ESTABLISHMENT OF ENGINEERING LABS IN ARMENIAN SCHOOLS

 

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ESTABLISHMENT OF ENGINEERING LABS

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ESTABLISHMENT OF ENGINEERING LABS IN ARMENIAN SCHOOLS Project proposal Designed by Union of Information Technology Enterprises Yerevan 2015

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CONTENTS 1. 2. Executive summary............................................................................................................. 3 The core of the proposal ..................................................................................................... 6 2.1. 2.2. 2.3. 3. Input ............................................................................................................................ 7 Output .......................................................................................................................... 8 Supporting platform...................................................................................................... 9 Current situation/market opportunities................................................................................12 3.1. The gap between supply and demand of technical skills in the global technological market. ..................................................................................................................................12 3.2. 3.3. 3.4. 3.5. Outsourcing global market of technological services ...................................................13 Engineering to the school: recent market trends .........................................................15 The technological sector in Armenia ...........................................................................15 The technical skills study in Armenia ..........................................................................16 4. 5. Project prototype - Armrobotics project ..............................................................................17 Project description .............................................................................................................21 5.1. 5.2. 5.3. 5.4. Action plan ..................................................................................................................21 Schedule of investments .............................................................................................21 Investment project description ....................................................................................22 Current activities .........................................................................................................24 6. The economic results of the project/ impact assessment ...................................................27 6.1. 6.2. 6.3. Program graduates .....................................................................................................27 The economic impact ..................................................................................................28 “Investment-result” summary ......................................................................................31 7. Annex ................................................................................................................................34 7.1. 7.2. Union of Information Technology Enterprises: company description ...........................34 The technical infrastructure of the project ...................................................................36 2

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1. EXECUTIVE SUMMARY Union of information technology enterprises (UITE) initiates the implementation of the project of establishment of engineering club-laboratories in the system of schools of Armenia (in all 1,400 schools of Armenia), which aims at strengthening basic technical education in Armenia, assist pupils in choice of specialization, prepare technically education labor force, which will in turn contribute to growth of the sphere. The most significant outcome expected as a result of project implementation are encouragement of technological education in Armenia, growth of employment in the technology sector, increased economic activity both in technology and adjacent sectors. In addition to mentioned economic factors, the project has a large social value creation potential. It is expected that such a educational system will lead to change of mindset, will inculcate new innovative values that recuperate the system of social values among the youth Implementation of the project requires developing quality content, creating corresponding infrastructure and training teaching staff. UITE will assume project management with support of the government, business, adjacent projects and transnational organizations. Essence of the Proposal Current situation/market opportunities Project prototype: ArmRobotics program As a result of project implementation, a pool of technical skills will accumulate in the labor market of Armenia. Market research showed that an immense unmet demand for such skills in global and local technology sectors. Among other factors, the latter substantiates the necessity and timeliness of the project. Since 2008 Union of information technology enterprises has been implementing Robotics development project (ArmRobotics) in Armenia. It has had a number of achievement and progress and will serve as a prototype for the project of establishment of engineering club-laboratories in the system of schools of Armenia. The investment project is expected to be implemented in stages over a period of 4 years. During 2016-2019 corresponding infrastructure will be created in 1400 schools of Armenia, and teaching staff will be trained. The infrastructure required to launch engineering clubs in schools consists of 4 components: “Serob” robot constructor, Nairi lab, Atelie lab and The Live Code programming language. To qualify for the project, leaders of clubs have to pass training with an initially determined program. As a result of project implementation, the number of graduates from engineering club-laboratories is expected to reach ~10,000 by 2024. As a result of project implementation the cumulative number of additional technological jobs created will be 34,000, which will increase by 4 times the current workforce of the sector Incremental economic activity to be created is estimated at around ~200 billion AMD by 2024. Over the expected period of project implementation (2016-2024) investment needs are assessed at AMD 4.2 billion, and project operating expenses will amount to AMD 26.8 billion. In the envisaged period total investments and operating expenses will amount to AMD 31 billion. whereas as a result of project implementation budgeted inflows amount to AMD 171.9 billion over the same period. By 2019 accumulated inflows will have already exceeded accumulated outflows. The cost-benefit analysis shows that the project is rather economically efficient in the envisaged period. Project description Project outcomes/impact assessment Summary investments and outcomes 3

