EXECUTIVE SUMMARY

Over the past several years, Armenia has received respectable rankings in international indices that review country business environments and investment climates. Projects representing significant U.S. investment are present in Armenia, most notably ContourGlobal’s acquisition of the Vorotan Hydroelectric Cascade and Lydian’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. In 2020, COVID-19 and the intensive fighting in the Nagorno-Karabakh conflict dented Armenia’s economic output and investment profile.

In May 2015, Armenia signed a Trade and Investment Framework Agreement with the United States. This agreement establishes a United States–Armenia Council on Trade and Investment to discuss bilateral trade and investment and related issues. Since 2015, Armenia has been 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 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 continues 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 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. A number of investors have raised concerns about the quality of dialogue between the private sector and government. Investors have also flagged issues regarding government officials’ ability to resolve problems they face in an expeditious manner. An investment dispute in the country’s mining sector has attracted significant international attention and remains outstanding after several years.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 60 of 180 http://www.transparency.org/research/cpi/overview 
World Bank’s Doing Business Report 2020 47 of 190 http://www.doingbusiness.org/en/rankings 
Global Innovation Index 2020 61 of 131 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2019 USD 6 million https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2019 USD 4,680 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

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), limited consumer buying power, relative geographic isolation due to closed borders with Turkey and Azerbaijan, and concerns related to weaknesses in the rule of law.

Following a revolution in April/May 2018 fueled in large measure by popular frustration with endemic corruption, Armenia’s government launched a high-profile anti-corruption campaign. The campaign has yielded a number of high-profile cases. Beyond these successes, 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 remain concerned about the rule of law, equal treatment, and ethical conduct by government officials. U.S companies have 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. Concerns about equal treatment, particularly on the basis of nationality, are fueled by perceptions of the uneven application of laws and regulations across enterprises in specific industries. 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. Government officials have publicly responded to private sector concerns about perceptions of slow movement in the government bureaucracy as a function of needing to guard against corruption-related risks. 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 in particular. Government approval is required to take advantage of certain tax and customs privileges, and foreign investors are subject to the same requirements as domestic investors where regulatory approvals may be involved.

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.

Business Facilitation

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 here .  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 .  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 here . According to the World Bank’s most recent Ease of Doing Business report, it takes four days to complete the company registration process in Armenia.

Outward Investment

The Armenian government does not restrict domestic investors from investing abroad.

Basic provisions covering U.S. investment in Armenia are set by the U.S.–Armenia Bilateral Investment Treaty (BIT), in force since 1996. The U.S.–Armenia BIT stipulates that conditions for investors of each party be no less favorable than for the party’s own national investors or for investors from any third state. It provides for the option of international arbitration in the case of investment disputes. Armenia has BITs in force with the following additional countries: Argentina, Austria, Belarus, Belgium, Bulgaria, Canada, China, Cyprus, Egypt, Finland, France, Georgia, Germany, Greece, Iran, Iraq, Israel, Japan, Jordan, Kazakhstan, Kuwait, Kyrgyzstan, Latvia, Lebanon, Lithuania, Luxembourg, the Netherlands, Qatar, the Republic of Korea, Romania, Russia, Sweden, Switzerland, Syria, Ukraine, the United Arab Emirates, the United Kingdom, and Uruguay. Armenia has also signed BITs with Tajikistan, Turkmenistan, and Vietnam, but these agreements have not yet entered into force. Armenia is signatory to the Commonwealth of Independent States Multilateral Convention on the Protection of Investor Rights, in addition to some other international agreements with investment provisions.

Armenia became a member of the EAEU in January 2015, together with Belarus, Kazakhstan, Kyrgyzstan, and Russia. Armenia entered into a Comprehensive and Enhanced Partnership Agreement (CEPA) with the European Union (EU) in November 2017. CEPA entered into full force on March 1, 2021. While CEPA does not affect customs or tax rates, it will, over time, align Armenia’s regulatory system and standards with those of the EU as much as possible in the context of Armenia’s EAEU obligations.

There is no free trade agreement between the United States and Armenia.

In May 2015, Armenia signed a Trade and Investment Framework Agreement (TIFA) with the United States. The TIFA establishes a United States–Armenia Council on Trade and Investment to discuss bilateral trade, investment, and related issues and examine ways to strengthen the trade and investment relationship between the two countries.

Armenia does not issue foreign tax credits and does not recognize the existing 1973 double taxation treaty signed by the Union of Soviet Socialist Republics (USSR) and the United States. The United States considers Armenia to be party to this treaty by virtue of state succession to treaties and Armenia’s declaration of its commitment to fulfill the international treaty obligations of the former USSR as expressed in the Alma Ata Declaration of 1991. Armenia has double taxation treaties with several dozen other countries.

