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Armenia Attracts U.S. Investors Despite Challenges - report

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Arshaluis Mgdesyan
19.07.24 13:15
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Armenia consistently receives respectable rankings in international indices that review business environments and investment climates. U.S. companies seem to agree, with significant U.S. investments present in Armenia’s energy and mining sectors. Additionally, U.S. investors have acquired assets in the banking, pharmaceutical, and information technology sectors.

The U.S. Department of State has released the 2024 report on Armenia's investment climate, highlighting both positive trends and ongoing challenges for foreign investors.

In 2023, Armenia’s economic growth exceeded expectations, reaching 8.7%, driven by trade, construction, and information and communications technology services. Net foreign direct investment inflows also exceeded the global average, reaching 2.6% of GDP in 2021 and 5% of GDP in 2022.

Armenia aims to attract investment by creating favorable conditions through its legal framework and government policies. However, investors face challenges such as the country’s small market size, geographic isolation due to closed borders with Turkey and Azerbaijan, weaknesses in the rule of law and judiciary, and a legacy of corruption.

Armenia signed a Trade and Investment Framework Agreement with the United States in 2015 and became a member of the Eurasian Economic Union the same year. In 2017, Armenia signed a Comprehensive and Enhanced Partnership Agreement with the European Union, aiming to improve the investment climate and business environment.

The country imposes few restrictions on foreign control and private ownership rights. Business registration procedures are generally straightforward. However, foreign companies report that otherwise sound regulations, policies, and laws are sometimes undermined by issues such as the lack of independence, professionalism, and capacity in key institutions, particularly 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, though investors note the financial sector is relatively underdeveloped. The U.S.-Armenia Bilateral Investment Treaty provides U.S. investors with various protections.

Following the 2020 hostilities over Nagorno-Karabakh, the incumbent government retained power in June 2021 snap parliamentary elections that met international democracy standards. National elections are not expected again until 2026. The government continues to push forward with economic and anti-corruption reforms, improving the business climate.

Despite clear improvements that enhance Armenia’s attractiveness as an investment destination, numerous issues remain to be addressed to ensure a transparent, fair, and predictable business climate. Private sector representatives have raised concerns about the quality of dialogue between the private sector and government and the ability of government officials to resolve issues expediently.

An investment dispute in the country’s mining sector is moving toward resolution after several years of standstill. Business groups and international organizations have also raised concerns about the government’s assumption of minority ownership stakes in several major private companies.

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