Armenia 2014

Total score

53.78 change: 0.64

Quick facts

  • 3.29 million
Unemployement rate:
  • 18 %
  • 10.28 billion $
GDP growth rate:
  • 3.43 %
GDP per capita:
  • 3120 $

Score and comments

Economic Freedom
Security of Property Rights

Property rights in Armenia are not sufficiently secure. The administration of justice is weak and can be arbitrary due to partial courts that are also influenced by external factors, namely the political elite, all leading to the low integrity of the legal system. The process of privatization has been politicized and conducted in a non-transparent way, both in first waves of market liberalization and more recently. Certain rules and regulations are implemented in non-consistent way, pertaining widespread favouritism and corruption. Legal enforcement of contracts is ineffective and slow, burdened by a high number of procedures. Reliability of the police force is also low.

Size of Government: Expenditures, Taxes, and Enterprises

Due to sluggish economic recovery after a strong recession in 2009, only in 2013 did Armenian GDP reach its pre-crisis level. Government consumption is low in international comparison and reaches 25.6% of GDP in 2014, with fiscal deficits lower than the projected growth. However, a major concern is the level of public debt which has tripled since 2008 to 44.2% of GDP. Low government consumption has led to low level of taxation: tax on corporate profit is 20%, the same as VAT while income tax is slightly progressive and set at 10% and 20%. Social contributions are regressive, being higher at lower income and lower at higher salaries. Armenian government has through privatization process stepped out from the economy, but some companies (mostly in utility sector) remain in its property.

Reforms in the pension fund are expected to continue in order to make it more sustainable.

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Regulation of Credit, Labour, and Business

Regulation of business activities is not always in favour of businesses, which increases their operational costs. Administrative requirement are high with many unnecessary procedures (a fact recognized by the government which intend to launch a plan of regulation guillotine) and complicated bureaucracy. These requirements serve as a fuel for corruptive practices due to non-coordination of government bodies and their different interpretations of the rules. However, starting a business is easy and cheap, and there are few licensing restrictions. On the other hand, paying taxes and compliance with all tax procedures is very lengthy and incurs cost, as well as getting electricity. Labour regulation is mostly flexible, with little restrictions in hour regulation and low costs of worker

dismissal and minimum wage is not high compared to the average wage. Centralized collective bargaining is mostly concentrated within the public sector.

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Freedom to Trade Internationally

Armenia has become a member of Eurasian Custom Union (ECU) in September 2014, alongside the Russian Federation, Kazakhstan and Belarus. This would lead to a hike in Armenian effective tariff rate, which has been lower than the one in the custom union, leading to higher prices for many import goods, commodities especially. Russian and the EU market are the most important in international economic cooperation. Main problems in further interconnection of the Armenian economy with the rest of the world are political tensions with neighboring Turkey and Azerbaijan, who keep their borders closed for transit of people and goods. The other trade routes via neighboring Georgia is longer and with not equipped with quality infrastructure, which is almost completely absent in the south to Iran, which

all make both import and export of goods very costly. Standardization procedures also pose problems in international trade.  

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Rule of Law
Independence of the Judiciary

Among Caucasus countries, judiciary is the least independent in Armenia. It is the most corrupt branch of government, widely (by more than two thirds) mistrusted by the public. The Judicial Reform Strategy 2012-2016 had been still debated and was waiting for implementation throughout 2013. Criminal code and criminal and civil procedure codes were also awaiting change. Influence of the executive branch of power on the judiciary was strong. The quality of service and capacities of judicial staff were low. Application of laws by individual courts was often arbitrary. The only notable achievement, in January 2014, which might lead to improvements, was the start of work of the Judicial Academy as the future entry point for new judges and prosecutors.


During 2013, Armenia improved in fighting corruption. Transparency International ranked it 94 of 177, as compared to the place 105 of 176 in 2012. Its Corruption Perception Index thereby rose from 34 to 36. Still, Armenia is considerably worse than its northern neighbour Georgia, in spite of geographic, historical, demographic, socio-economic or cultural similarities between the two ex-Soviet republics. Plausible explanations might be found in the lack of timely economic liberalization in Armenia and lack of bold anti-corruption measures that Georgia undertook in those remaining sectors which could not be privatized or deregulated (e.g. police). Global Corruption Barometer 2013 showed corruption as widespread. It was perceived by majority of citizens in most areas of public life:

judiciary (69%), public officials (68%), police (66%), health care (66%), education (58%), political parties (57%), parliament (57%) and business sector (51%). It is only NGOs whose integrity was challenged by less than a third of the population (32%). Non-transparency is especially visible through inconsistent application of tax, custom or regulatory rules. EU Progress Report 2014 (on the developments in 2013) noted some improvements in curbing high-level political corruption and identified a few weak points that allowed it to remain widespread. There was no comprehensive anti-corruption strategy (but just plans in particular sectors). Political power and economic interests are too inter-wined. Recent deregulation measures (“regulatory guillotine”) and a breakthrough into e-government - both expected to reduce the administrative burden and narrow the space for corruption - have yet to produce visible results.

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Protection of Human Rights

According to Freedom House, Armenia saw improvements in the field of human rights in 2013. The attitude towards anti-government association and gathering was variable during the past decade. The prohibitive regulation as of 2008 was later repealed, but EU Progress Report 2014 noted increased violence against human rights defenders as well as pressure on - and harassment of - peaceful demonstrators. FH, however, found the climate for opposition street protests somewhat more permissive. Similarly variable was the attitude towards NGOs. In general they are free and they are many, even though waiting in line for registration takes long, while some NGOs later become inactive or a smoke screen for money laundering. Following a number of cases of conscientious objection to military service, a

new civil service program had been introduced in May 2013, yet criminal investigation was soon launched against 12 out of the total of 41 applicants on religious grounds who had failed to qualify. Academic freedom is among better protected rights. Well protected are also ethnic minorities, but with the exception of the Yezidi community. Contrary to that, sexual minorities face problems. True, a draconian law which copy-pasted that in Russia, itself banning “propaganda of non-traditional sexual relationships” was withdrawn from the parliament procedure. Yet, LGBTs, as well as feminists, face extremist attacks tolerated by the police. There is no comprehensive anti-discrimination law. The presence of women in public life, especially in politics, is generally low. Out of 131 MPs only 14 are women, despite the electoral law that stipulated their presence on electoral tickets by at least one sixth. Other problems not tackled enough include domestic violence and human trafficking for the purpose of - often forced - prostitution.

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Political Freedom
Free and Fair Elections

Despite recent changes in the electoral code in Armenia, elections often abound with irregularities. According to Freedom House, an alarming level of vote buying, voter intimidation and misuse of administrative resources can be seen throughout the election campaign. After the last presidential elections in 2013, many appeals on the elections were not taken seriously by the Central Elections Commission. They were mostly rejected, which was criticized by the ODIHR/OSCE. Armenia is a presidential democracy. The president - who is elected directly by a popular vote - holds the control over the legislative and executive power in the country.

Absence of Unconstitutional Veto Players

Armenia doesn’t have unconstitutional veto players. However the power in the country is highly concentrated and controlled by the president Serzh Sarkisian and a few MPs closely connected to the business sector. Security forces in the country also report directly to the president. Corruption is one of the most serious problems in the country, especially among the high-ranking officials. Thus, it presents a serious obstacle to democracy in Armenia.

Freedom of Press

The press in Armenia is not free. Journalists often face political or physical pressure. Even though most of the media is privately owned, according to Freedom House most of the dominant media are controlled either by the government or by government-friendly individuals. Considering all those, self-censorship of the journalists and a biased coverage are common in the Armenian media.

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