Transparency of the Regulatory System

The Armenian government nominally uses transparent policies and laws to foster competition.  Some report that Armenia’s new government has pursued a more consistent execution of these laws and policies in an effort to improve market competition and remove informal barriers to market entry, especially for small- and medium-sized enterprises.  Armenia’s legislation on the protection of competition has been improved with a number of clarifications regarding key concepts. There have been some procedural improvements for delivering conclusions and notifications of potential anti-competitive behavior via electronic means.  However, companies regard the efforts of the State Commission for the Protection of Economic Competition (SCPEC) alone as insufficient to ensure a level playing field. They indicate that improvements in other state institutions and authorities that support competition, like the courts, tax and customs, public procurement, and law enforcement, are necessary.  Numerous studies observe a continuing lack of contestability in local markets, many of which are dominated by a few incumbents. Banking supervision is relatively well developed and largely consistent with the Basel Core Principles. The Central Bank of Armenia is the primary regulator of the financial sector and exercises oversight over banking, securities, insurance, and pensions. Armenia has adopted IFRS as the accounting standard for enterprises. Data on Armenia’s public finances and debt obligations are broadly transparent, and the Ministry of Finance publishes periodic reports that are available online.

Safety and health requirements, many of them holdovers from the Soviet period, generally do not impede investment activities.  Nevertheless, investors consider bureaucratic procedures to be sometimes burdensome, and discretionary decisions by individual officials may present opportunities for petty corruption.  A unified online platform for publishing draft legislation was launched in March 2017 and is available here .  Proposed legislation is available for the public to view. Registered users can submit feedback and see a summary of comments on draft legislation. However, the time period devoted to public comments is often regarded as insufficient to solicit proper feedback.  The results of consultations have not been reported by the government in the past. The government maintains other portals, including  http://www.e-gov.am  and  http://www.arlis.am , that make legislation and regulations available to the public. Some regulations that affect Armenia are developed within the Eurasian Economic Commission, the executive body for the EAEU.

International Regulatory Considerations

Armenia is a member of the EAEU and adheres to relevant technical regulations. Armenia’s entry into CEPA will lead it to pursue harmonization efforts with the EU on a range of laws, regulations, and policies relevant to economic affairs. Armenia is also a member of the WTO, and the Armenian government notifies draft technical regulations to the WTO Committee on Technical Barriers to Trade. Armenia is a signatory to the Trade Facilitation Agreement and has already sent category “A”, “B,” and “C” notifications to the WTO.

Legal System and Judicial Independence

Armenia has a hybrid legal system that includes elements of both civil and common law. Although Armenia is developing an international commercial code, the laws regarding commercial and contractual matters are currently set forth in the civil code. Thus, because Armenia lacks a commercial court, all disputes involving contracts, ownership of property, or other commercial matters are resolved by litigants in courts of general jurisdiction, which handle both civil and criminal cases. Courts that handle civil matters may be overwhelmed by the volume of cases before them and are frequently seen by the public as corrupt. Despite the ability of courts to use the precedential authority of the Court of Cassation and the European Court of Human Rights, many judges presiding over civil matters do not do so, increasing the unpredictability of civil court decisions in the eyes of investors.

Businesses tend to perceive that many Armenian courts suffer from low levels of efficiency, independence, and professionalism, which drives a need to strengthen the judiciary. Very often in proceedings when additional forensic expertise is requested, the court may suspend a case until the forensic opinion is received, a process that can take several months. Businesses have noted that many judges at courts of general jurisdiction may be reluctant to make decisions without getting advice from higher court judges. Thus, the public opinion is that decisions may be influenced by factors other than the law and merits of individual cases. In general, the government honors judgments from both arbitration proceedings and Armenian national courts.

Due to the nature and complexity of commercial and contractual issues and the caseload of judges presiding over civil matters, many matters involving investment or commercial disputes take months or years to work their way through the civil courts. In addition, businesses have complained of the inefficiencies and institutional corruption of the courts. Even though the Armenian constitution provides investors the tools to enforce awards and their property rights, investors claim that there is little predictability in what a court may do.

Laws and Regulations on Foreign Direct Investment

Basic legal provisions covering foreign investment are specified in the 1994 Law on Foreign Investment.  Foreign companies are entitled by law to the same treatment as Armenian companies. A Law on Public-Private Partnership (PPP), adopted in 2019, establishes a framework for the government to attract investment for projects focused on infrastructure. The secondary implementing legislation to clarify key aspects of the PPP framework, including comprehensive criteria for project selection, is being developed.

The Investment Support Center is Armenia’s national authority for investment and export promotion.  It provides information to foreign investors on Armenia’s business climate, investment opportunities, and legislation; supports investor visits; and serves as a liaison for government institutions.  More information is available via the Investment Support Center’s  website .

