2. Mechanical engineering Electronics ICT Industry Overview Before 1991 Armenia was regarded as a Silicon Valley of the former Soviet Union. Armenian industry inherited: High quality technical workforce (according to the Brainbench Global Skills IQ Report for 2006, Armenia was ranked second in the world, after USA, in the number of IT certifications received per capita) Physical infrastructure (airways, roads, railways and telecom) Generally adequate manufacturing facilities coupled with scientific and design institutions The main industry sectors were: Chemical industry Energy industry

3. 2006 The share of the sector in Armenia's $5 billion nominal GDP - 1.3% 160 ICT companies (50 foreign) About $84 mln in total revenue ($10 mln in 1998) ICT Industry Overview Today ICT industry is one of the most dynamic and promising sectors of the economy

4. Embedded systems Semiconductor design Custom software development Financial applications Security and encryption Software development and outsourcing ICT Industry Overview Multimedia design Industrial automation Web design and development Educational software Management information systems Computer aided design Systems integration Major specializations include: 2008 About 200 Companies with 6000 employees, of which 72% are technical specialists

5. ICT Industry Overview Geographical Distribution At the peak in 2004, annual number of start-up ICT firms reached 25-30 (26% growth per year) In 2007 the total number of ICT companies established with foreign investment reached 60 (30% from the industry total) Share of local companies revenues in the industrys total amounts to 40-45% ($37 million) Average revenue per company for locals - 80% ( 8% for branches) 2006 2003

6. RA Government ICT industry Development Strategy Armenian Networked Readiness Index (NRI) 2007–2008 is 106 compared to that of Azerbaijan (67), Russia (72), Georgia (91), Moldova (96), Turkey (55), Colombia (69), Kenya (92) and Nigeria (94) * VariablesArmeniaAzerbaijanGeorgiaRussiaTurkey Total tax rate 5,445,145,34,414,85 Government prioritization of ICT 4,075,054,114,24,46 Government success in ICT promotion3,44,743,593,54,08 E-government readiness index 3,323,643,634,013,8 ICT use and government efficiency 3,024,43,65 4,6 University-industry research collaboration 2,493,182,273,173,32 Spending on R&D2,633,412,513,423,24 * Global Information Technology Report 2007-2008, World Economic Forum

7. ICT Industry Development Strategy of the Armenian Ministry of Economy (2001) No ICT-specific tax policy that would encourage the rapid growth of the sector Tax and Custom administration mechanisms in places are underdeveloped No tax benefits for Educational and R&D investments No fiscal and export incentives in forms of reduced tax rates, tax subsidies, waivers and exemptions to SME Enterprise Incubator Foundation - the only agency engaged in the development and incubation of ICT SMEs in Armenia One private techno-park - VIASPHERE RA Government ICT industry Development Strategy the current situation in ICT industry in Armenia may be characterized as an aggregate of mainly partial achievements, the results of which in terms of the global market can not be considered as significant* * IT Development Concept Paper, the Ministry of Economy of Armenia, 2007

8. New ICT sector development concept paper (2007) RA Government ICT industry Development Strategy Key milestones: Short-term (1-3 years): Build world class ICT infrastructure to support Armenian ICT industry and information society development Mid-term (3-5 years): Strengthen Armenias ICT infrastructure and ensure the presence and penetration of Armenia ICT brand in the global market Long-term (5-10 years): Achieve full Armenia ICT brand penetration in global markets and particularly in targeted high-growth market segments. Contribute to the growth of ICT, increase in sector revenues and development of knowledge-based economy through ICT infrastructure and Information Society development.

