Armenian IT sector develops at slower paces than expected

ARKA News Agency – Interview
March 10 2004


Exclusive interview with Andranik Aleksanian, Director General of
Arminco Global Telecommunications to ARKA News Agency.

ARKA- What can you say about the Armenian IT market of the previous
year? What is the position of Armenia in the region?

A. Aleksanian- In 2003, the IT sector could have grown by 20%, though
the actual growth was within 5-10%. This testifies to the fact that
the IT-sector develops parallel to the economy, but at slower paces
than may be. We are behind the world tendencies. In the regions, the
problem of the IT development is even more urgent, because of poor
transport and electronic communications, plus lack of specialists and
high cost of installation of communication lines. For example, the
cost of a 2 Mbit line from Yerevan to Gyumri is some $1600 per month.
This impedes business development in the regions, though there is
some growth, and `the frozen state’ has been overcome.

As to the state of the IT in the South Caucasian region, then the our
neighbors are doing principally better than we are . We are behind
Georgia and Azerbaijan as to the infrastructure and communications,
though we are in a better position, as regards the professional
level. That is, we have a good potential to occupy a solid place in
the IT sector of the region. But, we need a model of development,
especially since the IT industry has been declared a priority by the
RA Government.

ARKA- What is your evaluation of the IT-sector strategy (as to the
development model), recently submitted to the Armenian President?

A. Aleksanian- I am aware of the strategy. On the whole, it is
comprised of good and correct provisions. To develop the sector, the
President has set the task to integrate it into the global system.
There are rules of the game, and respective infrastructure and
specialists are needed to ensure the integration. All this brings to
the necessity of a law that will determine the tasks and goals, as
well as legislatively-fixed guarantees for an investor. The IT is not
just an Internet or software development . It assumes an entire
industry with specialists, developed infrastructures and
communications. In particular, the availability of the normal
infrastructure will resolve a lot of problems and will prevent
emigration. At least 5 years are required to attain the goal, and the
generation should change, I think. The technological process we have
now will be out-of-date the next year. In this respect, a `polygon’
should be created for specialists to introduce new technologies. The
period of 5 years is a normal term for training specialists. This is
the period, when the potential will be created. I think that any
problem may be resolved, if the task is set correctly. And in the
long run, nothing can prevent us from developing software in Armenia,
the way India does.

ARKA- What expectation do you have from the law on e-communications?

A. Aleksanian- We need a law that will serve the interests of both
investors, consumers and the country, as a whole. We need not `invent
a wheel’ in this regard. If Singapore and Taiwan managed to grow with
certain arrangements, we may make use of them and achieve success if
not at 100% level, then at least for 50%.. I think it is not that
important to draft a new law, it will be more significant to adopt
someone’s experience and put it into practice correctly. I am for the
above-mentioned, as I am not aware of positive or negative sides of
the law on e-communications.
I do not think it is correct to provide the IT-sector with greater
privileges, as compared to other economic branches. Once we decided
to make the sector a priority, we should organize the process in such
a way, as to enable specialists of other professions to make use of
IT-technologies. Provision of benefits or privileges to the Armenian
IT industry is an incorrect policy, which will ruin the economy.
ARKA- What are the financial results, reported by your company for
2003. Is there any growth as compared to the previous year? What new
services do you plan to provide in 2004?

A. Aleksanian- Theoretically, we have had some growth, though this
growth has been achieved at a high cost. Outside Armenia, it is very
easy to make the business and gain profits. In Armenia, this is not
the growth we could have achieved. We had planned to create 50 new
jobs, cut expenses, expand the infrastructure and introduce new
technologies, though we failed because of the problems with ArmenTel.
We did not manage to expand our clientele in the regions of Armenia.
I will not specify the turnover, though I can state that we report a
10% growth annually. We could have had a better growth, though 10% is
a good index under the conditions of stagnation. In other countries,
the growth index reaches 50-60%.

In 2003, we had to reduce our tariffs, because of ArmenTel’s policy.
We acquire a certain services from the ArmenTel, though we get fewer
discounts than smaller clients. Some of the ArmenTel’s employees have
no idea of the business they are in, and the shortcomings in our work
are on their conscience.
As to the new services, then we plan to introduce some of those in
2004. The first service is the radio-modem communications (enabling
to work from any place). This year, we are going to resolve the
problem in Yerevan. We are going to install the first 5,000
radio-modems in various parts of Yerevan in summer and get rid of
ArmenTel, in this regard. The second service will enable our clients
to access Internet and check mail through a cellular phone. We also
plan to expand our services in the regions of Armenia and we are
negotiating with ArCa and some commercial banks to launch the payment
for our services with plastic cards in ATMs.

ARKA- What about the development e-trade, as a form of

A. Aleksanian- E-commerce may not develop here because of the lack of
the corresponding law and infrastructure. The system may work,
provided that there is one of the attributes present. There is no
bank-shop-client relationship. We need a law on e-trade, which would
enable to make trade transactions through ArCa plastic cards. In
other countries, the problem is resolved easily. Soon, the Armenian
Chamber of Commerce and Industry plans to make a legislative
initiative, to prevent further complication of the problem. I think
that the e-trade will develop only after the adoption of the law.

ARKA- Was there any progress in the Internet advertisement in 2003?

A. Aleksanian- The advertisement business in the Internet is designed
for regular Internet users. However, this type of advertisement is
not in demand in Armenia, because of the restricted number of the
users. On the whole, Internet advertisement has its own place – it
neither grows nor decreases. The Internet advertisement’s share is
1-3% of the Armenian advertisement market.

ARKA- You mentioned above that there were some problems due to
ArmenTel Company’s activities. What is your policy in respect to
ArmenTel and what do you think on possible appearance of the second
cellular communications operator in Armenia?

A. Aleksanian – I have been in this business for 10 years and have
invested all my funds and health. The thing is that the business
generally results in profit in the world, unlike Armenia where it
brings in losses. We have to struggle for our share all the time –
and not just seek investment, but demand definite services from
ArmenTel. This is not an organization, this is a `mistake’. Here are
two examples. Two years ago I applied in writing to ArmenTel with a
request to provide me with a communication line in the regions. I
even allocated the funds immediately, and they (ArmenTel) provided
that line to others. But, this is not the point, the point is that
you have to wait for 2 years to get the long expected line.
It is impossible to collaborate with the organization. I used to try
to settle the issue peacefully, and now I have decided to go to court
directly, with all the problems relating to the ArmenTel. Any small
issue, impeding my activities will be settled in the Court from now
on. I shall apply to the Court, in case if they fail to reply my
inquiry in the set terms. At the moment, I have got two replies to
100 letters, sent to ArmenTel. I see no other technology of dealing
with this Company. On the whole, I am going to sue ArmenTel at a few
million dollars. In February, I plan to bring the first sue.
The organization with all its officials (no matter who they are
-Armenians or Greeks) is destroying the country premeditatedly. I can
state that they do not want Armenia to develop.
I think that the arrival of the second operator will not resolve the
problems, as the organization will be entitled to provide cellular
communications’ services only, and the cable network will remain at
the disposal of the ArmenTel Company.