Armenia-India Investment Strategies: A Comprehensive Guide

Armenia is an attractive prospect for investors from India, thanks to its favourable investment and business environment, modern infrastructure, and well-educated workforce. Armenia's government has implemented an open-door policy for foreign investments, and the country has one of the most open investment regimes among the CIS countries. It has consistently received respectable rankings in international indices that review country business environments and investment climates. Armenia offers a range of investment opportunities, including in the energy, mining, banking, pharmaceutical, and information technology sectors. The country has a strong legislative and regulatory framework, provides equal treatment for local and foreign investors, and imposes few restrictions on foreign control and rights to private ownership and establishment. Additionally, Armenia has two free economic zones with no profit, VAT, or property taxes, and investors can take advantage of special tax regimes for start-ups.

Armenia's favourable investment policies

Armenia has consistently ranked well in international indices that review country business environments and investment climates. The country's legal framework and government policy aim to attract investment, and there are several favourable investment policies in place. Here are some key aspects of Armenia's favourable investment policies:

• Open-Door Policy: Armenia implements an "open-door" policy regarding foreign investments, with one of the most open investment regimes among the CIS countries. This policy encourages and welcomes foreign investment into the country.
• Protection of Foreign Investors: Foreign investors in Armenia are protected by the Law "On Foreign Investments". This law provides a legal framework for foreign investments and ensures their rights and interests are safeguarded.
• Business Environment Reforms: The Armenian government is committed to deep and comprehensive reforms of the business environment. These reforms aim to provide favourable investment and business opportunities for foreign investors, making it easier to establish and operate businesses in the country.
• Wide Range of Investment Options: Armenia offers various investment options for foreign investors, including creating wholly-owned enterprises, joint ventures, acquiring shares in existing companies, real estate investments, and more.
• Tax Incentives: Armenia provides tax incentives to foreign investors, such as income tax holidays, VAT refunds, and exemptions from customs duties for certain investment projects.
• Free Economic Zones (FEZ): Armenia has established several Free Economic Zones that offer tax exemptions and other benefits to attract foreign investments. These zones are designed to promote specific industries, such as high-tech, pharmaceuticals, and jewellery production.
• Intellectual Property Rights Protection: Armenia has a strong legislative and regulatory framework to protect intellectual property rights (IPR). This protection provides confidence for investors looking to bring innovative products and technologies to the market.
• Supportive Tools and Information: The Armenian government offers a range of supporting toolkits and information resources to assist foreign investors. These include the website www.investmentprojects.am, which provides details on investment projects and opportunities in the country.
• Bilateral Investment Treaties: Armenia has signed bilateral investment treaties with various countries, including the United States, providing additional protections and dispute resolution mechanisms for foreign investors.
• Human Capital: Armenia boasts a highly educated population, particularly in STEM fields. This provides a talented and skilled workforce for businesses, making it an attractive destination for knowledge-based and technology-focused investments.

The country's skilled and inexpensive workforce

Armenia boasts a highly-skilled and inexpensive workforce, making it an attractive prospect for foreign investors. The country's population is well-educated, particularly in the fields of science, technology, engineering, and mathematics, which has led to significant investment in the high-tech and information technology sectors. This highly-skilled workforce has been a draw for many international companies, including those from the US, who have set up branches and subsidiaries in Armenia to take advantage of the talent pool.

Education Levels

Armenian workers are well-educated, with only a small proportion having less than secondary education, and these workers tend to be based in rural areas. In urban areas, one in three workers has a tertiary education, and one in four has a secondary technical education. This focus on education is also reflected in the country's entrepreneurs, who are often highly educated, with many possessing postgraduate degrees.

Employment Rates and Wages

Armenia's unemployment rate is currently at 16%, and the labour force participation rate is low, with only about two-thirds of those of working age employed or seeking work. The country also struggles with underemployment, with many individuals working in low-productivity and low-paid jobs. In fact, one in four jobs in Armenia is low-paid, paying less than two-thirds of the median wage. This has resulted in a large number of "working poor", where employed individuals still live below the poverty line.

Business Environment

Armenia has been working to improve its business environment, making it more attractive to foreign investors. The country has implemented reforms to create a favourable investment climate, and it has one of the most open investment regimes among the CIS countries. Armenia also offers a range of incentives to foreign investors, including income tax holidays, VAT refunds, and exemptions from customs duties for investment projects.

Barriers to Job Creation

Despite these positive aspects, there are some challenges to job creation in Armenia. Employers cite unfair competition from informal firms, red tape, and bureaucratic harassment as major obstacles. Additionally, Armenia's small market size and relative geographic isolation due to closed borders with neighbouring countries can deter investors.

Opportunities for India

With its skilled and inexpensive workforce, Armenia presents an attractive opportunity for Indian investors, particularly in the high-tech and information technology sectors. The country's favourable business environment, lack of restrictions on foreign ownership, and range of incentives make it a viable option for Indian companies looking to expand internationally.

Armenia's developing sectors

Armenia's main sectors of the economy include agriculture, mining, energy, and manufacturing. The country has a well-educated population, particularly in science, technology, engineering, and mathematics, which has led to significant investment in the high-tech and information technology sectors.

