investing in ALBANIA 2011 The conference is supported by
Platinum Sponsor Foreword
Foreword HE Dritan Mishto, Consul General of Albania in New York
ear Participants, The First US- of the favourable conditions, foreign Albania Investment Forum, that investments increased by a margin of Dtakes place on the twentieth 300%. Albania’s potential in the field of anniversary of the reestablishing of energy is huge and ambitious projects are the diplomatic relations between the currently under implementation. two countries marks an opportunity to present Albania “the economic miracle” According to Lonely Planet, Albania is to American investors and to build upon ranked as the top tourist destination to the momentum of interest in Albania. Our be visited during 2011. Albanian tourism is friendship dates back to the beginning diversified: coastal, mountain, cultural, etc of the 20th century, in a crucial time and due to investments in infrastructure for Albania, when President Woodrow it rapidly developing. Located between Wilson delivered his strong support and the Adriatic and Ionian Seas, Albania is saved our country. After strengthening the becoming one of the most attractive political relations and consolidating the destinations in the world with beautiful democracy, Albania approaches today as a and unexplored beaches, snowy mountain serious economic partner for the United peaks and a wealth of lakes and rivers. In States, with a lot of potential in energy, addition, our fascinating history provides tourism, transportation, agriculture and some of the world’s archeological other fields. wonders, such as Butrinti and Berat.
Based on the deep reforms of the Albania has so much to offer to the government, Albania has achieved potential investor. In this guide you will an admirable economic stability. find useful and important information An uncompromising fight against about the country, its rich history and its corruption, creating transparency, economic development. simplifying administrative procedures, embracing digital technology, investing I hope that this guide will aid you in your in infrastructure, privatisations, a low next investment. tax regime, creating the solid base of the Albanian economic model. We are the first country in the world where HE Dritan Mishto, 100% electronic procurement systems Consul General of Albania are applied. During 2007-2010, because in New York
2011 | INVESTING IN albania 1 Introduction
Introduction Introduction by Atam Sandhu Chief Executive, Developing Markets Associates
ear reader, It gives me great and analysis of its continued emergence as pleasure to present to you the a competitive European economy. DAlbania Investment Report for 2011, a guide to Albania and its investment It is still the case that many people have climate and a follow-up to the report little or no knowledge of what Albania produced for last year’s highly successful is today. Some will have an outdated UK-Albania Investment Forum, which was perception of the country based on its held in London in November 2010. history and the previous struggles of the region as a whole. The reality, however, is We are honoured to welcome to New that when one visits the country, he or she York a senior government delegation will consistently find a welcoming, open- from Albania, led by HE Sali Berisha, minded population and a progressive Prime Minister of Albania and including government, committed to creating a vital, Hon Edmond Haxhinasto, Deputy Prime healthy Albania. We hope this forum and, Minister and Minister of Foreign Affairs in extension, this report, showcase the and a number of key ministers from true face of Albania and the numerous the government. We are also delighted opportunities therein. to welcome HE Dritan Mishto, Consul General of Albania in New York who has I would like to express my sincere thanks been a key partner in designing this Forum. to all those who helped make the Forum and this report possible and in particular This investment forum provides an to the many sponsoring companies excellent platform for the panellists to today who have demonstrated their speak to the FDI community about the commitment to the country by growing business opportunities that supporting today’s activities. exist in Albania and to forge sound and productive relationships for the future. I sincerely hope that you will take the We intend to give a thorough briefing of opportunity to read this timely report Albania today, about the transformations on Albania and explore the opportunities that have taken place, and the vision and presented therein. prospects for the future of the country.
