The U.S. Department of State’s Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world. They analyze a variety of economies that are or could be markets for U.S. businesses.  The Investment Climate Statements are also references for working with partner governments to create enabling business environments that are not only economically sound, but address issues of labor, human rights, responsible business conduct, and steps taken to combat corruption.  The reports cover topics including Openness to Investment, Legal and Regulatory Systems, Protection of Real and Intellectual Property Rights, Financial Sector, State-Owned Enterprises, Responsible Business Conduct, and Corruption.

Executive Summary

Over the past several years, Armenia has received consistently 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 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.  Armenia had commenced a robust recovery from a deep 2020 recession prior to the introduction of new sanctions against Russia.  GDP growth reached five percent in 2021 and had been expected to continue to grow in 2022 by at least five percent.  As a result of the war and sanctions imposed on Russia, Armenia’s 2022 GDP growth forecast is now just above one percent.

In May 2015, Armenia signed a Trade and Investment Framework Agreement with the United States. This agreement established 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 into a single integrated market. In November 2017, Armenia signed a Comprehensive and Enhanced Partnership Agreement with the European Union, which aimed 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 generally 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 are in need of improvement.

Armenia experienced a dramatic change of government in 2018, when a democratically elected leader came to power on an anti-corruption platform after street protests toppled the old regime. Following the 2020 NK hostilities, in June 2021, the incumbent retained power in snap parliamentary election that met most international democracy standards.  The government continues to push forth with economic and anti-corruption reforms that have improved the business climate.  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 issues 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.

To access the ICS, visit the U.S. Department of State Investment Climate Statements website.