YEREVAN (RFE/RL) — Information technology (IT) companies remain the fastest-growing sector of Armenia’s economy that has expanded by 25 percent in 2014, according to official statistics.

Preliminary data from the Armenian Ministry of Economy shows the combined output of the nearly 400 IT firms operating in the country reaching almost $475 million. The figure is equivalent to about 5 percent of Gross Domestic Product and almost one-third of Armenian exports in 2013.

The Armenian IT industry, which is dominated by local subsidiaries of U.S. software giants, generated only 1.7 percent of GDP in 2010. The total number of skilled personnel working there has since more than doubled to around 11,600, the ministry figures show.

The export-oriented sector had already expanded by an average of 22 percent annually from 2008-2013. The Armenian government expects this growth to continue unabated in the years to come. Some government officials have forecast that the sector’s annual operating revenue will pass the $1 billion mark by 2019.

Much of this rapid growth has been driven by U.S. hi-tech firms such as Synopsys, National Instruments, Mentor Graphics and VMware. Synopsys, a global microchip design leader, employs about 700 engineers in Armenia, making its local branch the country’s largest IT enterprise.

VMware, which posted a net profit of $1 billion in 2013, plans to double the size of its Armenian subsidiary currently numbering over 60 specialists. “The business results that we are getting here give us confidence to expand. We are going to invest around $100 million here in the next four or five years,” Raghu Raghuram, a vice-president of the California-based software giant, told the Mediamax news agency during a November 2013 visit to Yerevan.

In another significant development, Oracle, the world’s second largest software developer, set up shop in Armenia just over a month ago. The Silicon Valley heavyweight reportedly plans to expand its research and development office in Yerevan.

The IT industry has been further boosted in recent years by a growing number of startups partly or fully owned by Armenians. According to the Ministry of Economy, more than 200 such firms have been set up since 2007. Those include PicsArt, the manufacturer of one of the world’s most popular mobile photo-editing applications. The Yerevan-based company has reported more than 100 million software downloads since launching its key product three years ago.

Another Armenian startup specializing in mobile apps, Inlight, attracted strong interest from a Los Angeles-based company, Science Inc., and was acquired by the latter in July.

The Armenian government hopes to facilitate the emergence of more such home-grown firms with forthcoming tax breaks and a $6 million venture capital fund that started functioning in February 2014. Over the past few years, the government has also helped to set up about a dozen centers providing logistical, technical and even financial assistance to promising IT entrepreneurs. Two of those hi-tech “accelerators” are sponsored by the world-famous Microsoft and Nokia corporations.

Another U.S. computer giant, IBM, announced earlier this month the establishment of an Innovative Solutions and Technologies Center at Yerevan State University (YSU). The center is due to modernize the YSU’s laboratory equipment and computer science curricula.

The U.S. Agency for International Development and the Texas-headquartered National Instruments inaugurated a similar facility at the State Engineering University of Armenia (SEUA) in September 2013. The $6.2 million Armenian National Engineering Laboratories gave the SEUA’s professors and some 2,400 students enrolled in IT programs free access to state-of-the-art equipment.

These facilities are meant to address what IT executives describe as the number one problem facing their burgeoning industry: the still inadequate quality of education at the IT departments of Armenian universities. Most of their graduates are not qualified enough to work for IT companies without undergoing additional training. There are currently an estimated 2,000 job vacancies in the sector, a highly unusual phenomenon for a country that has long suffered from double-digit unemployment.

Armenia’s Union of Information Technology Enterprises (UITE) has also been trying to address this problem with extracurricular robotics classes organized in about 60 public schools across the country. “Our objective is to detect in all schools children with engineering talent and help them find jobs in the future,” the UITE chairman, Karen Vardanyan, said in a recent interview. He argued that schoolchildren involved in the classes are learning not only robot design but also broader software development.

The UITE, which launched its Armrobotics program financed by several private firms in 2008, is now lobbying the government to gradually open such “study groups” in all 1,400 or so Armenian schools by 2018. The government supports the ambitious $25 million project in principle but has yet to make a final decision to finance it.

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