This report includes snapshots of the key Atam Sandhu sectors in Albania, including a detailed Chief Executive economic overview of the country in 2011 Developing Markets Associates
2 INVESTING IN albania | 2 011 CONTENTS
Contents 04 Economic Overview 12 Agriculture 15 Energy 19 Infrastructure 22 Remittances 24 TOURISM 27 Political history Publisher: Chris Gerrard Contributors: Tom Minney and Moin Siddiqi Art Director: Steven Jones Conference Team: Deanne Lintorn, Rebecca Isaacs, Clodagh Ryan Conference Directors: Atam Sandhu, Leon Isaacs
Correspondence Developing Markets Associates Ltd (DMA), 150 Tooley Street, London, SE1 2TU email: [email protected] | web: www.developingmarkets.com | www.moneymove.org | www.sendmoneypacific.org DMA acknowledge the assistance of all the individuals and organisations who have contributed to this publication. The views expressed herein are the opinions of the authors, and do not necessarily represent the Embassy of Albania, the Government of Albania or DMA. All rights reserved. No part of this publication may be reproduced or transmitted in any form without the written permission of the publisher. Published by Developing Markets Associates Ltd (DMA). Printed by Gap Printing. Picture credits: istockphoto.com
© Developing Markets Associates Ltd
2011 | INVESTING IN albania 3 Economic Overview
A decade of achievement By MOIN SIDDIQI, economist
oday’s Albania bears no US$4,200 sees Albania continue to make debut in international financial markets in resemblance to its past history of steady economic progress. 2010 with the placement of a Eurobond T a centralised planned economy. sent a powerful signal to global investors The country has been one of the fastest- The EU’s Progress Report 2009 reflected of growing maturity and its ability to tap growing regional economies, enjoying that Albania had made progress in a private capital in order to help finance a surge in foreign direct investment number of areas, though it stressed the critical infrastructure projects, especially that has also contributed to stability in need for further institutional reforms in transport and electric power – the key the Balkans. Albania became a member and restructuring. to sustained growth. of North Atlantic Treaty Organization (NATO) in 2008 and formally applied Albania graduated from the International The pursuits of macro-prudential for the European Union ‘candidate’ Development Association (IDA) (the soft policies and well-anchored structural status in 2009, following ratification financing arm of the World Bank Group) reforms, focusing on privatisations, of its Stabilization and Association lending in mid-2008, and has entered the fiscal probity, trade liberalisation, the Agreement, originally signed in 2006. rank of ‘upper-middle income’ countries. business climate, energy and financial Today, with a GDP per capita of More significantly, Albania’s successful sectors, have boosted Albania’s credibility
4 INVESTING IN albania | 2 011 Economic Overview among the Bretton Woods Institutions. by keeping inflation within the Bank of should continue its strong economic Successive governments over recent Albania’s (BoA) 3+1 target band. performance thanks to modest exposure years have sought to address issues such to global markets and low levels of as infrastructure deficiencies and social The International Monetary Fund (IMF) credit to GDP. deprivation, whilst strengthening market commented: “The monetary policy reforms and improving governance and framework of an inflation target and Growth over recent years has been institutions, with the end-goal of gaining EU flexible exchange rate is a fundamental driven by structural transformation, membership. The move to full European strength of the Albanian economy.” based on the movement of labour from integration offers future generations A subdued inflationary environment the low productivity agricultural sector opportunities for increased economic bolsters confidence in the Lek and to services and construction, and, to prosperity through intra-regional trade leads to higher capital inflows (especially some extent, manufacturing. The non- and investments, as well as preserving workers’ remittances). The annual inflow tradable sectors such as construction and democratic institutions and safeguarding of remittances has fluctuated between services – led by banking, transports and the rule of law. 11-14% of GDP and has been an retail trade – now represent over 60% important source of domestic demand. of GDP. A combination of higher capital The World Bank in its Country inflows (mainly private transfers) and Partnership Strategy for the fiscal year The International Monetary Fund (IMF) robust domestic demand has sustained 2011-14 commended: “Albania has been noted that prudent measures helped the expansion of these sectors. a development success story in many mitigate the contagious impact of the By contrast, a relative lack of new respects. Over the past two decades recession on the wider economy. In investment and land fragmentation has the country has made enormous particular, monetary conditions were undermined the agricultural sector – strides in establishing a credible multi- markedly relaxed, by quantitative easing despite its potential.
