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3
Conclusions

Armenia’s geographical location and paucity of natural resources inspire little optimism for the growth of traditional economic activities. At the same time, the Armenian culture has long respected literacy and learning, and looking toward a knowledge-based economy is a realistic approach for both the government and international donors. The recent inclusion of Armenia among the countries eligible to participate in the activities of the new Millennium Challenge Corporation provides an excellent opportunity for the country to seek Millennium Challenge Account assistance for particularly promising science and technology (S&T) development projects (see Appendix J).

STRENGTHENING THE S&T INFRASTRUCTURE

The Armenian National Academy of Sciences (NAS-RA) has been the leader of S&T research in Armenia for decades. However, many of its laboratories are not in good condition. Many scientists are aging, and some are struggling unsuccessfully to adjust to market economy conditions. Its research is supported largely by international sources. With presently available resources, the NAS-RA has increasing difficulty sustaining its huge physical plant and multiple laboratories, which often engage in overlapping research activities.

There should be some realignment of the overall governmental research structure with the establishment of a few centers of excellence, both within and outside the NAS-RA. Much of the progress of contemporary science comes from interdisciplinary research, and these centers should be designed to break down the narrow focus that characterizes Armenia’s S&T organizations. As noted in



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Science and Technology in Armenia: Toward A Knowledge-Based Economy 3 Conclusions Armenia’s geographical location and paucity of natural resources inspire little optimism for the growth of traditional economic activities. At the same time, the Armenian culture has long respected literacy and learning, and looking toward a knowledge-based economy is a realistic approach for both the government and international donors. The recent inclusion of Armenia among the countries eligible to participate in the activities of the new Millennium Challenge Corporation provides an excellent opportunity for the country to seek Millennium Challenge Account assistance for particularly promising science and technology (S&T) development projects (see Appendix J). STRENGTHENING THE S&T INFRASTRUCTURE The Armenian National Academy of Sciences (NAS-RA) has been the leader of S&T research in Armenia for decades. However, many of its laboratories are not in good condition. Many scientists are aging, and some are struggling unsuccessfully to adjust to market economy conditions. Its research is supported largely by international sources. With presently available resources, the NAS-RA has increasing difficulty sustaining its huge physical plant and multiple laboratories, which often engage in overlapping research activities. There should be some realignment of the overall governmental research structure with the establishment of a few centers of excellence, both within and outside the NAS-RA. Much of the progress of contemporary science comes from interdisciplinary research, and these centers should be designed to break down the narrow focus that characterizes Armenia’s S&T organizations. As noted in

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Science and Technology in Armenia: Toward A Knowledge-Based Economy Chapter 1, adjustments in the S&T infrastructure will present challenges in minimizing social costs and countering the potential for corruption and waste, but these changes are nevertheless urgently needed. In 2002, the Government of Armenia issued a resolution on Science and Technology Development Priorities in the Republic of Armenia (see Appendix K for full text). These priorities are as follows: Armenian studies Basic research promoting applied research of vital importance Special-purpose research Information technologies Advanced technologies (biotechnology, nanotechnology) New energy sources Risk factors and human health New materials These areas are somewhat general, but they provide an indication of the Armenian government’s research priorities. However, given the high staff-to-budget ratio within the Academy and at other institutions, it is likely that most of the available funding will simply cover salaries of current staff members, with little discretionary funding to initiate new programs even in priority areas. As to the quality of proposed research to address the priority areas, the committee found no evidence of mechanisms for external peer review of research activities funded by the Armenian government at NAS-RA institutes or other institutions. Such reviews could be helpful in ensuring that Armenian researchers are up to date on international efforts in their fields and in linking them with counterparts with similar interests in other countries. In 2003, the NAS-RA presented to the government its proposals for future directions for S&T in Armenia and recommended the following research priorities: Armenian studies, information technology, laser physics and technology, nanotechnology and semiconductor nanoelectronics, biotechnology, new materials, and environmental risk factors and human health (see Appendix L for an abridged translation). Most of these topics were included in the Armenian government’s October 2002 resolution. The NAS-RA proposals included some very practical elements, such as the following: Improving the water quality of Lake Sevan; Developing hydroponic production of high-value plants that are usable in medicines, perfumes, and flavors; Developing new materials such as high-temperature superconductors; Protecting the Arpa-Sevan tunnel from deterioration; Using biological means to separate copper and gold from ores;

