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Armenia’s Economic Structure and the Role of Entrepreneurship
Figure 2.1 Structure of the Armenian Economy, 2011 % gross value added Agriculture, 23%
Manufacturing, 10%
Construction, 14%
Industry excluding manufacturing, 7%
Services, 46% Source: EV Consulting 2012.
The country’s value added comes primarily from the services sectors (figure 2.1). In particular, the information and communication technology service sector has developed as a driver of the economy (box 2.1). Industry grew 14.1 percent in 2011.2 The sectors with the highest productivity growth are manufacturing, trade, transport, communication, financial intermediation, and mining. However, the manufacturing sector remains small, especially when compared with that of global leaders such as Germany or other regional comparators, including Russia and Turkey. As a result, Armenia’s competitiveness has consistently been below that of its comparators. According to the World Economic Forum’s (2011) Global Competitiveness Report 2011–2012, Armenia’s competitiveness ranking decreased steadily over the previous five years (2007–12), only recently reversing in 2011 when it increased to a ranking of 92 (EV Consulting 2012). By comparison, Russia ranked 66, Turkey 59, and Georgia 88. Investment in fixed capital, a crucial factor for growth, is quite strong in Armenia. Foreign direct investment accounts for a substantial share of the country’s gross capital formation. In 2009 foreign direct investment had reached 9 percent of GDP. Despite a drop in investment following the global economic crises crisis (down from 6.4 percent of GDP in 2011), foreign direct investment remains high, with the information and communication sector receiving a consistently high share. But recently, foreign direct investment has also been directed toward new nontraditional investment sectors, such as energy supply and land transport infrastructure. Fostering Entrepreneurship in Armenia • http://dx.doi.org/10.1596/978-1-4648-0064-1