Competition and Antitrust Laws

SCPEC reviews transactions for competition-related concerns.  Relevant laws, regulations, commission decisions, and more information can be found on SCPEC’s  website .  Concentrations, including mergers, acquisitions of shares or assets, amalgamations, and incorporations, are subject to ex ante control by SCPEC in accordance with the law.  Whenever a concentration gives rise to concerns about harm to competition, including the creation or strengthening of a dominant position, SCPEC can prohibit such a transaction or impose certain remedies.  Armenia’s Law on Protection of Economic Competition has been amended several times in recent years to bring Armenia’s competition framework into alignment with EAEU and CEPA requirements. The law was recently changed to improve SCPEC’s capabilities to investigate anti-competitive behavior, in collaboration with Armenia’s investigative bodies, whereas before SCPEC had to rely primarily on document studies and request information from other state bodies.

Expropriation and Compensation

Under Armenian law, foreign investment cannot be confiscated or expropriated except in extreme cases of natural or state emergency upon obtaining an order from a domestic court. According to the Armenian constitution, equivalent compensation is owed prior to expropriation.

Dispute Settlement

ICSID Convention and New York Convention

Armenia is party to the ICSID Convention (Washington Convention) and Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).

Under Article 5 of the Armenian constitution, international treaties ratified by Armenia take precedence over domestic law.

Investor-State Dispute Settlement

According to the Law on Foreign Investment, all disputes that arise between a foreign investor and Armenia must be settled in Armenian courts. A Law on Commercial Arbitration, enacted in 2007, provides a wider range of options for resolving commercial disputes. The U.S.–Armenia BIT provides that in the event of a dispute involving a U.S. investor and the state, the investor may take the case to international arbitration. As of March 2021, two investment disputes brought against Armenia under the U.S.–Armenia BIT were pending with the International Center for Settlement of Investment Disputes.

International Commercial Arbitration and Foreign Courts

Commercial disputes may be brought before an Armenian or any other competent court, as provided by law or in accordance with party agreements. Commercial disputes are heard in courts of general jurisdiction. Specialized administrative courts adjudicate cases brought against state entities. Decisions of general and administrative courts may be appealed first to the Civil Court of Appeal and Administrative Court of Appeal, then to the Civil and Administrative Chamber of the Court of Cassation.

The Law on Arbitration Courts and Arbitration Procedures provides rules governing the settlement of disputes by arbitration. In accordance with the New York Convention and Article 5 of the Armenian constitution, domestic courts must recognize foreign arbitral awards.

Armenia intends to develop an alternative dispute resolution (ADR) mechanism that will include mediation and arbitration. ADR could be used not only in commercial matters, including those involving mobile property and secured transactions, but also in cases involving family and labor disputes. While ADR options are available to those who seek alternatives to litigation, they currently are not widely used or trusted.

Bankruptcy Regulations

According to the Law on Bankruptcy adopted in 2006, creditors and equity and contract holders (including foreign entities) have the right to participate and defend their interests in bankruptcy cases. Armenia decided with the passage of a new Judicial Code in 2018 to adopt a new, specialized bankruptcy court, which began operations in 2019. Creditors have the right to access all materials relevant to cases, submit claims to court, participate in meetings of creditors, and nominate candidates to administer cases. Monetary judgments are usually made in local currency. The Armenian Criminal Code defines penalties for false and deliberate bankruptcy, concealment of property or other assets of the bankrupt party, or other illegal activities during the bankruptcy process. UNCTAD observes that Armenia’s framework for bankruptcy procedures needs improvement, adding that insolvency cases are expensive and almost always result in liquidation. Armenia amended its bankruptcy law in December 2019 to reduce the cost of bankruptcy proceedings. In addition, premiums have been set for bankruptcy managers for submitting financial recovery plans, as well as for the recovery of a bankrupt person, with the aim of raising rates of financial recovery. In 2020, the debt threshold to launch bankruptcy proceedings was raised to grant companies a greater ability to pay off debts rather than having their assets frozen.

According to the World Bank’s 2020 Ease of Doing Business Index, Armenia stands at 95 in the ranking of 190 economies on the ease of resolving insolvency. Resolving insolvency takes 1.9 years on average and costs 11 percent of the debtor’s estate, with the most likely outcome being that the company will be broken up and sold. The average recovery rate is 39.2 cents on the dollar.

