A decade after independence, Armenia embarked on a radical reform path to create a vibrant, market economy – triggering substantial economic growth, often reaching double digits.
As recent trends and volatility indicate, sustaining such growth requires addressing a range of structural challenges. A land-locked country with high costs of trade, Armenia is highly dependent on a narrow range of commodity exports and remittances from abroad. Increasing productivity across the economy and diversifying and upgrading its production and export structure will be essential, especially for Armenia to progress towards the goals in Agenda 2030 and for the transition to the circular economy.
This requires trying out ideas to find out what works or what does not across the economy and society – or innovation. While technology entrepreneurship and scientific research are important elements, most of the potential lies in absorbing, adapting, and trying out ideas that have worked elsewhere. Innovative, high-growth entrepreneurs are leading agents in this dynamic, and many of them show up in unexpected areas of activity, such as construction materials, childcare, and radiology services.
This implies a different approach to governance – one that is not only effective and broad, but also feasible given fiscal constraints after the COVID-19 induced slump. As innovation is inherently unpredictable, it requires effective and targeted public policy that enables and incentivizes innovative activity systematically that would not occur otherwise – in other words, innovation in policy governance itself. Put simply, policies should aim at ensuring that more entrepreneurs try out more things than otherwise would be the case and create the demonstration effects that could trigger new, competitive sectors in the economy.
Fortunately, Armenia has many fundamentals in place to take advantage of opportunities. These include a strong legacy of basic and applied research, economic openness and rule of law, high levels of educational attainment in the work force, competitive wage levels, and pockets of excellence in tourism, the exporting ICT sector, business process outsourcing and agri-food. Particularly promising is the large, educated, and increasingly engaged Armenian diaspora that can bring opportunities, ideas, networks, and investment – all essential elements for innovation.
However, innovation does not yet happen systematically across the economy. Supporting innovation effectively involves the flexibility to respond to constraints and opportunities as they emerge – not based on specific sectors or technologies. This also includes adapting a broad government approach with co-ordination mechanisms that bring together the full range of policy areas that affect the emerging innovation system, as well as trying out what works and what does not and, most importantly, stop what does not work.
To support Armenia in harnessing these opportunities, UNECE initiated an Innovation for Sustainable Development Review (I4SDR) for Armenia at a virtual meeting on 8 October, bringing together high-level government officials, international and local experts, and private sector representatives in the country. A UNECE flagship product, this review will assess the scope, quality, and effectiveness of governance, policies, and institutions from an innovation system perspective. Following the first UNECE review of the country in 2014, and based on the findings and analysis of the recently launched Sub-regional Innovation Policy Outlook 2020 and other UNECE work streams, the review will also take an in-depth look at areas of particular importance, such as enhancing innovation policy coordination, strengthening science-business linkages, engaging the diaspora for innovation as well as improving the innovation infrastructure. Developed in collaboration with the Government of Armenia and funded by the Government of Sweden, the I4SDR of Armenia will be published in 2022.