MINISTRY OF ECONOMY OF THE REPUBLIC OF ARMENIA
INVESTMENT POLICY DEPARTMENT
Invest in Armenia CONTENT OUTLINE
SOCIO - ECONOMIC OVERVIEW
MARKET & TRADE OVERVIEW
TAXATION & INCENTIVES
PROMISING SECTORS
INVESTMENT OPPORTUNITIES REPUBLIC OF ARMENIA
POPULATION 3,000,000 (approx.)
TOTAL AREA 29.800 sq./km
GOVERNMENT Parliamentary Republic YEREVAN THE CAPITAL CITY LANGUAGE Armenian (English and Russian languages are widely used) Currency – Armenian Dram (AMD) Currency rates / 2015 average TIME & DOMAIN ZONE 1 USD - 477 AMD UTC /GMT +4:00 1 EUR - 530 AMD .AM
REPUBLIC OF ARMENIA
GEORGIA
10 REGIONS (MARZES) 866 VILLAGES
DISTRICTS OF THE 12 CAPITAL CITY
48 CITIES AND TOWNS
IRAN DEMOGRAPHIC STATISTICS
TOTAL POPULATION 2.998.600 47,8 % 52,2 % URBAN 1.907.400 RURAL 0-19 20-29 30-49 50-64 64+ 1.091.200 18 PENSION 26 AGE 27
19 63 10 EMPLOYEMENT IN ARMENIA
Agriculture 14,3 Industry 1,6 52 % 34,8 Construction 7,9 1,13 Trade 4,5 Education mln Healthcare 9,3 Public & Defence 48% Finance & Insurance 10,9 11,5 5,2 Other
63,9% 50,9% 18,5% ECONOMIC ACTIVITY EMPLOYMENT UNEMPLOYMENT RATE RATE RATE AVERAGE SALARIES
Agriculture 221181 206 Mining 264 682 Processing Industry Energy 404 Construction 295 388 Trade Telecommunications 819 USD 464 Finance & Insurance Public Administration 371 Healthcare 608 241 Education Services
In 2015 average monthly salary in Armenia was around 184,000 AMD ARMENIAN DIASPORA
Estimation of Armenians living abroad - 8,000,000 -
UNITED STATES FRANCE GEORGIA RUSSIA 1,5 M 0,5 M 0,45 M 2,5 M EDUCATION IN ARMENIA
60 80K 20K STATE & STUDENTS in 2015 GRADUATES COMMERCIAL in 2015 UNIVERSITIES STUDENTS BY SPECIALITY
5,7 6,5 IT & Mathematics 9,4 3,9 Natural Sciences Humanities 9,8 Healthcare 80,000 28,6 Economics & Management STUDENTS Education & Pedagogy 10,7 Industry & Services Agronomy & Food Arts 18,1 7,3 FOREIGN UNIVERSITIES
AMERICAN UNIVERSITY OF ARMENIA UWC DILIJAN COLLEGE
MOSCOW STATE UNIVERSITY IN EUROPEAN REGIONAL ACADEMY ARMENIA RESEARCH & DEVELOPMENT
INNOVATION CENTER ARMENIA ARMENIAN-INDIAN CENTER FOR 100+ EXCELLENCE IN ICT R&D CENTERS
DEVELOPMENT & TESTING CENTER FOR CREATIVE LABORATORY TECHNOLOGIES
TECHNOPARKS , FREEZONE, INCUBATOR
ENTERPRISE Vanadzor Technology Center INCUBATOR VTC FOUNDATION GTC Gyumri Technology Center INTERNET ACCESS 2,2 MLN. USERS
Average internet 98% speed in Mbps* COUNTRY COVERAGE
1$ 8,5 PER 1 MBPS 6,8
Sources: Akamai, Bandwidthplace.com, Numbeo ARMENIA WORLD E-SOCIETY
GOVERNMENT REGISTER Legal databases, visas, System allows online tracking the progress of registration of legal entities in letters, applications, a matter of minutes requests WWW.E-REGISTER.AM WWW.E-GOV.AM
CADASTRE PAYMENTS Online submission of Online payments of duties, requests for registering fees and administrative fines rights over real estate and collected for services movables delivered by state or local WWW.E-CADASTRE.AM government bodies. WWW.E-PAYMENTS.AM MACROECONOMIC PERFORMANCE GDP GROWTH