Investment Incentives

Armenia offers incentives for exporters (e.g., no export duty, VAT refund on goods and services exported) and foreign investors (e.g. income tax holidays, the ability to carry forward losses indefinitely, VAT deferral, and exemptions from customs duties for investment projects). Starting in 2018, the Armenian government began exempting imports of capital investment-related goods from VAT payments at the border. In 2015, the Armenian government began exempting from customs duties investment-related imports of equipment and raw materials from non-EAEU member countries. VAT and customs duties exemptions are implemented by government decisions made on a case-by-case basis. Also, in accordance with the Law on Foreign Investment, several ad hoc incentives may be negotiated on a case-by-case basis for investments that are targeted at certain sectors of the economy or are of strategic interest. As part of its response to COVID-19, the government launched several economic response and social support measures in 2020, including to subsidize commercial lending, promote investment in agriculture and other industries, and create an investment fund with authority to undertake equity investment alongside private investors.

Foreign Trade Zones/Free Ports/Trade Facilitation

In June 2011, Armenia adopted a Law on Free Economic Zones (FEZ), amended in October 2018, and developed several key regulations to attract foreign investments into FEZs: exemptions from VAT, profit tax, customs duties, and property tax. The Alliance FEZ was opened in August 2013 to focus on high-tech industries, including information and communication technologies, electronics, pharmaceuticals and biotechnology, architecture and engineering, industrial design, and alternative energy. In 2014, the government expanded operations in the Alliance FEZ to include industrial production. In 2015, the Meridian FEZ, focused on jewelry production, watchmaking, and diamond cutting, opened in Yerevan. The Meghri FEZ, located on Armenia’s border with Iran, opened in 2017. A new FEZ, located in Hrazdan, opened in late 2018 and is focused on the high-tech and information technology sectors. Armenia has signaled an interest in developing logistics hubs, including one in Gyumri, to facilitate goods trade.

Performance and Data Localization Requirements

There are no performance requirements for investment in terms of mandating local employment. The processes for obtaining visas, residence, or work permits are straightforward. There are no government-imposed conditions on permission to invest.

Armenia does not follow any policy that would force foreign investors to use domestic content in goods and technology. There are no requirements for foreign information technology providers to turn over source code or provide keys for encryption. There are no requirements to store data within the country.

Real Property

Armenian law protects secured interests in property, both personal and real. Armenian law provides a basic framework for secured lending, collateral, and pledges and provides a mechanism to support modern lending practices and title registration. According to Armenia’s constitution, foreign citizens are prohibited from owning land, though they may take out long-term leases. In the World Bank’s 2020 Ease of Doing Business report, Armenia ranked 13th among 190 economies for the ease of registering property. Lack of clear title to land is generally not an issue in Armenia. The World Bank observes that while all land plots in Armenia are mapped, some may not be formally registered with the body responsible for immovable property registration.

Intellectual Property Rights

Armenia has a strong legislative and regulatory framework to protect intellectual property rights (IPR).  Domestic legislation, including the 2006 Law on Copyright and Related Rights, provides for the protection of copyright with respect to literary, scientific, and artistic works (including computer programs and databases), patents and other rights of invention, industrial design, know-how, trade secrets, trademarks, and service marks.  The Intellectual Property Agency (IPA) in the Ministry of Economy is responsible for granting patents and overseeing other IPR-related matters. The collective management organization ARMAUTHOR manages authors’ economic rights. Trademarks and patents require state registration by the IPA, but copyright does not.  There is no special trade secret law in Armenia, but the protection of trade secrets is covered by Armenia’s Civil Code. Formal registration is straightforward, the database of registered IPR is public, and applications to register IPR are published online for two months for comment by third parties. Armenia’s legislation has been harmonized with the World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

In 2005, Armenia created an IPR Enforcement Unit in the Organized Crime Department of the Armenian Police, which acts only based on complaints from right holders and does not exercise ex-officio powers.

Despite the existence of relevant legislation and executive government structures, the concept of IPR remains unrecognized by a large part of the local population. The onus for IPR complaints rests with the offended party.  The police assert that the majority of cases are settled through out-of-court proceedings. While the Armenian government has made some progress on IPR issues, strengthening enforcement mechanisms remains necessary. UNCTAD reports that low awareness and poor monitoring of IPR violations harm the business climate.

A new Law on Copyright has been drafted.  It includes provisions from new international agreements (Marrakesh and Beijing Treaties). A new Law on Patents and Law on Industrial Design have been adopted by the parliament. The new Law on Patents strengthens the requirement for substantive examination before rights registration and introduces the concept of a short-term patent. The new Law on Industrial Design includes some procedural changes, including publishing applications for industrial designs and objects during the state registration process.

Armenia is not included in USTR’s Special 301 Report or Notorious Markets List.

For additional information about national laws and points of contact at local IP offices, please WIPO’s country profiles at  http://www.wipo.int/directory/en/ .

