Armenia is located between Asia and Europe and occupies a land area of 29,800 sq km. It neighbours Turkey to the west, Azerbaijan to the east, Georgia to the north and Iran to the south, although the borders with Azerbaijan and Turkey are closed. Armenia declared its independence on September 21, 1991 following the dissolution of the Soviet Union. The population is estimated to be 3.2 million and the national language is Armenian though most Armenians also speak Russian.

The Head of State is the President. He is elected by popular vote for a five-year term, and is eligible to serve two terms. The current President is Serzh Sargsyan, who was sworn in on April 9, 2008.

Despite ongoing improvement, Armenia remains a poor country. The average salary in 2009 was about AMD 101,800 (approximately US$255) per month, an increase of 10.6% compared with 2008. 

Economy

Like other Commonwealth of Independent States ("CIS") countries, Armenia's economy initially suffered from the legacy of a centrally-planned economy and the breakdown of the former Soviet trading patterns. However, the government was able to carry out wide-ranging economic reforms in the early 1990s. The 1994 cease-fire in the Nagorno-Karabakh conflict also helped. New sectors, such as precious stone processing and jewelry making, information and communication technology, and even tourism began to supplement more traditional sectors in the economy, such as agriculture. This resulted in strong economic growth from 1995.

The GDP growth rate exceeded 10% in every year from 2002 until 2007. This fell to 6.8% in 2008 on the back of the global financial crisis, with the mining sector in particular affected by falling international commodity prices. Economic activity slowed to the point that the country’s real GDP contracted by 14.4% in 2009. However, the Armenian authorities have developed a policy package that aims to restore confidence in the currency and financial system. The program’s key features include a return to a flexible exchange rate regime, an increase in the refinancing rate, supportive financial sector policies, prudent fiscal policy, continued reforms in tax administration and targeted support for the poor.

Transport

Armenia has a railway network of 845 kilometres and 15,900 kilometres of highways, and effective road and railroad communication exists between all the major regions of Armenia. Because of transport blockages by Turkey and Azerbaijan, almost all cargo shipments to landlocked Armenia are routed through ports in Georgia. Almost all international flights go to Zvarnots International Airport, about 10 km west of Yerevan. The airport is capable of handling two million passengers annually.

Business Climate

Armenia encourages foreign trade and investment, and laws allow foreigners to purchase businesses and property, repatriate revenue and profits, and receive compensation if property is nationalized. Taxes are quite low with generally a 20% rate applies to companies and individuals. The value-added tax ("VAT") rate is also 20%. 

Surveys suggest that Armenia is a relatively easy country in which to do business. The World Bank study, Doing Business 2009, ranked Armenia as the 44th easiest country to do business with out of 181 countries surveyed. Nevertheless, there are still issues related to the transparency and implementation of the Armenian regulatory system. The application of tax, customs (especially valuation) and regulatory rules (especially in the area of trade) can be inconsistent, creating uncertainty for medium size businesses and market entrants.

Investment Climate

Foreign investment into Armenia is welcomed. Foreign nationals may lease land or acquire it through an Armenian legal entity. As a general rule, investment permits are not required, however, all enterprises must be established according to the form and procedure prescribed by law and registered with appropriate government agencies. Foreign investors are generally not required to seek special approval from authorities for foreign direct investments. There are no restrictions on the rights of foreign nationals to acquire, establish or dispose of business interests in Armenia. The Government maintains a free floating and freely convertible currency, the Armenian Dram.