Armenia: Investing

FDI in Figures

According to UNCTAD’s World Investment Report 2023, FDI inflows to Armenia stood at USD 998 million in 2022, almost three times the level recorded the previous year. The total stock of FDI was estimated at USD 7.1 billion, around 36.5% of the country’s GDP. The electricity and gas supply sector lead the sectoral distribution of FDI flows into the real economy, accounting for 58% (USD 578 million), followed by the mining and real estate sectors, accounting for 15% and 7%, respectively. Russia remained the most prominent investor in Armenia, with approximately 70% of the FDI inflow, amounting to USD 697 million, ahead of Cyprus (7%) and Jersey (4.6%). According to data from the Ministry of the Economy, the volume of foreign direct investment in 2023 was about USD 350 million.

Armenia ranks first among CIS countries in terms of FDI appeal, according to the World Bank. The Government has recently introduced conditions and laws favorable to foreign investment, and, because of its economic dynamism, the country has earned the nickname 'The Caucasian Tiger'. These measures include free economic zones for high-tech industries that provide companies with preferential treatment on corporate profit tax, VAT, property tax, and customs duties (UNCTAD). Armenia has strong human capital and a well-educated workforce. It does not impose restrictions on foreign control and rights to private ownership and establishment (except for the media and commercial aviation sectors), and business registration procedures are fast. FDI is also promoted through the EU-Armenia Comprehensive and Enhanced Partnership Agreement. Following the conflict in Ukraine, some multinationals with operations in Russia have moved their offices to Armenia, while an influx of Russian émigrés to the country has brought in new qualified workforce. However, the country remains strongly dependent on the economic health of the Russian and EU economies for FDI, it has a small domestic market and corruption is still widespread. In general, Armenia's competitive landscape is showing signs of enhancement. However, numerous businesses have highlighted the need for comprehensive reforms encompassing judicial, tax, customs, health, education, military, and law enforcement institutions to consolidate these advancements. Armenia ranks 72nd among the 132 economies on the Global Innovation Index 2023 and 47th out of 184 countries on the latest Index of Economic Freedom.

What to consider if you invest in Armenia

Strong Points

The attractiveness of the country is linked to its sustained economic growth over the last ten years and a series of reforms. We can also mention the following elements:

• Political stability
• Its geographical position, allowing access to the former Soviet republics
• Good integration into the world economic order: regional (a member state of the European Union and Eurasian Economic Union) and intercontinental
• A skilled and relatively inexpensive labour force
• A developing economy with sectors requiring foreign investment (such as telecommunications)
• Controlled inflation at a low level
• A desire to normalise relations with Turkey, suggesting a possible opening of the border
• A safe and advanced financial and banking sector
• Significant mineral resources (molybdenum, copper, gold)

Weak Points

The main obstacles to Armenia's economic development are:

• A small domestic market
• High transport costs (all goods must transit through Georgia because of the embargo imposed by Turkey and Azerbaijan)
• High risk of nepotism and interferences at the State authority level
• Strong dependence on the economic situation in Germany and Russia
• High public debt slowing down necessary investments, particularly in infrastructure
• Risk related to natural disasters (earthquakes)
• The poverty of the population is also a negative factor, especially in times of crisis, because the social climate and domestic consumption can be undermined.
• High external debt (USD 11.9 billion in 2019 - World Bank, latest data available)

Government Measures to Motivate or Restrict FDI

The Armenian government is conscious of the need to create a more inviting business environment and has made targeted efforts to encourage foreign investment, required for the development of the economy. The law on the reduction of poverty and corruption, as well as other reforms specifically linked to the business environment, have come into force. In particular, we can name:

• Equal treatment for foreigners
• No limitation on foreign ownership
• Freedom to repatriate profits
• Limited state intervention and deregulation

The high-tech and information and communication technologies sectors have attracted foreign investment in recent years. Many international companies have established offices in Armenia to recruit qualified human resources and experts in these disciplines. Finally, in 2015, the government created the Development Foundation of Armenia to encourage foreign investment, promote tourism and develop exports, and which has been functioning under the new name Doing Business Armenia.

Procedures Relative to Foreign Investment

Freedom of Establishment

Freedom of establishment is guaranteed.

Acquisition of Holdings

As part of the privatization programme initiated by the government of Armenia, a foreign investor can acquire an interest in a domestic company (both public and private) through purchase of shares or its assets. The properties and companies owned by the State need to be privatized before being acquired by a foreign investor. Privatization process in the country is regulated by the 'Law on Privatization of State Property'.

Obligation to Declare

Foreign investors can make investments in Armenia only through the establishment of fully foreign-owned companies (including representations, affiliates and branches) or the purchase of existing companies and securities or the establishment of joint-ventures. There are no limitations on the volume and type of foreign ownership, the number of foreign employees' and access to financial sources.
In addition, a foreign investor is bound to bear the responsibility for any violation of legislation of the Republic of Armenia, as defined by legislation of the Republic of Armenia. Property of a foreign investor, including working capital and property rights may be used by that investor to guarantee any type of obligations.

Competent Organisation For the Declaration

Ministry of Finance

Requests For Specific Authorisations

There are no limitations in foreign ownership.

However, foreigners can only lease land and need permission to lease land on a long-term basis.

Investment Opportunities

Investment Aid Agency

Business Armenia
Ministry of Economy of the Republic of Armenia

Tenders, Projects and Public Procurement

Tenders Info, Tenders in Armenia
Globaltenders, Tenders & Projects from Armenia
DgMarket, Tenders Worldwide

Other Useful Resources

Invest in Armenia (Global SPC)
Enterprise Armenia

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