Armenia & Diaspora- Invest
Armenia & Diaspora- Invest
A Roadmap to Succeed in the 21st century.
Artak Beglaryan, the elected human rights ombudsman for the Republic of Artsakh, stands in the wreckage of a Stepanakert school in Nagorno-Karabakh on Oct. 23. He was blinded by a land mine in 1995 and now works to document the ongoing conflict with Azerbaijan. LIZ COOKMAN FOR FOREIGN POLICY
NO INTRODUCTIONS NEEDED.
ARMENIAN’S IN ARTSAKH UNDER ATTACK.
LET’S GET RIGHT INTO IT.
Since the 2000s, Armenians around the globe, including politicians, academics, and businesses, began looking for ways to expand investment in Armenia’s nascent technology sector.
The sector, which would later become the driving force in the country’s economy, is in need of private capital for research and development at this time of war. The first step for the Armenian Government will be in devising a strategy to identify and mobilize a stronger diaspora involvement in the military, investment, technology, and cybersecurity development. The Armenian Diaspora can bring important financial, intellectual, and social capital to the development process, but they cannot substitute for the cultivation of domestic resources. Armenians need to be united, more than they’ve ever had to before.
How can the Armenian Government, Private Citizen, or Diasporan invest in Armenia?
The relevance of the Diaspora’s financial capability is clear. In 4 weeks, over $160m USD was donated to Armenia Fund to aid Artsakh in its humanitarian efforts as they continue to face Azeri and Turkish military bombardment.
The problem is, remittances and donations are short term band-aids that barely stops financial bleeding. What Armenia needs is capital to stop the short-term bleeding, but also, the long-term capability to continue to invest in high-technologies to equip our military and our people.
The Armenian diasporan faces important barriers to direct participation in the Armenian capital markets: a domestic bank account is often a prerequisite, and few diasporans have the capacity or expertise to individually manage a transnational portfolio.
The following section reviews several targeted investment vehicles that have can be used to mobilize diaspora wealth for investment in the agencies proposed above, including via deposit accounts, securitization of remittance flows, transnational loans, and mutual funds.
Diasporans as Investors
Deposit Accounts
Among the most basic ways that diasporan can contribute to Armenia’s capital market development is by opening up domestic bank accounts. Deposit accounts increase domestic bank assets, allowing banks to expand lending and onward investment. Armenian banks such as Inneco and Ameriabank have now adopted a much faster approval process for U.S Citizens. Most banks now offer a mobile app that lets you manage your account remotely, even with the functionality to pay utility bills or make other transfers (including international wire transfers) from your home. However, most will require you to visit a branch in-person to get set up in the first place, especially if you do not have an Armenian social security number. Due to the cost of wire fees, you can decide whether you want to bring the cash with you on a flight, which has its own risks. Remember that amounts over $10,000 need to be declared at customs; there are no associated taxes but you do need to fill out a form both when exiting and entering a country, for anti-money laundering precautions.
Although not strictly capital market investments, deposit accounts expand bank capitalization and are often a prerequisite to direct participation in buying a stock or bonds from the Armenian Stock Exchange. If you are U.S Citizen, having an Armenian Bank account is your ticket to being able to invest directly in Armenia. The Armenian Deposit Guarantee Fund will guarantee up to 10million AMD of cash that’s been physically deposited.
Banks chartered in Armenia should begin thinking about expanding their services to the U.S, Europe, or Russia to provide banking services directly to the Armenian diasporas where they live.
If Banks have more Diasporan Armenian’s as clients, they’ll offer better rates for Armenian citizens, increasing economic activity in regions outside of Yerevan.
Securitization of Remittance Flows
Another mechanism through which the Armenian Diaspora can contribute to broadening the assets held by Armenian domestic banks is through the securitization of remittance flows. Future-flow securitization is a fairly recent financial innovation that allows credit-worthy borrowers with a record of regular income to access international lending at friendly interest rates. Issuers of debt securitized by remittance future flows can include the Armenian Government, The Armenia Military, public entities, private corporations, and banks that have some sort of periodic revenue with a proven record of stability. All Diasporans or Investors would have to do is have an Armenian Bank Account so they can invest directly in the funds, grants, and companies that are raising capital.
Transnational Loans
Another new mechanism Armenian Domestic banks can provide is transnational loans. Transnational loans can be generally small loans provided or micro financed by Diasporans, that allow Armenian citizens to apply for a loan underwritten by Diasporans and issued by Armenian Domestic banks. This could allow Armenian citizens, and businesses to expand operations, purchase homes and real estate, pay education and liability expenses and start new businesses without Armenian Banks having to front the capital or the Armenian Government issuing a bond. Transnational loans enable Diasporans to provide credit to their family members back home while leveraging their own credit history (established in the US for example) and retaining ultimate control over the loan.
Armenian Diaspora Mutual Funds
Mutual funds are professionally managed collective investment vehicles that allow individual investors to diversify risk by purchasing shares of a basket of investment products. Mutual funds allow anyone to diversify risk and have investments professionally manage the fund without incurring the costs of a personal investment manager. As such, an Armenian Global Mutual Fund should appeal to nonexpert Armenian Diasporans and institutional investors interested in investing in Armenia who lacks the time and expertise to individually manage the investment. Since few Armenian corporations are publicly traded and those that are listed are rarely well known, diaspora funds could also serve a price discovery function. In this sense, the Armenian diaspora serves not only as an investor base but also as (1) a conduit for technological transfer and (2) a portal opening up investment opportunities in Armenia for the outside world. Fund shareholders will be required to maintain an Armenia Dram denominated account with a domestic bank.
Another mutual fund proposal would be the US-Armenian Diaspora Mutual Fund — a social investment fund that is owned and managed by Armenians living in the United States and- invests in small businesses in Armenia. The fund focuses on six sectors: agribusiness, education, natural resources, technology, infrastructure development, and health care. Three-quarters of the funding will come from members of the Armenian diaspora, with the remaining quarter coming from multilateral organizations and other social investors. In addition to providing financing, the fund will provide business training and mentoring.
The Diaspora…
should guarantee the preservation of the Armenian people in the homeland and abroad. These strategies don’t have to inflict major financial hardships on the Armenian Government or its citizens, rather it’s up to the diaspora to invest in these initiatives. Our goal should be focused on producing strategic, political, and operational intelligence and superiority over our enemies while giving Armenians at home, and around the world, the ability to thrive in the 21st century.