MAJOR FACTORS INFLUENCING THE DEVELOPMENT OF THE NONPROFIT SECTOR IN ARMENIA PhD thesis

Objective of the work  Explore the main factors influencing the development of the nonprofit sector (legal norms, state-nonprofit relationship, public trust and participation)  Explore the influence of the mentioned factors on the internal issues of the sector (organizational issues, cooperation and sustainability) The main thesis The main thesis The unfavorable legal, political and social environments of the nonprofit sector hinder its development and largely cause the internal deficiencies of the nonprofit organizations. Furthermore, the absence of a strategy to address these issues in a comprehensive and consistent manner make the chances of the further development of the sector quite slim. The unfavorable legal, political and social environments of the nonprofit sector hinder its development and largely cause the internal deficiencies of the nonprofit organizations. Furthermore, the absence of a strategy to address these issues in a comprehensive and consistent manner make the chances of the further development of the sector quite slim.

Research sources  Study and analysis of the secondary sources (theoretical materials on the concept of civil society, legal environment, state-nonprofit relationship, public attitudes and participation, relevant research papers and assessments)  Study and analysis of the primary sources (legal norms governing the sector, results of the interviews and a survey conducted among nonprofit organizations in Armenia)

Structure of the work  Introduction  Chapter I. The Concept of Civil Society and the Functions of the Nonprofit Organizations  Chapter II. Embeddedness of the Nonprofit sector  Chapter III. Political and Social Environments of the Nonprofit Sector in Armenia  Chapter IV. Legal Environment of the Nonprofit Sector in Armenia  Chapter V. Internal challenges of the Nonprofit Sector in Armenia  Conclusion  Bibliography  Annexes

Chapter I. The Concept of Civil Society and the Functions of the Nonprofit Organizations  The history of the idea of civil society  3 main schools of thought: 1. civil society as a part of society 2. civil society as a kind of society 3. civil society as the public sphere  Nonprofit organizations- the infrastructure of civil society  The operational definition of the nonprofit organizations by Salamon and Anheier: institutionalized, private, non-profit, self-governing, voluntary  The main functions of the nonprofit organizations in society: social, political and economic  Revival of civil society in CEE and former Soviet Union countries

Chapter I. The Concept of Civil Society and the Functions of the Nonprofit Organizations (cont.)  Civil Society Rating, Nations in Transit 2007.

Chapter II. Embeddedness of the Nonprofit Sector  The concept of embeddedness (Granovetter)- linkages between the organizations and their environments  Legal perspective of imbeddedness (legal framework, including tax regulations)  Public policy perspective of embeddedness (state- nonprofit relationship and embeddedness in the welfare state system)  Social perspective of embeddedness- attitude and participation of public

Chapter II. Embeddedness of the Nonprofit Sector (cont.)  State-nonprofit relations and the embeddedness in the welfare state system 1. Four C‘s model of Najam (cooperation, confrontation, complementarity, co-optation) 2. Division into cooperative (continuous cooperation and delayed cooperation) and conflicting relationship (Fric) 3. Young’s model (supplementary, complementary, adversarial)

 State-nonprofit relations and the embeddedness in the welfare state system (cont.) 4. Social origins model (Salamon and Anheier) 5. Regime model (Zimmer, Freiser) Chapter II. Embeddedness of the Nonprofit Sector (cont.) Liberal regimeSocial democratic regimeConservative regime Government social welfare spending lowhighMedium or high Position of NPOs within social policy Competing with forprofit enterprises Not relevantPrivileged position/protected against commercial competition Major suppliers of social services Nonprofit sector on par with the market GovernmentNonprofit sector Impact and side-effects on NPOs Professionalisation and marketization of NPOs Marginalisation of NPOs in the field of social services Development of nonprofit cartels within the field of social services

Chapter II. Embeddedness of the Nonprofit Sector (cont.)  Legal environment 1. Main issues identified by Salamon and Flaherty (overall legal context, eligibility for nonprofit status, internal governance requirements, tax treatment, personal benefit restrictions, reporting and other requirements, business activities, political activity) 2. International standards developed by ICNL (legal establishment of NPOs, structure and governance, prohibition on private benefits, activities and operations, reporting, taxation)

