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DUAL CITIZENSHIP - OR WHETHER THE ARMENIAN GOVERNMENT IS SERIOUS ABOUT REFORMS Armenian News Network / Groong March 31, 2005 By Njdeh Melkonian In the upcoming days, the Armenian parliament will be discussing a bill that proposes to permanently lift the constitutional ban on dual citizenship in Armenia. This would seem like a perfectly logical thing to do in the Armenian context, something that would finally unite the divided nation in the wake of the 90th anniversary of the Armenian Genocide. A noble thing to do, indeed, if only the bill were not doomed to fail in the parliamentary vote. We look at the story behind this bill and review the economic and political economy aspects surrounding it. Here is how the main players in the Armenian Parliament are likely to react to the introduction of the bill. The senior member of the governing coalition, the Republican Party, clandestinely opposes the bill, while one of the two junior partners, the Orinats Yerkir, has never been a big Diaspora fan. Finally, those who control the parliamentary vote of the third coalition partner, the ARF Dashnaktsutiun, have similar reasons for not wanting to allow dual citizenship in Armenia. Why should, as the argument goes, those in Glendale be allowed to vote on issues of importance for residents of Armenia. After all, they know little about what's right and what's wrong in terms of everyday life, economic development, and national security of the people residing in Armenia. The sad truth is that the `Glendale residents', meaning former Armenia residents now living in the Diaspora, and Diasporans who preferred not to repatriate to Armenia while moving to other countries, have effectively voted with their feet. They did not like what they saw taking place in Armenia. Therefore, it is no surprise that the Armenian government does not want to see their votes counted again, and this time explicitly, once these `Glendale residents' are granted dual citizenship. While it is true that with a Diaspora population outnumbering the residents of Armenia by a factor of 2 to 1 according to some estimates, Armenia is a special case, possibly meriting separate research and innovative approaches when it comes to dual citizenship. But absence of any attempts by the Armenian government (e.g., to commission studies that look at the experience of nations with large and active Diasporas as a starting point) is alarming in itself. Might looking into this reveal a number of active modes of engagement between other sovereigns and their respective Diasporas, - Israel, Ireland, and Croatia come to mind, - that may not suit Armenia's leadership for political reasons? Some of these countries, after all, went through great lengths to accommodate their Diasporas and make them an active participant in the economic development and political life of their ancestral homelands. But let us abstract ourselves from the political economy aspects of this issue and look at the pure economics of it. Does it make any economic sense to allow dual citizenship or any other active mode of engagement for the Diaspora, in the Armenian context? The answer is overwhelmingly: yes. The history of, and the empirical literature behind, economic development shows that it is all about governance and human capital . While in theory the physical capital should flow to countries with lower level of capital per capita no matter what the underlying conditions are (i.e., from rich to poor countries, thus bridging the gap between poor and rich economies), the empirical literature does not support this hypothesis. Instead, in practice, capital flows to countries where labor is more educated and market-friendly, and business environment is fair and more developed. This phenomenon was coined as the `Lucas paradox' after Robert Lucas' (1990) classical paper that looked at returns to capital in the US and India . A recent working paper by Laura Alfaro from Harvard Business School and her colleagues Sebnem Kalemli-Ozcan and Vadym Volosovych from the University of Houston  provides solid evidence of the importance of institutions and business environment, while citing references that also demonstrate the importance of human capital in explaining the `Lucas paradox,' that also includes Lucas' original article. While 15 years ago Armenia arguably had the highest levels of human capital and best educated/trained labor force in the former Soviet Union, very few would venture to make the same claim these days. The reasons for this decline are twofold: (1) emigration, which erodes the human capital because the best workers are also the most competitive outside of Armenia, and (2) depreciation of skills, which has the same impact because of years of unemployment or underemployment. Despite recent rather rosy ratings put up by the Wall Street Journal and Heritage Foundation, which place Armenia's de jure business environment on a par with the likes of France and Singapore, the real state of affairs on the ground in terms of enforcement and implementation of existing laws and regulations remains rather gruesome. Therefore, the message is clear: in order to attract sufficient amounts of capital flows to reduce poverty and sustain growth, which would not be possible in the medium term with the amount of savings generated by the economy of Armenia in its current state, Armenia has to do better in terms of its institutions and business environment, as well as human capital development. And for those who still think that opening the border with Turkey is the panacea against the economic hardship in Armenia, the cross-country findings of Dani Rodrik and Francesco Trebbi of Harvard University and Arvind Subramanian of the International Monetary Fund