concrete strategy outlining how policy decentralization will be achieved. This has resulted in a situation where municipalities have, as a whole, become more efficient and better at implementing their tasks and obligations, yet they remain mainly implementation bodies of central government policy. Overall, there is little progress on a larger concept of decentralization, and political will to decentralize policies and financial resources further needs still to be demonstrated.

Moreover, it is vital that municipalities have a representative body that allows them to collectively engage with MTAI. It is indeed an important requirement of the Council of Europe’s Charter on Local Self-Government that Armenia has agreed to, and it is also important for municipalities as decentralization reforms progress. This body should be directly linked to the interests of municipalities, and attention needs to be paid to the democratic and independent operation of such a body. The existing Communities Association of Armenia (CAA) does not meet these criteria fully, leaving municipalities with little collective influence on central government decisions. It should also be in the interest of MTAI and other Ministries to support such a body, so that future reforms can be based on sufficient consultation, and a culture of cooperation can be established that is required for future policy and fiscal decentralization.

Municipalities have become much better at delivering relevant services and incentives for citizens, the business environment and local economic actors. But as the territorial consolidation of the reform has come to an end, it remains increasingly vital to reinvest savings from larger municipalities in structures that enable economic development. Indeed, economic development outside of Yerevan remains a key issue for Armenia as a whole, and increasing the business and investment environment is often pointed out as an important requirement for improved and more balanced economic growth. The consolidation of municipalities within TARA has also resulted in a professionalization and streamlining of processes to ultimately benefit economic development. For example, a change to the Law on Local Self-Government in November 2021 has made it a legal requirement for municipalities to develop annual work plans and clearly highlight the short- and long-term plans for local economic investments, development and growth. With this aim, participatory mechanisms are today enshrined in the law and overall citizens’ participation has increased. Municipalities hold public hearings, try to assess needs, set priorities and involve minority groups. Although local participation in the budget design and development plans is generally visible, engagement is still a challenge. Further thought needs to be given to motivate larger numbers of residents to actively take part in the consultation and planning activities of their local municipality. It is interesting to note that it is in the enlarged municipalities, where Women and Youth Councils often operate, that there is greater public participation and inclusion.

 

The Next Steps: A Comprehensive Strategy based on Capacity Building and Effective Decentralization

Although there has been an impressive amount of capacity building in municipalities on a variety of issues from working in the Citizen Offices, to the new municipal management system, gender awareness training, budgetary and economic development, capacity enhancement as well as some enhancement of open government and integrity, the efforts should be continued. A national training strategy, which would ensure that continuous support is given to municipalities is urgently needed. However, municipalities should also be encouraged to establish their own training provisions, including providing funding for these training activities. This is a continued challenge, as municipalities have shown willingness to provide funding for human resource development, but so far no such funding has been allocated in any municipality.

It is furthermore vital for the next step of decentralization in Armenia that now, when territorial reform is completed and municipalities are consolidated, a comprehensive concept for decentralization, focusing on sectoral and fiscal issues, is developed. The lack of substantial policy and fiscal decentralization has meant that municipalities remain mainly bodies of central government policy implementation with little authority to take specific decisions in major areas, including local economic development, and with limited independent resources. While there has been an increase of government funding for municipalities, most of this budget is specifically designed for certain areas and projects in which municipalities have no or little individual decision-making authority.

It is therefore highly desirable that all stakeholders are actively involved in this critical phase for the consolidation of the decentralization efforts, which will be both technically demanding and politically challenging. Such a strategy will thus require strengthened coordination between MTAI and other Ministries, as well as between international donors, MTAI and other Ministries. The role and involvement of municipalities in these discussions also needs to be clarified and strengthened. One should consider supporting the establishment of strong cooperation forums as part of developing and implementing the next steps of decentralization reform in Armenia.

 

Conclusion

The overall pace and impact of local government reform in Armenia has been impressive. The consolidation of municipalities has enabled better service-delivery and more funding for local authorities. However, more work is needed to move from structural consolidation and reform to policy and fiscal decentralization. This will be vital for the next steps of TARA – and it will require a coherent decentralization strategy, which should be based on strong cooperation of MTAI with other Ministries and with municipalities. Thinking about the linkages of further reforms, the need for a nationwide training strategy, and long-term democratization, economic development and inclusion of women and young people in decision-making is vital for a comprehensive and inclusive reform process. It will not only ensure that territorial reform and decentralization will succeed, but it will also guarantee that Armenia’s democratic progress continues, and that often-ignored groups and actors are included and have their voices heard.