8 2015 GDP 7 10,6 BILLION USD 6 5 4 3 2 1 2.2 4.7 7.2 3.3 3.5 3.0 0 2010 2011 2012 2013 2014 2015 GDP STRUCTURE
TAXES INDUSTRY
10,6 16,4
FISIM* (-1,8%)
10,6 17,3 AGRICULTURE bln. USD 37,3
9,4 SERVICES 10,8 CONSTRUCTION
FISIM stands for Financial TRADE Intermediation Services Indirectly Measured GDP STRUCTURE BY YEARS
2010 2011 2012 2013 2014 2015
INDUSTRY 15.4 17.1 16.0 16.3 16.2 16.4
AGRICULTURE 17.0 20.3 17.9 18.4 18.5 17.3
CONSTRUCTION 17.3 13.0 11.7 10.5 9.2 9.4
TRADE 12.9 12.6 12.1 12.0 11.7 10.8
SERVICES 27.9 28.5 33.8 33.7 35.2 37.3
TAXES 11.2 10.9 10.7 11.1 11.3 10.6
FISIM -1.9 -2.5 -2.2 -2.0 -2.1 -1.8 INFLATION RATES
9 8 7 6 5 4 3 2 8.2 7.7 2.6 5.8 3.0 3.7 1 0 2010 2011 2012 2013 2014 2015
INFLATION BENCHMARK
20
18
16
14 Georgia
12 Germany
10 Armenia 17,6 Russia 8 15,9 14,7 14,1 Kazakhstan 6 Ukraine 9,5 9,7 4 7,8 7,4 7,2 6 5,3 4,8 5 4,3 ARM 2 4,3 3,8 3,4 2,1 1,7 2,7 GER 1,1 1,2 1,5 0 0 2011 2012 2013 2014 ECONOMIC RATING
DOING BUSINESS INDEX ECONOMIC FREEDOM INDEX
35 54
Among 189 countries Among 186 countries FDI INFLOW
Cumulative FDI in 2010 -2015 - $ 3,000,000,000 -
ARGENTINA FRANCE GERMANY RUSSIA $144,7 M $ 524,4 M $ 162,2 M $ 1,37 BN FDI STRUCTURE
FDI inflows during 2010 -2015 mln. USD PROCESSING INDUSTRY
MINING 304
318 950
TELECOMMUNICATION ENERGY 889 LATEST INVESMENTS
4 STAR HOTEL IN YEREVAN AZAD PHARMACEUITCALS BY DOUBLE TREE HILTON LABORATORY IN YEREVAN
UWC INTERNATIONAL SCHOOL HYDROPOWER STATION IN DILIJAN BY U.S. CONTOUR GLOBAL LAW ON FDI
100% OWNERSHIP PERMITTED
STABILIZATION CLAUSE NO RESTRICTIONS Guarantees against changes Unrestricted access to of legislation on investments any sector and for 5 years geographic location within country
LAND OWNERSHIP EQUAL TREATMENT Companies registered by a Legal regime no less foreigner in Armenia have favorable than that of the right to buy land. nationals, unless a more o Free exchange of foreign Foreign citizens can have favorable regime is currencies long-term lease contracts. provided by a respective o No restrictions on remittances treaty o Free repatriation of profit o No restrictions on staff recruitment INTERNATIONAL TREATIES
41 41
PROMOTION AND RECIPROCAL DOUBLE TAXATION AND THE PROTECTION OF INVESTMENTS PREVENTION OF FISCAL EVASION
Argentina, Austria, Belgium and Luxemburg, Belarus, UK, UAE, Austria, Belgium, Bulgaria, Belarus, Canada, Bulgaria, Canada, China, Cyprus, Egypt, Finland, France, Switzerland, China, Cyprus, Czech Republic, Estonia, Spain, Georgia, Germany, Greece, India, Iran, Iraq, Israel, Italy, Finland, France, Georgia, Greece, Croatia, Hungary, India, Jordan, Kazakhstan, Kuwait, Kyrgyzstan, Latvia, Lebanon, Iran, Italy, Kazakhstan, Lebanon, Lithuania, Luxembourg, Lithuania, Netherlands, Qatar, Romania, Russian Latvia, Moldova, Netherlands, Poland, Qatar, Romania, Federation, Sweden, Switzerland, Syria, Tajikistan, Russian Federation, Syria, Thailand, Turkmenistan, Ukraine, Turkmenistan, Ukraine, UAE, UK, USA, Uruguay, Vietnam Germany, Ireland, Kuwait, Slovenia INVESTMENT FREEDOM INDEX