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Science and Technology in Armenia: Toward A Knowledge-Based Economy Synthesizing new biochemical preparations for treating immunodeficiency and infectious diseases; and Establishing a government-wide computer network and a scientific computer network for Armenia. The NAS-RA is to be commended for its efforts in making constructive suggestions regarding the management and funding of S&T and recommending specific research priorities. However, the ability of the NAS-RA to achieve meaningful objectives in these areas is inhibited by both limited resources and fragmentation of efforts. Its detailed plan lists cooperating institutions, but leadership always appears to be vested in an Academy institute. Many areas of science currently funded through the institutes of the NAS-RA are unlikely to yield significant returns in terms of economic development. With limited resources, Armenia should emphasize a limited number of topics with significant potential to produce jobs, increase income, and enhance social welfare. Redirecting resources to a few targeted areas such as those identified later in this chapter should be undertaken. Many researchers will oppose such a limitation on S&T activities, since they naturally want to maintain even the meager funding they have. The changes should, however, benefit a large number of people in the long term and should help to harness the potential of those talented young scientists who have remained in Armenia. In addition to weaknesses in structure, funding, and priorities, Armenian S&T is faced with other impediments to its development. Many scientists left Armenia after the collapse of the Soviet system. University programs in S&T are in need of strengthening, and the present number of graduating Ph.D.s in science will not be sufficient to replace the aging university staffs. Programs to bring in foreign faculty members and to persuade émigré scientists to return should be considered. In short, the entire Armenian university system has to be developed further. It is plagued by funding shortfalls, inadequate infrastructure, and misdirection of limited funds. Much of the scientific potential of Armenian students is being lost due to the lack of adequate university laboratory facilities, especially in the biological sciences, that provide opportunities for hands-on research experience. The principal science-oriented universities of Armenia have shown that they can stretch resources a long way, and investment in equipping teaching laboratories would yield high benefits. Modern equipment for research laboratories is also badly needed. Future investments should be centered in the institutions that train large numbers of students. Selecting the laboratories to be upgraded will require careful evaluation of priorities, perhaps with input from objective outside experts, because modernizing all of the facilities is not possible. Science curricula also have to be updated to bring them into line with world standards. To promote this effort, a sustained program should be initiated to bring distinguished international professors to Armenia for periods of three to twelve months or longer. A modest investment in such a program could have a multiplier

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Science and Technology in Armenia: Toward A Knowledge-Based Economy effect not only in upgrading the course content but also in improving organizational and administrative practices within universities. Additional funds are needed to support travel by Armenian researchers, especially junior investigators, to visit U.S. and European laboratories, preferably coupled with opportunities to attend scientific conferences. The U.S. Civilian Research and Development Foundation (CRDF) and the National Foundation of Science and Advanced Technologies (NFSAT) support a limited number of exchanges, but many more Armenian graduate students and young researchers could profitably spend a year or two in foreign laboratories. Armenia is not in a position to finance such trips, but support from other countries and even from the receiving laboratories might be arranged. Mechanisms are needed to counter the significant “brain drain” afflicting Armenia. The U.S. National Institutes of Health offers reentry grants to help scientists from some countries who have spent time in the United States reestablish themselves in their home institutions, and the U.S. National Science Foundation provides similar support for U.S. researchers who have done postdoctoral research abroad. If a similar program of reentry grants were established for Armenian scientists, it could provide an attractive incentive to return home. Increasing salaries for young and mid-level researchers to keep them in science in Armenia is a high priority. Currently, such an investment is easiest to defend in information technology and physics, areas of Armenian strength. Biology, though weak at present, is such an important area for both health and agriculture that it is too critical for the well-being of the country to be ignored. The Academy of Agriculture, Yerevan State Medical University, and the American University of Armenia (AUA) have made promising progress toward building strength in the biological sciences, but a significant investment in equipping teaching laboratories, particularly with instruments for molecular biology and biochemical analysis, would yield high benefits. Other organizations such as the Center for Medical Genetics and the Drug and Medical Technology Agency have also developed good biological programs and can provide a limited number of jobs for university graduates. According to senior Armenian government officials, provision of software development services by Armenian companies generated about $50 million in export revenue in 2003. The young entrepreneurs and returnees in this field have impressive links with Western companies. However, inexpensive and widely accessible international broadband connectivity is now essential to build a larger and more effective network inside Armenia. Connectivity should be a high priority for building on successes in the information technology (IT) field and extending capabilities throughout the country as well as within the academic and scientific communities. Armenia’s S&T future depends on international linkages for many reasons: for journals at more affordable prices, for identification of and cooperation with partners abroad, for marketing and sales, and for customer service. The North