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ECONOMIC RESULTS OF THE PROJECT: EXPENSES AND INCOMES AMD million 20162024 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total investments and operating expenses Total collected taxes 31,022 171,849 1,645 2,349 1,678 3,143 4,528 3,594 8,124 3,544 13,217 3,784 18,945 4,040 27,511 4,314 40,507 4,607 57,260 80 ECONOMIC RESULTS OF THE PROJECT. EMPLOYMENT AND ECONOMIC ACTIVITY 20162024 Schools with engineering clubs, as of the ending of academic year Members of clubs Graduates Entrants into labor market, with secondary specialized education Continuing education in higher educational institutions in technical sciences Entrants into labor market, with higher education 2016 2017 2018 2019 2020 2021 2022 2023 2024 1,400 50,400 56,400 0 0 0 400 8,800 1,600 800 19,200 4,000 1,200 31,200 6,000 1,400 39,200 8,400 1,400 42,000 8,400 1,400 44,800 8,400 1,400 47,600 9,800 1,400 50,400 9,800 28,200 0 800 2,000 3,000 4,200 4,200 4,200 4,900 4,900 16,920 0 480 1,200 1,800 2,520 2,520 2,520 2,940 2,940 5,400 0 0 0 0 0 432 1,080 1,620 2,268 New jobs in technology sectors, annual 33,600 0 800 2,000 3,000 4,200 4,632 5,280 6,520 7,168 New jobs in technology sectors, cumulative 33,600 0 800 2,800 5,800 10,000 14,632 19,912 26,432 33,600 4

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Incremental economic activity, AMD million Growth of the technological sector Creation of additional GDP Additional export 526,208 0 960 5,280 14,640 30,240 53,875 87,667 134,918 198,627 0.0% 0.00% 0.00% 0.3% 0.00% 0.07% 1.3% 0.02% 0.36% 2.9% 0.06% 0.90% 4.8% 0.12% 1.69% 6.9% 0.21% 2.74% 9.0% 0.32% 4.05% 11.0% 0.48% 5.67% 13.0% 0.69% 7.58% Job created in adjacent sectors, annual Incremental economic activity in adjacent sectors, AMD million 100,800 0 2,400 6,000 9,000 12,600 13,896 15,840 19,560 21,504 141,523 0 3,370 8,424 12,636 17,690 19,510 22,239 27,462 30,192 5

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2. THE CORE OF THE PROPOSAL The Union of Information Technology Enterprises (UITE) undertakes to conduct a program of establishing engineering club-laboratories within the public school system of Armenia, which has the goal to improve the technical education base in Armenia, guide the professional orientation of pupils, prepare professional workforce with technical education, which, accordingly, will enlarge the sector. The engineering club-laboratories will give an opportunity to run engineering clubs in all 1400 schools of Armenia as after class activities. The project, with its expected wide-ranging social-economic impact, is linked to the national strategies of national security, economic development and education. The most important results, expected from implementation of the project, are stimulation of technological education in Armenia, expansion of technological employment, establishment of additional economic activity both in the area of high technologies and the adjacent sectors. It is noteworthy, that besides the mentioned economic factors, the project stands out with a large impact on the social values. It is expected that such educational system will lead to the change of mentality and train new creative values, which will remedy the social value system among the young people. This program strengthening technical education will enhance Armenia’s position in the international landscape as a knowledge-based country. The “Chess Empire” will stand out by another exclusive approach – the state wide-ranging program of engineering education in the public school system. The implementation of the project requires development of high-quality content, establishment of appropriate infrastructure and training of high-quality trainers. The UITE will run the management of the project. The short description of the project is presented by the “Input-output” model1 in the following Figure. Figure 1: The description of the program of establishing the engineering club-laboratories by the “Input-output” model 6

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2.1. Input The main inputs of the project are the development of the content, necessary for running the engineering club-laboratories, setting up the infrastructure, and training of the trainers. Development of the education content: experts will work on the development of the education program of engineering club-laboratories and its constant updates. The education program should comply with the best international practice. The program should be provided for the pupils of 5-12 classes. The 4 main components of the program, by their phases, are the followings: A robot kit, Nairi lab, Atelier lab, LiveCode. 7

