Armenia and Diaspora

Armenia’s investment climate and Diaspora’sparticipation in development policies.

Hayk Sargsyan, Johns Hopkins University

Data: WB Investment Climate Surveys (ICA)

• Create indicators that benchmark the quality of the business and investment climate across countries.

• Measure the general economic conditions affecting the business operations.

Percentage of firms in Armenia identifying main obstacles to their business operations.

Main five obstacles to Armenian businesses (2002-2009)

Firms complaining about political instability – International Comparison, 2004-2009. (%)

Percentage of firms complaining about political instability vs. FDI/GDP ratio.

Firms complaining about corruption. (2003-2009)

Firms complaining about corruption – International Comparison, 2004-2009. (%)

• Traditionally Diaspora communities have the potential to play an active role in economic policy of their home countries.

• Diasporas matter since they can use political and financial means, such as economic investments, remittances, and controlling and manipulating the media to play an important role in influencing decision-making in the development processes.

• Diaspora can have positive political impacts on investment climate through protecting the interests of investors and businesses.

• It has been widely accepted that the Diaspora is an invaluable and one of the most fundamental resources for the Armenia’s economic development.

• At the same time there might be a possible gap between the massive humanitarian contributions received from Diaspora and its much less active participation in Armenia’s economic life and economic policies – including the improvement of investment climate and creating favorable business environment.

• One of the main issues is the limited participation of the Diaspora in development policies in Armenia.

• Diaspora is highly successful in mobilizing both humanitarian aid and foreign developmental assistance to Armenia.

• However Diaspora seemed to be less active in the process of the creation of the development agenda and particularly in its participation in the local debate on improving the investment climate.

• The Diaspora should have a significant role not only in the form of FDI, business partnerships, advisory services to Armenian businesses, but also should be actively involved in the improvements of the business environment in the country.

New approaches of economic cooperation

With some exceptions Diaspora investments in Armenia are relatively small size individual investment projects.

• Today’s realities create a demand for collective Diaspora projects that would accumulate large amounts of investments and expertise from Diaspora organizations.

The collective Diaspora projects have severaladvantages in terms of improving the investment

climate.

Advantages• As opposed to individual projects, the collective initiatives would

allow the projects to get the political backing of the broader Diaspora community, thus giving those projects more leverage to influence the implementation of the economic policies in Armenia. The collective nature of the initiatives is also an additional guarantee against investment risks, especially caused by the corruption practices and adverse business environment.

• It would make possible to monitor the performance of the investments, funded by the projects. It would thus help to further monitor patterns of economic developments in the country. At the same time the tight control and the transparency would provide Diaspora investors with more opportunities to advocate for economic improvements.

Policy and decision-making

• Diaspora should seek to actively engage in the process of creation of the Armenia’s development strategy.

• Some institutional entity might be developed to represent the Diaspora. The institution could cooperate with the government on key development challenges.

The Diaspora should promote the economicliberalization at the level of small and mediumenterprises by targeting:

• Equal economic opportunities, • Removal of the entry barriers for small

businesses, • Reducing the hardships of doing business, etc.

The focus on the education and professionalbusiness projects, instead of only humanitarianones.

• Not only investment, but also Professional Diaspora Organizations.

• Establishing and promoting the professional organizations is a key to this strategy.

• The activity of the Diaspora should be directed at the development efforts, supporting the private sector, promoting further regulatory reforms, and contributing to the technical assistance programs.

• Local businesses in Armenia are in need for a Diaspora Professional Organizations to learn the basics of business and technical assistance.

Armenian Government• Despite the years of high economic growth

and considerable government efforts to improve the country’s investment climate, there is still insufficient trust in the government economic policy.

• The Government has to find ways to upgrade its communication tools and outreach practices.

• Gather and disseminate information about Diaspora and their approaches and opportunities to contribute to Armenia.

• Identify the steps that could encourage and facilitate Diaspora involvement in Armenia.

• Ensure the political stability inside and the stable image of a developing country abroad to further ensure the Diaspora involvement.

• Generate opportunities with the innovative partnership with the Diaspora organizations.

It should be also necessary to:

• Implement research on Diaspora attitudes to understand the Diaspora’s needs and worries.

• Create and publicize case study examples of Diaspora involvement in Armenia.

• Bring together stakeholders from the Armenian government and the Diaspora to share opinions and approaches regarding the development policies.

• Address the Diaspora communities concerns regarding the economic development policies in Armenia.

• The example, of such countries as India, Ireland and Greece show Armenia might be able to create new business networks that would allow using more efficiently the potential of the Armenian Diaspora, including its financial, professional and technical opportunities.

Thank You