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Science and Technology in Armenia: Toward A Knowledge-Based Economy Atlantic Treaty Organization (NATO) Virtual Silk Highway Project is an important regional effort in information technology. It began as a network infrastructure project for the Caucasus and Central Asia and has evolved into a broad initiative aimed at supporting national research and education organizations throughout the region. While Armenia’s S&T community still faces significant problems of isolation and the Virtual Silk Highway Project has encountered problems with hardware and bandwidth availability, electronic infrastructure-building initiatives of this nature are helpful and could be encouraged. The S&T capacity of Armenia is much greater than the current ability of the economy to absorb its output; therefore, external customers are essential if this capacity is to be sustained. Markets outside Armenia would provide important income streams for the Armenian economy. Advertising Armenia’s capabilities and building customer confidence in using Armenian services require travel and connectivity as well as effective marketing. The IT sector is making good progress, and such efforts should be extended to other areas. In addition to marketing, a new product requires specialized individuals and institutions to support its development throughout its evolution from research to commercialization. Many of the resources and institutions critical to science- and technology-based economic development—such as knowledge of marketing, finance, and intellectual property protection; access to capital; and product development skills—are missing in the Armenian economy. Development assistance to promote a specific technology should also target those institutions and economic capacities needed to move the products of that technology to market. The agricultural support programs of the U.S. Department of Agriculture (USDA) can serve as a good example of this type of holistic approach. Most of Armenia’s small S&T companies as well as its research institutes lack the contacts, knowledge, and funds required to find foreign customers. The Enterprise Incubator Foundation, a joint effort of the government of Armenia and the World Bank, addresses some of these needs among information technology firms by providing business, training, and facility services and helping to promote Armenian enterprises and increasing their competitiveness in the global marketplace. The foundation is establishing an office in the United States, which should be helpful. However, young entrepreneurs also need more training in business and marketing. The AUA can play an important role in this area, perhaps by providing continuing education opportunities. Continued emphasis should be placed on encouraging foreign direct investment in private-sector companies in Armenia, particularly companies that could take advantage of the products of the many research institutes.1 Greater involve- 1   The U.S. Department of Commerce’s Business Information Service for the Newly Independent States maintains a comprehensive website providing information about various sectors of the Armenian economy as well as specific Armenian firms seeking foreign investors and partners (see http://www.bisnis.doc.gov/bisnis/country/armenia.cfm).

