5.4. The Transition Period and Possible Prospects for Sustainable Human Development: Conclusions and Recommendations

The above presented analyses of the transition period with its problems, achievement, failures trends and deviations suggest the following:

In 1990-91 Armenia entered the transition period, having the establishment of a democratic system with a socially oriented market economy as the ultimate goal. To this end, it was necessary to resolve the following inter-related fundamental issues _ establish a democratic state, form a civil society, create a system of socially oriented market economy and become integrated into the international economy.

Now it can be said that an independent state has been established and a number of essential institutional changes have taken place:

1. most means of production were de-nationalized

2. the centralized administration of the economy was replaced with market regulation

3. the administrative-command methods of management were replaced with democratic principles

4. the legal basis of a democratic system was established

5. an independent judicial system was founded

6. a new system of local self-governance was founded

RA is being gradually integrating into the international economy and the levers of market regulation were put into effect.

The start of the transition period coincided with an urgent need of eliminating the consequences of the earthquake of 1988, the Karabagh conflict, the transportation blockade, a disastrous energy crisis, the mass influx of refugees. Adding to these complexities are difficulties, typical of CIS countries, based on the collapse of the unified soviet economy. A certain regress in democratization processes in 1993-94, an outburst of violations, especially in the sphere of privatization, in the form of patronage and corruption among the central and local authority officers, contributed to the deterioration of the overall situation in the country.

The social cost of economic and social reforms, and of their consequences turned out to be very high. The imperfect and sporadic nature of reforms and their implementation mechanisms makes the public so far mainly the negative impact of transformation, accompanied by a drastic decline in the living standard of the population, mass unemployment, social polarization, impoverishment of the majority of the population, the deterioration of the demographic situation and narrowed access to social services and the rising level of migration.

Employer_employee relations are not regulated in the private sector. Workers' rights are not legally protected. Neither is the status of trade unions clear. Human capital is not re-produced; the intelligentsia, relatively secure in the past, is now seriously endangered. The establishment of a middle class is proceeding slowly.

Society has made a shift from social cohesion to social discord. No government has so far succeeded in enjoying the genuine trust of the people and making them a true participant in the decision making process and reforms. Nevertheless, the prerequisites of social cohesion and cooperation are in place and could be activated if the interests of all the players will be considered in developmental processes. It is equally important that transparency of the decision-making process, people's participation, mutual trust and social partnership are assured in society.

The overall crisis is aggravated by unfavorable ecological conditions: decrease in the water surface of Lake Sevan and deterioration of its ecological characteristics; loss of forests and degradation of alpine zones, etc.

Along with issues raised above, in 1997-1998 certain healthy trends have been observed, which resulted in the improvement of Armenia's ranking among 174 countries (Annex II). However for Armenia it is too early to speak about overcoming the crisis and especially static survival, (where certain conformities operate) and making a leap toward sustainable human development.

The following recommendations are offered to overcome the current difficulties in the country and to head towards SHD:

Domain of foreign and domestic policy

· to overcome Armenia's persisting state of isolation, the transportation blockade and promote integration into regional programs;

· to achieve a peaceful resolution of the Karabagh conflict;

· to improve the election law, to democratize the election process by securing its transparency and legitimacy;

· to drastically narrow the spheres within which corruption and shadow economy operate.

Domain of Economic policy

· to use more effectively the regulatory levers of the State` by undertaking the coordination of institutional changes, the promotion of internal competition, the creation and perfection of market institutions and legal infrastructures, the protection of the domestic producer;

· to develop a national concept on economic development, and promote investment and taxation policy in accordance with the selected priorities;

· to create employment, promote small and middle entrepreneurship through pursuing targeted taxation and loan policy;

· to focus on resource - and energy-saving, low waste high technologies, on the development of alternative energy, on maximum recycling of production and of consumption waste as well as on dissemination of the existing experience of bio-dynamic agriculture throughout the entire country;

· to reduce the taxation burden by enlarging the taxation field (including the shadow economy).

Domain of social policy

· to use more efficiently state allocations in the social sector (education and health care), to secure fair re-distribution of incomes, mitigate the apparent social injustice present in society. The incomes of the poorest layers of the population should be increased at the expense of progressive taxation of the well-off.

· to adopt officially the minimum subsistence budget, and to define the minimum sum of salaries and pensions through its proportions. To strive toward equating the minimum incomes of the population to the minimum subsistence budget;

· to encourage the establishment and development of a middle class;

· to pay special attention to the population of the disaster and borderline zones and refugees while elaborating on the programs of employment creation and unemployment mitigation. Give privileges to young families;

· to use social cohesion and cooperation mechanisms (including cultural integration), which heal social rifts. More intensively integrate the vulnerable groups into social life. Use mechanisms of cultural integration for that purpose;

· to unfold a dialogue on the goals and means of pursued policies; It is crucial that the public at large participates in making vital decisions through expanding political dialogue.

An irreversible shift toward sustainable human development requires development of a national concept and strategy on SHD, which would incorporate and harmonize the economic, social and ecological policies.