WORLD ARMENIA 80 FREE 80
MOSTLY FREE 70
MODERATELY FREE 60
50 MOSTLY UNFREE
REPRESSED 40
2000 2016
IN 2016 ARMENIA’S SCORE OF INVESTMENT FREEDOM IS 80 POINTS. RANKED AMONG TOP 23 ECONOMIES BY INVESTMENT FREEDOM COMPONENT FINANCIAL SYSTEM
CENTRAL 21 33 9 BANK OF BANKS CREDIT INSURANCE ARMENIA ORGANIZATIONS COMPANIES
30 BILLION AMD Total capital requirement for banks Approx. 62M USD CURRENCY STABILITY
USD/ AMD USD/ RUR 20% 100% 410 - 490 34 - 70
USD/ GEL USD/ UAH 40% 150% 1.7 - 2.4 11 - 27
* Currency rates/charts - xe.com INTEREST RATES
ACTUAL HIGHEST LOWEST 35
30 30 30
25 22 21 20 17 17 17
15 12 10,5 11 10 8,25 6,75 8 6,5 5 5,5 5 3,75 3,5
0 Armenia Georgia Moldova Ukraine Russia Kazakhstan FINANCIAL RATING
B+ B1
with a Stable Outlook with a Stable Outlook MARKET & TRADE
Eurasian Economic Union Armenian Market of Market of 3,000,000 180,000,000 Consumers Consumers
MEMBER COUNTRY
GSP Regime With USA, Japan, Canada GSP+ Regime (3500 products) With EU countries (6400 products) MAIN EXPORTS
Total exports in 2015 - $ 1,500,000,000 -
Processed Food 15,4 20,7 Mining Products
13,9 Textile
Precious, semi-precious 5,5 stones, metals, articles 31,1 Non-precious metals and articles MAJOR EXPORT DESTINATIONS
Total exports in 2015 - $ 1,500,000,000 -
CANADA USA GERMANY GEORGIA IRAN RUSSIA CHINA 3,7% 7,5% 9,8% 5,2% 11,1 % 7,8% 15,2 % EXPORT / IMPORT VOLUMES
5000
4000
3000
2000
1000
0 2010 2011 2012 2013 2014 2015 thousand USD 2010 2011 2012 2013 2014 2015 EXPORT 1041 1329 1380 1478 1547 1486 IMPORT 3749 4151 4261 4385 4424 3254 BALANCE -2708 -2811 -2881 -2907 -2877 -1768 TAX SYSTEM
General taxation regime Simplified taxation regime
COMMON CUSTOMS TARIFF OF EAEU 3,5% - 10% ON TURNOVER 24,4% -36% INCOME TAX o Replaces Value Added Tax and Corporate Tax for SMEs. o Reduces the amount of data to be filed by the taxpayers with the tax authority. CORPORATE TAX o The tax rate is differentiated based on the 20% type of income. o Taxpayer’s turnover from the previous calendar year should not exceed AMD 115 million (around 240.000 USD) VALUE ADDED 20% TAX TAX BURDEN
100%
One of the most favorable tax regimes in CIS and Europe countries 48,6 37,6 36,7 34,8 32,7 25,4 24,8 23,4 22,4 15,7
* Source “2016 Index of Economic Freedom” TAX INCENTIVES FOR INVESTORS
FREE ECONOMIC ZONES TAX EXEMPTIONS VAT PAYMENTS in border areas postponement for up to of Armenia 3-year period for importing equipment and goods within the scope of investment projects.
