Over the past several years, Armenia has received respectable rankings in international indices that review country business environments and investment climates. Significant U.S. investments are present in Armenia, most notably ContourGlobal’s acquisition of the Vorotan Hydroelectric Cascade and Lydian International’s efforts to develop a major gold mine. U.S. investors in the banking, energy, pharmaceutical, information technology, and mining sectors, among others, have entered or acquired assets in Armenia. Armenia presents a variety of opportunities for investors, and the country’s legal framework and government policy aim to attract investment, but the investment climate is not without challenges. Obstacles include Armenia’s small market size, relative geographic isolation due to closed borders with Turkey and Azerbaijan, weaknesses in the rule of law and judiciary, and a legacy of corruption. Net foreign direct investment inflows are low. Armenia is a member of the Eurasian Economic Union, a customs union that brings Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia together in an integrated single market. In May 2015, Armenia signed a Trade and Investment Framework Agreement with the United States. The TIFA establishes a United States-Armenia Council on Trade and Investment to discuss bilateral trade and investment and related issues. In November 2017, Armenia signed a Comprehensive and Enhanced Partnership Agreement with the European Union, which aims in part to improve Armenia’s investment climate and business environment.
Armenia imposes few restrictions on foreign control and rights to private ownership and establishment. There are no restrictions on the rights of foreign nationals to acquire, establish, or dispose of business interests in Armenia. Business registration procedures are straightforward. According to foreign companies, otherwise sound regulations, policies, and laws are sometimes undermined by problems such as the lack of independence, capacity, or professionalism in key institutions, most critically the judiciary. Armenia does not limit the conversion and transfer of money or the repatriation of capital and earnings. The banking system in Armenia is sound and well-regulated, but investors note that the financial sector is not highly developed. The U.S.-Armenia Bilateral Investment Treaty provides U.S. investors with a variety of protections. Although Armenian legislation offers protection for intellectual property rights, enforcement efforts and recourse through the courts require improvement.
Armenia experienced a dramatic change of government in April/May 2018. Parliamentary elections in December 2018 led to the exit from power of numerous parliamentarians known to have significant business holdings in Armenia and exercise outsized sway over large sections of the economy. An anti-corruption campaign is underway as part of efforts to eliminate systemic corruption. Overall, the competitive environment in Armenia is improving, but several businesses have reported that broader reforms across judicial, tax, customs, health, education, military, and law enforcement institutions will be necessary to shore up these gains. Despite progress in the fight against corruption and improvements in some areas that raise Armenia’s attractiveness as an investment destination, investors claim that numerous concerns remain and must be addressed to ensure a transparent, fair, and predictable business climate. An investment dispute in the country’s mining sector has attracted significant international attention and remains outstanding after several years.
|TI Corruption Perceptions Index||2019||77 of 180||http://www.transparency.org/
|World Bank’s Doing Business Report||2020||47 of 190||http://www.doingbusiness.org/
|Global Innovation Index||2019||64 of 129||https://www.globalinnovationindex.org/
|U.S. FDI in partner country ($M USD, historical stock positions)||2018||USD 7 million||http://apps.bea.gov/international/
|World Bank GNI per capita||2018||USD 4,230||http://data.worldbank.org/indicator/
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The government of Armenia officially welcomes foreign investment. The Ministry of Economy is the main government body responsible for the development of investment policy in Armenia. Armenia has achieved respectable rankings on some global indices measuring the country’s business climate. Armenia’s investment and trade policy is relatively open; foreign companies are entitled by law to the same treatment as Armenian companies. Armenia has strong human capital and a well-educated population, particularly in the science, technology, engineering, and mathematics fields, leading to significant investment in the high-tech and information technology sectors. Many international companies have established branches or subsidiaries in Armenia to take advantage of the country’s pool of qualified specialists and position within the Eurasian Economic Union (EAEU). However, many businesses have identified challenges with Armenia’s investment climate in terms of the country’s small market (with a population of less than three million), relative geographic isolation due to closed borders with Turkey and Azerbaijan, per capita gross national income of $4,230, and concerns related to weaknesses in the rule of law.