Capital Markets and Portfolio Investment

The banking system in Armenia is sound and well-regulated, but the financial sector is not highly developed, according to investors. Banking sector assets account for over 80 percent of total financial sector assets. Financial intermediation tends to be poor. Nearly all banks require collateral located in Armenia, and large collateral requirements often prevent potential borrowers from entering the market. U.S. businesses have noted that this creates a significant barrier for small- and medium-sized enterprises and start-up companies.

The Armenian government welcomes foreign portfolio investment and there is a supporting system and legal framework in place. Armenia’s securities market is not well developed and has only minimal trading activity through the Armenia Securities Exchange, though efforts to grow capital markets are underway. Liquidity sufficient for the entry and exit of sizeable positions is often difficult to achieve due to the small size of the Armenian market. The Armenian government hopes that as a result of pension reforms in 2014, which brought two international asset managers to Armenia, capital markets will play a more prominent role in the country’s financial sector. Armenia adheres to its IMF Article VIII commitments by refraining from restrictions on payments and transfers for current international transactions. Credit is allocated on market terms and foreign investors are able to access credit locally.

Money and Banking System

Since 2020, the banking sector has withstood the twin shocks created by COVID-19 and the Nagorno-Karabakh conflict. Indicators of financial soundness, including capital adequacy and non-performing loan ratios, have remained broadly strong, though with some deterioration more recently. The sector is well capitalized and liquid. Non-performing loans have ticked upward slightly from rates of around five percent of all loans. Dollarization, historically high for deposits and lending, has been falling in recent years. There are 17 commercial banks in Armenia and 13 universal credit organizations. There are extensive branch networks throughout Armenia. At the end of 2020, the top three Armenian banks by estimated total assets were Ameriabank (909 billion Armenian drams (AMD), or $1.7 billion), Armbusinessbank (889 billion AMD, or $1.7 billion), and Ardshinbank (880 billion AMD, or $1.7 billion). The minimum capital requirement for banks is 30 billion AMD (around $58 million). There are no restrictions on foreigners to open bank accounts. Residents and foreign nationals can hold foreign currency accounts and import, export, and exchange foreign currency relatively freely in accordance with the Law on Currency Regulation and Currency Control. Foreign banks may establish a subsidiary, branch, or representative office, and subsidiaries of foreign banks are allowed to provide the same types of services as domestically-owned banks.

The Central Bank of Armenia (CBA) is responsible for the regulation and supervision of the financial sector. The authority and responsibilities of the CBA are established under the Law on the Central Bank of Armenia. Numerous other articles of legislation and supporting regulations provide for financial sector oversight and supervision.

Foreign Exchange and Remittances

Foreign Exchange

Armenia has no limitations on the conversion and transfer of money or the repatriation of capital and earnings, including branch profits, dividends, interest, royalties, or management or technical service fees. Most banks can transfer funds internationally within two to four days. Armenia maintains the Armenian dram as a freely convertible currency under a managed float. The AMD/USD exchange rate has been generally stable in recent years, but the dram experienced a notable depreciation against the dollar following the fall 2020 intensive fighting in the Nagorno-Karabakh conflict. The depreciation was stemmed in part by sales of foreign exchange reserves by the CBA. The CBA maintains levels of reserves that are broadly seen as adequate.

According to the Law on Currency Regulation and Currency Control, prices for all goods and services, property, and wages must be set in AMD. There are exceptions in the law, however, for transactions between resident and non-resident businesses and for certain transactions involving goods traded at world market prices. The law requires that interest on foreign currency accounts be calculated in that currency, but paid in AMD.

Remittance Policies

Armenia imposes no limitations on the conversion and transfer of money or the repatriation of capital and earnings, including branch profits, dividends, interest, royalties, lease payments, private foreign debt, or management or technical service fees.

Sovereign Wealth Funds

Armenia does not have a sovereign wealth fund.

Most of Armenia’s state-owned enterprises (SOEs) were privatized in the 1990s and early 2000s, but SOEs are still active in a number of sectors.  SOEs in Armenia operate as state-owned closed joint stock companies that are managed by the Department of State Property Management and state non-commercial organizations.  There are no laws or rules that ensure a primary or leading role for SOEs in any specific industry. Armenia is party to the WTO Government Procurement Agreement, and SOEs are covered under that agreement.  SOEs in Armenia are subject to the same tax regime as their private competitors, and private enterprises in Armenia can compete with SOEs under the same terms and conditions. The Department of State Property Management maintains a public list of state-owned closed joint stock companies on its  website .

Privatization Program

Most of Armenia’s state owned enterprises were privatized in the 1990s and early 2000s.  Many of the privatization processes for Armenia’s large assets were reported to be neither competitive nor transparent, and political considerations in some instances prevailed over fair tender processes.  The most recent law on privatization, the fifth, is the Law on the 2017–2020 Program for State Property Privatization, which lists 47 entities for privatization. The Department of State Property Management oversees the management of the state’s shares in entities slated for privatization. Details of the privatization program are available on the Department of State Property Management  website .