TAX EXEMPTIONS CUSTOMS DUTY for IT start-up exemption companies PROFIT TAX within the scope of privileges for investment projects. large exporters FREE ECONOMIC ZONES
JEWELRY
MERIDIAN FEZ OFFICE AND INDUSTRIAL HI – TECH PREMISES ALLIANCE FEZ 2 OFFICE PREMISES FREE ECONOMIC ZONES
ALLIANCE FEZ INDUSTRIAL PREMISES Free Economic Zones are located in Yerevan. TAX INCENTIVES FEZ IN FIGURES
DURING 2014-2016*
$ 124 M 535 INVESTMENTS 12 NEW WORKPLACES RESIDENT 2 COMPANIES Investments are expected to be made and FREE workplaces created in 5 years according to the business plans ECONOMIC * Data as of June 2016 ZONES PROMISSING SECTORS
INFORMATION TECHNOLOGIES 01
JEWELRY & DIAMOND 02 PROCESSING
03 BEVERAGES & WINEMAKING
04 FOOD PROCESSING
05 TOURISM & AVIATION
06 RENEWABLE ENERGY INFORMATION TECHNOLOGIES o World-class R&D capabilities in engineering, computer science, physics, and mathematics Well-educated and talented workforce with technical skills and English language proficiency o Strong university programs with specializations in IT and related sciences o Highly competitive labor costs and low operating costs
500 o Solid government support for the sector 450 Number of IT companies 400 2007 -2015 Sustainable and continuous growth in the IT o 350 sector 300 250 Extensive experience with large multinational o 200 450 396 379
companies 363 150 345 324 297
100 262 IP protection laws and regulations meeting 223 o 50 international standards 0 JEWELRY & DIAMOND PROCESSING
o Ancient jewelry making traditions in Armenia o Skilled labor force incorporating recently arrived Armenians from Syria, Low labor cost, A considerable number of sector players (10000 jewelers) o Strong comparative advantage compared to CIS countries: 2nd exporters after Russia
Positive image of Armenian jewelry in Exports o 2010 2011 2012 2013 2014 some of export market (thousand USD)
Diamonds 90 262 113 728 79 141 88 051 118 018 o Favorable tax conditions in Armenia (Free Economic Zone) Jewelry 13 218 12 166 13 160 21 269 21 527 o A bsence of duties on import from Clocks, watches 3 975 8 118 12 885 13 981 17 788 jewelry items from Armenia in main Total 107 455 134 012 105 186 123 301 157 333 target markets BEVERAGES & WINEMAKING
o Steady growth of production, sales and exports in the last years o Strong comparative advantage: Armenia is the 5th global exporter of grape brandy, and the first exporter of the CIS region. Production volumes / mln. liters Wine Brandy 30 o Long time tradition, strong know- how, professional education 25 (Wine Academy) 20 20,3 15 18,5 18,8 Many producers (farmers) and 15,4 o 10 12,6 open market 5 5,1 6,2 5,7 6,6 6,1 0 2010 2011 2012 2013 2014 FOOD PROCESSING o Long established tradition of producing high quality processed food o Export oriented and diverse agro-food processing sector o Developed logistic and distribution services o Effective food safety system based on international standards o Favorable and unique soil and climate 300 conditions for growing of agricultural species Export of processed food 241,9 250 2009 -2013 mln. USD 212,9 Seven research institutions, one higher o 200 education institution and eight state colleges 167,4 offer education and research activities in food 150 122,7 processing sector 100 91 . Estimated to be worth USD 900 million, sector o 50 is one of the largest industries in Armenia, directly employing about 21,000 people 0 TOURISM SECTOR
o Annual growth of the number of incoming tourists in Armenia is 15- 20% in average o Second home for around 8 million Armenians living in different countries o More then 5000 historical monuments spread around the country, some included in UNESCO World Heritage o The longest ropeway in the World “Wings of Tatev” – 5.7 km o Ski resorts – Tsakhkadzor with modern 6 lifts rope-way o Mineral Spa resorts – Jermuk, Bjni, Dilijan, Arzni AVIATION SECTOR
o Armenia is implementing “Open Skies ” policy in the field of civil aviation and air communication. o Reconstructed “Zvartnots” Intl. Airport, the main air gate of Armenia, was recently declared the best airport in CIS countries.
