In October 2024, the World Bank published the Trade Competitiveness Diagnostic (TCD) report for Armenia. This document provides an in-depth analysis of Armenia's trade environment and its competitiveness on a global scale. The report identifies several obstacles to trade, highlights areas that require improvement, and explores opportunities for enhancing Armenia's position in international markets.
The report notes that Armenia has seen significant growth in exports of goods and services, increasing from 27% of GDP in 2011 to 42% in 2019. However, the country's export profile is heavily reliant on unprocessed commodities like copper ores, which accounted for 25% of total exports between 2019 and 2021. Over 80% of merchandise exports are primary products, making Armenia susceptible to fluctuations in global demand and prices. Despite this reliance on commodities, services exports—particularly information-communication technology (ICT)—have increased significantly.
Armenia's export destinations are concentrated mainly in Russia and China, with a declining share going to the EU—from 43% in 2011 to 23% in 2021. Geographical challenges also affect trade; as a landlocked country with closed borders with Türkiye and Azerbaijan, Armenia faces limited access to trade routes. Membership in the Eurasian Economic Union (EAEU) has increased dependence on EAEU partners and raised tariffs, complicating efforts to secure affordable imports. Armenian businesses struggle internationally due to these constraints and a small domestic market.
The ICT sector stands out as a growing area within Armenia's economy. In 2021, ICT comprised 20% of commercial services exports. The sector benefits from investments by the Armenian diaspora and faces fewer barriers than goods trade because digital services can bypass logistical issues. It is moving towards higher value-added services that are globally sought after post-COVID-19.
To turn these challenges into opportunities, the report suggests several strategic actions:
- Effective implementation of WTO Trade Facilitation Agreement obligations could increase exports by nearly 15%, imports by over 10%, and real GDP by almost 3%.
- Enhancing foreign direct investment attractiveness requires strengthening investor protections.
- Aligning educational programs with industry needs will support ICT sector growth.
The TCD report outlines three strategic priorities for improving Armenia’s trade competitiveness:
1. Implement WTO Trade Facilitation Agreement: Establish a national committee on trade facilitation involving private sector collaboration; advance digitization reforms; redesign border management using modern technologies.
2. Adjust export support for diversification: Develop targeted programs in agriculture, apparel, and ICT; integrate SMEs with larger exporters; facilitate product certification best practices.
3. Enhance ICT sector competitiveness: Upskill workforce; revise regulatory frameworks; attract foreign investment; address data protection law gaps.
These interventions aim to improve Armenia's global market positioning by addressing trade facilitation issues, promoting export diversification, and boosting the ICT sector.