Investment opportunities in Armenia

The Republic of Armenia implements an “open door” policy towards foreign investment and has one of the most open investment regimes among the CIS countries.

The Armenian government has been implementing deep and comprehensive reforms in the business environment, providing favorable investment and business opportunities for foreign investors.

Sectors for Investment

Mining

Armenia has a long history in mining, marked by the beginnings of copper mining at the Alaverdi mine in the 1770s, the Kapan gold mine in the 1840s, and the Kajaran copper-molybdenum mine in the 1950s. After the country gained independence, further development of the mineral sector was hampered by a number of factors, including its geographical location and the difficult conditions for transporting products to markets abroad. The industry was also technologically paralyzed. Reform in the sector began in earnest in the early 2000s with a review of the regulatory framework, liberalization of contractual mechanisms, and privatization of large mining companies.

Mining issues are under the jurisdiction of the Ministry of Territorial Administration and Infrastructure, which was formed in 2019 through the merger of the former Ministry of Energy Infrastructure and Natural Resources and the Ministry of Territorial Administration and Development.

The mining sector is regulated by key legislative acts, including the Mining Code, Land Code, Civil Code, Water Code, Administrative Code, Law on Waste, Law on Environmental Supervision, Law on Payment for Environmental Protection and Use of Natural Resources, Law on Environmental Impact Assessment and Environmental Expertise.

International donors have supported Armenia's efforts to improve legislation in the mining sector in line with In line with international best practices, the Armenian government has identified mining development as a strategic priority. The World Bank financed a strategic assessment of the sustainability of the mining sector, completed in 2016, which focused on key challenges and opportunities in the sector, with an emphasis on developing a regulatory environment that both promotes sustainability and attracts investment.

In May 2023, the Armenian government adopted a strategy for modernizing the domestic mining industry by 2035. The main goals are to create a unified geological database, effectively make decisions on subsoil use and environmental protection, comply with international environmental and sanitary standards, and distribute revenues fairly. The government also approved amendments to various laws overseeing environmental standards, permitting, and construction practices. In 2022, the government approved a package of amendments and additions to the Tax Code and the Law on State Duty, revising the royalty system applicable to mining companies and introducing a two-tier progressive tax system, moving away from royalty price scales and special export duties.

The mining sector accounts for Armenia's gross domestic product and dominates its goods exports. Exports of extracted resources, including finished products based on raw materials such as aluminum foil and diamonds, account for more than half of Armenia's annual goods exports. Extracted copper resources represent the country's largest source of exports. Per capita mineral wealth levels are high compared to similar oil-importing countries in the region.

Armenia's mining industry is centered around the extraction of metals: iron, copper, molybdenum, lead, zinc, gold, silver, antimony, and aluminum. There are valuable reserves of rare metals in gold-polymetallic, copper-molybdenum and copper-pyrite deposits.

In addition to metals, Armenia produces other industrial minerals, including cement, diatomite, gypsum, limestone and perlite. The country also has local resources of building materials such as basalt, granite, limestone, marble and tuff, semi-precious stones. The country also has a developed diamond processing industry based on imported diamonds.

Leading Subsectors

The mining and export of copper and associated molybdenum reserves dominate the mining landscape of Armenia. The leading producer of copper and molybdenum concentrates in Armenia is the Zangezur Copper and Molybdenum Combine (ZCMK), which operates a large mine in Kajaran and is responsible for 60% of the annual turnover in the mining sector. The Agarak mine, located near Armenia's border with Iran, also produces copper. The government has been considering new investments to replace a decrepit copper smelter in the town of Alaverdi.

Gold is the second most important subsector of the mining industry.

In 2023, the Armenian government signed a memorandum of understanding with Lydian Armenia that will allow the massive Amulsar gold mine to restart operations and help raise $250 million for the project. As part of the agreement, Lydian ceded 12.5% of its shares in the gold mine to the government. The Sotk mine in eastern Armenia is also a leading gold producer, but the company was forced to suspend operations at the open pit mine in April 2023, continuing only a much smaller underground mining operation. The second-largest gold mine is the Shahumyan mine near Kapan in southern Armenia.

Other important sub-sectors in terms of export value are diamonds and jewelry.

