In a context where global foreign investment increased by 10.9% in 2013, in particular in Europe (+25.2%) and in Latin America (+17.5%), FDI flows to developing economies reached a new high of US$759 billion. However macroeconomic fragility and policy uncertainties are driving investors to caution.
FDI stock has reached more than 20% of the country's GDP. These investments are essentially in the oil, metal ore, infrastructures and construction sectors, and more recently, in the telephony sector. Albania has set up reforms to boost FDI. The State has adopted a tax reform that is advantageous to foreign investors and aims to reduce corruption and administrative difficulties which can be discouraging to investors. The long-winded procedures to obtain operating licenses in the trade, construction and tourism sectors have slowed down investment progress. In addition, investments continue to suffer from the lack of infrastructures and a poorly defined property law. In the context of the global economic crisis, foreign direct investments in Albania strongly decreased since 2009, mainly due to the decline of remittances from Albanians living abroad (-27%) which represents 15% of the country's GDP. This trend continued since then and should remain unchanged in 2014, due to the general European context and the difficulties faced in particular by the Greek economy. In 2013 FDI reached USD 1.35 billion.
Information on the 2013 FDI influx in this region can be accessed in the Global Investment Trade Monitor published in January 2014 by the United Nations Conference on Trade and Development (UNCTAD).
|Albania||Eastern Europe & Central Asia||United States||Germany|
|Index of Transaction Transparency*||8.0||7.0||7.0||5.0|
|Index of Manager’s Responsibility**||9.0||5.0||9.0||5.0|
|Index of Shareholders’ Power***||6.0||9.0||5.0|
|Index of Investor Protection****||7.3||5.9||8.3||5.0|
Source: Doing Business - Last Available Data.
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.
|Foreign Direct Investment||2011||2012||2013|
|FDI Inward Flow (million USD)||876||855||1,225|
|FDI Stock (million USD)||4,399||4,622||6,104|
|Performance Index*, Ranking on 181 Economies||40||-||-|
|Potential Index**, Ranking on 177 Economies||123||-||-|
|Number of Greenfield Investments***||8||11||4|
|FDI Inwards (in % of GFCF****)||20.2||21.8||29.3|
|FDI Stock (in % of GDP)||34.6||38.4||47.5|
Source: UNCTAD - Last Available Data.
Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.
Additionally, Albania is still a developing country which needs foreign investors to develop entire sections of its economy, a fact which provides interesting opportunities.
Up to now, the main hindrance to FDI development has been the dominance of personal relations over the law and legal procedures: competition is rarely fair and in reality far removed from the legal decisions, corruption exists and despite efforts to fight it, it remains one of Albania's major problems. The taxation and Customs systems also need to be improved. Albania must continue its reforms and, above all, ensure they are effectively enforced, especially in the area of the fight against organized crime and corruption, the reinforcement of the Rule of Law, the freedom of the judiciary system and media freedom.
In addition, on 16 August 2006, the Prime Minister, Sali Berisha, presented the "Albania for 1 euro" solution: this measure aims to offer investors public land at 1 euro, staff training at 1 euro, technological water at 1 euro, the cost of registering a company at 1 euro, and entry into Albania at 1 euro.
Therefore for a number of years, Albania has established measures aimed at attracting foreign capital. Guarantees such as equal treatment of national and foreign investors and tax measures like the absence of VAT in certain sectors will allow for the development of FDI in the country.
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Last Updates: January 2015