Describes how major projects are secured and financed. Explains activities of the multilateral development banks in and other aid-funded projects.
Selling to the Government
Armenia acceded to the World Trade Organization’s Agreement on Government Procurement Agreement (GPA) in 2011. As part of its accession to the GPA, Armenia made market liberalization commitments and updated key legislation, notably the Law on Procurements, in a bid to move toward international tendering across all levels of government. Since acceding to the GPA, Armenia has continued to refine procurement legislation, introducing anti-corruption measures and increasing the transparency and effectiveness of the system. Amendments have also been calibrated to bring government procurement in line with Armenia’s commitments as a member of the Eurasian Economic Union (EAEU). Achievements include more robust guidelines for beneficial ownership disclosure, conflict of interest, debarment, and recordkeeping for bid evaluations. New institutions have been created to institutionalize and manage procurement processes.
The law regulates the government procurement in line with GPA requirements and provides for the participation of foreign nationals on equal basis in public sector procurement. Since 2011, state government authorities carry out their procurements independently. Procurement decentralization aims at improving the organization of procurement procedure for state and communities’ needs, increasing publicity and transparency. As a result, the participation and responsibility of state government authorities in procurement procedure have increased. Procurement processes have moved online and windows for direct negotiation and sole-source procurement have been narrowed as part of efforts to increase transparency. The government has recently moved to establish new frameworks for public-private partnerships, but implementing legislation is still forthcoming.
In March 2021, the government passed amendments that decreased the deposit requirement for participating in tenders from 100 percent to 15 percent (for tenders under $145,000) and 30 percent (for tenders above that threshold). This legislation was well received by small and medium enterprises. Citing an increase in the number of tender participants, analysts in Armenia have stated that the government procurement process has improved as a result of this legislation.
Armenia’s state procurement laws and regulations aspire to international standards of transparency and public accountability. However, what appears in print and what happens in practice can be very different. The time allowed for preparing bids after the announcement of a tender is frequently short and documentation requirements, including translations, can be onerous for companies not based in Armenia. A lack of transparency in business dealings remains. Though the law stipulates a preference for open tendering in procurement processes, this method has been relatively lightly used in recent history, particularly in comparison to framework agreements and negotiation procedures without prior announcement.
Most of the government’s large purchases are connected to programs funded by international financial donors, including the multilateral development banks. Credit terms are one of the most important factors in government purchasing decisions. Product quality and supplier reputation are secondary factors. U.S. companies are advised to approach any government tender deliberately. However, lucrative opportunities do exist, and U.S. companies have had success in Armenia. In recent years, state procurements have totaled between four and seven percent of annual gross domestic product. Over 25,000 contracts tend to be granted per year, based on recent statistics. Goods make up the bulk of the government’s purchases, as opposed to services. The central government, as opposed to sub-central government or other entities, is the primary customer.
U.S. companies bidding on government tenders may also qualify for U.S. government advocacy. A unit of the U.S. Commerce Department’s International Trade Administration, the Advocacy Center coordinates U.S. Government interagency advocacy efforts on behalf of U.S. exporters bidding on public sector contracts with international governments and government agencies. The Advocacy Center works closely with our network of the U.S. Commercial Service worldwide and inter-agency partners to ensure that exporters of U.S. products and services have the best possible chance of winning government contracts. Advocacy assistance can take many forms but often involves the U.S. Embassy or other U.S. Government agencies expressing support for the U.S. bidders directly to the foreign government. Consult the Advocacy for Foreign Government Contracts website for additional information.
Financing of Projects
Local commercial banks limit their lending operations to mostly short-term loans at relatively high rates of interest. Numerous additional fees add to costs and make such financing unattractive. Additionally, these banks often demand high levels of collateral. Project financing is very limited unless implemented through subsidized loan programs funded by foreign governments and other international partners.
There are several notable opportunities for U.S. firms to participate in major project opportunities in Armenia, including in telecommunications, energy, road construction, transportation, and other major areas. Supplier financing is often key to being able to participate in such projects. U.S. government agencies can help U.S. suppliers in this regard.
The Small Business Administration (SBA) offers financing packages specifically targeted to assist U.S. exporters expand overseas by funding export transaction costs or financing for the export of goods or services. SBA programs can provide the liquidity needed to accept new orders, enter new markets, and compete more effectively in the international marketplace.
The Export-Import Bank of the United States (EXIM) is the official export credit agency of the United States. It is an independent, self-sustaining agency with a mission of supporting U.S. jobs by facilitating the export of U.S. goods and services. When private sector lenders are unable or unwilling to provide financing, EXIM can fill the gap for American businesses by equipping them with the financing tools necessary to compete for global sales. In doing so, EXIM levels the playing field for U.S. goods and services in overseas markets.
The U.S. Trade and Development Agency (TDA) funds feasibility studies performed by U.S. firms that examine the technical, economic, environmental, and financial aspects of major development projects. TDA helps U.S. companies pursue overseas business opportunities through funding of feasibility studies, orientation visits, specialized training grants, business workshops and various forms of technical assistance.
The U.S. International Development Finance Corporation (DFC) is the international development bank of the United States. The DFC partners with the private sector to finance solutions to the most critical challenges facing the developing world today. It is also able to provide direct equity financing and support for investment funds; direct loans and guarantees of up to $1 billion for tenors as long as 25 years; political risk insurance coverage of up to $1 billion; and technical development support in the form of feasibility studies and assistance to accelerate project identification.
Armenia finances a substantial portion of public works projects through borrowing from the multilateral development banks (MDBs). A helpful resource for working with the MDBs is the Guide to Doing Business with the Multilateral Development Banks.
Multilateral Development Banks and Financing Government Sales. Price, payment terms, and financing can be a significant factor in winning a government contract. Many governments finance public works projects through borrowing from the Multilateral Development Banks (MDB). A helpful guide for working with the MDBs is the Trade Finance Guide. The U.S. Department of Commerce’s (USDOC) International Trade Administration (ITA) has a Foreign Commercial Service Officer stationed at each of the five different Multilateral Development Banks (MDBs): the African Development Bank; the Asian Development Bank; the European Bank for Reconstruction and Development; the Inter-American Development Bank; and the World Bank.
Learn more by contacting the:
- Commercial Liaison Office to the Asian Development Bank
- Commercial Liaison Office to the European Bank for Reconstruction and Development
- Commercial Liaison Office to the World Bank.