 

[i] Armenia is generally seen as a success story of democratic governance in Central Asia. However, organisations such as Freedom House point out that issues remain in the spheres of political and civil rights protection, human rights implementation, democratic governance, and combatting the effects of state capture. See: Freedom House (2022) Armenia – Freedom in the World Report 2022. Available at https://freedomhouse.org/country/armenia/freedom-world/2022

[ii] In Sisian community it was not possible to elect a major after the elections of 25^th September 2025, and new elections took place on 26^th March 2023

[iii] For an assessment of enlargement as a whole, see: Baleyan, Hasmik (2022): Enlargement of Communities: Problems and Challenges. EVN Report, October 11th 2022, available at: https://evnreport.com/law-society/enlargement-of-communities-problems-and-challenges/

This paper is also informed by the work of the authors on a mid-term evaluation that the Institute of Federalism conducted on behalf of the Swiss Development Cooperation, titled “Mid-term Evaluation “Improvement of the Local Self-Governance System in Armenia – Phase 2 2019-2023.” All opinions expressed in this paper are those of the authors and do not necessarily reflect the opinions of the Swiss Development Cooperation and its partners.

Suggested citation: Mnatsakanyan, A., Felder, F., and Keil, S. 2023. ‘Decentralization in Aremnia: Local Governance Reform and the Need for Functional Decentralization’, 50 Shades of Federalism

 

References

Council of Europe, the Chamber of Local Authorities (2014), Local Democracy in Armenia: Recommendation 351, CPL(26)2FINAL, Strasbourg, France. Available at: https://rm.coe.int/local-democracy-in-armenia-recommendation-nigel-mermagen-united-kingdo/168071a25f#_Toc383674464, last accessed: 15.11.2022.

European Charter of Local Self-Government (1985), European Treaty Series – No. 122, Strasbourg, France. Available at: https://rm.coe.int/168007a088, last accessed: 15.11.2022.

Markarov, A., Galstyan, N. S. & Grigoryan, H. (2016). The Main Dimensions and Issues of Armenia’s Foreign Security Policy. In Kakachia, K. & Markarov, A. (eds.), Values and Identity as Sources of Foreign Policy in Armenia and Georgia, Universal, Tbilisi, pp. 107- 144

RA Constitution (1995), Chapter 7, Article 104-105. Available at: https://www.arlis.am/documentview.aspx?docID=1 (Armenian version), last accessed: 15.11.2022.

RA Constitution (2005), Chapter 7, Article 108. Available at: https://www.arlis.am/documentview.aspx?docID=75780, (Armenian version), last accessed: 15.11.2022.

RA Electoral Code, Article 83, Point 4. https://www.arlis.am/documentview.aspx?docid=105967

RA Government (2011), Concept Paper on Enlargement of Communities and Establishment of Inter-community Unions. Available at: https://www.e-gov.am/u_files/file/decrees/arc_voroshum/11/qax44-18_1.pdf, last accessed: 15.11.2022.

RA Law on Administrative-Territorial Division of the Republic of Armenia (1995), Article 2. Available at: https://www.arlis.am/documentview.aspx?docid=59732, (Armenian version), last accessed: 15.11.2022.

RA Law On Local Self-Government (2002), Chapter 1, Article 4. Available at: https://www.arlis.am/documentview.aspx?docID=73271, (Armenian version), last accessed: 15.11.2022

Further Reading

Council of Europe, the Chamber of Local Authorities (2014), Local Democracy in Armenia: Recommendation 351, CPL(26)2FINAL, Strasbourg, France. Available at: https://rm.coe.int/local-democracy-in-armenia-recommendation-nigel-mermagen-united-kingdo/168071a25f#_Toc383674464, last accessed: 15.11.2022.

Hayrapetyan, Ruben (2018): Problems of Local Governance in Armenia, in: East European Scientific Journal, Vol 2(30), pp. 28-30.

Baleyan, Hasmik (2022): Enlargement of Communities: Problems and Challenges. EVN Report, October 11th 2022, available at: https://evnreport.com/law-society/enlargement-of-communities-problems-and-challenges/

RA Law on Administrative-Territorial Division of the Republic of Armenia (1995), Available at: https://www.arlis.am/documentview.aspx?docid=59732, (Armenian version), last accessed: 15.11.2022.