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15.06.2015

LARGE CAPITAL OF DIASPORA AND DEVELOPMENT ISSUES OF ARMENIA: HISTORY AND MODERN TIMES

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Vahram Hovyan

Expert, Centre for the Armenian Studies, Noravank Foundation

For the nations that have diaspora, the economy plays a unique role in the area homeland-diaspora relations. The economic capital of diaspora is viewed as a crucial resource for development of such countries. The point is, however, that other than economic interests, the national feelings and natural human desire to help strengthen one’s homeland often play an important role in the issues related to foreign investment in a given country.

The capital of compatriots abroad may contribute considerably to the economic and technological development of homeland, if used properly and knowledgably. To give an example, the Jewish diaspora invests about $0.5 billion annually in Israel’s economy, a significant part of which goes into knowledge-based industry. Much like Armenia, Israel is a small country with limited natural resources and surrounded by enemies, yet it has achieved remarkable economic and technological development, which among other things in a substantial extent is driven by the mentioned investments.

An efficient involvement of diaspora’s capital in development of the home country implies knowledgeable approach, one of the important components of which is to assess it if not accurately, then at least adequately.

In Armenian realities there had been both rational and irrational, sometimes even mythical ideas about the Armenian capital. Irrational ideas suggest that the Armenian capital, the net worth of Armenian wealthy individuals is allegedly astronomical and that all pan-national problems can be solved by using it. A false thesis then follows that one of the reasons for tragedies that haunted Armenian people (Genocide, territorial losses, etc.) had been the low level of national feelings among the well-to-do Armenians, or in sterner wording their treachery, because at the time they did not want to use their financial wealth for liberation of the homeland and saving the Armenians1.

It has to be noted that mythical perceptions about Armenian capital were typical not only among ordinary people, but also intellectuals, public figures and politicians. For example, Garegin Nzhdeh once wrote that a fraction of the wealth of Zmurnia (Smyrna) Armenians alone would have been enough to liberate the entire country. With all due respect to the remarkable personality of Garegin Nzhdeh as military leader, statesman and philosopher, and acknowledging his enormous contribution in building the modern history of Armenia, we still consider that his mentioned assessment was rather a result of an emotional distress with regard to the tragic situation the Armenian people suffered from at the time.

Indisputably, as with any other nation, there has always been a group of individuals among Armenian with higher status and net worth than that of the others, who topped the social hierarchy. And as with the other nations, this group consisted of trade/industry bourgeoisie.

It has to be mentioned that the Armenian trade/industry bourgeoisie has never been out of touch with the national life and contributed to addressing national problems as much as they could. For example, that very trade/industry bourgeoisie led by wealthy Egyptian-Armenian benefactor and national leader Boghos Nubar Pasha established in 1906 the Armenian General Benevolent Union (AGBU) in Cairo. This organization had made valuable contributions both for solving the national problems in the pre-statehood period (before the First Republic of Armenia was declared on May 28, 1918), and in strengthening the Armenian statehood after it was restored, as well as cooperated with the First, Second and Third Republics.

In particular, the AGBU was the only organization of Diaspora permitted to work in Soviet Armenia, till 1937. After that, despite AGBU was banned in Armenia, the Soviet Government continued to cooperate with it. During the World War II the AGBU procured a tank regiment called Sassuntsi-Davit and donated it to the Soviet Army. AGBU’s role was invaluable in post-war period, too, especially in helping organize the Great Repatriation in 1946-1948, for which AGBU raised $2 million.

Wealthy Armenian individual benefactors also have contributed to addressing national problems, among which Mantashian, Aramian and Gulbenkian can be mentioned as examples.

However, it would be an exaggeration to state that the capabilities of the trade/industry bourgeoisie were unlimited or that they were powerful enough to organize and sponsor an armed struggle for Armenia’s liberation. One should remember that war is one of the most expensive things on the world. Even the richest nations of the world were exhausted economically due to wars, let alone such a stateless nation as Armenia was at the time, the only economic potential of which consisted of capabilities of the national bourgeoisie.

Mythical perceptions of Armenian capital are also characteristic to our adversaries. For example, with regard to the recognition of the Armenian Genocide by Pope Francis during the Mass on April 12, 2015 dedicated to the 100th anniversary of the Armenian Genocide, the Turkish media purported that Armenian-American billionaire Kirk Kerkorian has promised to give Vatican $25 billion for that. Such comment might have been just a disinformation trick used in information warfare, but it could have also been part of the mentioned issue: according to the Forbes 2015 Billionaires List Kirk Kirkorian’s net worth is $4.2 billion only.

Rational perceptions about Armenian Diaspora capital can be summarized in two concepts. The first one is that the financial capabilities of the Diaspora are limited. For instance, as Karlen Dallakyan noted, at the time the funds raised by the Armenian Aid Committee2 were miniscule compared to the enormous problems that Soviet Armenia faced. The second concept is that although an integral part of Armeniancy, the Diaspora is, nonetheless, a separate system with its own problems, which require funding. Such issues include sponsoring schools, hospitals, publishing houses, cultural institutions, scientific centers, etc. Therefore, Diaspora cannot provide all of its resources to Armenia.

Armenia should not ask Diaspora to invest all its resources in strengthening and developing Armenia, but rather should find together with Diaspora mutually beneficial ways economic cooperation that would be effective both for Armenia and Diaspora collectively and individually.

It has to be noted that such ways already exist. For instance, a group of Lebanese-Armenian businessmen initiated a program called ARI: Artsakh Roots In¬vest¬¬ment, to which Armenian Diaspora business people from other countries later joined. The program aims at facilitating settlement in Qashatagh region of Artsakh by residential construction and agriculture development through investment programs (low-interest concessional loans).

