“die Armenisch-Deutsche Korrespondenz” Article entitled “Silicon Valley of the Caucasus”

The german version of the previous article published: https://mshakdotorg.wordpress.com/wp-admin/post.php?post=298&action=edit

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Silicon Valley of the Caucasus: Tablet odysseys

The unedited version of this article was published for the Germany-based Armenian current affairs journal “die Armenisch-Deutsche Korrespondenz” in March 2014

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Nayiri computers, manufactured in Soviet Armenia

While still a soviet republic, Armenia had garnered a reputation as the USSR’s answer to Silicon Valley. the Republic was a centre for mainframe and industrial computing, electronics, semiconductors, software development and others research and development, as well as production. Indeed, roughly 40% of the Soviet Union’s high tech and military research took place in Yerevan’s top of the line facilities, such as the Mergelian Institute and Microprocessor Institute. In fact, the USSR’s vast array of SAM missiles and ICBM relied on guidance systems designed, developed and manufactured in soviet Armenia in hopes of hitting their intended NATO targets.

Armenia also produced technological innovations for civilian and research use as well. The famous Nairi family of computers was developed at the Yerevan Computer Research and Development Institute in 1964. Other innovations were made in the production of transistors, microcomputers and so on.

The collapse of the Soviet Empire, in tandem with the Shirak Earthquake and the Karbakh War (1989-1994) shook the newly independent republic’s previously highly industrialised economy to its core. Now cut off from its former export markets within the Eastern Block as well as with difficult access to the sea; Armenian firms having appreciated the high value of human resources, turned their attention to software development. The major specialisations include embedded software and semiconductor design, custom software development and outsourcing, financial applications, multimedia design, Internet applications, web development, MIS and system integration. Armenia’s best achievements were in the fields of  semiconductor design software and IP solutions.

Since then, the Information and Communications Technology sector has been one of the fastest growing in the Armenian economy. A unique start-up scene has developed over recent years, which is growing to rival its more famous counterparts in New York, Berlin and the Baltic. Grassroots conventions such as the famed Barcamp IT conventions have already spread to cities outside the capital such as Gyumri and Stepanagert. A number of educational institutions also help secure the next generation of IT specialists. The TUMO Centre for Creative Technologies in Yerevan, for example, with a branch in Dilijan was founded to help teenagers develop their skills in programming, design, robotics and so on. Yerevan is also home to a small number of trendy coworking spaces such as the SaryanTumanyan space catering to a growing number of tech start-ups. The city also hosts a chapter of TEDx.

Innovative home grown projects such as Armenia’s answer to Instagram: Picsart, or other projects such as the virtual whiteboard Voiceboard, the Yerevan-based serviced apartment group ginosi.com or teambuilding app Teamable  have also attained worldwide recognition. The country has also managed to attract international ITC giants, including Microsoft, Synopsis, and Macademia,

ICT has grown at an average of 27% per year. In theory, at least, the Armenian government has made efforts to support this sector by conducting grant competitions for start-ups and R&D efforts in collaboration with the World Bank, the US government funded Enterprise Development and Market Competitiveness project, as well as the Enterprise Incubator Foundation. The Armenian and Indian governments have also collaborated to found the Armenian-Indian Centre for Excellence in ITC. The government has already designated three Tax-Free Zones for IT development in the country: The Mergelyan institute, the Gyumri Technopark and the Vanadzor technopark.

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FRM Prime-Minister Tigran Sargsyan and Gyumri Mayor Samvel Balasanyan visit the new Technopark in Gyumri (source: oratert.com)

The first ever, fully-indigenous developed tablet computer, unimaginitively named the ‘ArmTab’ was recently presented to Armenia’s Medvedev-esque Yuppie prime minister Tigran Sargsyan. This new tablet, along with its north-american counterpart, Minno is supposed to have been entirely designed locally, including the software design, operating system, applications and overall tablet design. Though it was speculated that it would be manufactured in China, Vahan Sahakian, the director of Technology and Science Dynamics/Armtab Technologies insists that they will be assembled in Armenia. Critics doubt the need for a new tablet in an already crowded market, and argue that it is just another soviet-style publicity stunt designed to showcase the country’s technological might; but Sahakian insists that the tablet will target the regional markets of Armenia Georgia and Ukraine first, and then get into a world Market. Though the tablet’s technological specifications are not yet available, its 165 EUR asking price should give it a competitive edge on its competition.

Despite overt endorsement of ITC sector development in Armenia, the Government’s actual support remains uneven. High corporate and income taxes, (update: as of April 2014, the Armenian government offers tax breaks to IT start ups)  as well as spotty rule of law hamper the proper growth of the industry. Furthermore, a recent government pension reform is poised to remove an extra 5% of the already squeezed-for-Tax incomes of these skilled professionals; with many of them now considering emigration over what they perceive as being more state ‘punishment’ for their success. (update: As of April 2014, the constitutional court has put this reform on hold, with results pending) Another issue that needs to be addressed is brain-drain amongst Armenia’s IT specialists. Many companies are not having difficulty finding senior IT positions despite high salaries and benifits, because the people necessary to fill these seats are not in the country. This issue should be addressed.

In conclusion; Armenia’s ITC industry shows a lot of promise, and can indeed turn into Armenia’s strategic economic strength if the government learns to nurture its growth instead of hampering it.