1400000 Incoming tourists o Shirak is the 2nd largest airport located in 120 km from Yerevan. 1200000 2010 -2015 Airport is granted certain tax 1000000
exemptions and can be cost 800000 efficient option specifically for low 600000 1203746
cost airlines. 1192120
400000 1084188 963000 757935 200000 683979
0 RENEWABLE ENERGY
o Favorable legislation, fixed feed-in tariffs effective for 20 years, tax incentives o Hydro resources are the most widely used among the renewable energy resources. o Significant solar energy potential. The Renewable Energy Generation Capacity and average annual amount of solar Production Targets by 2020-2030 energy flow per sq. m. of horizontal surface is about 1720 kWh (the Capacity installed (MW) Generation (GWh) average European is 1000 kWh). 2020 2025 2020 2025 Small Hydro 377 397 1,049 1,106 o Number of hydropower, geothermal Wind 50 100 117 232 and solar investment projects Geothermal 25 100 373 745 available for PPP implementation PV 40 80 88 176 Total 492 677 1,627 2,259 PPP OPPORTUNITIES
NORTH-SOUTH ROAD CORRIDOR YEREVAN’S 33RD DISTRICT INVESTMENT PROJECT INVESTMENT PROJECT The preliminary estimated cost of The preliminary estimated cost of construction works of the North- construction works of the South Road Corridor Investment Investment Program is about Program is about USD 2-3 billion USD 300 million PPP OPPORTUNITIES
SOUTHERN ARMENIA RAILWAY COPPER SMELTER PLANT INVESTMENT PROJECT INVESTMENT PROJECT According to the preliminary According to the preliminary estimates, the required estimates the required investment is around investment is around USD 3.2 billion USD 400-450 million MAJOR BRANDS WHY ARMENIA ?
FAVORABLE INVESTMENT LEGISLATION. ONE OF THE MOST OPEN INVESTMENT REGIMES. “OPEN-DOOR” POLICY TOWARDS FOREIGN INVESTORS
HIGH EXPERIENCED, CREATIVE, COST EFFICIENT AND WELL EDUCATED WORKFORCE
STABLE MACROECONOMIC & POLITICAL ENVIRONMENT
SUSTAINABLE BANKING SYSTEM IN LINE WITH INTERNATIONAL STANDARDS
COMPREHENSIVE CONTINUOUS REFORMS OF THE BUSINESS ENVIRONMENT CONTACT US
MINISTRY OF ECONOMY OF THE REPUBLIC OF ARMENIA INVESTMENT POLICY DEPARTMENT
T + 374 11 597 127
W www.mineconomy.am
The printing of this publication is funded by the IFC Armenia Investment Climate Reform Project, implemented by the World Bank Group Trade and Competitiveness Global Practice, in partnership with Austria’s Federal Ministry of Finance.