R&O - How Armenia Can Come Out of this Crisis Stronger Than Ever - Kevork Kalayjian - 01/10/2021

How Armenia Can Come Out of this Crisis Stronger Than Ever

Review & Outlook

January 10, 2021

By Kevork K Kalayjian

Armenians have been going from one crisis to the next, from genocide, deportation, armed resistance, revolutions, responding to earthquakes, blockade, and of course to the urgency of the problems that need to be addressed today. The short-sighted approach for profits now, has derailed the people and the leadership in Armenia from setting priorities that should have used domestic resources, and foreign aid with strategies for success to invest with purpose into the future of the nation.

 

Every so often Armenians and non-Armenians alike are called to respond to urgent needs and provide emergency aid in helping to assist a particular village or town in Armenia and Artsakh. All Armenians along with its Diaspora, in India, Argentina, France, Cyprus, Istanbul, Syria, Canada, Brazil, Lebanon, USA, UAE, etc. receive weekly appeals from several philanthropic and reputable organizations who want to raise funds for honorable causes. These collections are intended to help children, to assist orphans, to plant trees, to refurbish and repair residential rooftops, water and sewer lines, hospitals, schools, roads, and of course support the soldiers.   

 

After the Second World War when Armenians were once again running helter-skelter after the defeat of Germany by the Allied Powers, there was an organized effort to repopulate and relocate homeless Armenians, in the United States. These efforts were entrusted to the Armenian National Committee to Aid Homeless Armenians (ANCHA). The effort was powered and partially financed by the United States Displaced Persons Act of 1948 and led by George Mardigian and Souren Saroyan. Simultaneously, the Armenian Communists organized a similar resettlement for the families who wanted to settle in the Soviet Socialist Republic of Armenia, to preserve its status as a republic within the Soviet Union.

 

Today’s Armenia faces continuous but also vastly different challenges. There are an ever-growing number of Armenian philanthropic and charitable organizations everywhere working in silos and unfortunately failing to think forward and strategically build the foundations for a strong future for the country and its inhabitants. A purpose-driven strategic approach will try to combine all of these efforts and transform aid in value-creating, focused investments. Hence, Armenia and Diaspora organizations need to cooperate to build a new set of financial tools to help coordinate all financial aids into strategic investments to boost a set of key industries in the country.  

 

Setting Priorities: 

 

What should Diaspora-Based Armenian philanthropic organizations do for Armenia?

Diaspora philanthropic organizations should be able to offer free transportation and transfer of any Armenian individual or family from any part of the world to Armenia without the hassles of import or other taxes on the repatriates’ home or business belongings.

Terms and conditions would apply for those who relocate to another country in less than 10 years.

 

What should the Government of Armenia do to attract and keep productive facilities?

Armenia needs a government that can build a set of key infrastructures to support the industry, businesses, and skill sets in the major sectors of the economy. Focusing on creating the physical, commercial, and legal infrastructure where a viable commercial, industrial, agricultural, technological society could flourish, produce, market, and prosper.  

 

Generally, infrastructure refers to a country’s roads, sewer and water system, energy utilities, health, and education system. The business infrastructure includes the essential laws that ensure business continuity, including the legal framework that protects the legal, productive, and profitable operations of businesses in the fields of: energy and power supply; telecommunication; IT; computing and network services; as well as facilities and transport.  

 

Diaspora assistance should be contingent on the Armenian Government’s commitment on the creation, safeguarding, and maintenance of a reliable physical, commercial, and legal infrastructure where a viable commercial, industrial, agricultural, technological society could flourish, produce, market, and prosper.  

 

The roots of the commercial infrastructure will be ill served by the growing presence of multitude of not-for-profit charitable organizations, which tend to keep people reliant on public assistance, and in some instances create a culture of people whose life mission is to meet the minimum standards set by the donor organizations in order to qualify for the continuous receipt of that assistance, thus contaminating the national character away from honest, creative productive work towards institutionalized self-deception, and self-degrading lies intended to obtain short-term benefits. The foundations of a productive, industrial, and innovative business environment could reliably be enhanced by the presence of for-profit businesses and industries that produce goods and services marketable locally and internationally, and which simultaneously create job opportunities for professional, and skilled workers, thus strengthening the basic infrastructure for long-term growth, intellectual innovation, and advancement.

 

Some essential endeavors require the constant and expanding support of not-for-profit charitable organizations, for example, the preparation of top professionals at prestigious colleges and universities of the world; funding the post-graduate studies of high achievers in the fields of science, music, art, sports, and chess to represent the country in worldwide competitions; the financing of visiting experts in the fields of surgery, medical care, and other specialized public health exerts to come and act as mentors in Armenia.

 

For-profit shareholder-owned corporations create a reciprocal responsibility both within the shareholder investor community and enhances the concept of fiduciary responsibility in the management of the enterprises, to make sure that the business entity remains a cutting-edge productive enterprise while adhering to both local and international laws, regulations, and product quality standards, while safeguarding the investments of the individual shareholders.