• Agriculture: Armenia has a long history in agriculture, dating back to the beginning of the 20th century. While the agricultural sector has long-term needs for more investment and updated technology, it still accounts for a significant portion of the country's GDP. In 2018, Armenia produced large quantities of potatoes, vegetables, wheat, grapes, tomatoes, watermelons, barley, apples, and apricots.
• Mining: Armenian mines produce copper, zinc, gold, and lead. The mining industry is a significant contributor to the country's economy, with mineral product exports (excluding precious metals and stones) growing by 46.9% in 2017 and running at US$692 million, comprising 30.1% of all exports.
• Energy: Armenia's energy sector is heavily dependent on imported fuel from Russia, including gas and nuclear fuel for its Metsamor nuclear power plant. However, the country is also focusing on renewable energy sources, with recent loans and projects aimed at integrating increased renewable energy capacity into its power transmission grid.
• Manufacturing: Armenia has a history of manufacturing, dating back to its time as part of the Soviet Union when it produced chemicals, electronic products, machinery, processed food, synthetic rubber, and textiles. Today, the manufacturing sector continues to be important, with many foreign companies establishing branches or subsidiaries in Armenia to take advantage of the country's skilled workforce.
• Information Technology: Armenia's IT sector is growing, with a highly educated workforce specializing in electrical and computer engineering, optical engineering, and software design. The country has also established several free economic zones (FEZ) that offer tax incentives and support for high-tech industries, including information and communication technologies.
• Tourism: Armenia has been a key sector for the Armenian economy since the 1990s, with the number of incoming tourists continually increasing. In 2018, the country welcomed over 1.6 million inbound tourists, and receipts from international tourism amounted to $1.2 billion.

Armenia offers a favourable investment and business environment, with an "open-door" policy towards foreign investments. The country has received consistently respectable rankings in international indices reviewing country business environments and investment climates. Additionally, the Armenian government is carrying out reforms to improve the business environment and provide favourable opportunities for foreign investors.

The country's economic dynamism

Armenia has been dubbed the "Caucasian Tiger" due to its economic dynamism. The country has experienced sustained economic growth over the last decade, and its competitive landscape is showing signs of enhancement. Armenia's investment policy is geared towards creating a favourable investment and business environment, increasing transparency, and developing human capital. The country has one of the most open investment regimes among the CIS countries and has implemented an "open-door" policy for foreign investments.

Armenia's economic dynamism can be attributed to several factors:

• Skilled and inexpensive labour force: Armenia boasts a highly educated and skilled workforce, particularly in the fields of science, technology, engineering, and mathematics. This has attracted significant investment in the high-tech and information technology sectors.
• Developing sectors: Armenia has several developing sectors that require foreign investment, such as telecommunications, construction, and information technology. The country has a strong jewellery and diamond processing industry, with a long history of designing and producing jewellery. Additionally, the country's beverage and winemaking industry is renowned worldwide due to the high-quality fruits and vegetables produced locally.
• Favorable conditions for foreign investment: Armenia offers favorable conditions for foreign investors, including low taxes, free economic zones, and a supportive legal framework. The country has introduced conditions and laws that promote foreign investment, such as equal treatment for foreigners, no limitations on foreign ownership, and freedom to repatriate profits.
• Geographical position: Armenia's location provides access to the former Soviet republics and facilitates integration into the world economic order. It is a member of the Eurasian Economic Union and has preferential trade agreements with Canada, Switzerland, Japan, Norway, and the USA.
• Strong human capital: Armenia has a well-educated and hardworking population. The country's human capital is one of its strongest resources, making it attractive to foreign investors.
• Safe and advanced financial and banking sector: Armenia has a safe and well-regulated financial and banking sector. The banking system is sound and stable, providing a secure environment for investors.
• Significant mineral resources: Armenia is endowed with abundant natural resources, including molybdenum, copper, and gold.

However, it is important to acknowledge that Armenia's economic development also faces some challenges. The country has a small domestic market, high transport costs due to the embargo imposed by Turkey and Azerbaijan, a high risk of nepotism and interference at the state authority level, and a strong dependence on the economic health of Russia and the EU. Nevertheless, Armenia's economic dynamism and favourable investment climate make it an attractive destination for foreign investors.

Armenia's strong human capital

Armenia has made significant improvements in ensuring health and learning through access to services. Enrollment in primary and middle school is above 90%, and 100% of childbirths are attended by skilled healthcare providers. Social transfers have helped reduce poverty and increased access to education and healthcare for low-income households. Life expectancy has also increased, with women's life expectancy rising from 73.3 years in 1990 to 78.7 years in 2017, and men's life expectancy increasing from 66.7 years to 72.4 years in the same period.

Armenia's healthcare system has undergone significant reforms since its independence in 1991. Primary care services have been free of charge since 2006, and in 2019, healthcare became free for all citizens under the age of 18. The government is also implementing an ambitious plan to boost human capital through reforms in the education and health sectors. The ongoing Education Improvement Project (EIP) supports the government's efforts to create a network of stakeholders to accelerate knowledge creation and innovation, teach job-relevant skills, and remove barriers to labor market participation.

Armenia's human capital is further strengthened by its democratic values and respect for human rights. The country has universal suffrage for those above the age of eighteen, and human rights in Armenia tend to be better than in most former Soviet republics. Armenia is also classified as "partly free" by Freedom House, and it recorded unprecedented progress in the 2019 World Press Freedom Index, published by Reporters Without Borders.

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