Albania Albania

! ! Country Outlook: Albania Albania Albania is a parliamentary republic. The capital, Tirana, is home to 421,286 of the country's 2,831,741 people within the city limits, 763,634 in the metropolitan area. Tirana is also the financial capital of the country. Free-market reforms have opened the country to foreign investment, especially in the development of energy and transportation infrastructure. Albania’s sustained high economic growth in the decade prior the 2008 global financial crisis helped the country to achieve a middle in- come status and reduce poverty (1998-2008 growth annual growth averaged 6% in real terms). The global financial crisis of 2008 brought to an end Albania’s growth model based on domestic demand. Although it has been able to avoid recession, Albania was hit hard by the crisis. The crisis led to lower remittances and other flows, which in turn contributed to lower growth particularly in the construction sector which has since experienced a sharp decline. GDP grew by an average of below 3 percent between 2009-2012, mainly on the back of basic services and the extracting industry which sought markets outside the EU. The Euro- zone crisis further compounded the challenge of recovery. With its close links to the Greek and Italian economies via exports, remittances, and financial flows, Albania has borne the brunt of the Eurozone sovereign debt crisis. Economy ! Albania is participating in the Stabilisation and Association Process to EU and has been implementing its obligations under the Stabilisation and Association Agree- ment (SAA) well. The EU states that, as regards the economic criteria, Albania made some further progress towards becoming a functioning market economy. Albania should be able to cope with competitive pressures and market forces within the Union in the !medium term, provided that it accelerates structural reforms. In 2013 Albania has maintained macroeconomic stability. GDP growth decelerated but remained positive mainly due to external demand. Low inflation created room for monetary policy easing to stimulate growth, but its transmission to the real economy is yet to be seen, as credit growth slowed amid high and rising non-per- forming loans. The budget deficit remains high and public debt increased further, leading to the statutory debt ceiling of 60% of GDP being breached and abolished. There was a slight improvement in the labour market but unemployment remains high. The current account deficit has narrowed but remains large. The economy remains vulnerable to both domestic structural weaknesses and global economic !volatility. Albania needs to complement stability-oriented fiscal and monetary policies with structural reforms to ensure long-term sustainable economic growth. Albania will have to address the high levels of budget deficit and public debt and its short term bias. Moreover, it will need to improve fiscal predictability by reducing the recurrent overestimation of revenues and by collecting taxes more efficiently. Country outlook !2 Improving the business and investment environment is essential for diversifying the economy and boosting its long-term growth potential. This could, inter alia, be achieved by reinforcing the rule of law, tackling corruption and addressing payment arrears, as well as developing infrastructure and enhancing human capital. The informal sector remains an important challen- !ge. The main economic sectors are Agrifood, Constructions, Energy, ICT, Metal-processing sector, Mining, Textile. Tourism. Albania’s private sector has around 430 large enterprises,1.580 medium-sized companies and around 85,000 small businesses, many of them with single pro- prietorships. Innovation in companies has generally been understood as adopting ICTs or in- !stalling new machinery, mainly imported from abroad. It is in this context that technologically oriented FDI and the knowledge and know-how of Al- banian diaspora returning from abroad are particularly important for the development of new products and services that are needed on the market. A limited number of medium-to-larger firms, (e.g. in the agro-food sector) can potentially become actors in terms of investment in product development innovation. To attract foreign investments the government in 2009 made law n.10081 which reforms the business licensing process in Albania. The National Licensing Center (NLC) has started it’s ac- tivity as a central public institution, which is subordinate to the Ministry of Economy, Trade and Energy since June 2009. With its one-stop-shop services and shortened, transparent and quick procedures, the NLC has reduced the administrative barriers to free enterprise, reducing business costs related to the licensing process and minimizes the level of informality, thus im- !proving considerably the business climate in Albania. Here find more info: http://bit.ly/1eabXHp ! ! ! ! ! ! ! ! ! ! ! ! ! ! !3 ! ! ! Swot analysis !Strenght ! Weakness Business concentration in the area High fragmentation of microbusiness Business Entry: (new registration , % of Low innovation in Sme: low level of staff total) competencies, micro-small dimension, Indicator of confidence in business envi- no cluster initiative, no export oriented ronment Low investment level in R&D (0,3-4% Multisectoral presence of businesses GDP) Broadband infratsructure R&D centralized, private very limited Great number of universities and HE insti- VET education centralized tution Good level of HR !Opportunity Threats! EU Smart Specialisation Strategy The financial crisis can reduce R&D National strategies Projects for BB infra- investment structures, 3G technologies, digital TV Deficit in current account balance Projects for transports and mobility Lack in Intellectual Property and tech Growing level of wealth transfer compared with Balcans com- Increasing Country wealth petitors Human capital coming back from abroad ! Growing number of degree/graduate in scientific diciplines New industries from R&D investments Country outlook !4 Main economic sectors and clusters In 2010, branch of agriculture, forestry and fishing in the generation of the national gross value added was 19.3% of total economy, 0, 6% higher than in year 2009. In the individual prefectures, the share of agriculture, forestry and fishing ranged from 5% in Tirana to 40% in Fier prefecture. Most of the prefectures with the share of agriculture, forestry and fishing in the generation of gross value added exceed !the national average. Branch of industry generated 11,7% of the national gross value added, 1,63% higher than 2009. In the individual prefectures, the share of industry ranged from 3% in Kukës to 20% in Elbasan prefecture. The prefectures with the shares of industrial activities in the generation of gross value added exceeding !the national average are Korca, Fier, Durrës and Elbasan. Branch of construction generated 11.0% of the national gross value added, 3,24% less than in 2009. In the individual prefectures, the share of construction in the generation of gross value added ranged from 3% in Diber to 18% in Tirana prefecture. The prefectures with the shares of construction in the ge- !neration of gross value added exceeding the national average are Tirana, Vlora, Kukës. Branch of trade, hotels, transport and communication generated 30, 5% of the national gross value added, 0,39 % higher than in 2009. In the individual prefectures, the share of this branch ranged between 17 % in Diber and Gjirokastër to 41% in Tirana prefecture. The prefectures with the shares of trade, hotels, transportation and communication in the generation of gross value added exceeding the na- !tional average are Tirana and Durrës. Branch of financial intermediation generated 14.1% of the national gross value added, less by 0.02% in comparison to 2009. In the individual prefectures, the share of financial, insurance and real estate activities ranged between 10% in Elbasan and 30% in Gjirokastër prefecture. Most of the prefectures with !the share of financial intermediation in the generation of gross value added exceed the national average. Branch of other services, including public administration and defense; generated 13.4% of the national gross value added, 0, 62% higher than in 2009. In the individual prefectures, the share of other services ranged between 8% in Fier and 16% in Tirana prefecture Most of the prefectures with shares of other services in the generation of gross value added are at the same level with the national average. ! Country outlook !5 ! Main data Population (Mn) 3.3 GDP (US $) 12.8 GDP per capita (US $) 3.992 The global competitiveness index 2010 - 2011 2013-2014 Rank Score Rank Score 88/139 Infrastructures 89 3.5 91 3.5 Macro economic environment 101 4.2 98 4.3 Higher education and training 84 3.9 76 4.1 Financial market development 100 3.7 120 3.4 Labor market efficiency 63 4.5 68 4.4 Technological readiness 72 3.5 77 3.7 Market size 103 2.8 98 2.9 Innovation 121 2.6 123 2.6 Business sophistication 87 3.6 98 3.6 ! Country outlook !6 ! Finance and innovation Private equity and venture capital market in Albania Over the past twenty years a number of venture funds have succeeded in Albania. That being stated, the funds which have succeeded have completed their investment phases and no direct follow-on funds are expected to be formed. The key to succeeding in venture capital in Albania has been linked to heavy ma- nagement and governance control. Hands-on experienced investors are the only ones that have had con- sistent success. To date, the largest and most successful venture fund in Albania has been the Albanian-American Enter- prise Fund (AAEF). Other venture funds have been active as a part of a regional geographic initiative with some success. Innovative fund investments that have done best in Albania have followed Drucker's 'Entrepreneurial Judo' approach in that they are not always introducing a new technology previously unknown in the world, but rather introducing its application into Albania in ways that the country had yet to experience.

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