 

The Armenian Government should encourage, through tax breaks and other incentives for enterprises operating in Armenia, to obtain ‘Certified B Corporation’ Status. Certified B Corporations are businesses committed to balance purpose and profit. They are legally required to consider the impact of their decisions, and their production methodologies on their workers, customers, supplies, community, and environment. As of June 2019, there were over 2,750 Certified B Corporations across 150 industries in 64 countries in Latin America they are known as Systema B Corporations.

 

How to bring aid that becomes investment for the future of Armenia?

For the sake of not adding yet another non-profit organization, it will be reassuring to witness the cooperation of existing Armenian charitable organizations under one umbrella “Armenian National Committee of Homebound Armenians” to accomplish the following:

• organising of the Diaspora owned Armenian businesses in Armenia;
•  negotiation of terms of operations with the government of Armenia;
• understanding and communicating the rules and regulations to operate productive resources, factories as well as research and development facilities, pharmaceutical research and development centers, manufacturing facilities;
• ensuring the stable model business infrastructure;
• improving employment conditions and employment opportunities;
• maintaining profitable non-corrupt work environment in Armenia.

The umbrella association ANCHA, first and foremost, is to facilitate the logistics of ensuring the free and legal repatriation of diaspora Armenian individuals and families. Simultaneously, to organize Diaspora-owned Armenian businesses in Armenia to negotiate with the government of Armenia terms of operation, rules and regulations, to operate productive resources, factories, research and development facilities, pharmaceutical research and development centers, manufacturing facilities, to accomplish the stable model business infrastructure, improve employment conditions and employment opportunities, and ensure profitable, yet non-corrupt work environment in Armenia. 

 

Many studies have shown that continuous economic, financial, and emergency assistance to underdeveloped countries hinders the economic development and independence of that country.

 

Hence, instead of collecting donations to buy medical supplies and equipment for Armenia, Armenian enterprises should be able to sell shares in corporations that manufacture medical supplies and equipment in Armenia. Instead of collecting donations to purchase and donate bullet proof vests, night vision equipment, and other essential supplies to the Armenian Defense Forces, Armenian for profit enterprises should be offering shares of ownership for Diaspora investors in manufacturing facilities in Armenia, which could produce all or most of the military hardware and software necessary to overcome all the aggressive challenges posed by the adversaries of the country.

 

The shareholder-management relationship will enhance the degree of commitment for transparency, and accountability in personal and corporate level, for everybody to do the right thing not only because it is required by law, but also because both parties, investor, and management, are working towards a common goal, to make profits while providing a service to the country.

 

New Financial Tools to Boost Armenia’s Productive Capabilities

The Armenian Government through the Central Bank should be able to issue and offer Armenian Development Savings Bonds to expand the productive facilities in Armenia which are considered critical in the fields of transportation, communication, energy, water, and military-industrial enterprises. Through such National Savings Bonds if the average diaspora Armenian was donating $100 Dollars to XYZ Armenian Charity now the same individual can put $500 in an Armenian Savings Bond which the Government can use for the modernization of infrastructure and for funding scientific, biological, and technological research in the Armenian Universities, besides entering into joint ventures with military production facilities within the country.

 

The United States Savings Bond for example was created in February 1935, by then President Franklin D. Roosevelt. The US Savings Bond was offered at a face value of $25 Dollar increments it was marketed as a safe investment accessible to everyone, if you kept the bond for 20 years the redeemable value was doubled to $50. The bonds are redeemable only by the original purchaser, or a beneficiary in case of death.

 

In Israel, after the aftermath of the 1948 Arab-Israel War, then Israel’s first prime minister, David Ben-Gurion discussed the importance of the Israel Savings Bond as a tool to enable the country's recovery. The fund was established in New York in 1950 under the name of Development Corporation for Israel (DCI), first year sales were estimated to be $25 million but the actual results were $52 million. In 2013 the sales of Israel Bonds were $1.12 billion, and since then the annual sales of Israel Bonds have been over $1 billion every year.

 

The investment in innovative, productive facilities will be exponentially enhanced in Armenia by the use of such financial resources with or without the presence of oil fields or goldmines. The next frontier in the development of any country is the level of intellectual capability, marketable, and brandable, as intellectual property.

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Kevork K. Kalayjian, Jr. has a multidisciplinary educational background with degrees in Political Science and Economics, master’s in education, and is a Certified Public Accountant specialized in auditing. He has decades of experience auditing not-for-profit and for-profit entities while working as an auditor for New York State Department of Taxation and Finance. He has managed teams of auditors while working for the New York State Medicaid Inspector General’s Office, he has also worked as an audit supervisor for the US Department of Defense. He has held positions at the Armenian General Benevolent Union’s  Social Service Office in New York City, and at the Armenian Relief Society Central Executive Board, Boston, MA. Kalayjian is the co-founder of the accounting firm Kalayjian Consulting, Inc. with locations in Fort Lee, NJ and Karashamb, Armenia.