After nearly two decades of rapid growth, industry technologies and information of Armenia became a rare economic success story for this small country wedged South Caucasus.

Export-oriented, technology sector and information (IT) has increased by an average of 22 percent per year during the period 2008-2013, much faster than any other economic sector, according to government data. With a combined capacity of nearly 380 Million $, about 400 IT companies operating in Armenia cutomers represented 3.8 percent of gross domestic product last year to nearly $ 10 billion. The sector currently employs more than 10,000 programmers and software engineers – comparable to the total number of Armenian mining industry, the most important source of export revenue figure.

However, according to the Ministry of Economy, more than half of these high-tech companies have emerged since 2007. “This is the only place where Armenia is successfully compete globally, not even regionally, “said Yeva Hyusian, the center’s director of the Armenian Innovation Microsoft (MICA).

A dozen relatively large companies, most of them subsidiaries of American heavyweights high technology, dominate the sector. Armenian subsidiary of Synopsys Inc., one of the chip designers the largest in the world, employs more than 500 engineers, making it the largest company in the sector. Other U.S. software giant with a presence include Armenian National Instruments, Mentor Graphics and VM Ware.

Armenia has also made its mark on the world stage in the IT sector by homegrown talent as Artavazd Mehrabian, 40, developer of PicsArt, one of the mobile applications world’s most popular photo editing. Another Armenian boot supported by an American partner should publish soon a voice platform presentation Voiceboard, designed as an alternative to the ubiquitous PowerPoint software.

Meanwhile, a joint US-Armenian venture plans to start manufacturing Armenian shelves later this year.

So far, the long-standing problems of Armenia with corruption, lack of competition and the closure of borders with neighboring Azerbaijan and Turkey have had little impact on the rapid growth of the sector. This led some experts to conclude that the knowledge industry is the best economic hope for the future.

Part of the reason may lie in the past.

During the Soviet era, Armenia was the home of dozens of companies that have produced about a third of microelectronics equipment used by the Soviet defense industry. The deceased Research Institute of Mathematical Machines Yerevan, who designed one of the first Soviet computer systems in 1959, had him alone about 10,000 employees in the 1980s.

The Soviet collapse was the death knell of the industry of the state, but strong skills of its experts and modest wage demands have provided fertile ground for a new technology sector that emerged after Armenia had regained its independence . A dozen U.S. software companies mostly owned by the Armenian diaspora largely led the trend.

One such company, Synergy International Systems, based in Vienna, Virginia, moved to Yerevan in 1999. “We started with only four people working in a Yerevan apartment,” said Ashot Hovanesian, founder and president of Synergy. With customers in 55 countries, the company now has Hovanesian 160 employees and plans to double their number in the coming years.

The rapid emergence of these start-up prompted the Armenian government to intensify efforts to support the industry. In recent years, the government has teamed up with foreign donors and corporations, including Microsoft and Nokia to open new centers in Yerevan providing logistical, technical and financial assistance to entrepreneurs in the sector. A “technopark” supported by the government for the same purpose began operating in the second city of Armenia, Gyumri, earlier this year. The sector has gained new momentum when the government recently launched, in cooperation with private investors, a venture capital fund of $ 6 million to start.

Tax breaks are also underway. It is expected that the Parliament adopted later this month a bill that will give a new IT companies with fewer than 15 employees a three-year exemption of 20 percent of the corporate tax. It would also provide a tax on income of 10 percent heavily discounted rates for their employees. The government expects between 40 and 60 IT startups appear each year thereafter. These technology companies are already able to move in tax havens of Armenia began operating last year in premises belonging to Russia in Yerevan.

“The opening of a new IT business in Armenia is now very easy,” commented Hyusian MICA. “We did not have the infrastructure and [these] opportunities there four years.”

New and better ways of training are needed: the number one problem of the Armenian sector at the moment is the poor quality of education in universities underfunded Armenia. Few graduates of universities and institutes Armenians are sufficiently trained to join the companies established without undergoing additional training qualified, say industry leaders. The lack of qualified graduates has resulted in about 2,000 jobs in the IT sector, highly unusual for a country plagued by unemployment unofficially estimated with two digits.

Leaders in the industry say that without improving standards of education that could affect the growth of the sector in the long term. The government has repeatedly promised to address the issue. As a step in this direction, in 2013, he opened a laboratory 6.2 million in computer art, primarily funded by the U.S. Agency for International Development and the U.S. National Instruments, University engineering Armenia.

The private sector also takes action. Synopsys, using its own programs and technical facilities, is sponsoring a chair in computer science at the University of Engineering of Armenia. Synergy recruiting new employees among university students taking courses computer shortcuts.

Despite the shortcomings, officials are optimistic. The average annual growth rate of 22 percent sector should “at least remain the same in the years to come,” predicted Naira Nikoghosian, Head of Information Officer at the Ministry of Economy.

Emil Danielyan

Eurasianet.org