Armenia Investment Climate Statement 2015

Armenia is located in Western Asia. The Government of Armenia (GOA) officially welcomes foreign investment and the country has received respectable rankings on some global indices measuring business climate. In January 2015 the Eurasian Economic Union trading bloc went into effect, creating a single economic market of 176 million people between Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia. Armenia has a highly educated workforce and the high-tech and information technology (IT) sectors have attracted foreign investments - particularly from the United States. 2014 saw the initial steps towards a major U.S. investment in Armenia's energy generation sector that is expected to finalize in 2015. However, Armenia's investment climate can be difficult and poses several serious challenges: a population of less than three million; relative geographic isolation due to closed borders with Turkey and Azerbaijan; per capita gross national income (GNI) of about USD 3,800; and high levels of corruption in both official and commercial spheres.Armenia has no limitations on the conversion and transfer of money or the repatriation of capital and earnings, including branch profits, dividends, interest, royalties, or management or technical service fees. The banking system in Armenia is sound and well-regulated, but Armenia's financial sector is not highly developed. Foreign individuals who do not hold special residence permits cannot own land, but may lease it; companies registered by foreigners in Armenia as Armenian businesses have the right to buy and own land. There are no restrictions on the rights of foreign nationals to acquire, establish or dispose of business interests in Armenia. The U.S.-Armenia Bilateral Investment Treaty (BIT) provides that if a dispute arises between an American investor and the Republic of Armenia, the investor may choose to seek remedy through binding international arbitration. Although Armenian legislation complies with the Trade Related Aspects of Intellectual Properties (TRIPS) Agreement and offers protection of intellectual property rights (IPR), enforcement efforts need to be improved.The Armenian regulatory system lacks transparency. Major sectors of Armenia's economy are controlled by well-connected businessmen who enjoy government-protected market dominance. Corruption remains a significant obstacle: although the government has introduced a number of reforms over the last few years, and the overall investment climate seems to be improving incrementally, corruption remains a problem in critical areas such as the judiciary, tax and customs operations, health, education, and law enforcement. Tax and customs procedures, while having improved, still lack transparency. It is still not uncommon to see the use of the two-invoice system, where reference prices are used, instead of invoice prices during customs clearance and manipulation of the classification of goods increases costs. The court system lacks independence, making it an unreliable forum for resolution of disputes.