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Science and Technology in Armenia: Toward A Knowledge-Based Economy ment of foreign firms should enhance both the technical and business skills of Armenian employees through opportunities for formal and on-the-job training. Ensuring that investments in S&T eventually lead to self-supporting and sustainable institutions and activities is a key issue. One aspect of sustainability relates to the long-term flow of development assistance that directly supports research activities. A broader aspect concerns how development assistance can help create or strengthen institutions or economic activities so that they become self-sustaining over time. To this end, institutions should expand ties with foreign collaborators who derive financial benefits from supporting science in Armenia and therefore become committed to long-term involvement. AREAS OF POTENTIAL COMMERCIAL INTEREST The following fields may offer commercial opportunities that build on existing strengths in S&T. Information Technology, Particularly Software Development. At present, the industry is oriented primarily to performing outsourced tasks for large foreign software companies. Moving to the stage where Armenian-owned software products are marketable worldwide will require improving business and marketing skills among the management personnel at these software firms and strengthening the framework for intellectual property rights. Semiconductors. The NAS-RA institutes have a history of work in this area. For example, one laboratory reportedly has produced up to 50-pin integrated circuits with down to 1-micron feature sizes on a laboratory basis. It is highly unlikely that a semiconductor production plant will be built in Armenia. However, Armenian specialists might be able to build on their previous work in solid-state phenomena and pursue basic research related to circuit design that would be of value to U.S., European, or Asian semiconductor companies. Such niches for specialty electronics should be explored. Infrared Detectors. Bismuth and antimony multilayer solid-state components for detecting infrared radiation at wavelengths as long as 6 microns are under development at the NAS-RA Institute of Radiophysics and Electronics. Researchers at this institute are producing thin films of bismuth (Bi), antimony (Sb), solid solutions of bismuth and antimony, and multilayer Bi-Sb-Bi-Sb structures from elemental sources by pulsed laser deposition for optoelectronic applications. This method of sequential deposition is used for fabrication of multilayer Sb-Bi-Sb structures with quantum-confined layers of bismuth. Sensors that can detect infrared radiation at wavelengths as long as 6 microns would address large markets for analytical instruments, night vision, and other defense systems. However, such components have to be integrated into complete systems, which is currently beyond Armenia’s capacity. The production and testing of prototype components and the refinement and validation of manufacturing techniques for these devices are technical-manpower intensive, which should provide a com-

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Science and Technology in Armenia: Toward A Knowledge-Based Economy petitive advantage for the development of the technology in Armenia. In order to assess and then access worldwide markets in military and nonmilitary applications, a partnership with a large international company is necessary. Production of Large Single Crystals. Armenia was the former Soviet Union’s largest producer of crystals for use in lasers. Much of this capacity still appears to exist. One company, LT-PYRKAL, a joint venture owned by the Armenian and Greek military defense agencies, offers a wide range of monocrystals of different materials for a variety of lasers. Several NAS-RA institutes and start-up companies also possess the necessary expertise for growing large single crystals that are important in laser optics and other applications. Of particular interest are crystals used in scintillation counters for detecting X-rays and gamma rays that could be used in computed tomography (CT) and positron emission tomography (PET) medical diagnostic scanning systems. Laser Technology and Light Detection and Ranging (LIDAR). Considerable expertise in laser technology exists in Armenia that may have economic potential. Besides its work with crystals, the firm LT-PYRKAL also has the capability to produce a wide range of laser systems and laser system components, including optics, mirrors and antireflective coatings, lasers, electronic parts and blocks, mechanics, and software. There is a premium available in the market if firms can produce high-quality items of this type while meeting production schedules. LT-PYRKAL has, for example, developed an optical parametric oscillator that operates in the middle infrared in the wavelength range of 1.4-4.2 μm. This device is an ideal light source for an enormous number of applications, including LIDAR, high-resolution spectroscopy, medical research, environmental monitoring, display technology, and precision frequency metrology. The firm has used its laser technology to develop a device for remote atmospheric sensing using infrared differential absorption LIDAR. This device can be used to measure the concentrations of trace gases in the atmosphere, which are very important for environmental monitoring, chemical process control, and biomedical applications. The reported performance specifications of this system make it a state-of-the-art instrument. The world market for this type of high-performance, high-price instrument may be only in the range of 25 to 40 instruments; however, the ability to produce this device demonstrates a capacity to build high-quality components and to integrate complicated systems. If the firm can perform similarly in commercial production, there are likely to be many markets for its laser components and systems. Precision Electromechanical Instruments. Armenia has a capability for precision machining and equipment building, as well as the design of numerical control software. The company Mshak has produced what it claims to be the fastest machine in the world for punching holes in printed circuit boards. Similar capability exists in the NAS-RA Institute for Radiophysics and Electronics, which has built absolute angle encoders for use in space and robotics systems. The

