Deputy General Manager of Synopsys Armenia Andranik Hovhannisyan in 1998-2005 served as director of HPLA, an American software company in Yerevan. Before 1998, for six years, he worked for the US State Department at the US Embassy in Yerevan as Assistant to the Ambassador, and later for the US Department of Commerce running the Embassy Commercial Section. He Is one of co-founders of the American Chamber of Commerce in Armenia, received his business education in Canada and the United States, an active lobbyist of improvements in the investment climate. Authored many research and analytical publications on business and IT industry development in Armenia.
– Can one say that the global economic crisis is reflecting on operations of IT companies in Armenia?
– Of course, it does. Armenia is not an isolated island, not mention the IT industry located here. For example, the cluster of US-owned companies in Yerevan, of which Synopsys Armenia is a part, cannot but feel its impact. These days, the world population is spending much less on purchasing electronic gadgets, accordingly the demand in semiconductor chips is going down, and the chain reaction eventually hits those who help to design and manufacture those chips and the related software.
However, the impact varies from a company to a company and it is important to understand how companies were readying themselves to face it. I can state, with satisfaction that due to its well-thought business, licensing, as well as revenue accounting model, Synopsys closed a very successful fiscal year 2008. I can’t state the same about some of our competitors. Of course, we remain realists and understand that the crisis continues. Accordingly, we, as others, are taking efforts to counter it, and are implementing a cost reduction program, which does not necessarily mean job cuts. There are other reserves to draw upon. Our subsidiary in Armenia remains one of our priority R&D centers worldwide.
– We recently witnessed closure of a few foreign-owned IT companies. As a result, several hundreds of engineers were thrown into the street. Is there a hope, that this will not become a trend?
– Yes, the hope is there. If you take a careful look, you will notice that the companies that closed were in financial trouble for quite some time already. The crisis only accelerated the processes taking place there. Note, that in the West, hundreds of companies close all the time, with a crisis or without it. This is business: one is winning the competition, another one is losing. One should not dramatize these events too much. Again, we are not on an isolated island.
I expect that some foreign-owned IT companies in Armenia will have to freeze their growth and cut expenses. Maybe some will be forced to conduct layoffs. I am saying maybe, because it makes more business sense to save several qualified engineers in Armenia by terminating one engineer in the West. Also, some successful companies may benefit from the situation by easily obtaining qualified personnel.
We may also see an increase in structural changes, such as mergers and acquisitions, because the rapid but unequal depreciation of stock prices within competing groups may change situation overnight, and easily make some companies vulnerable to others. All of these are quite natural crisis-time and market-related processes.
I also do not exclude, that some American or European companies will find a way out of the crisis in expanding their outsourcing operations, including in Armenia.
– You have had an unusual career: started as an architect, were engaged in the citizen diplomacy, worked as assistant to the first US Ambassador to Armenia, then as the US Embassy’s Commercial Attaché, in 1994 authored and published in the US the first comprehensive manual on doing business in Armenia in English language, successfully managed the first US-owned IT company in Yerevan – HPLA, were very active in efforts aimed at improving the business climate, authored several legislative amendments , in other words – always kept your hand on the country’s economic pulse. What do you think of the reforms recently announced and being implemented by the government?
– On many points, these reform plans are finally reflecting what I and many of my business colleagues were many years fighting for. This is inspiring. Implementation deadlines for various reforms are also encouraging, and in my recent interview, I called on everyone and I am calling now to support their implementation, because the resistance of corrupt officials is still very strong. The economic crisis came at a bad time. In these conditions, it is important for the government not to panic, but to realistically evaluate the situation and not to decrease the pace of reforms, otherwise we will be lost. Instead, the reforms must be accelerated.
However, in recent years, Armenia has been increasingly facing a new serious problem, and it is not clear whether the current pace and scope of reforms will allow to solve it. I mean the challenges posed by the unexpectedly fast growth of the cost of decent living, especially in Yerevan (do not mix it with the official cost of the consumer basket, which has nothing to do with decent living) in conditions when incomes of salaried employees in the private and state sectors are lagging far behind. The recent official increases of the minimal and regular salaries by the government, for which so many debates were conducted and so many nerves spent, in reality do not come even close to real needs of the population. In what comes to the cost of living, we will soon win the once popular competition – remember the slogan “Catch up and overpass America!”?. In many price categories we already did. The local economy does not generate such high incomes an masse, and paying high salaries is not also on priority agenda of foreign investors. In the result, even in the relatively well-paying IT sector, where the turnover was amazingly low for many years, we are observing a new wave of outmigration to Russia and West. True, the global economic crisis has slowed down this trend, but the dam will brake as soon as overseas jobs start emerging again.
I see part of the solution in urgent and radical liberalization of small and medium businesses, especially in the area of taxation, along with complete eradication of semi-criminal monopolies that stand on their way. And most important, protection of businesses – the timely and reliable legal protection. Each entrepreneur, who is starting more or less profitable business, must be safeguarded against immediate attempts of various representatives of law enforcement, local governance, licensing, tax and customs bodies to grab a share in it, and those who dare to do so must be subjected to fair trial and punishment. These well-known illegalities must be finally stopped. And, of course, the calls on the population to report illegalities should be made only after the government proves that it is committed to protect the people from possible “revenge”. Otherwise, such calls will smell of cynicism.
To make it, the good laws are not enough. History shows that it is also necessary to have a strong, knowledgeable, charismatic, honest and self-confident leader in the role of the president or the prime-minster. A lot depends on a country leader’s drive for change and courage. One can easily earn the fame of a democratic reformer by simply agreeing to various useful reforms and assistance programs – all initiated and funded by foreign governments and donors. This does not take much courage or initiative. But it takes a real courage and strongest will to consistently and uncompromisingly fight corruption in such a small country, where one knows by face all the key players of the underworld, and may be linked with them through multiple working, social, friendly, or family circles, close or remote relations. Let’s hope that the current government possesses necessary power, will and dedication to highest moral principles to fight the evil openly and successfully.
– What will you say about the future of IT sector in Armenia
– In Armenia, and particularly in Yerevan, due to the contribution of reputed western firms and the talent of Armenian engineers there has emerged a mini-“Silicon Valley”, which generates state-of-the-art, complex software tools and other intellectual property for the international semiconductor industry. Unfortunately, many relevant officials either pretend not to notice or do not comprehend the cluster’s value for the country. But it is already several years that we all have something to be proud of, an important sector that deserves more serious financial and intellectual investments. If this sector is promoted and further developed, it has all the potential to diversify and strengthen the economy of the nation, bring it back to the high-tech domain, and help Armenia integrate into one of the most sophisticated and lucrative international industries.
Liana AVETISYAN