Armenia Local Economy and Infrastructure Development Project Report

6Implementation Risks of SEDPs and SCTDS, and Alternatives for LEID Project

The main risk for implementation of SEDPs in regions is lack of priority setting in these documents. All issues covered in SEDPs are indeed relevant, however addressing them all is an overly ambitious goal that may cause thin spread of resources and fragmentation of effort. At the same time, investing in addressing of a single priority may cause disproportional development and may affect both physical and social environment. For instance, giving exclusive priority to industrial development (e.g. labor-intensive extractive industries) may result in damage to environment and public health while creating a much sought new employment. Excessive concentration of social welfare programs puts pressure on budgets and may not be sustainable as it does not solve the problem of unemployment. To minimize the risk, it is important to apply integrated approach by combining several inter-related priorities to produce synergy effect, preventing adverse impacts and providing for sustainable development in other priority sectors. Tourism development may serve as one of the areas for such integrated approach, which allows for effectively combining the priorities and catalyzing development in other sectors, including infrastructure, poverty, employment, SMEs, cultural heritage, other.

Risks associated with the implementation of SCTDS (if separate from regional SEDPs), is that the increase of tourism arrivals cannot be stimulated without correlation with SEDPs and improvement of not only specific site infrastructure, but the broader improvements of urban and social infrastructure in tourism destination areas. As it is stated in SCTDS, one of the main challenges for Armenian tourism is that while international arrivals have been increasing dramatically (tripling from 2005 to 2013), average receipts earned per visitor have steadily declined by 2013. This could mean that visitors are not finding relevant infrastructure for additional spending opportunities, including staying overnight in regions. To minimize these risks the SCTDS focuses on responsible tourism as a catalyst for broad economic development in selected regions. This considers improving site management, infrastructure, services and facilities to attract more visitors to South Corridor destinations, developing more product reasons to stay overnight, more experiential and product-based spending opportunities, increase number of persons locally trained and employed in hotels, restaurants and attractions in South Corridor destinations, to attract and facilitate the necessary investment to increase the number of hotels and guesthouses.
The LEID Project contributes to reducing risk of implementation of SEDPs and the SCTDS. The Project ideology, design and specific subprojects are based on integrated approach to selection of priorities, discussed above. The LEID Project development objective is to cover/integrate several priority directions declared in SEDPs of target regions: tourism development, infrastructure improvements, environmental protection, preservation of cultural heritage, SME development, increase of employment, poverty reduction, other. At the same time the LEID Project is built on the outcomes of the SCTDS. It aims to improve infrastructure services and institutional capacity for increased tourism contribution to local economy; to serve as example and catalyst for other infrastructure development projects in regions; and to amplify positive and mitigate negative implications of tourism development.
The following alternatives to LEID Project, as an integrated program supporting both SEDPs and SCTDS, are considered/analyzed below: sector strategies and policies alternatives, program design alternatives, implementation alternatives, sub-projects alternatives, “no-project” alternative.
Sector strategies and policies alternatives. Various alternatives have been considered during the preparation of SEDPs and the SCTDS by GoA, but are not subject for analysis in this report. For the proposed LEID project the following alternatives have been considered: 1) implementation of SEDPs without correlation with (or existence of) SCTDS and the LEID Project; 2) implementation of SCTDS without LEID Project and/or without correlation with SEDPs; 3) implementation of LEID Project in support of SEDPs and the SCTDS. These alternatives are presented as scenarios in Section 12 of this report, where risks related to each alternative scenario are analyzed in more details.
Program design alternatives – may consider mono-sectoral development (industry, agriculture, or tourism, etc.) as an alternative to LEID proposed integrated approach. It is clear that development of single specific sector is less efficient comparably to LEID, where project design is based on stimulation of development in co-related sectors (tourism, infrastructure, environment, cultural heritage, social sector, services, etc.) including not only physical development (rehabilitation, reconstruction, new construction) but also institutional development (capacity building, business advisory services, access to financing, workforce development, etc.).
Implementation alternatives – may consider implementation of LEID Project-supported activities without procedures and institutional arrangements for the projects undertaken with the WB financial and technical support. In this case the effectiveness of implementation may be lower and the risks of various scale failures may be higher. The LEID Project implementation in adherence to the World Bank’s safeguard policies as well as implementation support provided by the World Bank will definitely ensure quality implementation of all activities proposed within LEID Project.
Sub-projects alternatives – consider specific projects in target regions that will be selected for the LEID Project. These alternatives are still open for proposals and discussion. Several specific sub-projects are proposed by LEID Project for the very initial stage of implementation – but still are subject to discussion, modifications and final approval. The further LEID sub-projects will be selected based on thorough consultations with the central and local authorities, stakeholders and the local population, as well as all other affected groups in target regions.
No-project alternative – considers implementation of SEDPs and the SCTDS without LEID project. This will simply reduce the effectiveness of plans and strategy implementation due to absence of integration of SCTDS components with the most priority SEDP components – such as development of urban and social infrastructure, environmental protection, cultural heritage rehabilitation, SMEs and employment, etc. In addition there will not be opportunity for replication of the best practice and procedures, applied when the World Bank support is involved, in the spheres of procurement, construction methods, project management, environmental and social management, H&S issues, etc.

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