Foreign Direct Investment
According to UNCTAD’s World Investment Report 2023, FDI inflows to Armenia stood at USD 998 million in 2022, almost three times the level recorded the previous year. The total stock of FDI was estimated at USD 7.1 billion, around 36.5% of the country’s GDP. The electricity and gas supply sector lead the sectoral distribution of FDI flows into the real economy, accounting for 58% (USD 578 million), followed by the mining and real estate sectors, accounting for 15% and 7%, respectively. Russia remained the most prominent investor in Armenia, with approximately 70% of the FDI inflow, amounting to USD 697 million, ahead of Cyprus (7%) and Jersey (4.6%). According to data from the Ministry of the Economy, the volume of foreign direct investment in 2023 was about USD 350 million.
Armenia ranks first among CIS countries in terms of FDI appeal, according to the World Bank. The Government has recently introduced conditions and laws favorable to foreign investment, and, because of its economic dynamism, the country has earned the nickname 'The Caucasian Tiger'. These measures include free economic zones for high-tech industries that provide companies with preferential treatment on corporate profit tax, VAT, property tax, and customs duties (UNCTAD). Armenia has strong human capital and a well-educated workforce. It does not impose restrictions on foreign control and rights to private ownership and establishment (except for the media and commercial aviation sectors), and business registration procedures are fast. FDI is also promoted through the EU-Armenia Comprehensive and Enhanced Partnership Agreement. Following the conflict in Ukraine, some multinationals with operations in Russia have moved their offices to Armenia, while an influx of Russian émigrés to the country has brought in new qualified workforce. However, the country remains strongly dependent on the economic health of the Russian and EU economies for FDI, it has a small domestic market and corruption is still widespread. In general, Armenia's competitive landscape is showing signs of enhancement. However, numerous businesses have highlighted the need for comprehensive reforms encompassing judicial, tax, customs, health, education, military, and law enforcement institutions to consolidate these advancements. Armenia ranks 72nd among the 132 economies on the Global Innovation Index 2023 and 47th out of 184 countries on the latest Index of Economic Freedom.
Foreign Direct Investment | 2020 | 2021 | 2022 |
FDI Inward Flow (million USD) | 59 | 366 | 998 |
FDI Stock (million USD) | 5,229 | 5,629 | 7,124 |
Number of Greenfield Investments* | 3 | 8 | 24 |
Value of Greenfield Investments (million USD) | 45 | 896 | 263 |
Source: UNCTAD - Latest available data.
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Country Comparison For the Protection of Investors | Armenia | Eastern Europe & Central Asia | United States | Germany |
Index of Transaction Transparency* | 7.0 | 7.5 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 6.0 | 5.0 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 8.0 | 6.8 | 9.0 | 5.0 |
Source: Doing Business - Latest available data.
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.