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The technical description of these components is given in the Annexes. Setting up the infrastructure and the logistics: The infrastructure, necessary for running of the clubs, includes the equipment of the labs and the software. Training of the trainers: The trainers are one of the key success factors of the project. The choice of the coaches and their appropriate training is the cornerstone of the project, with the biggest portion of investments. 2.2. Output The project stands out for its wide-ranging social-economic impact. The main impacts, expected as a result of implementation of the project, are discussed below. Professional orientation towards engineering profession: one of the most important impacts of the project is the professional orientation of the young generation towards technical sciences. The latter supports the strategy of development of a knowledge-based economy in Armenia. In addition, the spread of engineering clubs in the public education system will bring to the remedy of public mentality, giving the young generation a possibility to practice in science. As a result of the latter, the importance and reputation of engineering/technical education will increase, which will promote the development of science-based sectors and high-tech industry by providing an appropriate workforce to the sectors. Workforce with new quality/technical education The educational program of the engineering clubs assumes that the graduates of the clubs (without graduating from a university) will be armed with an appropriate technical knowledge for entering the labor market as technical specialists of initial levels. This will establish a qualitatively new segment in the technological labor market of Armenia, with technical skills. Transformation of the “role model” in the society New job creation as a result of the program implementation, high salaries and perspectives of development will show the young generation the opportunities to achieve a success with the help of education and own intellectual capital. The success stories of professionals in the technological area will bring to transformation of the role models within the society. Currently within the wide range of the society the business owners and representatives of the governmental authorities are considered as “successful examples” for imitation, then as a result of the program a critical mass of successful professionals will be formed in the technological sector, which will establish a role model of a new quality. As a result of such transformation the social values will significantly change, which is one of the cornerstones of economic development and remedy of social-economic system. Additional economic activity The development of new skills will open new markets for technological companies of Armenia. Currently, the Armenian technological sector is mainly specialized on outsourcing of the 8

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services with higher than average additional value, which is due to domination of the specialists with higher education and higher than average skills. Meanwhile, the domestic IT and engineering companies affirm that in case of existence of high-quality technical workforce with average professional level they could enter into the segment of export of services with lower added value and compete with China and India, which have an advantage in the labor costs. The entrance to those markets will serve as a platform for Armenia’s technological sector, as a result of which the domestic companies will accumulate the appropriate experience and skills for activity in international markets. In the long-term period the latter will contribute to enlargement of export markets. Development of the adjacent sectors The increasing economic activity in the technological sector will inevitably bring to development of the adjacent sectors. The experience of different economies of the world shows that 1 new workplace, created in the technological sector, creates up to 6-7 new workplaces in the adjacent sectors. Even the modest assessments of this impact bring to very big results in the economy of Armenia. Other impact areas Regional development, as the program will be implemented within the whole country. Currently, the domestic technological companies already have a solid experience of working in the regions and regional development. The major part of the social-economic impacts of the program will be decentralized from the capital city. Promotion of the entrepreneurial culture, Establishment and strengthening of the “school system – labor market – university system – labor market” link Improvement of demographical situation by decreasing the reproductive age and lowering the level of emigration due to provision of financial incentives, Link between the companies of the sector and the educational system, Formation of the critical mass of the leaders and entrepreneurs of the new quality. - 2.3. Supporting platform Union of Information Technology Enterprises (UITE) The UITE will perform the general management of the project. Besides the administrative management, the organization will develop and serve the content part of the program, ensure the link among the beneficiaries of the program and continuous enlargement of the program. The UITE is the biggest business association of Armenia, which during its long-term activity has accumulated a huge experience of management of projects. The company’s assets for implementation of the project include the appropriate human resources. Institutional capacities, 9