Industry has maintained its share of GDP The country has made solid progress towards at around 10%, mainly due to the growth achievement of the Millennium Development of textile and shoe manufacturing and more recently, helped by the expansion Goals (MDGs). of construction materials (mostly cement production). The impacts of regulatory reforms to improve the business climate party democracy and market economy via BoA direct liquidity injections and and steady increases in total factor and it is rapidly re-integrating into the repeated interest rate cuts and a larger productivity have underpinned real international and European communities fiscal stimulus was provided on both growth, which averaged 5.2% during after decades of isolation. Albania has the revenues and expenditures side, 2005-10. This has led to tangible increases enjoyed average annual real growth rates mainly funded from privatisation receipts. in per capita GDP in dollar terms. By of 6%, accompanied by rapid reductions Subsequently, real GDP rose by 3.3% in contrast, the economy grew by 1.1% per in poverty. The country has made 2009, according to the national statistical annum over 1989-1998, on IMF figures. solid progress towards achievement agency (INSTAT) – the highest growth of the Millennium Development Goals in the Balkans. The IMF’s estimation is Services led by banking, transport and (MDGs), although social indicators still lag lower at 2.8% - still the highest rate in retail trade now provide the largest significantly behind the EU-10.” the Balkans. In contrast, most of Europe contributions to GDP, well ahead of witnessed the steepest falls in output industry and agriculture. The country’s Overcoming since World War II. trade deficits (see Table 2) largely reflect regional recession imports of investment-related goods and A broad-based recovery is now hence post-transition driven productivity During the global crises, Albania proved underway, with both remittances and gains. In 2010, more than 75% of the the most resilient of South-eastern exports showing upward trends in current account deficit was financed by European economies, reflecting timely recent months. The authorities project net inflows of foreign direct investment policy stimulus, low external debt, a sound growth at 5.5% this year, edging up to (FDI). National infrastructure building financial system and sufficient forex 6.1% in 2012, (see Table 1) supported by and upgrading is heavily concentrated reserve buffers. However, the EU-wide higher capital spending on infrastructure on roads, railways and power generation, recession particularly in major trading projects and brisk activity in the services as well as water supply and sanitation. partners (Greece and Italy) led to falls in and telecommunications sectors. The government plans to boost exports and remittances. The prevailing Moreover, confidence in the banking spending on transport systems during monetary policy framework – backed sector has returned, as evidenced by the the current development plan; an by a floating exchange rate – helped the resumption of deposit growth. Despite estimated 6,000 Kilometres of roads will economy weather exogenous shocks the ongoing Eurozone debt crisis, Albania be rehabilitated by 2013.
2011 | INVESTING IN albania 5 Economic Overview
It takes five procedures and five days to establish a foreign-owned limited liability company. This falls below both regional and OECD-wide average (see Table 5). The minimum capital requirement for business start-ups has been abolished. Registration with the National Registration Centre (NRC) – a one-stop shop for licences and permits opened in September 2007 – takes just a day and the required documents are available online. Entrepreneurs can complete company, tax, social and health insurance and labour directorate registrations using a single application procedure with the NRC – hence cutting down red tape. There are over 1,000 foreign companies mostly from Italy, Greece, Germany, the UK, Turkey, Bulgaria, Canada and the US operating in Albania.
Foreign investors can open and maintain foreign currency bank accounts. Investors can also lease or own both privately and publicly held land. Lease contracts are limited to 99 years for agricultural land and 30 years for other land. Albania has taken steps to enhance contract enforcement and property rights by improving the commercial court system. Open for business IMF believes are “essential for raising Other incentives are low corporate and productivity and providing higher-wage personal income tax rates of 10% and Strategically located in the Western employment in Albania”. Meanwhile, cost-productive (flexible) workforce. Balkans, Albania’s natural resources include inward FDI stock has sky-rocked from Wage levels are among the lowest in significant hydropower capacity, large tracts just $247mn in 2000 to US$4,355mn in the region. of fertile agricultural land, over 360-km of 2010 (see Table 3), equivalent to more Mediterranean coastline with excellent than one-third of GDP. Whilst FDI flows Recent efforts to strengthen the regulatory tourism and transport potential and to Croatia and Serbia fell sharply in 2010, framework for private investments are valuable mineral deposits (including copper, Albania saw its FDI exceeding the $1bn reflected in Albania’s improved scores on iron and chrome ores). The country’s liberal mark for the first time ever, making it the the Global Competitiveness Index, the (FDI) regime grants foreign and domestic second largest FDI recipient in South-East Heritage Foundation’s Index of Economic investors equal rights of ownership of Europe after Serbia. Freedom and the World Bank’s Doing local companies, following the principle Business Indicators. The latter’s 2011 of ‘national treatment’. The total amount All sectors are fully accessible and 100% survey ranked Albania 82 out of [183] of FDI over 2006-10 was reported by foreign equity is permitted in local economies on the ease of doing business Geneva-based UNCTAD at US$4,045mn companies, excepting transportation for the period April 2009-June 2010. Its – vastly higher than US$1,251mn in 2000- and media (see Table 4). The former global ranking (up from 136 in 2007) 05 (see Chart 1 & 2). sector is limited to a maximum share exceeds regional neighbours – Croatia of 49% for both local and international (84); Serbia (89); Moldova (90); Greece The last decade witnessed the arrival air transportation. These equity ceilings, (109); and Bosnia and Herzegovina (110). of large-scale international investors however, apply only to investors Further improvements will help stimulate in Albania – notably Bechtel (US), from countries outside the Common business growth. Vodafone Group (UK), Austria’s Raiffeisen European Aviation Zone. While the law Zentralbank, Enka (Turkey) and CEZ on media (No. 8410/1998) stipulates that FDI inflows are expected to increase in (Czech-owned power utility), among no natural person or legal entity, Albanian 2011 and thereafter on the back of a others – a critical factor in the transfer or foreign, may own more than 40% stake more investor-friendly environment and of technology and innovation, which the in a television company. a new round of privatisations. Boosting
