Overview
Armenia is located in Southwestern Asia, bordering Azerbaijan, Georgia, Iran and Turkey. It has a population of almost 3 million and a GDP per capita of $4,500. Armenia became independent in 1991 after the collapse of the Soviet Union. It had a modern industrial sector under the Soviet system of central control, but this was neglected following the Soviet Union's collapse and economic activity turned to small-scale agriculture. The population is 97.9% Armenian, 1.3% Yezidi (Kurd), 0.5% Russian, and 0.3% other ethnic groups. It is also 94.7% Armenian Apostolic, 4% other Christian, and 1.3% Yezidi.

Social Indicators
Demographic pressures received a rating of 6.0 in the Failed States Index 2006 (FSI 2006). Population growth was negative at -0.19%. A drop in the birth rate from 21.6 per 1,000 in 1989 to 10.2 per 1,000 in 2002 coincided with a rise in the death rate from 6.5 per 1,000 in 1989 to 8.5 per 1,000 in 2003. The unemployment rate is very high, however, and is estimated at 32-35% (three times the official figure). The high unemployment rate, which has caused many people to return to subsistence farming, is largely responsible for the rating of 6.0 for demographic pressures. The rating for refugees and internally displaced persons (IDPs) was 7.1. Armenia is currently hosting about 235,000 refugees from Azerbaijan and also has about 50,000 IDPs resulting from the conflict with Azerbaijan over the Nagorno-Karabakh region from 1988 to 1994. Group grievance was rated 5.0. Although the conflict with Azerbaijan is still unresolved, Armenia's population is now very homogenous because most of Armenia's ethnic Azeri minority fled to Azerbaijan as a result of the conflict, while 250,000 ethnic Armenians fled to Armenia from Azerbaijan. The homogenous population accounts for the low level of group grievance. Human flight was high, with a rating of 7.0 in the FSI 2006. An estimated 800,000 people have left the country since the fall of the Soviet Union, giving Armenia a net migration rate of -5.72 per 1,000 people. The rate of emigration has fallen in recent years, however.

Economic Indicators
Armenia has a high level of inequality, resulting in a rating of 6.0 for this indicator in the FSI 2006. The top 10% of the population controls 41.3% of the wealth while the bottom 10% controls only 1.6%. The high unemployment rate combined with the return to subsistence agriculture from manufacturing has exacerbated the situation. The rating for the economy was 5.1. Although Armenia suffered from negative economic growth during the 1990s as a result of the conflict with Azerbaijan and the collapse of the centrally managed industrial economy left from the days of the Soviet Union, there were positive growth rates from 1995-2005. Armenia has stabilized its currency and reduced inflation significantly, and the economy grew by an estimated 13.9% in 2005.

Political/Military Indicators
Legitimacy of the state received a rating of 7.0 because of government corruption and an excessive concentration of power in the hands of the president. The president, Robert Kocharian, was first elected in 1998 and was reelected in 2003, but the elections were deemed flawed by international observers. An Anti-Corruption Council was created in 2003, but the fact that its members are mainly taken from the government or the judiciary has called its independence into question. Armenia received a rating of 6.5 for public services because, although public services were fairly well developed under Soviet rule, they have deteriorated since independence. The adult literacy rate is 99%, but spending on education has been cut from 6.6% of GDP in 1990 to 2% in 2003. Many schools now close in the winter because they are unable to provide heating, and books and teachers are in short supply. Healthcare has also deteriorated since independence.

Although Armenia had the highest life expectancy of any of the Soviet Republics, the number of hospitals, clinics and health professionals has declined since independence. Although human rights were generally respected, human rights was rated 6.0 in the FSI 2006 because there were scattered incidents of human rights abuses. These included beating of detainees and impunity of the security forces. The rating for the security apparatus was 4.5 because the military's support for the president played an important role in preserving presidential power. The indicator for factionalized elites received a rating of 5.8 because the country's ethnic homogeneity reduced political factions, and the president and his supporters (mainly the Republican Party) were the dominant force in government, with the opposition having very little influence. The rating for external influence was 5.5, mostly due to Russia's economic influence and military bases. Armenia relies on military support from Russia, and much of Armenia's energy sector is under Russian management. Armenia also receives substantial amounts of aid from the U.S., thanks, in large part, to the activism by large Armenian community in the U.S.

Core Five State Institutions
Leadership: Weak; Military: Moderate; Police: Weak; Judiciary: Weak; Civil Service: Moderate

Armenia has a strong president and a unicameral parliament. President Robert Kocharian was first elected in 1998 and reelected in 2003 in elections that international observers considered to be flawed. The last parliamentary elections, in which the pro-president Republican Party won the largest number of seats, were held in 2003 and were also considered to be flawed. Although the opposition organized several demonstrations calling for a public vote of confidence in the president, a government crackdown ended the protests and no vote of confidence was held.

Presidential power is connected to the military, with the officer corps playing an influential role in government. The military consists of a total of about 45,000 troops.

Impunity was a serious problem in the police force. Members of the police were involved in a number of human rights abuses, including beating of detainees and other forms of abuse. The police force lacked the resources or established procedures to end the abuses, and there were no reforms in progress. Corruption was also an issue and the police often set up checkpoints to extort bribes from motorists.

Judges are appointed by the president without parliamentary approval, which has resulted in a judiciary that is weak and lacks independence.

Civil service reform has been progressing since 2002, which includes raising salaries to reduce corruption and attract more qualified staff, but corruption still remains an issue.

Prognosis
Armenia, like many of the former Soviet Republics, has an authoritarian government and is still struggling with the transition to a market economy. The conflict with Azerbaijan over the Nagorno-Karabakh region also remains unresolved. In addition to reaching an agreement with Azerbaijan over the Nagrono-Karabakh issue, the government needs to allow greater democracy, uphold human rights, and focus on reducing unemployment to prevent the Armenian workforce from leaving the country or becoming too dependent on subsistence agriculture.

Copyright (C) 2006 The Fund for Peace