Armenian Minister of Economy – Mr. Tigran Davtyan

The American Times: Minister of Economy Armenia – Tigran Davtyan

A previously robust ministry, containing over 14 separate entities under its control, the current Ministry of Economy in Armenia now functions primarily as the monitor and regulator of three primary sectors: Information Technology, the country’s pride and joy, Trade and Industry as well as Tourism. Although the new structure is less heavy, Mr. Davtyan still maintains a total staff equating to roughly 25-33% of the entire governments human capital, including five Deputy Ministers.

This is not entirely surprising when one looks further into the segmented responsibilities within the structure of the aforementioned sectors. There are 5 Core Responsibilities that the Ministry has as of our conversation in February of 2013, including:

  1. Economic Development: SME and Business Development Improvement, women’s development in business and Regulation of the business environment
  2. Investment Policy: Industrial Development and IT development
  3. Trade and Tourism
  4. EU Relations Department: Diversifies and balances their markets economies outside of Russia
  5. Standardization and Metrology

 

When asked what sectors are of the utmost importance to the future of Armenia’s economic development the answer was, well, all of them under his ministry. However, when probing further Minister Davtyan duly noted that, “traditionally, Armenia has always had a rich mining sector for raw material extraction with large copper, molybdenum, zinc and gold deposits. What is also important is that industry has led to a secondary industry of final-good productions from those materials via the country’s robust metallurgy industry” further stating “This sector employs up to 15,000 people, which is significant for a country of our size. Aside from exploiting natural resources we are also world renowned diamond cutters and jewelry makers. But with the economic crisis and sanctions from Russia, our supply and demand was depleted significantly.”

“We are ready to discuss any investment incentive proposals by US firms. However, we do already have several incentives in place including; postponement of taxes for up to 3 years, special arrangements for export oriented companies and establishment of 3 Economic Zones which offer significant tax eliminations, just to name a few.”

Seguing rapidly, it is first noteworthy to state that the Mining Sector does indeed still offer exploration potential but strengths truly lay with soft investments which exist with mining operators currently in the market.

However, the opportunities only begin with mining. The true draw of the Armenian economy is its intellectual capacities. In fact, the first ever computer in Russia was designed and built in Armenia during the Soviet era. With over 400 IT companies, the majority with foreign capital insertions, ostensibly Armenia offers a cornucopia of cheap and extremely talented scientists, engineers, chemists and computer programmers. One needs look no further than the recent market entrant, Microsoft, which built a Research and Innovation Center. Although not producing, therefore, not contributing directly to the growth of GDP, the presence of MS should eliminate a few concerns off the due-diligence list. But what is more important are the market players that are producing such as: Synopsys, Synergy, D-Link and interestingly, the IBM delegation that was in Yerevan meeting with Minister Davtyan the day before The American Times sat down with him.

Exciting as the IT sector is, it is becoming more and more well known in the IT world. Even more so after an Armenian delegation, including Davtyan himself, along with US Ambassador to Armenia, John Heffren visited Silicon Valley, and notably an official visit to Google’s compound. A fact made aware when Mr. Davtyan joyously raises the name placard with Google’s insignia given to him on the visit. All of these motions have led to the IT sector, as Minister Davtyan states, “being the largest recipient of US investment. But unfortunately American investor influx essentially ends there, but contributes to 10-15% year-over-year sector growth.” One could understand the synergies between US technology and ingenuity and Armenia’s supply of workers that can operate within that sphere; but the pressing question was ‘Why’ weren’t American firms investing more heavily in other sectors? “Americans are domestic oriented, business and otherwise, and even when they turn their interests internationally, Armenia is hard to see.”

“Americans are domestic oriented, business and otherwise, and even when they turn their interests internationally, Armenia is hard to see.”

The Minister went on to further state that, “rather than potentially promote the IT sector as a prominent opportunity [which it is] we should look at the sector’s prominence in our economy as a strong success story for investors to learn from.” Which is a prudent thought. It is also a great example to help investors overcome some of the negative news and image perceptions due to corruption in the country.

When asked how Armenia has gone from FORBES Magazine’s unfavorable ranking of the Armenian economy to strong indices on the latest World Bank (35/185), the answer was surprisingly simple, but made sense: E-Governance. Electronic based registration of businesses, judicial outcomes, internal governmental correspondences and so forth. “We are not in a position to conduct the Revolutionary Approach [a 100% abrupt removal of governmental officials and/or corrupt organizations. Georgia did something like the revolutionary approach with its police force.] But rather by developing an environment conducive to legal and fair play, by removing the human element between day to day interactions; with the end objective of changing culturally ingrained mindsets.”

What other elements are aiding in developing an environment that tackles corruption and faces image concerns? First, it is important to understand that we are taking this action for ourselves, not for improved rankings only. The other undeniably important element is fundamentally simplifying and eliminating unnecessary and bloated legislation.  We are guillotining these legislation’s to create a more efficient and comfortable environment for businesses to operate.

Your northern neighbor Georgia has great rankings on Transparency International’s Corruption Index. How can Armenia learn and what synergies exist between the two nations?

It’s a good question because there is an interesting and playful dichotomy between Georgia and Armenia. If a Georgian claims that their history dates back 3,000 years, than Armenia’s dates back 3,001 years ago and vice versa [Stating with a good laugh. It is a mutual feeling of playful jest between Georgians and Armenians]. Recently, Georgia sent a delegation to Yerevan in January of this year including Prime Minister Ivanishvili and many of his cabinet heads. One of the proposed initiatives was to jointly promote the region, Georgia and Armenia as a single market; thereby, playing off each other’s strengths. Some of the items on the agenda aside from jointly attracting investors are: Promoting Regional Projects, Free Trade Agreement (FTA), share current investments and the like. One noticeable strategy, at least from our perspective, is that it would be much easier to attract US Investments located in Georgia than directly from the United States. As such, a campaign to promote Armenia as an obvious market extension for firms operating currently in Georgia is of great importance.

 

 

Overall, the message is clear and reiterated often during our time with the Minister, “We are ready to discuss any investment incentive proposals by US firms. However, we do already have several incentives in place including; postponement of taxes for up to 3 years, special arrangements for export oriented companies and establishment of 3 Economic Zones which offer significant tax eliminations, just to name a few.”

With current business successes, an open and collaborative government, US Ambassador backing of economic developments; the former USSR’s ‘brain’ is ready for investment, but lacking awareness. Let this be your first introduction to the opportunities that exist in Armenia.

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