Economic Overview
Economic Trends Armenia was one of the most industrialized republics of the former Soviet Union (FSU) with a sophisticated high technology sector. The main industries were mechanical engineering, electronics, light, chemical, and energy, with 95% of the industrial output exported within and outside the FSU. The high degree of integration into the centrally controlled soviet economy induced an economic collapse when the inter-FSU trade, payment and financial systems broke down. Armenian industrial sector inherited a highly qualified engineering and labor work force, substantial physical infrastructure (airways, roads, railways, and telecommunications) and a large number of manufacturing facilities supported by scientific and design institutions, as well as a reputation as a reliable business partner. Since becoming independent from the Soviet Union in 1991 Armenia has made good progress in the transition to a market economy. Armenia is considered to be the most economically and politically stable among CIS countries. Principle Growth Sectors The sectors in the Armenian economy that show steady growth include energy generation, chemicals, telecommunications, gem cutting, construction and construction materials. At the same time, significant growth has been observed in the overall number of businesses including the wholesale and retail trade, restaurants, passenger and cargo transportation, real estate brokerage, education, health care and social services, and electrical power distribution. Machine building, electronics and electric engineering have also demonstrated growth, and the software development industry has taken a strong leading role. Labour Human resources is one of Armenia's greatest assets. There is a significant supply of qualified specialists both in research/engineering and production in domains such as electric and electronic components and devices, electrical components and appliances; software; electric motors and generators, optics (including space optics), apparel production, chemistry, architecture and construction, jewelry, arts and crafts and food processing. The labor force is highly educated and well trained, particularly in engineering and technology. Almost 100% of the Armenian population is literate; 59% have completed secondary school and 13% have university degrees. Price Liberalization Almost all prices have been liberalized, with controls remaining only on urban transport, electricity, hot water, gas, heating, sewerage, rubbish collection, state-owned housing, telephones and irrigation. The privatization of state-owned bakeries and flourmills during 1997 and early 1998 has eliminated state controls on profit margins for flourmills, thus eliminating the implicit price controls on bread. Trade Liberalization Armenia has a liberal foreign trade regime with a simple two-band import tariff (at 0% and 10%), no taxes on exports and no substantial quantitative trade restrictions. Import, export and domestic production licenses are required only for health, security and environmental reasons. There are no limits on hard currency imports. Excise taxes are charged at various rates on the import or production of some luxury goods (including alcohol, tobacco, caviar, petrol, precious stones and furs). Foreign Trade Exports include machinery, transport equipment, textiles, chemicals, ferrous metals and metal products, rare and precious metals, gems and foods. Imports include food, fuel, non-food raw materials, machinery and chemicals. Trade Regimes Armenia has Free Trade Regime with Russian Federation, Ukraine, Turkmenistan, Georgia, Moldova, Tajikistan, Kyrgyzistan and Most-Favored-Nation Trade Regime with European Union, USA, Iran, Vietnam, China, Romania, Switzerland, Lebanon, Argentina, Cyprus, Egypt, Bulgaria, Canada, Syria, Poland, Hungary. Currency Convertibility The dram is fully convertible for current account transactions. Export surrender requirements were eliminated by mid-1995. Armenia accepted the conditions of Article VIII of the IMF Treaty in 1997. Participation in International Organizations Armenia is a member of the following organizations: BSEC, CCC, CIS, EBRD, ECE, ESCAP, IAEA, IBRD, ICAO, IDA, IFAD, ILO, IMF, INTELSAT, INTERPOL, IOC, ITU, NACC, OSCE, UN, UNCTAD, UNESCO, UNIDO, UPU, WHO, WIPO, WMO, WTO (World Tourism Organisation). Armenia also has observer status at ADB, European Council, NAM, WTO (World Trade Organisation) and participates in NATO PFP. |