For many people around the world, Armenia is known as an ancient country with predominantly Christian churches; for others – it is a “museum under the open air” and an affordable tourism destination for magnificent climate, and picturesque nature. Yet, not so many people have recognized Armenia as a place for doing business. Meanwhile, over the past two years, the new Government’s strong commitment to reducing corruption and improving the business environment, along with continued structural reforms and sound macroeconomic policy significantly increased the opportunities for a vibrant response from the economic development perspective.
Armenia: Strategic outlook
The Republic of Armenia has a number of unique advantages and benefits as a region to invest in and a business platform for umbrella economic cooperation projects.
In terms of economic growth and success, Armenia is a young country (post-Soviet republic) with unique characteristics of geographic location and strong science-based economic potential as well as increased demand for foreign direct investment taking into account the emerging growth and development of the technology in the domestic economy and the breakthrough approach to developing infrastructure of the domestic industries.
Given the current position, the economic leadership of the Armenian government is actively striving to attract foreign investment and business partners in order to create joint ventures, set up and implement partnership projects and initiatives in the long run to support exponential growth of import and financial investments, specifically in industry and production, revitalization and modernization of manufacturing facilities. Specific attention is given to sector of innovative technologies and IT solutions. Issues of import, creation and development of joint ventures and investments in infrastructure modernization are also on the agenda in the field of engineering.
Currently, innovative technologies and IT solutions are considered top priority sectors of the Armenian economy. The Government and the economic institutions in Armenia are exercising their utmost efforts to develop existing cooperation, as well as to encourage and support new projects and breakthroughs in all sectors of the economy. Government authorities develop and implement projects in the field of design, improvement and development, introduction and implementation of IT technologies and solutions in all spheres of life of the Armenian society. This process involves most government institutions and agencies curating various fields of activity, as well as all aspects of the social life of Armenian citizens.
Confirming the significant efforts by the Government of Armenia in terms of bolstering international economic activity with regard to foreign trade, import-export, various types of international economic activity, it should be noted that the Armenian leadership is equally committed to empowering economic development through practical reforms in key economic institutions and entities, as well as taking active steps to enhance, strengthen, develop and diversify existing international cooperation, identify and materialize new channels of economic opportunities and cooperation with foreign countries across the globe – from various regions and parts of the world. Therefore, in this regard, a diversified Armenian market, which is open to all types and forms of international collaboration, economic and investment cooperation, can be considered the most preferable basis for the development and creation, exacerbation and strengthening of various prospective projects, identifying diverse options and opportunities, and establishing of a foundation for effective mutually beneficial cooperation.
Another advantage of encouraging investment climate in Armenia, which provides a favorable basis for prosperous international cooperation and economic interaction is the political neutrality of the Republic of Armenia and its multifaceted vector, diversification of foreign policy. Particularly, possible forms of multilateral business projects could be manifested in direct bilateral cooperation between a foreign business entity and the business community of Armenia. Or, business projects between representatives of two countries, as another option, which may lead to some multilateral international business initiatives with joint ventures or projects for the benefit of third parties. This option is especially relevant for the areas of defense, security, innovation with a focus on IT solutions. Armenia is ready to establish and develop political and economic cooperation with international stakeholders that adhere to a completely different political agenda (sometimes with opposing political views). From this point of view, we can say that Armenia takes on the role of an “economic mediator”, representing a business platform for comprehensive economic cooperation, launching new international initiatives in the field of economic integration and establishing cooperation between various international business representatives. This in turn, contributes to faster and better integration of the Armenian business community into various promising and profitable initiatives and projects.
Due to its geographical location, the country is ideally positioned as a juncture and a promising platform for new initiatives and cooperation for the global business community with key business entities and stakeholders representing the former Soviet republics: no wonder many of the CIS and global businesses prefer Yerevan as an optimal venue for holding business meetings and negotiations in various areas of economic affairs. Year on year we witness different large scale and remarkable exhibitions, business forums and numerous business events representing various sectors of the economy, who choose Armenia as their venue of preference.
Armenia: Economic outlook. Key achievements in 2019
Fitch &Moody’s upgraded Armenia’s rating to a long-term stable outlook.
Thanks to efforts taken so far, in 2019, i.e. within one year after the velvet revolution, Armenia, a tiny country with a 3 million population, demonstrated extraordinary progress in many areas, toward a new growth model focused on boosting exports, enhancing human capital, and sustainably managing natural resources and the environment. Particularly, in 2019, Armenia recorded the largest GDP growth in Europe: 8.2%, export growth of 9%, industrial production + 9%, construction + 4.6%, commodity circulation + 8.9%, services + 15%, salary levels + 5.8%, foreign trade turnover+ 10.4%, inflation + 1.4%.