9. RA Government ICT industry Development Strategy Information society and IT Industry growth target indicators: Key Data20062018 Home computer penetration5%50-70% Educational computer penetration10%80-90% Public sector computer penetration10%100% Consumption of local IT products in the internal market – GDP 0.5%2-4% Share of e-services provided by RA state entities against the total <1%80% Number of IT companies From which those with foreign capital committed 160 50 1000 200 Workforce500020000 Industry revenues84 million (USD)1 billion (USD) IT R&D companies<10100-200 Large technology cities Techno-Parks & incubators 0202 1 >10

10. 2008-2018 Design, develop and build world class ICT infrastructure serving major regions, cities, government & private industry 2008-2011 Select, develop and rollout E-Government pilot projects (Rollout 3 pilot projects in 3 years) 2008-2018 Develop & launch targeted programs aimed at increasing Armenia IT graduates and workforce. 2008-2011 Build Armenian Techno-Park supported by world class ICT, municipal infrastructure and services IT D E V E L O P M E N T ACTION PLAN 2008-2013 Equip and operate national Tele-Centers serving citizens in key Armenian regions & towns.

11. 2008-2013 Establish Armenian Software Engineering Competence Center to certify & train Armenian software developers to ensure compliance with global Capability Maturity Model Integrated (CMMI) standards 2008-2018 Establish Armenian IT Enterprise Development Fund to promote private IT companies; attract foreign direct investment & venture capital to develop and commercialize IT innovation & product development 2008-2018 Develop, design & rollout world class strategic marketing & promotional campaign to position Armenia brand in targeted high growth IT markets. 2008-2015 Replicate EIF business incubator model and establish university-based technology transfer centers (TTC) to stimulate IT innovation & product development IT D E V E L O P M E N T ACTION PLAN

13. The Union of Information Technology Enterprises Main Strategic Directions: Education and workforce development (strategic goal: the number of qualified ICT specialists is 10000) Legal framework/collaboration with state bodies (strategic goal: ICT is a priority industry in Armenia in practice) Development of ICT/High Tech sphere/Formation of Information Society (strategic goal: higher level of use of ICT in other businesses) Development and enhancement of the association (strategic goal: UITE is an influential and powerful institutional organization serving the interests of its member enterprises)

14. The Union of Information Technology Enterprises 2007 in brief Participation in CeBIT (2000-2007) Intellectual Property Rights Protection Campaign Custom legislation improvement project Development of ICT/High Tech Portal (www.uite.org)www.uite.org DigiTec Expo - 2007 ICT/High Tech exhibition (50 companies, about 8000 visitors) ICT Leaders Meetings UITE became the official counterpart of the CBI, the Netherlands Centre for the Promotion of Imports from developing countries for assisting local ICT companies outsourcing. Participation in new Armenian ICT development concept drafting

15. The Union of Information Technology Enterprises 2008 Action Plan Education and workforce development UITE participation in Stockholm Challenge-2008 award ceremony Training center formation within UITE Legal framework/collaboration with state bodies Drafting the package on tax & custom legislation improvements Media campaign Development of the sphere of ICT/High Tech UITE members participation in CeBIT 2008 Armenian High Tech Virtual Community Portal (www.uite.org)www.uite.org Assisting Government in Techno City establishment in Gyumri Organizing Armenian delegation participation in World Congress on Information Technology 2008 in Malaysia Organizing DigiTec - 2008 Organizing Robotics Contest Development and enhancement of the association Organizing the series of ICT Leaders Meetings

16. The Union of Information Technology Enterprises The main problems that hinder Armenian ICT industry development: The lack of authorized state body responsible for Information Society development Limited financing for ICT sector Insufficient interaction among the entire scope of the sectors infrastructure, including the National Academy of Science, industry, state ministries and the private sector Low level of government investments in R&D Excessive Custom and Tax administration (applications of estimated prices custom clearance method for ICT goods for importing and VAT levy at the border for importing) The lack of tax benefits for educational investments The lack of qualified ICT specialists AMD appreciation (in recent years the AMD has appreciated on average by 20%)

17. Meri Duryan UITE email: mduryan@uite.orgmduryan@uite.org url: www.uite.orgwww.uite.org