Want to make a change in Armenia? #1

Without remittances, can Armenia grow?

Hi friends 👋🏻!

Happy Monday (😮) and welcome to the Pomegranate Seed!

A bit of housekeeping: If you’re looking for doom and gloom about everything that’s going on in Armenia, you’ve come to the wrong place.

We only do optimistic takes here.

I did not expect to kick off the Pomegranate Seed Newsletter with a delay, but my mind was with our soldiers and fallen heroes who spent last week defending Armenia’s Tavush region. My energy level plummeted, my brain turned to anger for a few days and writing a newsletter was out of the question. But, remember, we only do optimistic takes here.

First things first, a huge thank you to everyone who has signed up. I kindly ask you to share this week’s email since we’re about to go through actionable ways to make a change in Armenia.

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By no means do I have a Ph.D in macroeconomics but I do have experience as an investment analyst and technology project manager for the last 5 years. I currently am a graduate student studying the intersection between Government and Defense Intelligence at Johns Hopkins University.

My post offers a preliminary data analysis associated with remittance flows and migration trends in Armenia, interpreted from the Central Bank of Armenia’s household survey (2018). The relevance of remittances in Armenia continues to be a pressing economic development policy matter and if we want to find an immediate way to help Armenia, remittances are the most effective way.

WHAT IS A REMITTANCE?: A remittance refers to money that is sent or transferred to family members back in a person’s home country.

The survey finds that nearly 1/3 of the households receive money from outside Armenia, the average is $1,600 a year- mostly coming from siblings and children who are working abroad. 70% of these recipients use the money on day-to-day expenses with less than 2.5% stating they save the remittances they receive.

Most migrants receive their money from relatives in Russia (77%), followed by Armenians in the United States (11%) and in Ukraine (3%); the remaining group receives from France, Kazakhstan, Spain and Greece.

Another issue relating to remittances received is the way in which people spend the money. Seventy percent said they use the money for regular current expenses, and the rest is distributed to education, real estate, or other investments such as savings. The percent of people who said they save was very small (2.5%), as was the percent saved.

If 1/3 of the Armenian population relies on these remittances to survive, what does this mean about the state of the Armenian economy itself? How important is it to send money to family members living back in Armenia?

It's EXTREMELY IMPORTANT:

• First, volumes are amounting to more than $1 billion, benefiting nearly 40 percent of the population. Armenia’s GDP grew by 7.6% in 2019 but COVID-19 hit private consumption, investment, and export growth. Economist Intelligence Unit forecasts a contraction of 3.9% in 2020, with a hopeful pick-up of 5% positive growth in 2021.

• Second, the flows represent about two-thirds of all income earned in the household, with expenditures dealing predominantly with day to day expenses, leaving little for long term asset building. Armenia’s population literally survives paycheck to paycheck, or in many cases, money incoming from transfers by family.

• Third, the expectation among recipients that flows are likely to continue at least three more years is significantly as high as 75%. Armenian families will continue to help each other out, but the pandemic risks the ability for senders to have the disposable income to send back home. The central bank reduced its policy rate by 50 basis points from 5% to 4.5% on June 16th in order to loosen the financing conditions and support economic activity however this will do little to help the average Armenian whose monthly salary is $150.

• Fourth, 20 percent of remittance recipients expect to migrate in the very near future, arguing a problem in the lack of jobs or poor salaries. The scariest realization is more and more Armenian citizens are looking to leave Armenia to find a more stable income, regardless of the regime change.

Can we really be optimistic here?

The Global Pandemic which has led to the decline in global tourism and domestic social distancing restrictions will/has hit the services sector, with services export values expected to contract by more than 30%. Rising coronavirus cases in Armenia suggest that tourists from Europe and the wider Eurasian region will avoid the country, amid widespread travel warnings and restrictions. This impacts foreign direct investment( FDI) which obviously is expected contract as well, owing mainly to recession in Russia, the main source of FDI into the country. (AZERI businessman can’t stop Armenian goods from being sold in Russia, FACTS)

Not only did/will the pandemic hurt exports, but the data is showing that remittances have already taken a huge hit.

With less money coming into the country from the Diaspora, exports, foreign direct investment, Armenia’s central bank has stepped up (rather kicked ass) to stop the bleeding.

Emerging market currency valuations have been awful to watch. Mexico’s Peso is down 24% while the Turkish Lira is down 14%. The Brazillian Real and the South African Rand have been hit hard, down 25%, and 32% respectively.

