Despite the numerous commercial opportunities in Armenia and increasing gains in international business rankings, several key business environment challenges remain. While the government has been successful in pushing through some notable reforms and reducing corruption, the formal reduction of red tape has not yet had a wholly transformative effect. Businesses continue to note challenges with regulatory processes and lack of capacity within the government bureaucracy which results in inefficiency, though companies uniformly note the improved ease of doing business. Businesses frequently highlight the difficulty of approaching the government to engage in substantive discussions. A lack of effective consultation with the business community inhibits the formulation, implementation, and enforcement of investment friendly laws, policies, and regulations.

A longstanding issue in Armenia is an overall lack of market competition, which is the result of vested interests exercising considerable sway over broad swaths of the economy. Despite a welcoming legal framework for foreign investment and straightforward official procedures for starting a business, market entry can be hindered in practice by lingering corruption, weak law enforcement, and collusion between business interests and politically connected individuals. However, the government has made great strides in improving transparency, reducing corruption, and standing up new anti-corruption institutions. Nevertheless, some government interventions, though perhaps well-intentioned, have had the effect of propping up market incumbents to the disadvantage of newcomers or dissuading government agencies from moving ahead with procurements in a timely manner. These pose barriers to entry for both domestic and foreign businesses, and harm competition and consumer welfare. The Armenian government remains an active interlocutor with the U.S. government and businesses and welcomes dialogue and feedback. U.S. companies have shown increased interest in- Armenian government tenders and licensing. 

Armenia’s relatively small market size and closed borders with two of its four neighbors (Turkiye and Azerbaijan) tend to cap opportunities for merchandise trade and increase logistics costs, though Armenia shows signs of emerging as a regional technology and services hub. Transport costs through Georgia, Armenia’s major trade outlet, are high, and frequent delays at the sole border crossing point between Georgia and Russia create a chokepoint for Armenian trade. Internal barriers within the EAEU and uncertainty around the implementation of EAEU standards and regulations can hinder trade opportunities with non-EAEU countries. Trade with Iran is limited, restricted by international sanctions, poor transportation infrastructure, and protective Iranian market practices.  

Rule of law and transparency issues are common concerns among the business community in Armenia. Although the government has recorded some impressive gains in the fight against corruption, perception problems persist with respect to the predictability, reliability, and fairness of court decisions. Businesses frequently observe shortcomings in intellectual property rights (IPR) enforcement. Corporate governance and transparency standards often lag those in more developed markets. Businesses often struggle to obtain responses to their inquiries of government bodies.