6 INVESTING IN albania | 2 011 Economic Overview industrial productivity by attracting FDI is For dedicated investors, privatisation offers liquidity and capital buffers to weather vital for sustained robust growth. opportunities to acquire assets in mining, the crisis. However, supervisors need utilities, petroleum, telecoms and finance. to continue to stay ahead of evolving Infrastructural AlbTelekom (the fixed-line operator) was challenges and risks. Banks can help the development sold in July 2007 to Turkish firms Calik needed economy-wide rebalancing and Enerji and Turk Telekom for €120mn. real-estate price correction by executing Like other frontier markets, long-term Albkrom and Albbaker (engaged in the collateral of non-performing loans or rewards in Albania can outweigh short- mining of chromium and copper) were seeking viable loan restructurings. The term risks. There are plenty of openings privatised through concession contracts Fund also underscored the need for in infrastructure – electricity supply, with foreign miners. In April 2010, the continued vigilant supervision in the face telecoms and transport (including government signed an agreement with a of exogenous shocks, namely potential logistics). Laws on concessions and Turkish/Chinese consortium to explore contagion risks from Greek debt. public procurement abide by European the feasibility of chrome production from standards; they guarantee transparency mines in Kalimash and Vlahne. This planned The country’s regulatory framework of deals, accountability of officials and a project (if implemented) can produce since 2007 complies with EU legislation in ‘level playing field’ for local and foreign 210,000 tonnes of chrome/year. the areas of surveillance, licensing, foreign investors. The provisions include an branch regulations, as well as risk and increase in the duration of concession The Czech energy group CEZ paid prudential management. Concurrently, contracts from 20 to 35 years. In 2009, €102mn for a 76% stake in Albania’s sole the BoA’s expertise in stress testing and the government awarded 50 concessions electricity distributor OSSH. Other deals off-site bank supervision has improved – for private companies to operate both (involving partial divestments) included it now annually conducts a full inspection small and large hydropower stations. the sale of Armo (an oil refinery), of every bank, while supplementing these Albpetrol, the state-owned company with partial, more focused risk-based In the telecoms sector, the passage of a involved in upstream oil exploration, periodic inspections as required. Recently, new law in 2007 resulted in improved Albanian Mobile Communications (AMC), stress tests assessing key risks indicated services, significantly lower costs and the a leading mobile telephony operator to the sector has sufficient capital buffers to entrance of a third mobile service provider. CosmOTE of Greece and INSIG, the weather the downturn. The second phase of Tirana International country’s second-largest insurance firm. Airport’s rehabilitation was completed The banking sector is now fully privatised Moreover, despite deterioration in asset in 2009 involving private contractors. since the divestment of the government’s quality because of growth slowdown, Recently a mega Secondary/Tertiary 40% stake in the United Bank of Albania the financial sector proved stable and Roads programme has been established in March 2009. The US State Department did not require public funding. In March that aims to reconstruct and rehabilitate estimated that privatisation generated 2010, the Supervisory Council of the 1,700 km of road networks, through about three-fifths of total FDI into Albania. BoA abolished restrictions – which were mainly Public-Private Partnerships (PPPs). imposed a year before – on financial The government has invested over €1bn Emerging transactions of foreign-owned banks in the new highway to Kosovo (opened financial sector to their parent banks, following a hefty in June 2009), with plans for developing increase in deposits at commercial banks. export routes across the Balkan Peninsula The banking system entered the global via the Durres and Shenjin seaports. crisis well-capitalised, relying on domestic Given the dominance of foreign players, funding, thus it remained solvent, liquid the BoA has increased cooperation An efficient transport infrastructure will and relatively profitable. There are 16 with regional supervisors and parent- help attract ‘vertical’ or asset-seeking FDI commercial banks (14 foreign-owned), bank supervisors. Many foreign parents from transnational corporations (TNCs), which offer corporate, retail and trade have boosted the capital of their Tirana whilst encouraging intraregional trade. finance services on a par with other subsidiaries and capital adequacy ratios of Such FDI is export-oriented and involves Eastern European markets. Major foreign some lenders exceed 17% - well above relocating parts of the production chains banks are Austria’s Raiffeisen Zentralbank, the Basle Committee’s norm of 8%. The to low-cost locations. The output is which in 2004 acquired the Savings Bank central bank has established a credit exported to the investor’s home country of Albania (now called Raiffeisen Bank), registry, which is vital for risk management and/or regional markets. Hence, FDI is Italy’s San Paolo IMI and Intesa Sanpaolo, as the sector’s level of non-performing unaffected by the host country’s market France’s Societe Generale as well as loans (i.e., bad debts) reached 10.5% by size. The 2006 Interim Agreement on subsidiaries of a number of Greek banks, end-2009, up from 3.4% in December Trade and Trade-related Matters allows which account for 25% of the country’s 2007. All domestic commercial banks are practically unlimited duty-free access total financing assets. now under private management. to the EU market. The authorities are planning a number of industrial zones to The IMF commented that prudential The Albanian corporate sector attract inward FDI. supervision has enabled banks to tap large is only moderately leveraged
2011 | INVESTING IN albania 7 Economic Overview
Closing the infrastructure gap with its neighbours in a fiscally sustainable manner, without incurring excessive levels of foreign debt.
