Armenia flag Armenia: Investing in Armenia

Foreign direct investment (FDI) in Armenia

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.

 
Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 10147379
FDI Stock (million USD) 5,5215,2185,631
Number of Greenfield Investments* 938
Value of Greenfield Investments (million USD) 18544875

Source: UNCTAD, Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 
Country Comparison For the Protection of Investors Armenia Eastern Europe & Central Asia United States Germany
Index of Transaction Transparency* 7.0 7.5 7.0 5.0
Index of Manager’s Responsibility** 6.0 5.0 9.0 5.0
Index of Shareholders’ Power*** 8.0 6.8 9.0 5.0

Source: Doing Business, Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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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.

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Latest Update: July 2022

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