What can the Diaspora do to improve the economy of Armenia?

The question posed in the title of this article is important because the wealth created from a strong economy is vital for the well-being and prosperity for any nation, particularly for its defense and security. Security is the paramount concern for Armenia, and wealth is a necessary but not sufficient condition for assuring it. The issue of security and defense is complex and separate from this discussion. 

By “economy,” I mean the word in its simplest sense, which is the creation of wealth in an open market-based system because that is what Armenia’s economy is trending toward. 

There are probably as many ideas, opinions, measures and wish lists that can answer the question of the Diaspora’s role in assisting Armenia’s economy as there are Diasporans arriving at Zvartnots International Airport. Many of these solutions may include the use of capital in the form of investment or charity applied directly by the holder of the capital or indirectly through a third person or organization. Another resource which is abundant in the Diaspora is human capital in the form of knowledge and expertise which may still be in short supply in Armenia, though that gap is narrowing. These are simple and obvious solutions readily available in an introductory macroeconomics course. It is also fair to say that the Diaspora has seemingly been generous with both resources for the past three decades. 

If this is so simple, why is the Armenian economy still so small and weak. There are multiple metrics which can readily attest to this, but the most painful, and perhaps the one that energizes Diasporans most (notably those who visit Armenia), is the high rate of poverty. 

Following are some thoughts and answers to the question of what the Diaspora can do to improve the economy of Armenia.

We may be overestimating the Diaspora’s capacity to make a transformational difference like the one brought about by the massive repatriation following World War II. The resources in the Diaspora may be vast, but what counts is whether they are available. The most striking evidence of stinginess is the trivial amount that was raised in the Diaspora during the 44-day war, which was nothing short of an existential threat. An estimated total of $180 million was raised. This represents less than one-percent of Armenia’s GDP, which is approaching $20 billion and growing nicely, but still very small and impoverished on a per capita basis. The estimates for the number of Armenians in the United States varies, but the U.S. Census captures about 500,000. With low estimates and U.S. GDP per capita of about $70,000 (though for Armenians it’s surely higher), approximately $35 billion of income is created annually by these self-identified Armenians. These very rough but conservative estimates answer both questions. There is enormous potential but it’s not available.

Why is the Diaspora unwilling to part with its capital, even at a time of crisis? The answer is complicated, but one reason that comes to mind immediately is the question of corruption or trust—a fair and important question worthy of deep discussion. But the fact remains that capital flow from the Diaspora is nothing more than a trickle. 

Human capital in the form of knowledge and expertise is a much softer resource and far more difficult to quantify, both in terms of investment and return. Arguably, such investment in the form of Diaspora assistance was more valuable in the immediate aftermath of the collapse of the Soviet Union. Thanks to a vast network of training, education, experience and simple Armenian entrepreneurship, the gap between home grown talent and that from abroad has narrowed significantly, particularly in Science, Technology, Engineering and Math (STEM). The role of women in this realm is enormous, and in many ways, offsets the demographic trends and the ever-present brain drain. Despite these advances, the value of Diasporan human capital should not be underestimated. 

Although this personal experience is from three decades ago, it still illustrates the point. When the U.S. Department of Treasury sent me to Armenia in 1995 to advise the country on establishing a Treasury debt program, I arrived with little knowledge of the inner workings of a Central Bank, a Ministry of Finance, or a Treasury, which Armenia did not yet have. Even mid-level officials of the Central Bank could run circles around me when it came to the quantitative fine points of central banking. I was a seasoned analyst at a major Wall Street bond rating agency and not a banker. Within four months of my arrival, we issued our first series of Armenian Treasury (Government) Bonds. We had no Treasury but did have a well-functioning government; hence the term in the parentheses to make the securities legal and enforceable. They were 28-day discount bonds sold through an auction held at the Central Bank. As such, the interest yield on the bonds was the difference between the bid price of the purchaser and the par value of the bond. The auction was oversubscribed; as such, we could place the entire series. But the effective interest was about 45-percent. The Minister of Finance, who had the authority to reject all the bids, was appalled with the results and was seriously considering nullifying the entire auction. This would have been catastrophic. It would send exactly the wrong message to the market, since in banking trust and predictability are indispensable. The network of bankers would never again trust the system and the government’s credibility would take years to recover. Convincing the minister to accept the bids was perhaps my most important contribution in my two-and-a-half years of service, even though it was not based on my technical expertise but on more of a banking “cultural” experience. The fact that the most recent Russian auction at the time had yields twice as high also helped my case. In the following months, the interest rates continued a steady decline, and Armenia went on to have a highly successful Treasury Bond program. This is a simple but instructive example of how the Diaspora can contribute in simple ways that can make a huge difference in the long run. 

