At the time Enver Hoxha’s totalitarian rule was overturned, in 1991, Albania’s international credibility had reached a historical low. It took nearly two decades of structural reforms and macro-prudential policies for the country to see its efforts recognized and start reversing the situation. In mid-2008, it graduated from the International Development Association (IDA) – the World Bank’s soft financing arm dealing with poor nations – to the International Bank for Reconstruction and Development (IBRD), which deals with upper-middle-income economies. This means Albania can now get loans from international banks, as opposed to relying mainly on handouts from funding bodies. A tangible sign of its hard-earned maturity.
To its credit, the country has emerged relatively unscathed from the worldwide financial turbulence of the past few years. Not only has it weathered the storm better than the rest of Europe, preserving a stable financial system, a low external debt, and sufficient foreign exchange reserve buffers. Most importantly, FDI has kept coming in. During the period 2007-2013, the UN Conference on Trade and Development (UNCTAD) recorded cumulative FDI inflows in excess of $6,6bn, nearly quadrupling the $1,6bn of 2000-2006. Moreover, inward FDI jumped from $247m in 2000 to $6,1b in 2013, roughly 50% of GDP, making it the number one recipient of FDI in the Western Balkans that year.
All this did not come about by chance, Albania’s investment regime is indeed quite alluring. To begin with, it takes a mere four days and five procedures to establish a foreign-owned limited liability company. A timeframe that is well below the region and OECD-wide average. Furthermore, foreign investments are not subject to restrictions, need no prior government authorization, and may not be expropriated or nationalized, except in special cases. Finally, both full transfer of capital and full repatriation of profits and dividends are allowed, as well as 100% ownership of a local company, excluding the transportation and the media sectors; the former being limited to a maximum share of 49% for both local and international air transportation (though these equity ceilings apply only to investors from countries outside the Common European Aviation Zone) and the latter to no more than a 40% stake in a television company.
And there is more good news. For the past year or so, the government has been fine-tuning a strategic investment law designed to provide investors with a quicker response to their needs, regarding permits, authorizations, documentation, and any administrative procedures they are required to go through. The Minister of Economic Development, Arben Ahmetaj, outlines a couple of important innovations, “We have split investors into two categories: special investors and assisted investors. They are both subject to the same regime, be they domestic or foreign investors, though those investing more than $5.5m will get the status of ‘special investors’ and obtain fast-track treatment, while the others will have to go through the regular procedure. Additionally, for investments above $55m, we are discussing the possibility to turn their contract into law in Parliament, in order to grant them maximum legal security. Of course, they will still go through regular tendering and procurement processes as any other investor would.”
Albania has yet more to offer. In terms of natural resources, it is one of the wealthiest nations per square kilometer in the world, although hydropower has been its only source of electricity so far, hence the need to diversify and beef up its energy portfolio. Minister of Energy and Industry, Damian Gjiknuri, sums it up in a sentence, Albania is blessed with energy resources; the time has now come to put them into use, in order to unleash our full potential and attract higher volumes of FDI”.
Ever since taking office, Gjiknuri has been grappling with a bundle of challenges, including chronic resource mismanagement – amounting to roughly $150m a year in losses; an outdated and largely inadequate tariff structure and widespread electricity theft, a nationwide phenomenon he intends to stop once and for all. As a measure of his commitment, over the next five years around $450m will be invested in the power sector alone.
Along with energy, Gjiknuri is also in charge of industry, a sector that has maintained a GDP share of approximately 14%, fuelled by strong demand for construction-related materials and chemicals, as well as textile and shoe products, where Albania retains a leading position worldwide. Today over 1,000 foreign companies – mostly from Italy, Greece, Germany, Turkey, the US, and Great Britain – are operating in Albania and benefitting from its comparatively good fiscal terms, such as corporate tax at only 15%, a VAT at 20%, a minimum wage of around $180 per month and an abundance of skilled workers in a variety of industries. With leading UK brands such as Vodafone, British Airways, British Petroleum, Glaxo Smith Kline, Lalzit Bay amongst others, already having a stronghold in the market, the conditions look ripe again for more UK companies to place their lucky bet on Albania.
Certainly, the government’s pro-business and pro-investment attitude is a relevant consideration when weighing up the nation’s benefits and opportunities. “Albania is a partner that is eager to cooperate and has an open-door policy towards foreign investors,” remarks emphatically Albania’s Ambassador to the UK, Mal Berisha, and concludes, “Here they can easily access the highest level institutions, up to the Prime Minister.” If his words hold some truth, in the case of Albania short-term risks may very well be outweighed by long-term rewards.