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Science and Technology in Armenia: Toward A Knowledge-Based Economy encoders appear to exhibit high-quality design and workmanship, and the expertise of their creators in using precision machining to make electromechanical devices could be the basis for the development of advanced electromechanical components for various applications. Analytical Services. The NAS-RA Molecular Structure Research Center currently has modern analytical instruments, including a nuclear magnetic resonance (NMR) system with a superconducting magnet, a mass spectrometer, infrared and ultraviolet spectrometers, and chromatographs. Some of this equipment is unique not only in Armenia but in the region. International analytical services based on these instruments might be expanded. The center has already fulfilled a contract for a Dutch firm. It is able to offer additional analytical services such as providing NMR and mass spectra for users as well as spectral interpretation and database services for molecular structure analysis. Specialty Chemicals. If international customers could be found, specialty chemicals such as the range of metal hydrides and carbides currently produced at the NAS-RA Institute of Chemical Physics could be marketed readily through worldwide distributors. Important requirements for a successful business in this area include high standards of quality (purity), reproducibility, reliability of delivery, and low cost. Sales of small quantities of materials for research purposes might open the door for large-quantity sales. Such specialty chemical synthesis is highly labor intensive and requires considerable technical expertise, aspects that could provide competitive advantage for such a business in Armenia. Specialty Materials. The NAS-RA Institute of Applied Problems of Physics has been studying the dramatic changes in properties of solid-state materials and crystals under acoustic excitation. One development with some commercial potential is a light bulb with a spectrum similar to that of sunlight. Also, the NAS-RA Institute of Mechanics has developed and is attempting to market a new material for use in brake pads. Specialty Agricultural Products and Processing. Beyond ensuring Armenia’s self-sufficiency in food, certain new products might be suitable for export. Shipping fresh fruit and vegetables has long been under way, but costs are very high due to transportation problems. Thus, processed foods such as wine and liquor, dried fruit and vegetables, preserves, fruit juice, mineral water, pasta, cheese, sausages, smoked meats, smoked and frozen fish, and herbal teas are preferable. Nutraceuticals and Functional Foods. An interesting area in the early stages of development, as previously discussed, is functional foods, or foods that provide health benefits beyond simple nutrition. These high-added-value, easily transported products are in increasing demand worldwide and might be an excellent niche for Armenia. Genetic Testing and Other Clinical Laboratory Services. A high-quality Center for Medical Genetics already exists in Yerevan. This center and other diagnostic clinical laboratories could be expanded to provide regional services.

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Science and Technology in Armenia: Toward A Knowledge-Based Economy Such a business might best be developed in collaboration with an international partner since success depends on a large volume of users. Human Clinical Trials. As previously noted, clinical trials could be carried out by Armenian medical centers in collaboration with international pharmaceutical firms. Regional Health Centers. As mentioned earlier, centers specializing in cardiology, orthopedic surgery, and gynecological services have the ability to provide regional services for paying customers. Geological Consulting. As noted, a regional service could be provided for assessing seismic and other hazards in building and road construction. Earthquake Engineering. Certain products associated with earthquake hazard reduction, such as building base isolation equipment, could be produced if a worldwide market were developed. Mineral Refining. Ores of various metals such as gold, lead, zinc, and molybdenum as well as perlite and bentonite are extracted but not refined in Armenia. Refining such materials in Armenia could add value to these exports, although investment costs would be substantial. RECOMMENDATIONS Small Business Innovation Research Program There appear to be unexploited opportunities for commercialization of science and technology activities in Armenia that might be competitive in worldwide markets. To encourage such commercialization activities, a small business innovation research program2 should be considered in Armenia. Competitive proposals for the commercialization of technology could be solicited from the country’s universities, research institutes, and commercial groups in fields such as those listed earlier in this section. The proposals would describe how specific technical ideas could be transformed into profitable businesses and would identify potential customers. Business plans would describe the markets for the proposed products or services, the competitive advantages of Armenia in the proposed business area, project management, and long-term financing plans. 2   In the United States, Small Business Innovation Research (SBIR) programs provide research and development funding to early-stage companies following a rigorous process of peer review. All major U.S. agencies that fund research are required to set aside a specific percentage of their research budgets for SBIR grants. Applications are reviewed in two phases. In Phase I, grants of $50,000 to $100,000 are provided for initial studies to demonstrate the technical feasibility of a proposal. In the second phase, funding from $500,000 to $1 million can be awarded to build prototype products or services. Phase II grants usually require that the business model for the product be established and business partners be identified.

