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.