Chapter II. Embeddedness of the Nonprofit Sector (cont.)  Public attitudes and participation 1. Membership in nonprofit organizations - one of the most important indicators of the development and well-being of civil society 2. Phenomenon of low citizen participation in post-communist countries and the explaining factors, e.g. 1) mistrust towards voluntary organisations 1) mistrust towards voluntary organisations 2) strong private friendship networks which substitute joining voluntary organisations, 2) strong private friendship networks which substitute joining voluntary organisations, 3) disappointment with the new political and economic systems (Howard) 3) disappointment with the new political and economic systems (Howard) 3. The negative effects of low participation in the formation of social capital

Chapter III. Political and Social Environment of the Nonprofit Sector in Armenia  State-nonprofit relationship: 1. Cooperative relationship rather than conflicting/adversarial but: 1. Cooperative relationship rather than conflicting/adversarial but: a) NPOs viewing personal contacts and connections as the best way to approach the authorities; a) NPOs viewing personal contacts and connections as the best way to approach the authorities; b) cooperation is mostly taking place under the pressure from the international donor community. b) cooperation is mostly taking place under the pressure from the international donor community. 2. Limited influence on public policy making: symbolic involvement rather than meaningful participation- the example of the participation in the development of the PRSP 2. Limited influence on public policy making: symbolic involvement rather than meaningful participation- the example of the participation in the development of the PRSP 3. Insignificant position in the welfare system - marginalized role 3. Insignificant position in the welfare system - marginalized role of the nonprofits in service delivery. Corresponds to the statist model (Salamon and Anheier) by low governmental social spending (8% of GDP) and low scale of the nonprofit sector of the nonprofits in service delivery. Corresponds to the statist model (Salamon and Anheier) by low governmental social spending (8% of GDP) and low scale of the nonprofit sector

Chapter III. Political and Social Environment of the Nonprofit Sector in Armenia (cont.)  State-nonprofit relationship (cont.): According to NGO Sustainability Index report, service delivery scored at 4 (between early transition and mid transition, stagnating since year 2000)

Chapter III. Political and Social Environment of the Nonprofit Sector in Armenia (cont.)  Public attitudes and participation 1. Low awareness about the nonprofit organizations: according to IFES survey 2006, 51% could not name any organization, while 19% did not know what this type of organization was 2. Low participation: only 2% of population engaged with the nonprofit organizations (Armenian National Voter Study, 2006) 3. Factors influencing participation and awareness: general lack of trust in people and institutions outside the immediate circle of acquaintances (IFES report, 2006), private friendship networks and disappointment with the new system 4. Lack of awareness and trust towards nonprofits involved in service provision- 78.6% of the respondents answered, that they had no idea about activities of NPOs providing social and health services, those who were aware stressed that NGOs are underdeveloped, unreliable, the services are of low standard (survey conducted by a research center Akounk) 78.6% of the respondents answered, that they had no idea about activities of NPOs providing social and health services, those who were aware stressed that NGOs are underdeveloped, unreliable, the services are of low standard (survey conducted by a research center Akounk)

Chapter IV. Legal Environment of the Nonprofit Sector in Armenia  General legal context: Constitutional protection and the general overview of the laws  Analyses of the Law on Public Organizations and Law on Foundations: establishment, structure and governance, prohibition on the distribution of profits and assets, permissible activities, reporting  Tax laws: tax benefits for the contributions, economic activities  Major findings: 1) improvement in comparison with the previous Law on Public Organizations, but 1) improvement in comparison with the previous Law on Public Organizations, but 2) prohibition to engage directly in economic activities for associations and absence of recognition of public benefit status in tax legislation make the improvements in the other laws not relevant 2) prohibition to engage directly in economic activities for associations and absence of recognition of public benefit status in tax legislation make the improvements in the other laws not relevant

Chapter V. Internal challenges of the Nonprofit Sector in Armenia  Organizational issues: broad and vague mission statements broad and vague mission statements lack of strategic planning lack of strategic planning lack of self-regulation mechanisms lack of self-regulation mechanisms lack of professionalized human resources lack of professionalized human resources lack of public outreach (recruitment) lack of public outreach (recruitment) lack of accountability to public (substituted by the accountability to donors)  Cooperation within the sector – more cooperation, influenced by the demands of the donor community  Sustainability issues: lack of government support and funding lack of government support and funding lack of private funding lack of private funding over-dependence on donor funding – negative consequences for sustainability over-dependence on donor funding – negative consequences for sustainability

Conclusion  The nature of the legal, political and social environments not favorable for the development of the sector  Negative influence of these factors on the internal issues of the nonprofit sector  Complex issues- need for comprehensive approach rather than ad- hoc initiatives implemented currently  First step is the elaboration of a concept/strategy for the development of the sector, tackling all the above mentioned issues in a comprehensive and consistent manner