Meanwhile in Armenia: The Armenian Dram is only down 5% with expectations that it remains stable through the rest of 2020 with a possible appreciation strategy implemented by the Central Bank of Armenia throughout the rest of the year.

So how do we help maintain Armenia’s economy while providing direct aid to family/friends?

How can we make the simple task of sending money back to Armenia more effective?

SOLUTION TIME:

BUILD A BUSINESS

• It is extremely surprising that nearly half of seasonal workers would return for a monthly US$300-600 in Armenia. However, these wages are extremely high compared to the country’s average monthly income which is under $150.

  More importantly, however, is that migration is predominantly a function of the lack of jobs in the country, rather than low wages. People with secondary education suffer mostly because of a lack of jobs in general, while those with higher education suffer the most because of the absence of professional jobs and low salaries.

  IF you truly want to make a change in Armenia, go start a business, and pay your employees above the market rate and watch how fast emigration from Armenia stops. I’ve helped start, operate, and build two companies in Armenia. It’s easy, rewarding, and the best course of direct action. If you pay your employees 3x the minimum wage, you increase their stability 3x as much. The numbers just make sense.

DON’T DONATE, SUPPORT:

• ARMENIAN citizens are not waiters, they don’t need tips, they need actual support. You just read how important sending money is.. it’s just as important to buy from Armenian business. Buying from Armenian artisans, farmers, craftspeople and products is so easy. Start a gofund me page, do a Facebook campaign. Raise the money, and buy as many Armenian products as possible. Or simply, find a family in need and wire them as much money as you can. All you need is a wire number and account number. (wire exchange fees are usually $30 dollars)

DIASPORAN POLITICAL GROUPS ARE OBSOLETE:

• With the power of technology… That shpiel is getting really old- but seriously, we don’t need Armenian Diaspora political institutions anymore to effectively serve our homeland. The Armenian Diaspora survey in 2018 is the first-ever attempt by a team of academics, researches, and experts to understand how the Diaspora behaves. 73% claimed no active affiliation with any Armenian political organization. The overwhelming majority of the respondents consider the continuation of the Armenian diaspora as important and meaningful space—94% marked as “fairly” to “very” important.

  As a new technological solution to a centuries-old problem of small country development, a diaspora web-portal could offer the much-needed formalized institutional backbone connecting professionals across the world with development needs in Armenia. Alexis Ohanian and Serj Tankian said they’d do it, AGBU and Hamazkayin said they’d do it, and the Diaspora Ministry is at least trying to do it. At the forefront at this race of centralization is the collective potential of the cultural and ethnic diaspora, regardless of its categorization as either old, new, or temporary labor migrants. As such, the web portal may serve as a novel initiative harnessing and directing the constructive energy of human capital and stepping beyond the ad hoc and personified remittances, or unclear prospects of a diaspora bond, or other monetary-based efforts to sustain development in small open economies with large national diasporas.

In light of remittances being the overarching backbone of the Armenian citizen financial stability, government policy considerations can be placed on current and future asset-building strategies. The conditions are prime given the continuity of flows in the long term (Armenian’s won’t stop financially supporting the homeland), but also the increasing formalized nature of the flows through bigger fish (banks and brokers) instead of (foreign exchange popups) brings the opportunity to stimulate savings that may be possible and could yield considerable benefits to the financial sector and remittance recipients. COVID’s spell of uncertainty will worsen economic conditions in Armenia, yet despite the chaos that we’re in, it offers a unique opportunity for exciting new innovation to allow motivated decision-makers to implement original, proactive, and beneficial solutions aimed at streamlining the (temporary) labor migration process and the Diaspora’s professional and financial resources.

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Blog/News Roll

I’ll be sharing a list of websites/people sharing extremely important information regarding Armenia. Expect this list to grow with every single publication.

DataArmenia

Armenian Military

Economist Intelligence Unit

EvnReport

Emil Sanamyan

Dr. Artyom Tonoyan

Armand has worked as an investment analyst and technology project manager for the last 5 years. Prior to Grüv & Illuria Security , Armand spent 2 years with NASA Jet Propulsion Laboratory, where he was responsible for budgeting, marketing, and overseeing business deliverables for NASA’s “Juno” spacecraft. Fun fact: Juno now orbits Jupiter. Most recently, Armand spent his time working as a Derivatives Analyst at the TCW Group - an asset management firm with over $200 Billion under management. He was in charge of trading documentation, onboarding assets in excess of $1B via Future and OTC Clearing, and servicing over 200 clients while negotiating over 50 successful trading documents with broker/dealers. An avid lyricist and poet, Armand has been writing and recording his own hip hop tracks since he was 14.