Paruyr Mamikonyan, a software engineer from Yerevan, began his career in Armenia’s booming tech industry in 2013, getting a job as network engineer at a small firm making voice communication applications.
As he gained more experience, he got his first well-paying job in 2017, with the photo- and video-editing giant Picsart. The salary of about $1,500 a month allowed him to get a mortgage and buy his first home, an apartment in Yerevan.
But in November, he got an even more attractive offer: a similar job in Dubai, where techies can get salaries of $10,000 a month, tax free. Now he works for a cryptocurrency trading platform, part of a growing community of Armenian tech expats there.
“The financial part was a big motivation, but I wouldn’t have been looking for a job abroad if Armenia wasn’t in such an unstable situation,” he told Eurasianet.
For years, a job in the information technology (IT) industry has been the easiest way into the middle class for young, ambitious Armenians. It offers relatively high salaries (starting at $1,000 a month and rising far above that for better-qualified workers) and little exposure to the country’s endemic corruption.
And for an Armenia recovering from war and economic disaster in the 1990s, it was thought to be a sector well suited for a nation that prides itself on being able to “squeeze bread from stone.”
“In the early 2000s, after the shootings in parliament, when people were getting into IT they were getting crazy money – $500 [a month], you can’t imagine how much of an incentive that was to study,” said Ruben Muradyan, who has worked in Armenia’s IT sector since the 1990s and is now a well known cybersecurity expert. “It was the first job where people could earn money only by using their brains. It was clean money. And now those people have the highest paid jobs,” Muradyan told Eurasianet.
Even as the rest of the country’s economy has struggled, the tech industry has grown rapidly and Armenia now claims neighborhood bragging rights. “You can definitely say that in this region, including Turkey, Armenia is in a very good place and it’s comparable to Ukraine and Belarus,” Muradyan said, pointing to two of the post-Soviet world’s recognized IT hotbeds.
Much of Armenia’s tech industry is small-scale: only 4 percent of Armenia’s IT firms have more than 100 employees, while 13 percent have between 25 and 100 employees and 83 percent, fewer than 25 employees.
But Armenia also has produced some companies that operate on a global scale. Picsart, which produces a photo- and video-editing app, was founded in 2011 and has headquarters in both San Francisco and Yerevan; it is currently valued at more than $1 billion. Yerevan-based Krisp, founded in 2017, makes noise-removal software for online meetings and grew 20-fold in 2020. Service Titan, which makes software for home renovation, is valued at $9.5 billion; it was founded in Los Angeles in 2018 by Armenian immigrants and opened a Yerevan branch the following year.
And IT companies in Armenia say they would expand even further if they could.
“We are satisfied with the quality of people, but not the quantity,” Mane Gevorgyan, a spokesperson for Service Titan in Yerevan, told Eurasianet. Office space is a problem, too. “Many companies that have big staff can’t rent spaces; they have to think about building their own offices,” Gevorgyan said. “Another issue is the education system, it doesn’t produce enough high-quality professionals and it becomes hard for companies to build bigger teams in Armenia.”
In 2015, in an effort to boost the industry, the government reduced the income tax rate for IT employees to 10 percent, when other types of workers were paying 26 percent or more, in an effort to spur the creation of more startups.
The tax breaks have contributed to the sector’s growth.
Tech’s share in Armenia’s total GDP has risen from 1.5 percent in 2010 to 4 percent in 2021, after having reached a peak of 7.4 percent in 2018. As of November 2021, 23,039 Armenians were employed in the IT sector, up more than 4,000 in the last year and from an estimated 10,000 in 2014 (and likely an undercount, given the number of people who work informally in the sector).
“In developed countries they stimulate industry using state purchases, because they have the budget, there are countries that stimulate by improving education, and in other countries there are taxes,” Armen Kocharyan, the founder of VOLO, a Yerevan software company, told Eurasianet. “In Armenia that’s what we have, this tax cut to ten percent has stimulated the sector.”
But even as it has provided good opportunities for a certain number of Armenians, the sector’s effect on the country’s economy as a whole has grown less noticeably. “For years people have been saying that IT should have a privileged status in the economy and have a more significant presence in our economy, but in reality the share of IT in the economy is at most four percent,” said economist Suren Parsyan in an interview with Eurasianet. Parsyan noted that the government’s economic strategy for 2021-2026 envisages increasing that figure to just five or six percent. “So in fact the government itself, in spite of the big talk, doesn’t have big goals about it.”
But advocates for the IT industry argue that its value is difficult to measure. “The value of Picsart is in the number of users and the influence it has,” Muradyan said. “If Picsart wants to raise awareness on any issue, it’s sort of the equivalent of a digital Kim Kardashian, and how do you put a value on that?”
On top of that, the high salaries of IT workers trickle down to other sectors; the fact that the salaries tend to not be under the table but openly declared means that high-earning techies can get mortgages, driving the country’s high-end real estate sector.
“It also creates a certain demand to improve other industries,” Muradyan said. “For example in healthcare, the IT professional can afford getting medical treatment abroad and so he/she can force the system indirectly to get better and the money stays in Armenia. And when it comes to the elite apartments, again who buys those apartments?”
Many of those professionals, however, decide that they can best seek their fortune outside Armenia – particularly in the United States, Germany, and the United Arab Emirates – where salaries are higher and the security situation less precarious.
Others take advantage of a growing trend of remote work as a result of the COVID pandemic, and in Armenia work off-the-books for foreign tech companies.
“For good professionals there are two options: either you create your own product in Armenia and do business here, or move to a country that pays better salaries,” Arsen Kostandyan, a co-founder of a software startup in Yerevan, told Eurasianet. “But after COVID kicked off there is a third way: to work for foreign companies remotely, which is now hugely popular. Good professionals who can do that earn big money and don’t pay taxes.”
Mamikonyan, in Dubai, said he still hopes to return to Armenia. “The apartment is there and I’m not going to sell it,” he said. “I’m thinking of moving the capital I earn here to Armenia eventually, when the political circus is over and we have a decent government.”
Ani Mejlumyan is a reporter based in Yerevan.