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. The country is nestled 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 key regional trade movements.
Since its independence from the Soviet Union in 1991, Armenia has initiated legal, policy and institutional reforms to gradually become a market economy. The country has adopted an Open-Door policy as a main principle of its investment policy, backed by protection of investors’ rights and the provision of equal conditions for foreign and domestic investors. These reforms have certainly helped the country to attract investment from Europe, the United States, the Middle East and Eurasia.
Foreign investment is allowed in wide sectors of the economy and in various forms. Investments are protected for a period of five years from adverse legislative changes. Armenia has signed bilateral treaties on 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 easy to access by providing supporting documentation of residency from foreign tax authorities.
Legal and court system
Armenia is a Civil Law country with a parliamentary system. The main sectors of law are codified (Civil Code, Criminal Code, Labour Code, etc.). Armenia’s civil legislation is heavily influenced by the German and Dutch legal tradition.
Over the past 30 years, the country has modernized its legislation with a fairly liberal approach to business and investment. 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 matters; 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.
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, 5.2% in 2018, and 7.6% in 2019. Despite its numerous geopolitical challenges, Armenia has been successful at increasing its trade volume and narrowing the trade deficit over time.
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 qualification of Armenian technical specialists is proved by the presence of widely-known companies. The IT sector enjoys government support through tax incentives and various targeted programmes. With the average annual productivity of USD48,000 per technical employee, the sector is considered one of the most fruitful and fastest growing sectors. Even during the COVID-19 pandemic, this sector grew by more than 50% in 2020.
Although exports remain resource-dependent, with mining products (mainly copper and molybdenum) forming the main export, some diversification is taking place into non-traditional markets (such as China and the Persian Gulf), as well as non-traditional products (e.g. tobacco, wine, fresh fruit and vegetables, textiles and services).
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.
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 with favourable environment including free currency exchange and a stable local currency.
Armenia is a member of the Eurasian Economic Union (EEU) enabling access to an integrated single market with a population of 182 million in Russia, Belarus, Kyrgyzstan and Kazakhstan with 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 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.