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close links and a history of cooperation with the companies of the sector, the educational system, governmental authorities and other beneficiaries of the project. The short description of the company and the implemented projects are presented in the Annexes. Government The support of the government is crucial for the appropriate implementation of the project in the following main directions: To give a state importance to the program and include it in the national agenda of reforms, To provide a financial support to the program, To ensure the public awareness for the program. The adjustment of legislative and regulatory framework for not limiting and increasing the results of the program. The business sector For multiplication of the efficiency of the program, the participation of the sector in the program will serve as a guarantee. The main formats of participation will be: Mentorship It is assumed that each of the companies, participating in the program, will “adopt” one engineering club and will become its mentor. This will assume a support by the company to the club and the members of the club, in particular     visits to the given school/club, presentation of the activity and success stories of the company to the members of the club, establishment of interest among the pupils towards the sector, by contributing to the professional orientation, regular hosting of the pupils and their parents at the company in order to give a general notion about the activity, professions, counterparts and clients. Participation in the development of the content A working group will be established for development of the content of the program and its current updates, which will include specialists from the companies of the sector. Establishment of job places and attraction of the graduates of the engineering clubs The companies of the sector will become the direct “consumers” of the results of the program. The latter are the ones to ensure the establishment of new job places for attraction of the new workforce. 10

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Assessment of the needs and presentation of the perspectives Highlighting of the current needs by the sector and presentation of the current and expected trends of the sector will help to provide modernity to the program and ensure maximum compliance of the results of the program with the requirements of the companies of the sector. Adjacent programs The impact of the program of establishment of engineering club-laboratories will increase by implementation of adjacent strategic programs, such as: The currently existing programs of development of the sector The technological sector of Armenia is one of the most dynamic developing sectors of Armenia. The latter is being highly contributed by the development programs, implemented in the sector, the establishing infrastructures and educational programs. It is expected, that the results of the latter will contribute to the success and continuity of the program of establishment of engineering club-laboratories. Such programs include the Microsoft Innovation Center (MIC), Regional Mobile Applications Laboratory (mLab ECA), Armenian-Indian Center for Excellence in ICT, Armenian National Engineering Laboratory (ANEL), Gyumri Information Technologies Center, Synopsys Armenia training center, etc. The description of these programs is given in the Annexes. The programs existing in the agenda A range of other programs is also being development in the direction of development of engineering education and technological entrepreneurship in Armenia, such as the establishment of online university, development of the program of accelerated bachelor education, as well as establishment of the software laboratory with the prototype of the ANEL. Foreign organizations or their research centers Development of the workforce and training of the critical mass of the specialists with the new skills will contribute to attraction of new foreign organizations and their research infrastructures to Armenia. The latter, for their part, will take part in the processes of transformation of the labor market. 11

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3. CURRENT SITUATION/MARKET OPPORTUNITIES In the result of the project’s implementation, the critical mass of professionals with technical skills will be created in the labor market of Armenia. The market analysis shows that there is a huge unsatisfied demand of similar skills in the international, as well as in local IT sector. This fact, along with other factors, substantiates the necessity and relevance of the project. 3.1. The gap between supply and demand of technical skills in the global technological market. Existing gap between supply and demand of the technical professionals (STEM) 2 and technical skills is one of the most discussed topics of the international technological sector in recent years. The rapid growth of the global high-tech industry made the key role of qualified workforce with scientific and engineering professions for every country, striving for competitive advantage in 21th century. Furthermore, in the countries with the most developed technology sector it is already long-term that the development of the sector exceeded the corresponding growth of the labor force, which leads to the growing gap between supply and demand of the technological skills. Moreover, this gap is the result of both qualitative and quantitative factors US labor statistics office forecasts that only in USA the number of the new vacant STEM work places will reach to 1mln3. during the 2012-2022. The latter means that the quantity of the STEM professionals, required by the sector, will have average annual growth of 13% (technological and mathematical sciences specialists in 18%) This rate of growth, according to various analyses, is significantly higher than the number4 of potential graduates in these professions. The latter will inevitably lead to a deepening of already existing gap. The problem, according to other resources, is deeper and problematic than than reflected in official statistics. Thus, according to the American Association of IT Industry – the research of the CompTia, there will be 2.5mln. vacant positions of the IT sector only in USA by 2020. There are the tendencies of the technical skill’s shortage also in the other developed and even in the developing technological markets. According to the researches among the employers, which was made by the Canadian “The Conference Board of Canada” research company in 2013, among the 20 professions for which it is the hardest to find a worker, the engineering profession is in the first place. There will be 1.3mln demand for IT professionals in Latin America, South-East Asia, China, Middle Asia and Africa by 2016. At he same time, there will be already 864,000 vacant positions in EU by 20155. 2 Henceforth, STEM: Classification includes technical professionals from science, technologies, architecture and mathematic sphers (STEM – science, technology, engineering and mathematics): 3 Bureau of Labor Statistics (BLS), United States Department of Labor 4 McKinsey Global Institute, 2012. “The world at work: Jobs, pay and skills for 3.5 billion people” 5 IDC 12