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Science and Technology in Armenia: Toward A Knowledge-Based Economy The U.S. model, by which grants are made in two phases, may be useful.3 Perhaps Phase I, funded at a level of $10,000-20,000, would call for a prototype product or other proof of the validity of the technology. This phase would also require the identification of potential partners and approaches for the manufacturing and distribution of the proposed product. Then, Phase II, funded at perhaps $100,000-200,000, would allow for the completion of the product and demonstration of its effectiveness. Grants in both phases should be awarded based on the results of a rigorous peer review process, with the expert review panels preferably including representatives of industry and the international science community as well as Armenian scientists. Of course, decisions about the details of any program launched in Armenia would be up to its planners, but the basic model described might be a useful point of departure. Given the size of the Armenian S&T sector and the potential impact of a program of this type, $10 million per year might eventually be an appropriate allocation for such grants. This would allow 40-50 grants to be funded in each of the two phases per year. Before launching a program of this scale, however, it is essential to have a smaller-scale exploratory grants competition to test the concept and demonstrate the quality of proposals that can be developed. The Next Steps to Market program of CRDF provides an example of a mechanism for testing the concept (see Appendix M). Centers of Excellence High-quality centers of excellence in research and teaching are an essential foundation for seeding new ideas in a science- and technology-based society. Such centers should be highly focused. Excellence in even a small number of areas could make a significant contribution to high-technology business development in Armenia. A program of centers of excellence grants should be established to support and strengthen the most productive and promising elements of Armenia’s research and educational sector. These centers could be established in universities or in NAS-RA or ministry-run institutes or under the auspices of university-institute partnerships. Such partnerships should be especially encouraged. Centers of excellence can be envisioned in computer science, solid-state devices, microelectromechanical systems, polymer sciences, natural product chemistry, fluid mechanics, and microfluidics. These examples are areas of cur- 3   The National Research Council is currently conducting a study of the SBIR programs operated by the U.S. Department of Defense, the Department of Energy, the National Aeronautics and Space Administration, the National Institutes of Health, and the National Science Foundation, and the conclusions reached may be helpful to others planning similar programs. Information about the study, which is expected to be completed in the spring of 2005, may be found at http://www7.nationalacademies.org/sbir/index.html.

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Science and Technology in Armenia: Toward A Knowledge-Based Economy rent Armenian strength; however, the actual fields supported should be determined in large measure by the quality of the proposals received. The selection of centers should be based on a peer review system including international researchers, representatives from industry, and other users of research products from Armenia and abroad. Pre-proposals could be required to allow the final proposals to be better developed. Grants for the centers might be for a five-year term and should allow for the purchase of research equipment as well as covering salary costs, research-related travel, and expendable supplies. Ideally, centers should have both research and educational components. An initial investment of $10 million per year would establish this program as a major force in the revitalization of Armenian S&T. Grants of up to $1 million per year per center might be appropriate, for example, with the goal of 10 new centers being established during the first five years. National Foundation of Science and Advanced Technologies The National Foundation of Science and Advanced Technologies is a model institution for the support of peer-reviewed research funding in Armenia and deserves a severalfold increase in its funding. Funding for new S&T programs such as those recommended in this report should be administered through NFSAT or another organization with a comparable peer review process. Higher Education The Armenian educational system is in need of reform. Armenian institutions of higher education should continue to modernize their organizational structures and curricula and make strong efforts to recruit young, foreign-educated faculty. A sustained program of visiting professorships would provide a useful mechanism for bringing in distinguished foreign faculty who could not only enrich curricular content but also contribute new ideas about university organizational and administrative practices. In some cases, their visits might also lead to longer-term joint research efforts and ongoing mentoring of Armenian graduate students. Selected laboratories for use by faculty and students in the universities should also be upgraded. Improved and stable economic conditions are important in allowing educational reform to move forward, as they should provide the Armenian government with additional resources to provide the required level of support. In the meantime, philanthropic organizations will likely be the main source of funding for these efforts, although industry may also be a promising source of support if firms can be convinced of the value of strengthening the technical education of their potential future employees. As examples of both of these avenues of support, the State Engineering University of Armenia has received a fiber optics laboratory from an Armenian-American professional society and the American

