Examples for Armenia
Looking at the experience of Israel’s development through migration can shed light on potentials for Armenia. Of course, many factors in the two countries differ, such as their history, quality of governance, rule of law, and economic opportunities. However, there are similarities too: insecure geographical environments prone to warfare and external hostility, historical tragedy uniting a far-flung diaspora, and the existence of diaspora organizations around the world sharing common ideologies and goals. For these reasons, comparison with the Israeli experience may reveal lessons for Armenia’s efforts at encouraging development by repatriating its diaspora.
Israeli statehood and repatriation
Israel became independent on May 14, 1948—but activity towards the formation of an independent state and the prerequisites for repatriation had begun long before that. From the start, repatriation was recognized to be crucial for Israel’s success.
According to the Israeli Ministry of Foreign Affairs, Israel received 687,000 immigrants from 1948-1951. In ten years the population of Israel almost doubled, from 1,174,000 in 1949 to 2,150,000 in 1960. Because most immigrants came from Arab countries and lacked money and shelter, the Israeli government created housing programs and granted citizenship to all Jewish immigrants upon arrival.
A solid foundation and effective policy
Unlike many other countries that faced deep social and economic problems upon acquiring independence, Israel was able to make policy and build institutions immediately. Large flows of funds, coming mostly from the Jewish diaspora, were directed to projects for building draining and irrigation systems as well as agricultural developments.
At the 1951 World Zionist Congress, Jewish diaspora representatives expressed their willingness to support Israel’s absorption of immigrants. Israel is the only country in the world with a Ministry of Absorption, which manages the process of arrival and absorption of immigrants from all over the world. Israel begins to work with immigrants from the moment they decide to repatriate. The state supports them in finding jobs and settlement, and helps them to be fully involved in the social and cultural life of their homeland.
During its first decade state independence, the Israeli government was able to organize the allocation of imported resources and to invest in capital assets to improve infrastructure and create the foundation for an innovative economy. This was achieved even amid warfare and unprecedented immigration flows. Due to these measures, as well as to the existence of democratic governance and a commitment to building infrastructure and institutions, the Israeli economy has skyrocketed in recent decades. Today it is considered one of the world’s most innovative and advanced economies in diverse sectors.
In 2005, the Israeli government adopted a Master Plan calling for the achievement of ambitious demographic goals by 2020:
- Israel’s population shall be over 9 million, and about 14 million Jewish people shall be living in the territory between Jordan and the Mediterranean;
- In connection with such population growth, it will be necessary to build 50,000 new homes; and
- Investments in human capital shall be increased by 13 percent annually, amounting to $1 billion per year.
The successful repatriation of Jews to their historic homeland and the development of the state of Israel were made possible by recruiting immigrants who possessed a high level of human capital and who were committed to the mission of national unification, growth and prosperity. It also required good governance, huge investments on the part of the diaspora and—crucially—targeted and efficient spending of that investment, which in turn sustained future donations and investments. A well-planned strategic approach, sound policies and good governance became guarantors of Israel’s success.
Armenia and Israel: similarities and differences
While there are many differences between the two countries, some similarities provide lessons that Armenia can apply to its own future. The following similarities are central:
a) Situations of conflict: Both Armenia and Israel have been conflict zones under the threat of war, and the environment in both countries has been insecure since gaining independence. The maintenance of the army and military equipment in both countries constitutes a considerable share of the state budget. A main difference between Armenia and Israel in this context, however, is that Armenia does not have a locally-developed production of armaments, while Israel produces new-generation weapons and is able to supply its own army.
b) Scarcity of resources and small territory: Unlike Israel, which imports raw materials from abroad and processes them into final products, Armenia exports resources (mostly mining resources) to other countries.
c) Large diaspora: Since Israel’s declaration of independence, and especially after the adoption of its Law on Return, many Jews repatriated to their historic homeland. The population of Israel’s 20,770km² territory is 7.7 million as of 2013, while Armenia’s population on 29,743km² is less than 3 million. One of the main differences between Israel and Armenia lies in the area of diaspora-state cooperation. The Jewish diaspora actively cooperates with Israel’s government and invests in its economy; by contrast, cooperation between Armenia’s government and its diaspora is reflected only in diaspora charity projects.
Due to cooperation and support on the part of the Jewish diaspora, the economy of Israel has flourished. Investments from the diaspora do not bring money only; when foreign companies are encouraged to invest, they bring technologies, business practices and connections, and training for local residents. These connections and business practices spread into the local market. Even if such companies close down their businesses in several years and go, the vacuum can be filled by other companies who can draw on trained workers.
