Armenia’s Tech Sector Continues Rapid Growth

YEREVAN (RFE/RL) — Armenia’s burgeoning information technology (IT) industry dominated by software firms has grown by around 30 percent this year and will double its output by 2024, Minister of High-Tech Industry Hakob Arshakyan said on Wednesday.

The industry currently employing at least 15,000 people has been expanding at double-digit annual rates for more than a decade, making it the fastest-growing sector of the Armenian economy.

Government data cited by Arshakyan showed the sector’s combined turnover increasing by 33 percent to $250 million in 2018. “Its average growth was around 28 percent from 2015 to 2018,” said the minister.

The former Armenian government reported much higher turnover numbers. Arshakian attributed the conflicting figures to the fact that the revenues of IT firms operating in the country are mostly generated abroad.

“The head offices of international tech firms operating in Armenia are located abroad, which is where their financial turnover occurs,” he told a news conference. “Their Armenian branches only get money needed for paying their employees’ wages.”

“Our research shows that a large part of Armenian companies operate in the same way,” he went on. “That is, their revenues are generated in foreign companies … This is why we have small turnover figures.”

The government is therefore looking into ways of helping homegrown tech firms “circulate their entire revenues in Armenia,” added Arshakyan. In his words, it expects that the sector’s combined annual revenues will reach $500 million in 2024.

Speaking about government efforts to spur its continued growth, the minister singled out tax breaks up for IT startups that were first introduced several years ago. He said they benefited 230 firms and resulted in 1,200 new jobs in the course of this year alone.

“About 45 firms were opened by Diaspora Armenians,” he said. “This means that we have an influx of talent.”

Many of the Armenian IT engineers work for local subsidiaries of U.S. tech giants like Synopsys, National Instruments, Mentor Graphics and VMware.

A shortage of skilled personnel is widely seen as the main challenge facing these and other high-tech companies active in the country. Industry executives have long complained about the inadequate quality of education at IT departments of Armenian universities. Many of their students require additional training after graduation.

“Please increase human talent, invest in technology education,” VMware’s chief operating officer, Rajiv Ramaswami, reportedly told Prime Minister Nikol Pashinyan when they met during the World Congress on Information Technology (WCIT) held in Yerevan in October.