U.S. Subsidizes Outsourcing Industry in Armenia, Bosnia-Herzegovina

Rob Sanchez

08/13/2010

Several days ago I wrote about the outsourcing of jobs to Sri Lanka and how the U.S. government is subsidizing the process. That trend continues, but this time it’s Armenia that is being showered with U.S. dollars.

News that the U.S. intended to fund high-tech outsourcing in Armenia was released in early August by USAID:

USAID Deputy Assistant Administrator for Europe & Eurasia Jonathan Hale met with Armenian Minister of Economy Nerses Yeritsyan on August 2, 2010 to discuss potential collaboration with the private sector on Information Technology (IT) projects. PUBLIC-PRIVATE ALLIANCES IN EUROPE AND EURASIA LEVERAGE U.S. RESOURCES IN PURSUIT OF DEVELOPMENT GOALS in Private Sector, USAID, 08/03/2010
The term "private sector" is an important one. In this context it’s used when government bureaucrats refer to programs that subsidize private companies with public money. Last week an article by Informationweek was published that gave us a glimpse of who that "private sector" beneficiary in Armenia might be:
Jonathan Hale, USAID deputy assistant administrator for Europe & Eurasia, is on a four-day trip to Armenia to meet with government and private industry leaders in the country. On his agenda is a meeting with Armenian economic minister Nerses Yeritsyan.

"We look forward to partnering with USAID on the IT sector, which has great potential as Armenia has an advantage in this sector," Yeritsyan said in a statement released by USAID. "We want companies to come to Armenia and create their innovative environments," Yeritsyan said.

Among other things, Armenia is looking to establish itself as a center for low-cost IT and engineering work outsourced from the U.S. and other Western countries. Now It’s Armenia: USAID Funds IT In Eurasia, by Paul McDougall, InformationWeek, August 5, 2010

Economic minister Yeritsyan is expecting money to help the outsourcing industry in Armenia. Nothing was said about what the U.S. wants in return but it’s been a standard diplomatic policy of the U.S. to use American jobs as a bargaining chip for any manner of concessions with other countries. Yeritsyan wants to set up business processing outsource (BPO) centers that are staffed by low cost IT/computer and engineering workers and in this case the U.S. seems more than willing to help Armenia to defray the costs of doing so.

Sri Lanka doesn’t seem to be the only country where Microsoft is reaping the benefits of subsidies (read the following excerpt closely). In the case of Armenia it is easy to see who is at the other end of the pig trough: Oracle/Sun Microsystems, who has been very active in funding training for technical workers for their Armenian operations.

Yerevan, Armenia — At an official ceremony held in the Republic of Armenia Ministry of Economy on August 6, 2010, Minister of Economy Nerses Yeritsyan, U.S. Ambassador to Armenia Marie L. Yovanovitch and USAID/Armenia Mission Director Jatinder Cheema signed two Assistance Agreements under which the U.S. Government will provide up to $50 million to the Government of Armenia for the period of 2010-2013 in support of the country’s economic development and health and social services reform. USAID AND ARMENIAN MINISTRY OF ECONOMY SIGN TWO ASSISTANCE AGREEMENTS TO FOSTER ARMENIA’S ECONOMIC DEVELOPMENT AND HEALTH AND SOCIAL REFORM, USAID, 08/06/2010
The USAID envoy went to Armenia and delivered the goods. In summary here is the deal with Armenia: The following USAID announcement is very revealing because they talk about plans to set up JAVA training centers in Armenia. It appears that the U.S. government has decided to help Sun Microsystems to move its advanced web programming capabilities overseas, or perhaps there is a new policy to move all high-tech engineering overseas.
Technology and Innovation: USAID partnered with Sun Microsystems to establish JAVA Teaching Laboratories in three major Armenian universities to train students in web-based software and to establish a Solution Development Center for IT companies, institutions, and individuals to test and develop integrated computer applications. The mission also partnered with Microsoft RA to establish a Microsoft Innovation Center to assist Small- and Medium-Sized Enterprises (SMEs) and professionals create innovative new products and services, bring those products and services to market, and build well-managed competitive businesses. Fact Sheet, USAID, August 3, 2010
No specifics have been announced about direct aid to Bosnia-Herzegovina but USAID did put this small news blip on their website that would indicate there is an agreement to dole out money in partnership with CISCO:
IT Improvements in Bosnia-Herzegovina: USAID/Bosnia-Herzegovina partnered with CISCO Systems and a local IT company to promote e-government in Srebrenica and Bratunac municipalities. As a result, municipal institutions can provide information on pension payments, healthcare, education, business services, and other social benefits and residents can communicate with other people and institutions in distant areas. Fact Sheet, USAID, August 3, 2010
In order to conclude this blog on a happy note read the following news clip from an Armenian webzine. They offer assurances that despite appearances to the contrary, American information technology (IT) workers have nothing to worry about. Whew!
The United States Agency for International Development, or USAID, has decided to fund the development of outsourcing industry in Armenia.

The USAID announced on August 5 of implementing the development program in Armenia with Oracle’s Sun Microsystems unit as one of its participants. The USAID did not disclose the sum to be allocated to the Armenian program, but hinted that the goal was to establish Armenia as an outsourcing hub in the information technology sphere.

USAID’s moves to help bolster the outsourcing industry in Asia and Eurasia have sparked anger among Americans who say the US labor force is being displaced in favor of cheaper work-force abroad. A USAID spokesperson said however, that the program ”will not displace American IT workers.”

The outsourcing industry meanwhile, specifically Indian companies, may find the new initiative advantageous because it will allow them to open new centers in the developing countries, rather than in India, where the cost would be higher. USAID to Fund Outsourcing Initiatives in Armenia, AsBarez, August 11th, 2010

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