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Science and Technology in Armenia: Toward A Knowledge-Based Economy University of Armenia has outfitted its motion control laboratory with equipment donated by a U.S. firm. CANDLE CANDLE (Center for the Advancement of Natural Discoveries using Light Emission) is an ambitious attempt to create a state-of-the-art, next-generation facility with applications in a wide range of fields, from basic physics, chemistry, and biology to applied research in drug design, medical diagnostics, and environmental remediation. It deserves to be supported through the next pre-construction phase of detailed engineering design and testing the concept of building prototype equipment in Armenia, which will require funding of up to $4 million over a two-year period. Intellectual Property Intellectual property is a key enabling issue for the long-term success of technology-based businesses. Entrepreneurs in Armenia need to understand the importance of timely filing of applications for patents, copyrights, or trademarks in Armenia and abroad before such filings are compromised by publications, web postings, or presentations at conferences. Without strong intellectual property positions, they may not be able to raise the financing needed for development and production activities or to compete successfully in international markets. At the same time, considerable expenses are involved in obtaining protection for intellectual property; for example, expenses in the United States often exceed $10,000 for each successful filing that provides protection only in the United States. Therefore, to receive international protection, the entrepreneur in Armenia must have substantial financial support from sources that are confident the products will be market successes. In Armenia, both an improved understanding of the legal framework for obtaining protection of intellectual property and the financial resources necessary to obtain such protection are important. Of course, there is a natural tendency for researchers and inventors to assume that their products will sell if only they have patent protection, but the reality may be quite different. A broad survey of the overall intellectual property rights (IPR) situation in Armenia—including the adequacy of domestic legislation and government organizations and the linkages of local IPR procedures to international IPR requirements—is urgently needed. This survey should be followed by steps that will begin to provide a framework for protecting commercially attractive innovations in Armenia. Meanwhile, Armenian institutions that have participated in activities sponsored by the International Science and Technology Center (ISTC) are eligible to apply for ISTC support in the areas identified in Appendix N. Unfortunately,

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Science and Technology in Armenia: Toward A Knowledge-Based Economy similar services have not yet been established to assist other entrepreneurs. Among the key questions are the following: Are the existing Armenian laws covering patents, copyrights, and trademarks adequate? If not, how should they be amended to help ensure that there is clarity as to ownership of intellectual property developed with private funds and intellectual property developed with government funds and that the procedures for applying for and obtaining certification of such ownership are appropriate? Should there be an office within the Armenian government that has the ability to advise entrepreneurs on how to obtain intellectual property protection within Armenia and the relationship of that protection to protection in other countries? Could such an office process applications for protection in Armenia in an efficient manner? How can the advisory mechanisms of ISTC, the European Union, or other external organizations be strengthened to provide entrepreneurs with guidance on applying for IPR protection in the United States, Europe, Japan, and other major worldwide markets, and how can the costs of such filings be covered for newly emerging firms? Is the court system in Armenia prepared to resolve disputes over infringement of intellectual property rights? What steps are necessary for it to do so? Is an advisory mechanism available, through ISTC, CRDF, or other organizations, that can assist entrepreneurs in their negotiations with foreign firms concerning the sharing of intellectual property rights (analogous to the services provided by these organizations in Russia)? There may be so many weaknesses in the current system in Armenia and inadequacies in the currently available advisory groups that a new center for intellectual property rights is warranted. In any event, when considered together with the realistic potential for worldwide marketing of many Armenian products, there is clearly a need for better understanding of these issues by entrepreneurs and relevant specialists. To this end, the law schools of AUA and YSU should be encouraged to give greater attention to intellectual property rights in their curricula. An effective initial approach would be to have a series of international workshops on various IPR issues to stimulate the Armenian government to become more involved while allowing entrepreneurs in the country to have direct access to foreign specialists who are able to clarify approaches and help answer their specific questions. In addition to ISTC and CRDF, NATO might also be able to provide a venue for such workshops. As the extent of the need for protection of intellectual property becomes clearer, a fund to support worldwide patent filings might be considered. Of course, there will be considerable challenges in sorting out which filings should be sup-

