20 October 2009

2974) Conceptual Approaches to the Strategy of Armenia’s Economic Development

Published in Delovoy Express (# 37, October 6, 2006), translated from Russian

Armenia is facing the challenge of maintaining its high economic growth which has been achieved today primarily due to private transfers. This does not create sustainable competitive advantages for the Armenian economy and will not secure Armenia’s long-term economic growth. New approaches for the country's development are required.

International practice suggests several successful examples of economies which managed to transform the initial acceleration into sustainable economic growth. This was mainly achieved by the countries which adopted consistent strategy of formulating a distinctive value proposition (e.g. Singapore, China, Ireland). . .

A value proposition points out to the specific role the country plays in the world or regional economy. What can constitute Armenia’s distinct value proposition?

Global Positioning of the Armenian Economy

The current situation in the country does not provide grounds for confirming the existence of a certain value proposition of Armenia. However, Armenia has two options.

First – complete annihilation as an independent player in the global arena, second – transforming into a supplier of highly qualified human resources for certain sectors of the global economy.

At present, the strongest obstacle for the first option is the Armenian-Azerbaijani conflict.

Paradoxically, this very issue makes Armenia significant in terms of foreign geopolitical interests. Hence, the complete settlement of the conflict without creating preconditions for formulation of a distinctive value proposition could turn Armenia into a “regional appendix.”

The second alternative implies shifting from a temporary exporter of high-quality workforce for Russia into a location of high quality human capital for narrowly-specialized fields with high value added.

The claim for such a specific regional and in future global role is quite an ambitious yet fully achievable objective, requiring a real breakthrough. Scarcity of resources, the unfavorable geopolitical situation and transportation problems do not allow Armenia to develop other propositions (for instance, becoming a base for expansion to developed and rich regions, as Ireland positioned itself in relation to Europe, and Singapore in relation to the Far East). On the other hand, the suggested positioning will enable Armenia to compete in creation and offering of specific values and to accumulate notable competitive advantages. But for creating such an advantage Armenia will have to compete with economies based not on exploitation of resources (China, Russia, Turkey), but with high value added (Estonia, Israel, Taiwan, Korea). This means that Armenia’s concept of competitiveness must be targeted on achieving best international standards in the field of human resource education and training, applied science, management systems, services and work requiring special competences and creative skills, as well as globally competitive business environment in general.

Moving to the Next Stage of Competitive Development

In the framework of the economic development paradigm based on the concept of competitiveness, three stages of development are identified: ..


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