There is not a widespread understanding of responsible business conduct (RBC) in Armenia, but several larger companies with foreign ownership or management are introducing the concept. Initiatives, where they do exist, are primarily limited to corporate social responsibility efforts. However, RBC programs that do exist are viewed favorably. Some civil society groups and business associations are playing a more active role to promote RBC and develop awareness.

Major pillars of corporate governance in Armenia include the Law on Joint Stock Companies, the Law on Banks and Banking Activity, the Law on Securities Market, and a Corporate Governance Code. International observers note inconsistencies in this legislation and generally rate corporate governance practices as weak to fair. Specific areas for potential improvement cited by the local business community include improving internal and external auditing for firms, enhancing the powers of independent directors on company boards, and boosting shareholders’ rights. Armenia has outlined commitments to corporate governance reforms, including with regard to mandatory audit, accounting, and financial reporting, within the context of an ongoing Stand-By Arrangement with the International Monetary Fund.

Armenia joined the Extractive Industries Transparency Initiative (EITI) in March 2017 as a candidate country. The first EITI national report for Armenia was published in January 2019. As part of its EITI membership aspirations, the government in March 2018 adopted a roadmap to disclose beneficial owners in the metal ore mining industry. Relevant implementing legislation, including for beneficial ownership disclosure, was adopted in 2019.

Armenia is not a signatory to the Montreux Document on Private Military and Security Companies, and no Armenian party is a member of the International Code of Conduct for Private Security Providers’ Association.

Domestic laws and regulations related to labor, employment rights, consumer protection, and environmental protection are not always enforced effectively. These laws and regulations cannot be waived to attract foreign investment.

Additional Resources

Department of State

Department of Labor

Despite the challenges facing Armenia due to the dual shocks of COVID-19 and the Nagorno-Karabakh conflict, the Armenian government’s commitment to eradicating corruption continues. Policy action and systemic change remain strong, and the government has pressed forward with legislative actions to establish investigative and judicial anti-corruption bodies. The government’s anti-corruption agenda is outlined in a 2019–2022 strategy and implementation plan. These documents establish a new anti-corruption institutional framework with separate entities tasked with preventive and investigative functions, set out specific measures for strengthening these functions, and prioritize strategic communication and public education to give citizens ownership of anti-corruption reforms.

The government took concrete steps in 2020 to establish and develop four key anti-corruption institutions: 1) the Corruption Prevention Commission (CPC), which conducts integrity checks on judges and other key justice sector personnel; 2) a civil asset forfeiture department within the Prosecutor General’s Office (PGO); 3) an anti-corruption court; and 4) a new anti-corruption investigative body. The CPC and PGO asset forfeiture department are already established, while the anti-corruption court and investigative body are expected to launch before the end of 2021. International experts are expected to play a role in the selection process for anti-corruption court judges and the head of the new anti-corruption investigative agency, which will serve to improve the legitimacy of the court’s judges and the investigative agency’s leadership.

The government has increased corruption investigations against mid- and high-level government officials since the 2018 revolution. Investigation targets include those appointed by the government that took power following the revolution.  Numerous high-ranking officials have stated publicly that corruption within their respective institutions will no longer be tolerated. Though some report that the government has mainly targeted ex-government officials in corruption investigations, there is no indication that Armenia’s anti-corruption laws are being applied by the post-revolutionary government in a discriminatory manner.  Armenia’s anti-corruption laws extend to all Armenian citizens.

Corruption remains a significant obstacle to U.S. investment in Armenia, particularly as it relates to critical areas such as the justice system and concerns related to the rule of law, enforcement of existing legislation and regulations, and equal treatment.  Investors claim that the health, education, military, corrections, and law enforcement sectors lack transparency in procurement and have in the past used selective enforcement to elicit bribes. Judges presiding over civil matters are still widely perceived by the public to be corrupt and under the influence of former authorities.  Anecdotal allegations of corruption or unethical behavior by sitting officials and associates, while less common than in the past, continue to arise and have dampened business sentiment. Although bribery is illegal in Armenia, the government does not actively encourage private companies to establish internal codes of conduct. Several multinational companies, select local companies, and foreign and local companies working with international financial institutions have implemented corporate governance mechanisms to tackle corruption internally.  However, such corporate governance principles are not widely implemented among local companies.

According to Transparency International’s 2020 Corruption Perceptions Index, Armenia made the second-best improvement in the world and received a score of 49 out of 100, ranking it 60th among 180 countries. This reflects an improvement by 17 places over 2019.