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Science and Technology in Armenia: Toward A Knowledge-Based Economy ported, given the uncertain potential value of a specific invention and the difficulty in assessing the possibility of competing applications. Product Certification In addressing international markets, Armenian officials and entrepreneurs have limited understanding of important regulatory and product certification issues. These constraints are particularly important for biotechnology and pharmaceutical development. Again, as an initial step, a series of international workshops to help sensitize both the Armenian government and entrepreneurs to these issues, such as U.S. and European regulatory requirements concerning food and drugs, are in order. During these workshops, foreign experts would have an opportunity to clarify the scope of the areas of concern and recommend mechanisms for addressing these concerns on a continuing basis. Perhaps the government should increase its capabilities in the areas of interest, or perhaps a university or a nonprofit group in Yerevan should be supported to provide advisory services in this field. Business Management Skills Business management skills are a critical need in Armenia. Master’s of business administration (M.B.A.) training programs in Armenia should be expanded, as previously discussed. Such support could include, for example, subsidizing existing M.B.A. programs at AUA and the State Engineering University of Armenia and providing funding for these programs to sponsor visiting faculty from Europe or the United States. Workshops in specific areas such as international finance, taxation, and management could be supported through a not-for-profit organization modeled after Connect San Diego or Pasadena Entretec. Research Relevant to Interests of U.S. Department of Defense Research related to military interests extends beyond the scope of this report. However, it could be very useful to arrange visits by U.S. military R&D organizations, such as the Office of Naval Research, the Air Force Office of Scientific Research, or the Army Research Office, to relevant Armenian institutions and firms. If an area of joint interest is found, these U.S. organizations should be in a position to provide travel grants, support research, or convene workshops as appropriate. Science and Technology Policy Overarching all of the foregoing recommendations is concern about the most efficient use of Armenia’s scarce resources to build an S&T base that both

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Science and Technology in Armenia: Toward A Knowledge-Based Economy responds to global challenges and opportunities and is grounded in the economic realities of the country. Strong Armenian government leadership is needed, including a long-term budgetary commitment to upgrade the science and technology base. Although the Armenian government has set a reasonable target of devoting 3 percent of the total national budget to S&T, actual funding has been only about one-third of that level. This low level of support by the government has led to excessive dependence on foreign sources of funding for the nation’s S&T capacity. Insistence by foreign funders on cost sharing by the Armenian government should be considered as a means of encouraging it to fulfill its budget commitments. Improving consensus within the country on S&T priorities, institutional responsibilities, and interactions with international partners is important in optimizing the use of resources. To this end, a series of well-structured national conferences, with international participants, on selected aspects of S&T policy should be considered. International experience can provide Armenia with a range of options as the country seeks the best road to making science and technology more potent development forces. Discussion of the issues by Armenians themselves can assist the international community in understanding how its members can most effectively participate in future activities in the country. Armenia must move toward an integration of education and research, focusing on fewer research institutions than now exist and creating centers of excellence corresponding to areas of national priority. Over time, the results of research will increasingly be applied in the local economy, when the latter improves its capacity to absorb research and researchers. Alternatively, research results may be sold abroad as part of cooperative projects. From these relationships and from the increasing marketability of students trained in these activities should emerge a condition of sustainability, meaning economic viability, and a greater contribution to the Armenian economy. The process of moving toward a knowledge-based economy is not simple and must be supported by committed political leaders with an appreciation both of what science and technology can contribute to economic and social development and of what they cannot.