should serve as solid evidence of the irrelevance of trade for determining income levels . One may wonder, what does dual citizenship have to do with human capital and business environment in Armenia? There is a direct link here and a potentially strong one too. Once actively drawn into the economic and political life of Armenia, the future dual citizens (i.e., current Diasporans) would be a valuable addition for the Armenian labor market with their right market skills, but much more importantly with their life experiences in countries with better governance and stronger civil societies than those in Armenia. The more actively Diaspora Armenians become engaged in the reform effort in their ancestral homeland, the greater the transfer of skills, know-how, and subsequently physical capital to Armenia from all around the world. Engaging them through a variant of dual citizenship would create more jobs, provide access to new markets and empower civil society in Armenia. That is, of course, on top of hard-to-measure emotional effect to be felt by the second, third, and fourth generations of Diaspora Armenians from owning and feeling themselves a true part of Armenia's present and future. Still, the opponents of dual citizenship cite problems with potential large-scale immigration to Armenia (especially from low-income countries of the Middle East and former Soviet Union) if dual citizenship is introduced. The good news is that even under some of the most restrictive assumptions (e.g., when incoming migrants/repatriates have lesser skills than the population of the host country on average, or they bring in less physical capital than the host country's existing capital per capita, etc.) the empirical literature from a wide range of countries and episodes provides ample evidence of the welfare-enhancing impact of immigration/repatriation [5, the text box on pp. 11-12]. The Declaration of Independence, adopted by the Supreme Soviet of the Armenian SSR in 1990 and signed by its chairman, Levon Ter-Petrosyan, states that `Armenians of the Diaspora have the right of citizenship of Armenia.' This promise, as we all know, did not materialize during Ter-Petrosyan's tenure as the President of Armenia in 1992-97, after Armenia's independence. Since then, President Kocharian's own rhetoric too has been pro-dual-citizenship. Yet, not only has he done little to support the introduction of dual citizenship, but for years he effectively blocked the application for Armenian citizenship of a Diaspora-born political rival, thus sending a strong signal about his true position as well as possible reasons for not wanting to support the idea of dual citizenship in Armenia. But what about the 10-year residency permit? Isn't that enough for one to get involved with the country and contribute as much as he/she wants? Unfortunately, the 10-year residency permit (or travel passport, as it is commonly referred to) is not an `active mode of engagement,' one that allows for indiscriminate and permanent rights and obligations, (relative to those carried by the current citizens of Armenia) for anyone in the Diaspora who wishes to accept them. It is simply a paper that says: `Fellow Diasporans, please come to Armenia, spend your money, invest and even buy land if you want to, but if you misbehave, we may revoke your status (or consider not renewing it upon expiration) and with it, also the right to the land you might have bought.' Any status that contains barriers for Diaspora Armenians to live in Armenia (as long or as short as they wish), pay taxes, complete military service, vote, and be elected into public office falls short of the promise of equal rights for all Armenians expressed in the spirit and the letter of the 1990 Declaration of Independence, and cannot be considered an active mode of engagement. In summary, the introduction of the bill lifting the ban on dual citizenship is thus a very solid test of the seriousness of the Armenian government to deliver on its long-time promise and take a tangible step towards full-fledged reforms in the country. Diaspora groups should make a point of educating the Armenian government about this issue and encouraging the government to make credible steps towards securing dual citizenship for Diaspora Armenians and, through that, better prospects for the Armenian economy and people. As the debate in the Armenian parliament unfolds, Diaspora Armenians will be watching closely for signals from Armenia on whether their ideas, experience, political views, and physical presence are as welcome in Armenia as their money. The 90th anniversary of the Genocide might be a good time to rethink these issues. REFERENCES  In economic literature, human capital is typically proxied by average years of schooling across a population group or high school enrollment ratios, and measures the sophistication of the labor force.  Lucas, Robert, 1990. `Why doesn't Capital Flow from Rich to Poor Countries?', American Economic Review, 80, 92-96.  Alfaro, Laura, Sebnem Kalemli-Ozcan, and Vadym Volosovych, 2003. `Why doesn't Capital Flow from Rich to Poor Countries? An Empirical Investigation,' University of Houston, Department of Economics working paper, December.  Rodrik, Dani, Arvind Subramanian, and Francesco Trebbi, 2002, `Institutions Rule: The Primacy of Institutions over Integration and Geography in Development', Working Paper No. 02/189.  Gevorkyan, Aleksander and David Grigorian, 2003. `Armenia and Its Diaspora: Is there Scope for a Stronger Economic Link?' Armenian Forum: A Journal of Contemporary Affairs, vol. 3, no. 2.  Section 2, paragraph 4. -- Njdeh Melkonian is an Indiana-based economist who works on a wide range of economic and developmental issues, including those facing the economies of transition.