Armenia’s ability to counter, deter, and prosecute corruption has historically been hindered by the lack of robust enforcement of official disclosure laws meant to prevent corrupt officials from entering and retaining positions of authority and influence.  The objective and systematic scrutiny of declarations by government officials had been lacking due to dysfunction within the Commission on Ethics of High-Ranking Officials, but is gradually improving with the establishment of the CPC in November 2019. The CPC has inherited responsibility for scrutinizing officials’ declarations and is scheduled to launch a fully automated system for declarations of assets, income, and conflicts of interest. The CPC has also conducted integrity checks and issued opinions on nominees to public positions. According to international evaluations, Armenian authorities have limited capacities to investigate money laundering and bring such cases to prosecution.

Various laws prohibit the participation of civil and municipal servants, as well as local government elected officials such as mayors and councilors, in commercial activities.  However, powerful officials at the national, district, and local levels often acquire direct, partial, or indirect control over private firms. Such control is often exercised through a hidden partner or majority ownership of fully private parent companies. This involvement can occur through close relatives and friends. According to foreign investors, these practices reinforce protectionism, hinder competition, and undermine the image of the government as a facilitator of private sector growth.  Because of the historically strong interconnectedness of the political and economic spheres, Armenia has often struggled to introduce legislation to encourage strict ethical codes of conduct and the prevention of bribery in business transactions. In 2016, Armenia adopted legislation on criminal penalties for illicit enrichment and noncompliance or fraud in filing declarations.

Armenia is a member of the UN Convention against Corruption.  While not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, Armenia is a member of the OECD Anti-Corruption Network for Eastern Europe and Central Asia and has signed the Istanbul Action Plan.  A monitoring report released by the OECD in 2018 cited Armenia’s lack of enforcement of anti-corruption laws, together with the continued presence of oligopolistic interests in the economy, as points of serious concern. The report contains a series of recommendations, including to take bold measures to ensure judicial and prosecutorial independence and integrity, introduce corporate liability for corruption offenses, investigate and prosecute high profile and complex corruption cases, and increase transparency and strengthen monitoring in public procurement.  Armenia is also a member of the global Open Government Partnership initiative.

No specific law exists to protect NGOs dealing with anti-corruption investigations.

Resources to Report Corruption

For investigating corruption:Investigation Department of Corruption, Organized and Official CrimesSpecial Investigation Service of Armenia13A Vagharsh Vagharshyan StreetYerevan, Armenia+374 11 900 002 press@investigatory.am 

For prosecuting corruption:Artur ChakhoyanHead of Department for Combating Corruption and Economic CrimesRA Prosecutor General’s Office5 V. Sargsyan StreetYerevan, Armenia+374 10 511 655 info@prosecutor.am

For financial and asset declarations of high-level officials:Haykuhi HarutyunyanChairpersonCorruption Prevention Commission24 Baghramyan StreetYerevan, Armenia hhcpcarmenia@gmail.com 

Watchdog organization:Sona Ayvazyan
Executive Director
Transparency International Anti-Corruption Center
12 Saryan Street
Yerevan, Armenia
+374 10 569 589
sona@transparency.am 

Armenia has a history of political demonstrations, some of which have turned into violent confrontations between the police and protesters. The last major violent protest occurred in November 2020 following the release of a tripartite ceasefire statement by Armenia, Azerbaijan, and Russia, which brought an end to the fall 2020 intensive fighting in the Nagorno-Karabakh conflict. Individuals and groups displeased with the announcement stormed government buildings and destroyed property. Protestors assaulted the speaker of parliament in the streets of Yerevan and broke into the prime minister’s residence. Since the release of the tripartite statement, groups opposed to the government have organized regular marches and rallies in Yerevan that have remained largely peaceful and caused minimal disruption to ordinary business. Pro-government groups have also organized peaceful rallies, although less frequently. Throughout Armenia, protestors use road blockades as a common tactic to register discontent, most often with the government over community-level issues. The disruption created by such road blockades is usually minimal. Protests have not resulted in any damage to projects of installations of international businesses. It is unlikely that civil disturbances, should they occur, would be directed against U.S. businesses or the U.S. community.

Armenia’s human capital is one of its strongest resources. The labor force is generally well educated, particularly in the science, technology, engineering, and mathematics fields. Almost 100 percent of Armenia’s population is literate. According to official information, enrollment in secondary school is over 90 percent, and enrollment in senior school (essentially equivalent to American high school) is about 85 percent. Despite this, official statistics indicate a high rate of unemployment, at around 20 percent. Unemployment is particularly pronounced among women and youth, and significant underemployment is also a problem.

