Armenia - Foreign investment

Armenia's investment climate is regulated by the bilateral investment treaty (BIT) signed with the United States on 23 September 1992 and by the law on foreign investment adopted by Armenia on 31 July 1994. Armenia has also concluded BITs on investment and investment protection with 15 other countries: Georgia, Turkmenistan, Kyrgyzstan, Ukraine, Iran, Egypt, Romania, Cyprus, Greece, France, Germany, Canada, Argentina, China, and Vietnam. Its investment policy is geared to attract foreign investment, with foreign investors accorded national treatment and any sector open to investment. As of 2003, under the law of profit tax, two-year tax holidays are accorded foreign investors whose equity investment in a resident company is at least 500 million drams, or a little less than $1 million. There are no limits on the repatriation of profits, or on the import and export of hard currency, so long as the currency is imported or earned in Armenia. Otherwise there is a $10,000 limit on the export of cash.

In late 1997, the government initiated the privatization of 11 of the larger state owned enterprises (SOEs), including the energy sector. It was not until 2002, however, that a suitable and willing foreign investor, Daewoo Engineering, was found to manage privatized electricity distribution. Operations at the Zvartnots International Airport have also been successfully leased. The 2001 debt-for-equity swap with Russia, whereby five unproductive SOEs (Hrazdan Thermal Power Plant, the "Mars" Electronics Factory established in 1986 to build robots, and three research labs that were part of the old USSR's military establishment) were exchanged for the cancellation of Armenia's debt with Russia (about $100 million of nonconcessional lending that was costing almost $20 million/year to service) promised to increase Russian private investment in Armenia as the Russian government passed the assets on to private investors.

From 1998–2000 annual inflow of foreign direct investment (FDI) ranged from $120 million to $230 million, though it fell to $75.9 million in 2001 in the wake of the global contraction of foreign investment following the 11 September 20001 terrorist attacks on the US World Trade Center. In 2002, FDI increased 12% to about $85 million. A large share of FDI comes from the Armenian diaspora in the United States, Russia, Iran, France, Greece, the United Kingdom, Germany, and Syria. Since 1998, the Lincy Foundation of Armenian American Kirk Kirkorian has made available about $165 million to support small and medium enterprise (SME) development (offering concessional loans for businesses that are at least 51% Armenian owned), assistance for tourism development ($20 million in 2000), and infrastructure repair ($60 million in 2002 and $80 million in 2003). Armenia's accession to the World Trade Organization in 2000 has helped improve the investment climate as a consequence of meeting the WTO's strictures for membership.

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