Armenia - Market Challenges Armenia - Market Challenges
While the new Armenian government launches important steps to create a more inviting business environment, many challenges remain. Perhaps the most critical challenge the government faces is the need to improve competition in the Armenian economy by breaking up the near monopolies/oligarchies held by a small group of well-connected businessmen on the import and sale of a range of critical products. These pose significant barriers to entry for both domestic and foreign businesses, and harm competition and consumer welfare. Conducting business might also be impeded by: burdensome regulatory regimes; inadequate intellectual property rights (IPR) protection and enforcement; widespread corruption and inadequate rule of law (although anti-corruption is a priority for the new Armenian government); inconsistent application of laws and regulations; lack of transparency; and an unequal playing field for competition.
Despite the poilitcal will from the new Government which came to power in May 2018, the tax and customs administration still lacks the institutional capacity to collect all revenues owed, and the Customs service must overcome a long legacy of corrupt practices. Seriously underdeveloped infrastructure poses logistical challenges, especially in accessing markets outside of Yerevan and major cities. English is not widely spoken, although knowledge of the language is expanding, especially in the major cities.
The EAEU has yet to live up to its promise of boosting trade among member countries, Armenia’s non-EAEU trade may also be more restricted as it conforms to EAEU standards. Importers are affected by poorly planned implementation of the EAEU integration, non-standardized application of the common customs code, and unclear documentation requirements that may also affect some U.S. firms.
Membership in the EAEU has required Armenia to apply higher tariffs than before on many imported goods. Though Armenia negotiated exceptions for around five hundred key products for up to five years (exprining in 2020), many other goods are subject to significantly higher tariffs since 2015. Another challenge is the administration of new EAEU customs regulations and processes. Armenia brought its customs system in line with the EAEU requirements in a relatively short period of time and businesses complain that there are still some problems with implementation creating delays and excessive paperwork.
The trade embargo imposed by Azerbaijan and the closed border with Turkey is a major impediment to development. Transport costs through Georgia, Armenia’s major trade outlet, are expensive, due to the extra travel distance and a lack of alternative routes and poor infrastructure. Trade with Iran is small, restricted by international sanctions, lack of good transportation links, and protective Iranian market practices. Other market challenges include Armenia’s relatively small market size.