- USD 105 million (7 times more than the total over the past 11 years) were recovered in the budget as a result of lacerated corruption and tax fraud schemes that were the common practice before the revolution. Thus, tax revenues collected in the budget of Armenia increased by 1,063,000,000 US dollars or 43.6% in 2019 compared with 2017 compared to 2018 by 20%.
- Small producers with annual sales lower than 55,000 USD now pay 0 taxes on business and 10 USD of income tax only, for employees:
- The minimum wage increased by 20%; in 1st tier healthcare (primary healthcare institutions), the salary of 15,000 employees increased by 30%, for ambulance workers – 10%; for instructors of sports schools – 56%, for teachers of art and music schools – 25%, for the latter will also get health insurance; for lifeguards – by 40%. Individual income tax is currently 23%, previously it was a progressive scale of 23-28-36% depending on the level of income.
- Medical care and services for children from 0 to 18 years are now free.
- Cancer operations and treatment of acute ischemic stroke are now free.
- 350 km of roads were constructed in 2019, funding for another 500 km of road construction allocated for 2020.
- Engineering City, which will host 100 foreign and local engineering companies, will open in Armenia thanks to investment commitment of $ 30,000,000 to accommodate 2,000 high-tech specialists. Construction works are expected to be completed by 2021.
- Digitown will be opened in Yerevan to serve as a hub for 100 startups. Construction works are expected to be completed by 2021.
- The new TUMO technology park with an area of 25,000 square meters will be developed in Armenia with investments of 25 million euros. Construction begins in the spring of 2020.
- $ 63 million was allocated for the complete reconstruction of 22 schools and 8 colleges in rural Armenia, construction has already begun by 2020 and will be completed by 2022.
- In 2019, two low-cost airlines launched operations in the Armenian market: Ryanair and Wizzair announced flights between Austria, Lithuania, Greece, Italy, Germany to Gyumri (2nd largest city of Armenia) and Yerevan. Ticket prices will start from 40 euros. For comparison, previously the cheapest ticket to Europe amounted to 200 euros. Flights already have been launched since January 2020.
- The number of tourists in Armenia increased by 15% and amounted to a[approximately 1,900,000 people:
- Owners of smart farms in Armenia can now claim a 50% reimbursement of construction costs. 30 intelligent farms were launched in 2019, the remaining 70 are planned for 2020 and 2021.
- Greenhouse farmers in Armenia can now receive a 30% reimbursement of construction costs. Through the state support program 35 ha will be covered:
- Enterprises that grow 0.5-100 ha of vineyards or intensive orchards with a minimum of 300 trees per ha in Armenia, can now claim 50% reimbursement of their costs.
- Preparatory works have been launched for the construction of five solar photovoltaic stations in 5 selected locations with a capacity of up to 120 MW. The construction of the largest solar photovoltaic unit in the South Caucasus with a capacity of 55 MW will begin in a few months.
- Currently, the police are implementing a point system in which each driver receives 9 points per year and deducts points for each violation, and when they reach 0, they lose their driver’s license. Police no longer take bribes.
- For the 9 months of 2019, the inflow of foreign direct investment increased by 17.6% and amounted to 454,000,000 US dollars:
- As of December 2019, the currency reserves of Armenia are now at a record high of $ 2,800,000,000, an increase of 26%.
- Dividends and coupon payments from companies listed on the exchange are now exempt from taxes.
- Freedom House puts Armenia in the top ten countries of the world per freedom of Internet
- Some of large factories launched in 2019: ADM Diamonds in Abovyan, 700 jobs, Italian Ceramisia ceramic factory in Arinj village, 500 jobs, textile factories with Chinese and Italian joint ventures Sartex, Asa Garment, Alex Textile and Texas production in Yerevan, 1,000 jobs (to increase up to 3,000 within 2 years), Artik half-cotton thread factory in Maralik, 150 jobs, SMT medical supplies factory in Yerevan, 100 jobs, Sambiel cheese factory in Noragavit, 120 jobs, Zakaryan Jeans factory in Gyumri, 58 jobs.
- In 2019, the number of registered workers increased by 81.534 people, and the unemployment rate fell by 2.2 percentile.
- The land reform was launched as part of the “Sustainable Agriculture of Armenia 2020-2030” strategy, according to which in 2020 agricultural land in Armenia will be mapped digitally. Idle agricultural land will be put up for auction by the state to attract Agro-investors, and the rent will be paid to the landowner.