Foreign aid effectiveness & state institutional capacity: the case of Armenia

Abstract

Foreign aid is directed to developing countries to make recipient countries grow in spite of their limited resources. Not always do recipient states manage to reach success and one of the major reasons for their failure is the relatively low capacity of their state institutions. One such recipient of foreign aid is the Republic of Armenia. This research aimed at finding out the extent to which the capacity of state institutions in Armenia contributes to or hinders the effectiveness of foreign aid. A qualitative approach was used to collect data through interviews with state institutions and all major donor organizations operating in Armenia. The analysis of interview transcripts showed that generally the projects implemented in Armenia have been effective, but there have been staff competence issues and related encumbrances that have hindered reaching more effective outcomes. The main problems that this research identified included the inadequate expertise of civil servants in some areas of specialized interventions, lack of project management skills and absence of institutional and partnership arrangements that increase the incentive for taking ownership of projects. However, institutional reforms of the recent past have somewhat contributed to enhancing the professional know-how of government officials and staff. These reforms may have included improved hiring process that has successfully brought in qualified staff without regard to actions of nepotism and cronyism that have existed for long in the state apparatus. However, more work needs to be done to further improve the delivery of foreign aid and implementation of such projects in order to maximize their impact on state development. This research makes a few recommendations that would contribute to increasing the impact of foreign aid towards sustainable development.