a day on average. The financial burden of inefficiencies in Armenia's water sector to the government was estimated to be significant, amounting to 2.7% of Gross Domestic Product. Sector reform Private sector participation in Armenia's water sector was accompanied by a comprehensive reform of the sector. The reform process was initiated in 2000 shortly after the first management contract covering the capital Yerevan was signed. As a first step, water tariffs were increased. Then the utility in charge of Yerevan, and which was assisted by the private company under the management contract, was transformed from a government department subject to civil service rules to a publicly owned commercially oriented joint stock company. In 2002 a new Water Code was passed as the centerpiece of the reform process. A powerful State Committee for Water Economy (SCWE) was created as the main decision-making body for sector policies, except for tariff reviews. The next year an autonomous regulatory agency, the Public Services Regulatory Commission, was set up to review requests for tariff adjustments on the basis of objective criteria. These reforms were an important element in securing the benefits achieved in the sector. The first two years of the management contract in Yerevan prior to the reforms had been challenging, characterized by suspicion and even hostility between the government and the private company. After the reforms were implemented, the situation improved. Overview of contracts with private water companies The private companies operate under three contracts with the government: A 10-year lease contract for the Yerevan Water and Sewerage Company, serving 1.1 million inhabitants. The contract is held by the French company Veolia Water. The contract, signed in 2005, was preceded by a 5-year management contract held by a consortium led by the Italian company Acea. A parallel investment program is being financed by the World Bank. A management contract for the service area of the Armenia Water and Sewerage Company (AWSC), serving 37 towns and 280 villages throughout the country with about 600,000 inhabitants. The contract was initially signed for a duration of 3 years in October 2004 and then extended by another 3 years. It is held by the French company SAUR International. The project is supported by the Asian Development Bank. A management contract, also for an initial duration of 3 years, for three regional water companies (Shirak, Lori and Nor Akunq) serving 5 towns and 37 villages with 375,000 inhabitants