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According to the published report of the Microsoft and IDC, there was 1.7mln. of unsatisfied demand for technological professionals, only in cloud-based and surrounding areas by 2012. This number, according to predictions, will reach to 7mln. before the end of 20156. The mismatch of STEM professional skill’s demand and supply the leading countries decide by several main directions: human capital imports, which prospects are limited to a certain level of labor mobility, as well as rising demand in experts in developing countries, which are the main suppliers of the technology workforce so far (eg India and China). workforce training, which cannot have an essential role in the rapid growth of demand. outsourcing. IT outsourcing services is the fastest-growing export market in the world. IT skills gap discussed in the context the outsourcing market has long-term and rapidly growing prospects. Outsourcing global market of technological services - 3.2. The outsourcing services of information technologies gained momentum thanks to the Internet, where all national borders are opened up by globalization Market development forces are the reduction in the cost of labor services through outsourcing, solution to the problem of limited manpower and so on. The main importers of ICT services are the United States and European countries. The latters, however, are more inclined to a nearshoring, and outsource to Eastern Europe countries. Figure 1. The largest importers of computer services, billions of US dollars Source: UNO on Trade and Development, UNCTADSTAT China, India and Ireland are world leaders in ICT services net exports.They satisfy the global outsourcing market demand for a large proportion. 6 IDC White Paper, 2012. “Cloud Computing’s Role in Job Creation” 13

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Figure 2. The largest exporters of IT services, billions of US dollars Source: World Bank, "World Development Indicators" online database data The ICT export service statistics of CIS region is quite modest compared to world leaders, but the prospects appear to be good, thanks to the impressive growth dynamics. Figure 3. The largest exporters of IT services per capita, USD Source: World Bank, "World Development Indicators" online database data The outsourcing market is steadily growing industry. The global IT services export volume grew by an annual average of 12% during 2005 - 2012 years. The most promising of IT outsourcing services are Web programming Mobile app development Solutions for business Cloud Services 14

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- "Big" Data 3.3. Engineering to the school: recent market trends The various researches in the developed world indicate that there is a shortage of qualified STEM professionals. Therefore, the implementation of the engineering education in the school educational systems getting more popular in the world. This trend is most popular in USA, where since 90th the various school programs have been developed with both public and private resources. The programs are various: generally the separate states have their own programs, but there are also those that have become widespread. Here are the most popular programs: ASSET Inc. (Achieving Student Success Through Excellence in Teaching): It develops the special programs for professional develpement of the teachers and educational programs for secondary schools. It was created in Pennsylvania in 1994 and initially introduced in two schools. Now it is implemented in more than 180 schools. Detroit Area Pre-College Engineering Program (DAPCEP): It develops educational programs for for 5,000 students annually. It cooperates with 40 schools. Engineering is Elementary (EiE): This is perhaps the most common project. One of the main aims of the project is the provision to children with the relevant literature. EiE also develops the programs about the STEM sphere for elementary schools. Already in 2009 EiE operates in 15,500 schools from 50 states of the USA. There are also many other, smaller projects, such as the Australian school program for children in grades 7-9. Besides, there are also a number of public and private projects, which organize the competitions for children. For example, the FIRST LEGO league, which is the most famouse projects in the field of robotics. It is for 9 to 16 years old children and has already implemented in 70 countries. It was created in 1998 with joint efforts of FIRST (For Inspiration and Recognition of Science and Technology) and LEGO. NASA is also organizing the robotics contests for children of all ages, in the frames of NASA Education project. 3.4. The technological sector in Armenia Information and high-tech industry is the fastest growing sector of Armenia's economy. The sector's competitive advantage is the availability of highly skilled and relatively cheap labor force and a strong educational base. That is inherited from Soviet Armenia, which is considered the "Silicon Valley" of the USSR. Armenia's IT and high-tech industry is quite young. About 80% of companies in the sector are established in 1998-2008. The flow of the newly established companies was especially large during the last 5 years, due to the dissemination of the "start-up" culture and the implementation of various programs. 15

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