Reconfiguring Trade to Overcome Geographical Limitations : A Trade and Competitiveness Diagnostic for Armenia (English)

Table of Contents

• Figure 1: Export growth vs. gross domestic product (GDP) per capita growth, 2000–19 16
• Figure 2: Exports of goods and services to GDP, Armenia and peer countries 19
• Figure 3: Exports by product type in Armenia 20
• Figure 4: Commodities versus manufactures as a share of goods exports and product concentration in selected countries, 2019 20
• Figure 5: Exports of non-primary products for Armenia 21
• Figure 6: Comparative advantage in manufacturing sectors, Armenia, and peer countries, 2021 22
• Figure 7: Exports of agricultural products for Armenia 22
• Figure 8: Imports of goods by product type and end use 23
• Figure 9: Armenia major trading partners 25
• Figure 10: Index of realization of export potential, Armenia and peers 28
• Figure 11: Missing exports by country 28
• Figure 12: GVC integration in manufacturing, Armenia and peers 30
• Figure 13: GVC integration in services, Armenia and peers 31
• Figure 14: Embodied services value added as a percentage of gross exports, 2021 32
• Figure 15: Share of services in Armenia’s exports 33
• Figure 16: Growth in commercial services exports, Armenia, and peer countries 33
• Figure 17: Composition of commercial services exports and imports, Armenia and peer countries 34
• Figure 18: Comparative advantage in services sectors for Armenia and peer countries, 2021 34
• Figure 19: Logistics Performance Index 36
• and sub-components 36
• Figure 20: Armenia FDI inflows 37
• Figure 21: FDI stocks 37
• Figure 22: Announced greenfield investments to Armenia 38
• Figure 23: FDI inflows by type: greenfield investments versus M&A 38
• Figure 24: Average effectively applied tariffs, latest available year 40
• Figure 25: Depth of trade agreements signed by Armenia (number of policy areas covered) 40
• Figure 26: Trade facilitation performance by pillar, 2022 42
• Figure 27: Results from the NQTM simulations on full TFA implementation in Armenia 42
• Figure 28: Sectoral impacts on exports by Armenia 43
• Figure 29: Sectoral impacts on imports 43
• Figure 30: Impacts on Armenia’s exports, by partner country 44
• Figure 31: Impacts on imports for Armenia, by partner country 45
• Figure 32: Changes in GVC integration as a percentage of gross exports for Armenia 45
• Figure 33: ICT services sector employment and growth 53
• Figure 34: ICT services export performance 53
• Figure 35: Share of IT services exports in total services exports 55
• Figure 36: Armenia IT services exports composition and specialization 55
• Figure 37: ICT services exports by mode of supply and value added 56
• Figure 38: Armenia’s services exports by destination market 57
• Figure 39: Average annual rent for Class-A office space per m2 (2023) 58
• Figure 40: Reforms implemented by investment promotion agencies to improve attraction and retention of investments in their countries 63
• Table 1: Armenia’s exports by destination 24
• Table 2: Armenia’s imports by trading partner 25
• Table 3: Tariffs by product group for Armenia 39
• Table 4: EU import tariffs before and after GSP+ graduation 41
• Table 5: Electronic documents, Armenia, and peers 59
• Table 6: Electronic signatures, Armenia and peers 60
• Table 7: Personal data protection, Armenia and peers 60
• Table C1: Growth in national supply and international demand for products exported by Armenia in 2022 77
• Acknowledgements 7
• Acronyms 8
• Executive 9
• Summary 9
• Introduction 15
• Snapshot of goods trade: 18
• a trade outcomes analysis 18
• 1.1 Rapid but commodity-driven export growth 19
• 1.2 Manufacturing sectors with growth potential 21
• 1.2.1 The role of agribusiness 21
• 1.2.2 The role of apparel 23
• 1.3 A surge in imports over the past two decades 23
• 1.4 Growing importance of Russia and China as export and import partners 23
• Leveraging opportunities: two pathways for diversifying trade 27
• 2.1 Armenia’s untapped export potential 28
• 2.1.1 Increasing value added through value chain participation 29
• 2.1.2 Digital services trade as an opportunity to overcome trade constraints 32
• What is limiting Armenia’s trade prospects? 35
• 3.1 Connectivity bottlenecks and border closures 36
• 3.2 Declining foreign direct investment 36
• 3.3 Trade policy limiting trade 39
• 3.3.1 The EAEU trade agreement 39
• 3.3.2 Graduation from the EU’s GSP+ preferential scheme 41
• 3.3.3 Weak implementation of the WTO Trade Facilitation Agreement 41
• 3.4 Trade policy reform scenarios 42
• Priorities for enhancing Armenia’s competitiveness 46
• 4.1 Effective implementation of the WTO TFA 47
• 4.2 Promote export diversification, upgrading, and integration into GVCs 48
• Deep dive: the Armenia ict services sector 51
• 5.1 ICT services sector performance 52
• 5.2 Global and geopolitical events risks progress in the ICT sector 57
• 5.3 Structural challenges affecting ICT services competitiveness in Armenia 58
• 5.3.1 Domestic skills shortages 58
• 5.3.2 Gaps in the regulatory framework affecting investments 59
• 5.3.3 Ineffective implementation of the current ICT strategy 61
• 5.3.4 Little coordination on data sharing between government and ICT Firms 61
• 5.4 Policy recommendations for enhancing ICT sector competitiveness in Armenia 61
• 5.4.1 Upskill and foster innovation 61
• 5.4.2 Promote new investments in the ICT sector 62
• 5.4.3 Enhance state capacity to effectively implement the ICT strategy 63
• 5.4.4 Facilitate the integration of new skilled tech professionals from Russia 64
• 5.4.5 Close existing gaps in the regulatory framework and review existing laws 64
• References 66
• Appendixes 68
• Appendix A 69
• Appendix B 71
• Appendix C 77