So, with these vast resources, why is the Diaspora not making a larger contribution to the Armenian economy? As an observer, I believe that the relationship is dysfunctional and both sides are to blame. But, based on my purely anecdotal experience and observation, there is fundamental disagreement on approach and a lack of understanding of one another. For too many Diasporans with good intentions, the fault lies in being oblivious to the ever-changing investment climate in Armenia and lacking the humility needed to learn and adapt.

Too often we view our investment as charity and expect it to be accepted with infinite gratitude and no push-back. We expect results in record time without being willing to make a long-term commitment. The ignorant sense of superiority without any regard to the sensibilities and pride of the native population dooms many projects before they start.

None of this is to disparage the countless Diasporans who have made enormous sacrifices for decades and have made notable contributions to the economy with their financial and human capital. I’m only suggesting that the success rate would have been much higher but for these shortcomings. And the success stories are usually the results of efforts which avoided the aforementioned pitfalls, as the two examples that follow will suggest.

Armenia also has a great responsibility to shoulder in the general failure to attract more lasting and meaningful investment from the Diaspora. Its most benign failure is the lack of capacity to absorb the proposed investment or assistance. Sometimes an investment just does not fit for all sorts of reasons, and it falls by the wayside. But too often the Diaspora is viewed as an ATM. The expectation is to bring as much capital as possible and simply spend it without asking any questions or expecting anything in return. The privilege of simply being in Armenia is deemed sufficient reward, and any reasonable expectation of accountability is met with scorn. The shortcomings of the Diaspora previously mentioned are overstated, and too often good opportunities are dismissed, even if there was real benefit to be reaped. 

By all accounts, in the Diaspora or locally, corruption has been the single most damaging force to obstruct investment, foreign or domestic. Two points can be readily made. Corruption is a common problem throughout the developing world, but in Armenia the current government has done a decent job in reducing it with tangible results. But as they say, perception is reality, and, still too often, reality is reality. Corruption in some form or another persists. But just as damaging is the perception of corruption, which also persists because transparency is still in short supply, and legal and judicial reform continue to lag other reforms.    

All is not lost. There is a great deal that the Diaspora can do for the benefit of the Armenian economy. And a strong economy is vital for meeting all sorts of national needs, including a meaningful national defense. But what is the most effective path, in terms of efficiency and outcomes? The theoretical answer is the path that avoids, overcomes and navigates the pitfalls discussed above. 

To answer the question more specifically, and with the discussion above, the optimal path is direct private investment and perseverance.

Fortunately, we have been at this for thirty years and have the benefit of some real data. Following are two notable examples which share common characteristics. These entrepreneurs made a large direct private investment in Armenia years ago with a long-term commitment and have the results to show for it. They do not view their work as charity but as business investment. They are sensitive to cultural differences. They do not take obstacles, even irrational ones, personally but view them as a course of doing business. They are also tenacious and patient. They employ hundreds with good, living wages and pay their share of taxes. 

Digital Pomegranate is a software development company located in Gyumri. Its founder and CEO is Todd Fabacher, a Louisianian married to an Armenian, who saw opportunities in Gyumri a decade ago when no one else did. Now, his company is the largest private employer in Gyumri with more than 100 high-paying jobs. Digital Pomegranate’s applications have a global reach, which has put the city on the map. Fabacher rejects the notion of investing for any reason other than meaningful return on investment. He chose Gyumri over Yerevan because of the lower cost of operating. According to Fabacher, Yerevan is quickly losing its competitiveness in many IT sectors due to rising costs (perhaps a sign of growing economy), and in the long run he believes only some clusters like chip design will maintain their advantage because of their size and entrenchment. He sees the lower cost of living in Gyumri as an opportunity to attract talent to fuel his growth plans. As a true entrepreneur, he speaks about all the difficulties which he has encountered over the years as opportunities on which to capitalize.    

Tufenkian Hospitality LLC Is the holding company for Tufenkian Heritage Hotels in Armenia. The chain of unique hotels is currently its founder James Tufenkian’s most recognizable endeavor in Armenia. Tufenkian was one of the first Diasporan investors in Armenia. His enormous capital commitment is matched only by his tenacity and unwavering dedication to the growth of the Armenian economy, from both the actual enterprises that bear his name and the ancillary benefits of his long-term presence in Armenia, such is being an example of excellence and developing expertise for the entire hospitality industry in Armenia. Tufenkian is perhaps best known, especially in the West for his unique artisan carpets, which was also his initial foray into the business world of Armenia; but his adaptability and commitment have allowed him to recognize and capitalize on emerging opportunities. Tufenkian’s companies now offer more than 300 well-paying jobs, and the company is among the largest corporate taxpayers in the country.

These are just two of the many private companies who are making measurable contributions to the economy, one representing the increasingly important tech industry and the other, the hospitality industry. The former represents the highest value addition to the economy on a per capita basis, and the latter, though not as high a value, contributes heavily to the brand of the country, whose indirect benefit to the economy is no less important.   

