Armenia’s tech industry has been evolving at a quite predictable and stable pace for the last five years. And this pace might have continued or grown steadily if not for several groundbreaking historical (already historical) events we all witnessed. To understand the current situation and make some predictions about where we are going and what we will have in the future, let’s take a look back.
Historical events that influenced Armenia’s ICT and high-tech sectors
2018, Change of Government
The growth of technology companies in Armenia began in the late 2000s, but the great developments began to be registered after 2015, when more and more startups began to appear, attracting investments and entering global markets. The next pace started with the change of Armenia’s Government back in 2018, and it was a major surge. Already a year later, in 2019, the average wage in the ICT (information and communication technology) sector was 2,5 times higher (68.000 AMD) compared to the previous year’s wage (55.000). The change of the government also brought governmental tax incentives for IT agencies resulting in a 25% increase in the number of registered IT companies. The advancement of the sector created a more favorable environment for foreign investments.
2020, The global pandemic
There were other major and minor improvements but let’s move on to the next driving factor, the pandemic. The devastating Covid-19 stroke the whole world, paralyzing almost everything. In a small country, such as Armenia, even a single paused economic segment badly collapsed the economy. What about the IT sector? Unlike tourism, another major economic segment, Armenia’s tech industry grew by 20% in 2020, becoming the fastest-growing sector.
The increased digitization of businesses throughout the country definitely contributed to the sector growth, but outsourcing had become the main power that pushed Armenia to the new international platforms. It was the beginning of Armenia’s transformation into a regional tech hub competing with other countries in Eastern Europe and becoming an attractive outsourcing destination for the rest of Europe and North America.
What about foreign investments?
Those historic events again played a significant role the foreign investments. After the revolution and during the pre-covid period, in 2019, the volume of foreign investment registered 19% growth (from 8% in 2018). In 2020, though, it had a 39% decline due to the global crisis. When the global economy could more or less stabilize, Armenia got a 54% increase in 2021.
The future of foreign investments is positive on one side and quite unpredictable, facing dramatic events. As for positive predictions, the macroeconomic stability, high-quality STEM education, proficiency in English, great potential in engineering and R&D, the large and diverse talent pool, reliable financial sector, and open policy towards investors will continue attracting new investors and expand the geography.
The present of the IT sector in Armenia
Finally, we are in 2022, having the government change, the pandemic, and the war behind us, and global and local political fluctuations at present. I will certainly not be mistaken if I say that Armenia’s IT sector is living its most disruptive “days.” The new realities and unstable situation affected the whole world. While Europe and the US observe the situation, Armenia’s economy feels the influence of those events. Still, not everything is unambiguous. Despite war-related disruptions to other sectors of the economy, Armenia’s IT hub is making significant strides toward geographical expansion.
What is happening in the IT sector of Armenia? Following the unstable situation between Ukraine and Russia, from mid-March 2022, many IT companies started relocating and registering businesses in Armenia. The rumor is that NVIDIA, a leading US-based tech company, is planning to open a research center in Armenia.
To support the IT sector and foreign companies’ relocation, the government approved a new policy in March 2022, providing a 50% income tax refund for IT companies with 50 or more employees (permanent and freelance). This refers to all the companies registered in Armenia, and the reformation will definitely improve the IT ecosystem.
What are the latest news and events in the industry?
As some surveys and statistics show, artists [designers, photographers, journalists] moved to Tbilisi, while IT talents moved to Yerevan, which will for sure provide a large influx of money into the economy and positively influence the country’s IT infrastructure. Moreover, the influx of foreign emigrants can help small businesses grow in a short time, that in its turn, will positively impact the country’s economy.
In recent years (skipping 2020), events on technology, startups and innovation business themes are increasing every year in Armenia, attracting more and more people all over Armenia and abroad. In addition to annual techno events such as Digitec Expo, Digiweek, JS Conf, Devfest Armenia, Yerevan Tech forum, Orion Summit, Buissup conferences with various pitching, acceleration and hackathon programs, as well as other contextual events. All this leads to the fact that every week after the arrival of spring, events on 3-4 important topics take place in Yerevan, Gyumri and Vanadzor, oversaturating the sphere of Armenian techno-events.
Not sure whether the unprecedented number of IT specialists in Yerevan or Armenia has stepped on its track of rapidly growing and popular IT Hub, the following months are all about tech events. Part of them have already taken place, but we still have some great events coming in June; Buissup Conference 2022 for innovative business technologies, Silicon Mountains Tech Summit 2022 dedicated to the digital transformation, and BarCamp Yerevan 2022, an annual tech event bringing together media professionals, IT specialists and IT companies. Whether it is a large or small-scale event, any activity contributes to community development.
How did Armenia meet expats?
In March, about 100.000 foreign citizens arrived in Armenia. The same number of guests arrived in April. Most IT specialists from CIS countries moved to Armenia, escaping the restrictions their countries were facing, and part of them would probably stay here indefinitely. The scary “emigration” word was replaced with a modern and profound name, “relocation,” relocation of people, families, and businesses.
To make the relocation comfortable, several Telegram channels, like “2022 Relocation/Armenia“, are created to discuss the challenges, lifehacks, and anything that can help to feel comfortable living in a new country. Most of the members are entrepreneurs and IT professionals building an international business; employees of international companies who work remotely; entrepreneurs who left their businesses and teams in Russia and other CIS countries; and the unemployed who quit in a panic, left their countries, and have not yet decided what to do.
So why do people choose to relocate to Armenia?
There can be dozen general or personal reasons, but I will mention just a couple of them.
- Russian is the second language for most of the population of Armenia, and there is no language gap.
- The prices in Armenia are relatively low compared to other European or post-soviet countries.
- The availability of services, the safety in large and small towns, less overloaded cities, etc.
- In most countries, registering a corporate account takes at least three weeks.
- In Armenia, Individual entrepreneurs can be registered in 15 minutes.
- Mir payment system also operates in Armenia.
What is the major drawback of hosting repats?
The major drawback for the locals was the sharp rise in prices for virtually everything, and the most dramatic situation was in apartment rental. The prices skyrocketed twice or even more for guests and residents who were forced to pay more or would lose their apartments. Yerevan’s housing prices are now comparable to those in Singapore and New York. A three-room apartment close to the city center is rented for $1,800 per month – more expensive than the rental in Moscow. The drastic rise of demand in the market brought to rise in prices for food and services. While it is a great tendency to have foreign employees in Armenia, it may also bring to unemployment of locals, but that is just pessimistic thoughts that I hope won’t come true.
The future of Armenia’s Tech hub. What’s next?
Global changes affecting Armenia’s IT sector transformation positively and negatively are inevitable. We can either learn on practice and make the right decisions for the future or stand by and see how others grab their chance of becoming the next “Silicon Valley.” Fortunately, our community is on the right track. As a result of government policy and legislation, a growing talent pool, and a diversity of specialties, Armenia now appears as an open platform for investors and companies in the IT sector.