After a dramatic change of government in April/May 2018, major sectors of Armenia’s economy have ostensibly become more open to competition. Large businesses backed by oligarchic interests are notionally less able to draw on government support to prop up their market positions. An anti-corruption campaign was launched after the 2018 change of government, and a series of high-profile cases have resulted as part of efforts to eliminate systemic corruption. These developments serve to improve Armenia’s investment climate and competitive environment, though the fight against corruption needs to be institutionalized in the long term, especially in critical areas such as the judiciary, tax and customs operations, and health, education, military, and law enforcement sectors. Foreign investors are still concerned about the rule of law and equal treatment. U.S companies have also reported that the investment climate is tainted by a failure to enforce intellectual property rights. There have been concerns regarding the lack of an independent and strong judiciary, which undermines the government’s assurances of equal treatment and transparency and reduces access to effective recourse in instances of investment or commercial disputes. Representatives of U.S. entities have raised concerns about the quality of stakeholder consultation by the government with the private sector and government responsiveness in addressing concerns among the business community. The Armenian National Interests Fund and Investment Support Center are responsible for attracting and facilitating inward foreign direct investment.
Limits on Foreign Control and Right to Private Ownership and Establishment
There are very few restrictions with regard to limitations on foreign ownership or control of commercial enterprises. There are some restrictions on foreign ownership within the media and commercial aviation sectors. Local incorporation is required to obtain a license for the provision of auditing services.
The Armenian government does not maintain investment screening mechanisms for foreign direct investment, though government approval is required to take advantage of certain tax and customs privileges.
Other Investment Policy Reviews
In 2019, the U.N. Conference on Trade and Development (UNCTAD) published its first investment policy review for Armenia . The World Trade Organization (WTO) published a Trade Policy Review for Armenia in 2018.
Armenia has traditionally fared well in the World Bank’s Ease of Doing Business report. The government has announced its commitment to addressing deficiencies that prevent Armenia from obtaining a higher ranking. Companies can register electronically at http://www.e-register.am/en/ . This single window service was launched in 2011 and allows individual entrepreneurs and companies to complete name reservation, business registration, and tax identification processes all at once. The application can be completed in one day. An electronic signature is needed in order to be able to register online. Foreign citizens can obtain an e-signature and more detailed information from the e-signature portal at https://www.ekeng.am/en/ . In December 2019, the government launched a new e-regulations platform that provides a step-by-step guide for business and investment procedures. The platform is available at https://armenia.eregulations.org/ .
The Armenian government does not restrict domestic investors from investing abroad.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
|Host Country Statistical source*||USG or international statistical source||USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
|Host Country Gross Domestic Product (GDP) ($M USD)||2019||$13,649||2018||$12,433||www.worldbank.org/en/country|
|Foreign Direct Investment||Host Country Statistical source*||USG or international statistical source||USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
|U.S. FDI in partner country ($M USD, stock positions)||2018||$228||2018||$7||BEA data available at
|Host country’s FDI in the United States ($M USD, stock positions)||N/A||N/A||2018||$3||BEA data available at
|Total inbound stock of FDI as % host GDP||2018||44%||2018||44%||UNCTAD data available at
Source for Host Country Data: Statistical Committee of the Republic of Armenia
|Direct Investment from/in Counterpart Economy Data|
|From Top Five Sources/To Top Five Destinations (US Dollars, Millions)|
|Inward Direct Investment||Outward Direct Investment|
|Total Inward||5,072||100%||Total Outward||232||100%|
|North Macedonia||334||6.6%||United States||3||1.3%|
|“0” reflects amounts rounded to +/- USD 500,000.|
Source: IMF Coordinated Direct Investment Survey (CDIS) (2018)
A significant portion of outward investment is not specified by destination in the CDIS.
Table 4: Sources of Portfolio Investment
Data not available.