Armenia's investment climate will remain harsh

Subject

The difficulties of doing business in Armenia.

Significance

Covert ties to the elite, corruption and the presence of monopolies make the investment and operating climate relatively unappealing for foreign investors. British Virgin Islands-headquartered East Prospect Fund warned in mid-August that an assault on the majority shareholder of Air Armenia, Arsen Avetisyan, could jeopardise its investment. However, it later announced it would go ahead with investing 70 million dollars. The Prosecutor-General's Office says it is not instituting proceedings against the alleged attacker, businessman Ruben Hayrapetyan, who has close ties to President Serzh Sargsyan, as Avetisyan has withdrawn his complaint.

Impacts

• In the short term, dram appreciation against the ruble will make it more expensive for Russian firms to invest in Armenia.
• Investors' concerns about the business and political climate may increase in the run-up to the May 2017 parliamentary election.
• Barriers to entry will remain high in sectors controlled by oligarchs.