But what about smaller investors who lack the means for such bold interventions? For that, I have proposed and presented to the government of Armenia a plan which would allow smaller investors to invest in a fund with the purchase of securities. With these proceeds, the fund would extend loans to small Armenian enterprises which would otherwise be priced out of the capital markets. With the plan, Armenian companies would be able to borrow in Armenian drams at hard currency interest rates, which are typically several hundred basis points lower than domestic currency rates because of currency risk. But in this scenario, all the currency risk is shifted to the Diaspora investors, as they are required to make their investment in the fund in Armenian drams, and they are repaid, principal and interest, also in Armenian drams. In many ways, this plan is a substitute for the much-discussed Diaspora bonds, which may not be feasible for Armenia. There is only one example of a successful Diaspora bond program, and that is Israel’s. But that program has many unique features which are difficult to duplicate, most notably the United States guarantee for those bonds, which requires an Act of Congress.  

To conclude, the Armenian Diaspora has great potential to help grow the Armenian economy. But the Diaspora’s financial wealth and human capital have been largely unavailable or unproductive in making a difference relative to its potential. We should certainly analyze and think of ways to improve the existing paths and come up with new ones. But as things stand, direct private investment seems to be the most effective path.

Kevork Khrimian

Kevork Khrimian

Kevork Khrimian was born in Yerevan, Soviet Armenia in 1960 of parents who had repatriated there from Lebanon and Egypt. He attended Hagop Baronian School No. 59 in the Nor Zeytoun section of Yerevan through the fourth grade. The Khrimians emigrated to the US in 1971, and Kevork completed his primary and secondary education in the New York City public school system. He received his undergraduate degree from the State University of New York at Buffalo where he studied engineering and economics, followed immediately with a master’s degree in 1986 from Carnegie-Mellon University in finance and decision analysis. After a brief stint in the New York City government, Khrimian spent almost his entire professional career at Moody’s Investors Service as a vice president and senior analyst. While at Moody’s, in 1995 Kevork assumed a temporary assignment with the United States Department of Treasury to serve as an advisor to the government of Armenia and helped establish the Armenian Treasury Bond system. Since retiring from Moody’s, Khrimian is involved in numerous projects in Armenia and New York, one of which is serving on the working group for potential Armenian Diaspora Bonds.
Kevork Khrimian

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  1. I disagree with the general thrust of this article.

    The Diaspora has been consistently supportive of, and generous to, Armenia and Artsakh at the expense of the Diaspora’s own needs.

    Armenia itself has been less than transparent and has wasted untold billions if not trillions in corruption and aid.






  2. Honestly its better for repatriate armenians lives in islamic countries to Armenia cuz as armenian from CA l dont want live near by turks azeris persians and russians but our armenians in middle east used to this situtation they can handle but l cant.

  3. For the past 30-plus years the diaspora acted as a pack animal for various Western AND Turkish agendas in Armenia. The diaspora has done enough damage…

    • What kind of thing to say! I think that Armenians like all other former Communist countries, have a long way to go before they would advance a western ethical standard. Civil rights, Private Property rights, A legal system that is responsive to the needs of the people and the business class. Free and unobstructed rights to buy, sell and keep weapons. Freedom from corruption, to mention just a few. We have all those things here in the US diaspora, and more. As to al those schemes where we are induced to invest money into funds and pools, etc. Business men are like squirrels. They gather their nuts and hide them even from their own children. My nuts, my money, so I’ll invest them as I want as I keep an eye on them. Only a Communist Gafa would suggest such schemes. Why? Easy to dip into those funds. The generation that lived under Communism, had to steal in order to survive. They won’t change. Only a new generation raised on Christian values will succeed.

    • Edward, when you wake up from your “American dream” you will see that those rights, rights that essentially took centuries to evolve, are slowly and gradually disappearing. Besides, none of what you said has anything to do with what Concerned Armenian addressed. I agree with Concerned 100%. Naive diasporans who have no real understand of history and geopolitics need to remain in their home countries and stop misleading and confusing Armenia’s citizenry. Enough damage has been done.

  4. This article and the comments above so far make good points. There are many examples we could emulate that have strong or upcoming economies with classical liberal values of human rights and freedoms. The author would probably agree that “rule of law” would be a critical factor of promoting both economic growth and human flourishing.

    I find it very encouraging that the occasional yet expected Marxist/Socialist drivel has so far not yet entered into this conversation.

    Perahps when *actual* factors of prosperity are seriously considered and debated, they chase away the Marxist miasmatic pipe dream clouding the senses of idealistic youth.