The appeal of Hranush Hakobyan, Armenian Minister of Diaspora to the Armenians of Diaspora to spend their vacation in Armenia once in four years and open bank accounts with some $1,000 in Armenian banks, was another interesting example of ideas on mutually beneficial ways of economic cooperation.

However, all ideas and undertaken practical steps are not sufficient to consider Armenia-Diaspora economic cooperation as a thorough one. More comprehensive ways and means need to be developed. As it was already mentioned, this requires if not accurately assessing the Diaspora capital, then at least having some adequate idea about it, which can be achieved through scientific and analytical research.

It is impossible to fully present the Diaspora capital in a single article, and for this reason we focus on the single largest segment of the Armenian capital abroad. In this article we consider Armenian billionaires to have the largest financial capabilities among the Armenians of Diaspora. This study is based on reviewing Forbes 2015 Billionaires List, which also contains information on their financial and economic capabilities

According to Forbes, there is not a single billionaire in Armenia. Generally, among the former Soviet countries only the following have billionaires: Russia (88 people), Ukraine (5), Kazakhstan (5) and Georgia (1 person). There are five billionaires of Armenian descent in various countries, so the Armenian capital abroad is comparable to that of some post-Soviet countries, such as Ukraine and Kazakhstan.

According to the data from Forbes, the following five Armenian individuals are billionaires.

1. Sergey Galitsky 3 (Russia), with net worth of $8.3 billion,

2. Kirk Kerkorian (USA), with net worth of $4.2 billion,

3. Samvel Karapetyan (Russia), with net worth of $4 billion,

4. Eduardo Eurnekian (Argentina), with net worth of $1.9 billion,

5. Danil Khachaturov (Russia), with net worth of $1.6 billion.

As seen, the aggregate net worth of five Armenian billionaire businessmen of the world is $20 billion.

Geographically, the Armenian billionaires from the mentioned list represent three countries of the world. Russia with 3 persons (Sergey Galitsky, Samvel Karapetyan, and Danil Khachaturov) tops the list of the countries with Armenian billionaires. The USA (Kirk Kerkorian) and Argentine (Eduardo Eurnekian) each have one Armenian billionaire.

The aggregated net worth of the three Armenian billionaires of Russia is $13.9 billion. Second comes the USA with Kirk Kerkorian’s $4.2 billion and Argentine is the third with Eduardo Eurnekian’s $1.9 billion. As seen in the list, Russia not only is the first by aggregate net worth of Armenian businessmen, but it is also home to the wealthiest one with his $8.3 billion net worth.

If the issue is viewed in the dimension of Russia vs. West, with the US and Argentine being part of the West, then Russia’s Armenian billionaires are still ahead by their aggregated net worth. The American and Argentinian billionaires of Armenian descent together have a net worth of $6.1 billion, whereas as noted before, the combined net worth of Russian-Armenian billionaires is $13.9 billion, which is twice as much as that of the Armenian billionaires of the Western world. Moreover, net worth of the wealthiest Russian-Armenian billionaire alone exceeds the combined wealth of the US and Argentinian billionaires of Armenian descent.

As for the business activities of the Armenian Diaspora billionaires, they are involved mostly in construction, agriculture, trade and services. The wealthiest Armenian businessman, Sergey Galitsky, is in retail business; he is the founder and co-owner of the retail chain Magnit. Armenian-American billionaire Kirk Kerkorian is involved in casino, hospitality and investment businesses. Samvel Karapetyan, President of the Tashir Group, is mostly involved in construction and real estate. Argentinian-Armenian billionaire Eduardo Eurnekian runs cable TV, airports and agricultural businesses. The “poorest” Armenian billionaire Danil Khachaturov is involved in insurance, banking and real estate businesses.

With regard to relations with Armenia, the world’s billionaires of Armenian descent have not stayed away from contributing to the economic development of homeland. They have funded both philanthropic and business activities to support Armenia’s development. For instance, the Lincy Foundation established by Kirk Kerkorian had donated significant funds for development of Armenia’s economic (particularly telecommunications) infrastructures, construction and restoration of roads. Kerkorian has also donated large sums to the Hayastan All-Armenian Fund. Aside from benevolent activities, Argentinian-Armenian businessman Eduardo Eurnekian has invested in Armenian agricultural sector, and implements concession management of the "Zvartnots” International Airport. Samvel Karapetyan’s Tashir Group is active in Armenian economy, particularly in restaurant business. Rosgosstrakh Company co-owned by another Russian wealthy businessman, Danil Khachaturov, conducts business in Armenia.

As much as we highly appreciate both benevolent and business activities of the Armenian Diaspora billionaires in Armenia, we believe the main problem is that none of them is involved in industrial business, especially knowledge-based technologies. As mentioned above, the well-to-do Armenians of Diaspora are mostly involved in trade, services, construction and agriculture. The only wealthy businessmen that with some reservations can be considered as doing business in industrial and technological areas, is Eduardo Eurnekian. His agribusiness is related to food processing and winemaking, while cable TV and airports businesses are to some extent technological. However, the Argentinian-Armenian tycoon is involved in service part of those businesses, rather than the industrial one.

Meanwhile, if there were foreign knowledge-based industrial enterprises with Armenian capital, it would have created additional opportunities for Armenia’s technological development. Possibly, such business people would have been active in Armenia, too, by investing in relevant technological industries. Obviously, technological and industrial development of Armenia is crucial not only for economic reasons, but also in political, national security and demographic aspects.

1 The Armenian Apostolic Church had also been blamed for this.

2 Armenian Aid Committee was established in 1921 in Constantinople to provide financial assistance from Diaspora to the Soviet Armenia. It was shut down in 1936.

3 Before marriage his last name was Arutyunian.


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