Considerable foreign investment in Armenia has occurred in the high-tech sector. High-tech companies have established branches or subsidiaries in Armenia to take advantage of the country’s pool of qualified specialists in electrical and computer engineering, optical engineering, and software design. There is a shortage of workers with vocational training. About 20 percent of the non-agricultural workforce is employed in the informal economy, primarily in the services sector. Armenian law protects the rights of workers to form and to join independent unions, with exceptions for personnel of the armed forces and law enforcement agencies. The law also provides for the right to strike, with the same exceptions, and permits collective bargaining. The law stipulates that workers’ rights cannot be restricted because of membership in a union. It also differentiates between layoffs and firing with severance. According to some reports, labor organizations remain weak because of employer resistance, high unemployment, and unfavorable economic conditions; collective bargaining is not common in Armenia. Experts observe that the right to strike, although enshrined in the constitution, is difficult to realize due to mediation and voting requirements. However, since the 2018 change of government, there have been consistent reports of grassroots movements to create unions in various spheres, including for doctors, teachers, and academics. Still, traditional labor unions are generally inactive with the exception of those connected with the mining and chemical industries. Labor laws cannot be waived to retain or attract investment.

The current Labor Code is considered to be largely consistent with international standards. The law sets a standard 40-hour workweek, with 20 days of mandatory annual paid leave. However, there are consistent reports that many private sector employees, particularly in the service sector, are unable to obtain paid leave and are required to work more than eight hours a day without additional compensation. The treatment of labor in FEZs is no different than elsewhere in the country. Employers are generally able to adjust employment in light of fluctuating market conditions. Severance in general does not exceed 60 working days. Benefits for workers laid off for economic reasons are mostly limited to receiving qualification trainings and job search assistance.

Individual labor disputes can usually be resolved through courts; however, the courts are often overburdened, causing significant delays. Collective labor disputes should be resolved through collective bargaining.

Since 2019, Armenia’s Health and Labor Inspection Body (HLIB) has gradually begun to exercise more robust enforcement of labor legislation and fulfill its oversight function, with its full mandate scheduled to come into force in July 2021.  Throughout 2020, the government adopted inspection checklists and risk assessment methodologies to enable HLIB to carry out inspections.  HLIB also continued to add new inspectors throughout the year and carried out 27 inspections in the mining sector.

Amendments to the Labor Code that entered into force in 2015 clarified the procedures for making changes in labor contracts and further specified the provisions required in labor contracts, notably those relating to probationary periods, vacation, and wage calculations.

The current legal minimum wage is AMD 68,000 (approximately $130) per month. Most companies pay an unofficial extra-month bonus for the New Year’s holiday. Wages in the public sector are often significantly lower than those in the private sector. 12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs

The United States and Armenia have an investment incentive agreement, signed in 1992, that serves to mobilize private capital via the U.S. International Development Finance Corporation (DFC). DFC can help solve critical development challenges by mobilizing private capital as well as providing investors with financing, guarantees, political risk insurance, and support for private equity investment funds. DFC’s predecessor organization, the Overseas Private Investment Corporation, has been involved in several projects in Armenia, including the expansion of the Armenia Marriott Hotel in Yerevan and lending operations at several financial institutions. In 2019, OPIC concluded a deal to extend $10 million in financing to First Mortgage Company to expand the origination of long-term home mortgage loans. Armenia is a member of the World Bank Group’s Multilateral Investment Guarantee Agency. 13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

 

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2019 $13,673 2019 $13,673 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2019 $214 2019 $6 BEA data available at https://apps.bea.gov/international/factsheet/ 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2019 $3 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data 
Total inbound stock of FDI as % host GDP 2019 41% 2019 42% UNCTAD data available at https://stats.unctad.org/handbook/EconomicTrends/Fdi.html  

* Source for Host Country Data: Statistical Committee of the Republic of Armenia

Table 3: Sources and Destination of FDI
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 $5,373 100% Total Outward $245 100%
Russia $1,978 36.8% Georgia $72 29.4%
Cyprus $510 9.5% Latvia $56 22.9%
Jersey $375 7.0% Bulgaria $36 14.7%
United Kingdom $300 5.6% United States $3 1.2%
The Netherlands $299 5.6% N/A N/A N/A
“0” reflects amounts rounded to +/- USD 500,000.

Source: IMF Consolidated Direct Investment Survey (CDIS) (2019) $351 million of inward direct investment is not specified by origin in the CDIS. $77 million of outward direct investment is not specified by destination in the CDIS.

$351 million of inward direct investment is not specified by origin in the CDIS. $77 million of outward direct investment is not specified by destination in the CDIS.

Table 4: Sources of Portfolio Investment
Data not available.

Economic & Commercial Officer
U.S. Embassy Yerevan
American Avenue 1
Yerevan, Armenia
+374 10 494 200
YerevanBusiness@state.gov 

2021 Investment Climate Statements: Armenia
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