  5. Armenia must first get its act together and show a willingness to work with various diaspora organizations in a transparent manner. I doubt whether the current Armennian goverbment, like its predecessors, are willing and able to do so. Funny that the author cites the Tufenkian organization as an example of diasporan investment in Armenia. It was the Tufenkian Foundation which promoted the resettlement of impoverished Armenians in the so-called “liberated territories”, without providing them any security guarantees. Tufenkian, who was steered into such nationalist folly by his ARF handlers, let these people to their own fate, with the diastrous consequences that befell them in the 2020 Karabakh war. Rahther than butressing the population of Nagorno Karabakh proper, strengthening settlements along its borders, these diasporan armchair nationalists used these people to achieve their own fantasies of a Greater Armenia. There was no overall strategy or comprehension of how to best maintain and strengthen the 150,000 strong Karabakh that existed and has now lost 1/3 of its territory and thousands of its former population. Such diaspora-hatched schemes have been diastrous.

  6. throughout the world poor areas with limited resources seek two clean “industries”
    2)universities to educate students

    Look no further than the US. Las Vegas…an area with no resources has a tourism
    industry (based on gambling)…Ski resorts are by definition in places hard to
    build and parts of the year inhospitable…. both of these examples prosper by tourism
    Universities have tuition paying students…and thus faculty and support staff. Money comes from outside the area and is spent locally. Look at State College Pennsylvania or South Bend Indiana. Take out the Universities and the economy collapses.
    Build Nursing Schools in Armenia. The world is disparate for Nurses. Certify the Nursing schools to United States Standards and you could graduate literally a few thousand tuition paying nurses each year. Don’t look to educate Armenian Students..look to bring in tuition dollars from around the world (ie South Bend Indiana Notre Dame University isn’t looking to educate students from South Bend Indiana

  7. A couple of points can be made here:
    1- Expecting Armenians to give $180 MM in a month because there is a war is not reasonable; where were the Armenian government and the diaspora organizations during the past 30 years to involve the communities? The model of charitable giving simply does not work to support a nation. Armenia and the Diaspora face existential threats(invasion and assimilation, respectively) and there has to be a commensurate policy response to meet the challenge; for example “national tithing “ where every Armenian family in US will give $ 1000 ( or some comparable amount) per year. In return the families expect services ( school, sports , exchange programs with Armenia, competent elected local and national bodies that represent them ). This model requires an “organized “ community in the US which does not exist at the moment.
    2- The nominal GDP of Armenia is $20 Bn for 3 million people. One needs to grow that by x 5-10 to make Armenia and diaspora strong. When we look at countries with comparable populations like Finland(5.5 million) and Singapore(5.7 million), their GDP are $ 200 Bn and $ 500 Bn respectively. Those who advocate that Armenia go back to the Russian model i.e join Belarus in union with Russia, are condemning Armenia to perpetual poverty and weakness.
    3- A key element of Armenia’s revival is practical STEM education. This is where the Diaspora can help in setting up or improving existing polytechnics. Basically , Armenia needs a clone of MIT, Stanford , Technion(Israel) or Nanyang Technological University(NTU, Singapore) to help drive innovation. While Armenia’s graduates excel in math in physics( Wall St has many Armenians working in algorithmic trading) , it tends to discourage practical innovation and startups.

    • Pashinyan’s rise to power was a historic victory for all those who proudly supported the velvet revolution in 2018 and all previous revolution attempts. God bless democracy. God bless westernization. The country’s future looks great now that we finally got rid of Moscow’s puppets known as the criminal Karabakh clan. Thank you everybody. Please keep up the good work!

  8. Extremely thoughtful article by someone who has the knowledge and experience to write about this. Unsurprisingly, the majority of the comments are negative. One says that he stopped donating money!! If you really think you can fix the economy of a country by donating 0.1 percent of your income annually then you know very little about economy. Another claims that diaspora has donated billions to Armenia which is a false statement. The total amount of money PLEDGED during those telethons was usually in the range of 10 to 20 million. Normally, the final number donated was less than 10 million dollars which is less than a small city budget in California!
    Long story short, the problem is that Armenians both in diaspora and Armenia are very emotional. They think by their emotions and not their logic. This means they are responsive when emotions are involved. If there is a war, they will donate some money. If they see footage of some poor villagers in Armenia, they will donate money. But when it comes to directly engaging with the country, that is when logic kicks in. They see it is hard and that is when the old broken record comes in. Nonstop nagging about corruption in Armenia or the same old political arguments. Oh, because I don’t like Pashinian I won’t move to Armenia! As if he would move if someone else was the PM!
    Truth is the Armenian diaspora is one of the least successful diaspora communities in US in terms of trade with ancestral country. Export from Armenia to US is abysmal. There is no direct flights from LA to Yerevan despite the route being the fourth most unserved route globally. Direct investment almost doesn’t exist. Who is responsible for this? We are all responsible for it and it has absolutely nothing to do with Pashinian or Kocharian or anyone else.

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