weighted score 4.1 · ten dimensions
Sourcing Attractiveness Index · ten dimensions
Armenia
Labour cost, supply base depth, logistics infrastructure, trade access, and innovation scores for Armenia as a sourcing destination.
Labour cost competitiveness
7
Competitive labour costs by European standards. IT sector cost-competitive versus Western Europe. Small population limits scale but per-unit costs attractive for niche manufacturing and services.
Supply base depth
3
Limited manufacturing base. Mining and food processing are primary physical sectors. No deep supply chain clusters. IT services growing but not a physical supply base.
Logistics & infrastructure
3
Landlocked with closed borders to Turkey and Azerbaijan. All trade routes via Georgia or Iran. Elevated logistics costs. Transport infrastructure adequate but constrained.
Workforce skills
5
Strong mathematical and technical education tradition. Growing IT talent pool in Yerevan. Engineering graduates competitive regionally. Small population limits scale of skilled workforce.
Scalability
5
Limited scalability due to small population (2.8M) and landlocked geography. IT services can scale digitally. Physical manufacturing scalability constrained by logistics and labour pool size.
Ease of doing business
5
Post-2018 reforms improved business environment. Corruption declining. Regulatory simplification ongoing. CEPA alignment with EU norms. Small economy aids navigability.
Trade access & tariffs
3
GSP+ provides EU preferential access. EAEU membership gives Russia/CIS access. EAEU-EU incompatibility creates structural uncertainty. No DCFTA with EU.
Sustainability baseline
3
Small carbon footprint in absolute terms. Mining sector carries environmental risk. Renewable energy potential (solar, hydro) exists but underdeveloped. Limited ESG reporting infrastructure.
Innovation & IP
3
Growing IT startup ecosystem. AI and fintech emerging. Innovation output modest in global terms. IP framework improving under CEPA. Strong education foundations.
Quality standards
4
Dual EAEU/EU standard environment creates complexity. Quality management systems less widespread than in larger economies. IT services benchmarked internationally. Food sector improving.
Labour & Cost Competitiveness
Labour & Cost Competitiveness
- Wage levels
- Armenia has competitive labour costs by European standards. Average manufacturing wages are significantly below EU levels. The IT sector commands higher wages but remains cost-competitive versus Western European and US alternatives.
- Labour pool
- Population of approximately 2.8 million limits the available labour pool. Emigration has historically reduced the working-age population, though the post-2018 reform period saw some return migration.
- IT workforce
- Yerevan has developed a strong IT sector with skilled software developers, data scientists, and engineers. Armenian IT professionals are recognized for strong mathematical and technical education foundations (Soviet-era legacy).
- Cost trajectory
- Labour costs rising as the economy grows and IT sector expands. Still significantly below EU averages. Cost competitiveness is strongest in IT services and niche manufacturing.
Supply Base & Infrastructure
Supply Base & Infrastructure
- Manufacturing base
- Limited manufacturing base. Mining (copper, molybdenum), food processing (brandy, wine, dried fruits), and light manufacturing are the primary physical production sectors. No deep supply chain clusters comparable to larger manufacturing economies.
- IT infrastructure
- Yerevan tech hub has developed significantly. Fibre-optic connectivity, co-working spaces, and startup ecosystem support are available. Multiple international tech companies have development centres in Yerevan.
- Transport infrastructure
- Landlocked with closed borders to Turkey and Azerbaijan. All physical trade routes through Georgia or Iran. Road and rail connections to Georgian Black Sea ports are the primary EU-bound logistics corridor.
- Energy
- Armenian nuclear power plant (Metsamor) provides significant domestic electricity. Gas supply dependent on Russia and Iran. Energy infrastructure adequate for current economic scale but limited expansion capacity.
Trade Access & Business Environment
Trade Access & Business Environment
- EU access
- GSP+ provides preferential tariff access to the EU. CEPA provides a political and regulatory alignment framework. EU membership process initiated January 2025 but faces structural barriers (EAEU membership).
- EAEU membership
- Member of the Eurasian Economic Union, providing tariff-free access to Russia, Belarus, Kazakhstan, and Kyrgyzstan. EAEU and EU membership are structurally incompatible — creating future trade access uncertainty.
- US strategic partnership
- US strategic partnership signed January 2025 as part of the Western pivot. May open new trade and investment channels. USAID and US private sector engagement increasing.
- Business environment
- Post-2018 reforms have improved the business environment. Corruption declining. Regulatory framework simplifying. World Bank Doing Business indicators improved significantly before the index was discontinued.
Innovation, IP & Quality
Innovation, IP & Quality
- IT innovation
- Growing startup ecosystem in Yerevan. AI, fintech, and cybersecurity are emerging specialisations. FAST Foundation and other initiatives support technology development. Innovation output modest in global terms but growing.
- Education system
- Strong mathematical and scientific education tradition (Soviet legacy). Several universities produce technical graduates. Engineering and computer science programmes are competitive regionally.
- IP protection
- IP legal framework exists and is improving under CEPA harmonisation. Enforcement capacity limited for a small economy. Risk profile lower than major manufacturing economies due to small scale.
- Quality standards
- Dual-standard environment: EAEU technical regulations and CEPA EU approximation. Quality management systems less widespread than in larger economies. IT services quality benchmarked to international standards.