4.7. Dynamics and Efficiency of the State's Institutional, Administrative, Technical and Political Capabilities

After acquiring independence in 1991, a number of significant changes in governance took place in Armenia among which are: 1) transition from state-owned to private-owned means of production; 2) state management of economy became market-oriented; 3) the Soviet partisan state governance was replaced with the principle of division of powers.

The above mentioned structural changes led to the conceptual reconsideration of the role of the state, changed the functions of the state, methods of management and institutions, and centralized management structures.

The ideology of the newly established government attaches more importance to the regulatory role of the state and rejects the methods of "wild liberalism". The government in its program pays much attention to structural reforms, tax administration and tax collection. The role of tax and customs directorates has been enhanced and they have been merged under the newly established State Revenue Ministry. An important role in the program of the government is given to the development of the financial market and banking system.

Reforms of state governance functions are still in progress, with a noticeable tendency of specifying the tasks and authorities of various governance bodies. In particular, the former two ministries - of Interior Affairs and State Security and the Ministry of Finance and Economy, have been divided in the government structure into four ministries. The role of the Ministry of Finance has grown in terms of budget expenditure supervision and management. The separation of the Ministry of Economy attests to the state's inclination towards enhancing the regulatory, programmatic and purposeful governance.

The creation of the position of Minister for coordinating industrial infrastructures in the structure of governance is aimed at increasing the State's institutional capabilities and functional management. The Minister in charge of operative issues implements the state management functions during emergency situations caused by natural and other disasters.

The retention of the Ministry of Privatization in the new government structure demonstrates continuity in the policy of enhancement of the market economy and establishment of an appropriate management system. However, in the privatized sector the new government plans to increase state governance capabilities in relation to governance facilities: "The private owners are responsible before society for the creation of material values and provision of industrial activity. Hence, it is necessary to increase the owner's responsibility for the failure to use the industrial potentials, applying appropriate taxation mechanisms " said the newly elected Prime Minister in his programmatic speech at the NA.

State capabilities and the efficiency of governance are greatly dependent on the organization of public service and personnel policy. Although the Law on Public Service has been under preparation since 1998, so far it is not in proper shape. A special role has been reserved for public service in the program of the new government.

The program of the government envisages the adoption of the appropriate law and elaboration of a strategy in this field. It is also envisaged to reduce the management structure thanks to optimization of activities of the state governance bodies.