Below is an interesting article that Harout Sassounian writes about... it talks about diasporas (Armenian, Chinese, Jewish) helping their mother country. It talks about the best way to help... note, he does not say that Armenians are not helping Armenia on a vast scale, but he does say that the help needs to be focused more on investment and business, which quickly begins to help the country help itself. It is an interesting analysis and worth the read.

Commentary
World Bank Expert Analyzes Diaspora's Role in Armenia

By Harut Sassounian
California Courier Publisher

As the Armenia-Diaspora Conference will be held later this month, it would be interesting to look at the relationship between these two entities from the dispassionate view of an "odar." The outsider in this case is one of the World Bank's senior economists, Lev M. Freinkman, who compares the Armenian Diaspora to several other Diasporas. The upcoming conference in Yerevan is slated to cover such topics as dual citizenship, Diaspora's role in Armenia's economic recovery, and concrete organizational structures that can link those residing outside to the homeland. It would be instructive to see how other nationalities

have approached these issues in order to learn from their successes and avoid their mistakes. In a paper he delivered last August at a Florida conference, Mr. Freinkman argued that "from the transition perspective, support provided by the Armenian Diaspora to independent Armenia since 1991 has been rather inefficient." He explained that China and Israel have been much more
successful because "they managed to divert a considerable chunk of expatriates' resources into a source of investment finance, export expansion, and new technology." He asserted that "most economies in transition face a significant shortage of skills and resources over which many Diasporan communities have much better control and/or access.

This relates to many core components of financial, human, and social capital, which, if well mobilized, could accelerate the entire dynamics of the transition process." At the end he made some recommendations on "how to rationalize Diaspora's involvement and assistance to home countries" in transition.

"China and Israel seem to be the best-known examples of countries that received a major developmental push from their nationals located throughout the world. While in most countries the main Diaspora-related benefit for the domestic economy was and still is associated with private transfers (including remittances) sent by members of Diasporas to their relatives and friends at home, China and Israel managed to complement this traditional financial support by much more active involvement of the Diaspora in their economic development," Freinkman said. "In these countries, Diaspora investors and entrepreneurs played a critical role in attracting FDI (Foreign Direct Investment), setting up joint ventures, promoting export of domestic companies, etc. In short, these examples confirm that traditional ethnical and cultural links could be instrumental in facilitating integration into the international economy as well as transferring of new professional and managerial skills."

Freinkman started his analysis with a general observation that "development is not so much about allocation of existing resources but rather about mobilizing resources that are hidden, scattered or badly utilized." He then underlined two key lessons learned from the experience accumulated during the past 10 years of transition in Eastern Europe: "1) economic growth has been coming mostly from newly-created companies (both domestic and foreign), not from privatized inherited state enterprises; 2) speed of change in management culture and business practices is a critical factor of growth." In the medium term, the factors that make a difference in the country's transition are: "the quality of investment climate, proximity to established markets, speed of transfer of new managerial skills, simplicity of access to existing assets, including land, etc." In this respect, "the Diaspora could accelerate closing the gap that inevitably exists between the post-socialist economy and the rest of the world as well as provide a strong backing for integration of the home country into the global market."

Freinkman suggested that the leaders in the home countries could use their links to the Diaspora to: "1) extract additional support in forms of FDI and management training to facilitate the creation and expansion of new companies; 2) accelerate building new business partnerships between local and international companies to advance transfer of skills and technologies; 3) provide advice to governments of home countries with respect to improvement of investment climate and deregulation." Of course, this assumes that these leaders are amenable to listening to advice. The Diasporan investors could play the beneficial role of "first movers," Freinkman suggested. These are investors who come first to an emerging market that is characterized by "great uncertainty and excessive economic risks." By so doing, they "could change market expectations and advance an inflow of more conventional FDI."

To avoid any misunderstandings, Mr. Freinkman has noted that the ideas expressed in his paper, subsequently posted on the groong website, were his personal views and should not be attributed to the World Bank.

Next week: An in-depth look at the Diaspora's involvement in Armenia.