In Armenia’s case, diaspora participation in the national economy and business life is limited to financial support and charity. Although many individuals are committed to helping Armenia in these ways, Armenia does not draw on the potential of human capital in the form of higher and mid-level professionals from the diaspora. The experience and contacts of Armenians from different parts of the world could potentially bring much enrichment and innovation to Armenia, as would investments in small or medium size projects. This is possible, and Armenia can use the full potential of the diaspora only in case of establishing rule of law.
The main reason why diaspora members currently refrain from investing in Armenia is the business environment and issues connected with rule of law. Even though the Armenian government has made a number of reforms to improve business conditions during the past three years, still there are many problems to solve. The main problems arise in businesses operations, importing goods and reporting taxes. A big obstacle for investment is ‘word of mouth’ reports about business difficulties caused by the patronage of state officials. (For example, a foreign or diaspora investor will never understand why a police officer or representative of the special police squad would deal with the tax reporting issues of an organization or private company.) Reports of frequent in-person visits to check on business activities and accounting documents are intimidating. As an example, the Ombudsmen’s office has received many calls by business entities reporting frequent check-up by representative of the State Revenue Agency skipping the approved plan to carry out inspections and without prior notice. To solve these problems, the Armenian government should continue the reforms it has started, and end all intimidation of businesses in order to build an attractive image for investors.
Besides making direct investments in the Armenian economy, the diaspora could also be supporting more projects of a charitable or other nature. For this to succeed, investors and diaspora members must have confidence that the money they invest is being spent properly for its intended purpose. Accounts of improper use of financial resources may result in the suspension of ongoing projects and discourage future projects.
Possibilities for adapting the Israeli model
Based on the Israeli experience, the following recommendations are applicable to Armenia:
i) Economic development
Since it lacks natural resources, Armenia should develop as an innovation/knowledge-driven economy aimed at importing new ideas, technologies and investments. This can be achieved by improving the business environment and governance, and by attracting diaspora participation in the economy. As well, the national economy must be de-monopolized and shifted toward an export-oriented economy.
ii) Improvement of the business environment
Armenia should improve the environment for potential diaspora investors and businesspeople by (a) enabling small businesses to survive and prosper (especially ones focused on production); (b) reforming the tax and customs systems to make them friendlier to local businesses involved in production; and (c) continuing reforms aimed at improving the business environment, and creating a centralized database of laws and procedures to help foreign companies start and manage a business.
iii) Investment in infrastructure
Armenia needs real investments in infrastructure. Neither the conflict situation nor the economic crisis can justify channeling borrowed funds into direct consumption (as opposed to infrastructure funding). Even in its most difficult times, Israel has directed huge cash flows to improving its infrastructure and providing the country with long-term capital assets. Armenia’s infrastructure needs improvement to ensure a basic standard of living through elements such as water supply, electricity, sewage, roads, and telecommunication services. Financial support for improving infrastructure is available to some extent, supplied mostly by diaspora donations and by loans from international financial organizations. However, the real driving force for financial inflow and activation of the economy would be the development of production, starting from small and medium businesses. To achieve real cooperation between Armenia and its diaspora aimed at developing investment projects, Armenia must cut down the level of corruption and monopolization over imports. It will be essential to ensure that financial resources invested or donated by the diaspora are spent properly.
iv) Encouraging diaspora repatriation
Somewhat akin to Israel’s Ministry of Absorption, Armenia’s Ministry of Diaspora could encourage repatriation. Even though resources may not be available for massive investment in housing and other needs, the ministry could create resources and immigrant community centers with specialized immigration and adaptation programs. Such centers could be a primary information center for immigrants, where they could be trained in the local lifestyle and culture, and gain access to institutions and other information to help them adapt faster. To make this process more effective, such community/resource centers could offer free internet and other resources, as well as counseling support by case workers to guide immigrants through the adaptation process. The ministry also could collaborate with employment agencies and maintain a database of available jobs for new immigrants.
Diaspora organizations, such as AGBU and the All Armenia Fund, need to involve themselves in policy development in Armenia. They should not simply fund projects presented by the state but must ensure that the particular project is in keeping with the country’s long-term policy objectives. For example, simply building schools where the over-riding concern is a shrinking population is not good policy. Schools should be built in cooperation with other population retention programs, like health services and pro-business development policies.
Download the full report Here