By: The Enterprise Research Institute
For: The World Bank, 2002

This paper examines the effect of the Armenian business environment on the traded goods sector and in particular, foreign trade. Because of Armenia’s small economy and the large share of foreign trade relative to GDP, in most cases the factors that impact firms engaged in foreign trade impact the private sector more generally. As a result, many of the foreign trade issues raised are virtually indistinguishable from those that arise from the more general business environment. The first section of the paper looks at some of the economy’s characteristics and outlines issues arising from privatization. It then puts issues of market size into perspective and examines the trade structure implications of high transport costs and other transportation difficulties. The paper also analyzes the institutions that underlie the private sector including the financial system and property rights for movable, fixed and intellectual property. By examining the legal basis for contracting the implications for the conduct of business, especially foreign trade, are revealed. Finally, the relationship between the private sector and the state is considered, with a focus on such issues as regulation, tax collection and customs procedures and tentative recommendations regarding promotion of the private sector generally and foreign trade in particular are made. In the appendix, an analysis of the most promising Armenian industries is presented along with summaries of each of those industries and a recommendation of industries for future focus and expansion.