With a total area of about 30,000 km² and a population of about 3 million people, Armenia is a country with a unique and diverse historical and cultural heritage at the crossroads of East and West in the South Caucasus.
Since its independence from the Soviet Union in 1991, Armenia has followed an impressive growth trajectory. Following a period of difficult economic transition, political upheaval and conflict in the early 1990s, the 25 years since have been largely stable both economically and politically.
Armenia has a stable macroeconomic environment and has achieved economic growth rates above the world average over the past two decades. It has moved from lower-middle income to upper-middle income status. GDP growth was 7.5% in 2017 and 5.2% in 2018. GDP growth for the year 2019 is projected at 7%.
Almost 30 years after gaining independence, Armenia has reached a turning point. Calls for improved governance and increased representation, together with mounting discontent about the proximity between the political and economic spheres, fuelled a peaceful revolution in 2018. A new Government is in place and the country is set on a path towards sustained democracy.
The country has adopted an Open Door policy as a main principle of its investment policy, backed by the protection of investors’ rights and the provision of equal conditions for foreign and domestic investors.
Investments are protected for a period of five years from adverse legislative changes. Armenia has signed bilateral treaties on the reciprocal promotion and protection of investments with 41 countries.
Armenia also has double taxation treaties with 41 countries. The benefits of these particular treaties are available upon the provision of documents from foreign tax authorities giving proof of residency.
The Government of Armenia has declared building a knowledge-based economy as its long-term strategic objective. Armenia’s labour market is characterized by a well-educated workforce, strong skills, educational heritage and competitive salary levels. English and Russian are both widely spoken and extensively used in business.
The IT sector enjoys government support through tax incentives and various targeted programmes. With an average annual productivity of USD48,000 per technical employee, the sector is considered one of the most fruitful and fastest growing sectors. A number of widely-known technology sector clients are present in Armenia.
Armenia is at the crossroads between the Eurasian Economic Union (EAEU), the European Union (EU) and the Middle East, which makes it uniquely positioned as a focal point to capture regional trade.
Armenia is a member of the Eurasian Economic Union (EAEU), enabling access to an integrated single market with a population of 182 million in Russia, Belarus, Kyrgyzstan and Kazakhstan and offering free movement of goods, capital and services.
A new Comprehensive and Enhanced Partnership Agreement (CEPA) with the EU was signed in November 2017. As Armenia has been a member of the World Trade Organization since 2003, it is also a signatory to bilateral trade agreements with several countries of the Commonwealth of Independent States (CIS). Generalized system of preferences (GSP) arrangements are in force with several trading partners, including Canada, Switzerland and the United States. Armenia also has GSP+ status with the EU.
Despite numerous geopolitical challenges, Armenia has successfully increased its trade volume and narrowed the trade deficit over the past 10 years. Services are the dominant sector of the economy and have increased steadily, reaching 53 percent of GDP in 2018.
Although exports remain resource-dependent, with mining products (mainly copper and molybdenum) forming a key export, some diversification is taking place into non-traditional markets (China and the Persian Gulf), as well as non-traditional products (e.g. tobacco, wine, fresh fruits and vegetables, textiles and services). Today, services make up almost half of total exports, with travel and tourism being the largest shares. Tourism has now firmly established itself as a pillar of economic growth with an impressive growth in the number of tourists.
The country’s banking system is well developed and sustainable. The regulatory environment is in-line with the best practices and international financial groups are present in the country.
According to the World Bank’s report “Doing Business 2020”, Armenia is ranked 47th out of 190 economies and 10th on the ease of starting a business indicator. Armenia provides a competitive cost of running a business within a favourable environment, including free currency exchange and a stable local currency.
Armenia is a Civil Law country with a parliamentary system. The main sectors of law are codified under codes (Civil Code, Criminal Code, Labour Code, etc.). Armenia’s legislation is heavily influenced by the German legal tradition.
Over the past 30 years, the country has modernized its legislation with a fairly liberal approach to business and investments. Many of the main sectors of business and financial legislation are harmonized with that of the EU, inter alia, banking, capital markets, insurance, company law, competition, consumer protection, etc.
The court system comprises the Constitutional court, which is the highest judicial authority for constitutional matter; the Cassation court, which is also empowered to hand down precedents to the lower level courts; the Appellate courts (civil, criminal and administrative), the first instance courts for general jurisdiction; and the specialized courts (Bankruptcy, Administrative). The Armenian judicial system has been facing its own share of challenges throughout the past 30 years of independence, but significant reforms are underway to tackle many of these challenges and raise the independence and professionalism of judges and the judicial system.
As Armenia is a member of the Council of Europe, the European Court of Human Rights has jurisdiction over matters falling under its mandate.