Armenia: Investing

FDI in Figures

According to UNCTAD’s World Investment Report 2021, FDI inflows to Armenia stood at USD 117 million in 2020, up from USD 254 million in 2019, following the global economic crisis triggered by the Covid-19 pandemic. In 2020, the total stock of FDI was estimated at USD 5.2 billion. Russia, Greece, Cyprus and Germany are the four major investors in Armenia, although significant investments are also made by the members of the Armenian diaspora (nearly 6 million people). Main FDI sectors include energy, telecommunications, metallurgy, hotel services and air transportation. According to the latest data by the National Statistical Committee (NSC), in the first three quarters of 2021 FDI inflows to Armenia totalled AMD 88.1 billion (around USD 180 million), with Germany and Italy as the main investors. The main flow of investments in January-September 2021 was channelled into the energy (AMD 60.7 billion) and mining sectors (AMD 54.4 billion).

Armenia has made great progress towards the liberalisation of its economy. According to the World Bank, Armenia ranks first among CIS (Commonwealth of Independent States) countries in terms of FDI appeal. The Government has recently introduced conditions and laws favourable 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). The country does not impose restrictions on foreign control and rights to private ownership and establishment, and business registration procedures are fast. FID is also promoted through the EU-Armenia Comprehensive and Enhanced Partnership Agreement. 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. Furthermore, the intensive fighting in the Nagorno-Karabakh conflict dented Armenia’s economic output and investment profile. The latest World Bank's Doing Business report places Armenia 47th out of 190 countries, losing six positions compared to the previous edition.

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)
Doing business in Armenia (Ministry of Foreign Affairs of the Republic of Armenia)
Invest in Armenia

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