Opportunities

Armenia is likely to continue to develop copper, gold, and molybdenum processing capacity. Growing recognition of the critical importance of the mining sector to the Armenian economy and the influx of foreign exchange has increased support for new developments, reinforcing the government’s focus on developing a productive, responsible sector.

With increased public and government sensitivity to the potential adverse environmental impacts of mining, as well as interest in the sector serving as a source of sustainable economic growth, new opportunities are emerging to provide services and technologies that can address legacy issues through the reclamation, restoration, or rehabilitation of mines and surrounding areas and sites.

Information and Telecommunications Technology

Armenia has a growing information and communications technology (ICT) sector. The sector has seen significant growth in recent years, with new companies expanding and hiring steadily as Armenia continues to increase its presence in global value chains. The number of firms active in the ICT sector exceeds 3,000, employing over 20,000 people and generating over $1 billion in annual revenue. The ICT sector is growing at 20% per year, which could be further accelerated by the arrival of thousands of new foreign highly skilled IT professionals.

Armenia’s ICT sector has several notable business areas, including: custom software, web design and development, IT services and consulting, mobile app development, chip design and testing, computer graphics and multimedia, and gaming. New business areas that are emerging or already developing include data science, artificial intelligence, quantum computing, and electronic design automation. These are of particular interest to Armenia as ICT companies explore opportunities to sustain aggressive growth.

The Armenian government has been active in supporting the development of the ICT sector. It works closely with international donors to enhance the competitiveness of Armenian ICT companies in the global market. Since 2019, the Ministry of High-Tech Industry has been overseeing the development and implementation of government policies and strategies regarding ICT and related industries. The government also aims to transform Armenia into a digital society more broadly and is implementing its country’s Digitalization Strategy for 2021-2025 in cooperation with international donors. The strategy envisages the digital transformation of the government, economy and society through the introduction and development of innovative technologies, cybersecurity, data policy, e-government systems, coordination of digitalization processes and the creation of common standards.

Armenia has positioned itself as a top destination for investment in the tech sector due to its large talent pool in mathematics and science, good and growing English language proficiency, several good university programs, competitive labor force and operating costs, government support for the sector, a strong diaspora network and existing relationships with large multinational companies within global value chains.

To ensure that the country continues to have a rich pool of highly skilled talent, several local universities and research institutes have increased their offerings of programs related to the ICT sector. Several of them have opened research labs and maker spaces in collaboration with international partners, local industry associations, and leading multinationals, including Microsoft, IBM, and National Instruments. These businesses are typically based in Yerevan, but also have a presence in second-tier cities, including Gyumri and Vanadzor.

According to the latest industry reports, about a third of ICT companies in Armenia claim foreign ownership. International companies account for about half of all employees in the sector. Foreign branches tend to be development centers for parent companies.

Armenia’s technology hubs, innovation districts, and free economic zones are used to support the high-tech sector. Tax incentives are used as a tool to stimulate start-ups. The government also uses other tools, including grants, study tours, educational programs, and the formation of a nascent investment fund, to support high-tech enterprises.

Leading Subsectors

Software, web design and development, mobile app development, systems engineering, and IT consulting services make up the bulk of activity in Armenia’s ICT industry. The country has found a more specialized niche thanks to the local presence of leading electronic design automation firms.

Several large multinational ICT firms operate in Armenia. The firms include Synopsys, NVIDIA, Adobe, DISQO, AMD, Microchip, Apple, Microsoft, D-Link, National Instruments, Siemens, Intel, Cisco, IBM, Oracle, VMWare, ServiceTitan, VOLO, Salesforce, and BostonGene. As of 2022, about 500 Russian tech companies are reported to have relocated or opened branches in Armenia.

The country has hosted a number of major industry events that have attracted international attention. The Armenian Science and Technology Foundation hosts the annual Global Innovation Forum, which attracts major speakers. The Enterprise Incubator Foundation, a local industry group, hosts the annual ArmTech conference, while another industry group, the Union of Advanced Technology Enterprises, organizes the regular DigiTec conference. In recent years, Armenia has held an annual Engineering Week to develop the engineering and industrial component of the Armenian ICT industry.

Educational institutions and innovation districts are opening up new opportunities in the ICT industry, developing talent and creating ecosystems in which new companies can establish themselves. Work is underway to create an Engineering City on the outskirts of Yerevan. Once completed, this multi-million dollar facility will house local firms, facilitate startup incubation, and provide access to cutting-edge tools and technologies.

Opportunities

As Armenia seeks to move up the value chain and remain competitive in the ICT sector, a number of new areas and opportunities are emerging. To the extent that Armenia can be successful in developing new technologies, it may become a more desirable location for contract research and development. Armenia is well positioned to continue providing such services, including software testing and prototyping, to clients abroad. Specific sub-sectors identified as having potential include pure AI research (and eventually engineering), semiconductor design and electronic design automation, and data science.

Software Development

Armenia has a strong reputation in the software development field. Many companies in Armenia specialize in creating custom software solutions, mobile applications, web, and enterprise software development.

Artificial Intelligence and Machine Learning

Armenia is making strides in the field of AI and ML. The country boasts talented data scientists, researchers, and engineers who are actively working on cutting-edge AI technologies.

Cybersecurity

With the increasing reliance on technology, cybersecurity has become a critical area of focus for Armenian IT companies. They specialize in every aspect of cybersecurity solutions.

Fintech

The country has seen the emergence of innovative fintech startups offering services such as online banking, digital payment solutions, peer-to-peer lending, and blockchain technology.

Games and Animation

Armenia has a growing gaming and animation industry. The country has talented game developers, designers, and animators who have contributed to successful international projects.

Tourism

Armenia offers excellent opportunities for tourism: cultural, religious, ecological, agricultural, recreational, culinary, natural, adventure, genealogical.

The country has many cultural, natural and historical sites, 6 UNESCO World Heritage Sites, medieval monasteries, churches and fortresses. Hospitality companies in Armenia include hotels, guest houses, restaurants, transportation companies, tour operators and travel agencies. Armenia's major markets for foreign tourists include France, Germany, Russia, Iran and the United States.

Yerevan serves as the main gateway to Armenia for tourists. The capital of Armenia offers an ever-growing network of restaurants, cafes and wine bars with traditional and international cuisine. Accommodation options continue to expand. The city has many museums, festivals, concerts, cinemas, green spaces. Yerevan is home to cultural, historical and religious sites.

Tsaghkadzor is a ski resort town located an hour's drive from Yerevan. It attracts a significant number of foreign and domestic tourists, especially in the winter. New ski resorts are planned in the Aragatsotn and Shirak regions. In 2023, a new mountain resort opened on the slopes of the mountains east of Mount Aragats, in the Aparan region of Armenia. Dilijan is another popular getaway from Yerevan, with small hospitality establishments. Nearby is the Dilijan National Park, which has recently seen dozens of hiking trails improved.

Lake Sevan, one of the largest high-altitude freshwater lakes in Eurasia, is a popular summer destination for foreign and domestic tourists. It offers opportunities for active recreation and entertainment, as well as sites of cultural and religious significance. Vayots Dzor Province is Armenia's wine region. The region also offers cultural and religious destinations, as well as hiking trails. Jermuk is a leading health resort, famous for its mineral waters and sanatoriums.

Various festivals have also become increasingly popular in Armenia, with various events dedicated to Armenian national characteristics.

A number of other initiatives have been implemented to restore and preserve interesting landmarks in the country. One notable example is the Tatev Revival project, a public-private partnership between the government and a private foundation that has restored a major monastery complex in southern Armenia and organized the construction of the world's longest reversible aerial tramway.

Opportunities

Several regions of Armenia with high-quality tourism potential still lack modern accommodations, restaurants and services. International partners have focused their recommendations on the need to develop hotels and guesthouses to a sufficient level to attract and accommodate foreign tourists. The government has developed investment master plans around strategic corridors. Of particular interest may be the picturesque but underdeveloped southern regions of Syunik and Vayots Dzor, as well as Gyumri and Dilijan in northern Armenia.

Armenia’s exceptional culinary and wine culture is an increasingly popular attraction for food and wine enthusiasts and a thriving sector for investments seeking high returns.

International partners, including the World Bank and the United Nations Development Programme, have invested in supporting the development of Armenia’s tourism sector through market analysis. Various studies have looked at infrastructure investment, skills development, product development, investment potential, and access to human capital as key factors in selecting potential tourism development sites and creating tourism corridors or routes.

There are ongoing opportunities for invest