Further improvements in the business environment and investor protection by securing property rights and strengthening law enforcement.
Improving governance and quality of economic institutions to ensure managerial integrity within the public sector are equally imperative.
Increasing the private sector access to credit, especially for micro, small and medium-sized enterprises (MSMEs) – the engine of job creation.
Export diversification by climbing up the ‘value-added’ production chains.
Nurturing a skilled labour force to compete in regional and global markets – with an emphasis on science and technology, particularly ICT in higher education, coupled with a strong focus on skills and vocational training schemes.
Supporting the development of the non-bank financial sector by attracting new institutional investors via Albania has made great strides within a decade accelerated pension reforms. The Albanian authorities, in collaboration and is well poised to advance towards its longer- with the World Bank, are developing term goal of EU membership. the insurance and pension sectors, which have the potential to provide long-term funds for investment. compared to South-eastern European trade, and participating in regional peers. The authorities have issued integration process – thus creating On current growth patterns and further a Eurobond to lessen the reliance favourable conditions for domestic/ deepening of market reforms, coupled on short-term domestic financing, foreign investment and much needed job with a spirit of enterprise, Albania has but current market conditions may creation. Whilst greater investment in the realistic chances of entering the EU have an impact on the size and pricing of upgrading of the national grid, transport club within five to 10 years. It remains the issuance. networks and modernisation of seaports, firmly on the path of successful regional especially through PPPs, are needed integration and Albanian state institutions Future challenges to raise productivity, thereby boosting compare favourably with new member competitiveness and diversifying the states of Bulgaria and Romania. A nation Albania has made great strides within country’s sources of future growth. with rich history and endowed with a decade and is well poised to advance natural resources has come a long way towards its longer-term goal of EU According to multilateral institutions such since the demise of totalitarian rule in membership. However, exploiting as the World Bank and the IMF, Albania’s 1991. Albania deserves recognition for the full benefits associated with the goals of becoming an advanced OECD stability amid global turmoil and should prospective EU integration requires economy require meeting a number of outperform other regional peers in the improving the business climate, boosting challenges. They include: coming years.
8 INVESTING IN albania | 2 011 Economic Overview
Table 1: Key macroeconomic indicators Projections 2005 2007 2009 2010 2011 2012 2013 2014 Nominal Gross Domestic Product (GDP) (Billions of Lek) 815 968 1,151 1,180 1,295 1,384 1,487 1,604 Total GDP (US$ mn) 8,161 10,704 12,118 11,352 12,950 13,180 13,518 13,887 Real GDP growth(1) 5.5 6.0 3.3 3.5 5.5 6.1 6.2 6.0 Consumer price index (CPI)(1) 2.3 2.9 2.3 3.5 2.8 2.9 3.1 3.0 Private sector share in GDP(3) 75.0 75.0 75.0 75-80 80-85 80-85 85.0 – Gross domestic fixed investment(2) 28.9 29.0 30.0 28.0 28.0 28.0 28.0 – Of which: Private-sector investment 24.2 24.0 21.0 21.0 21.0 21.0 22.0 – Gross national savings(2) 16.0 20.0 13.0 16.0 17.0 18.0 19.0 – The ‘repo rate' of the BoA (end-year) 5.0 6.2 5.2 5.0 5.2 (Apr) – – – Fiscal balance (% of GDP) -3.6 -3.5 -7.4 -5.2 -3.5 -3.0 -3.0 -3.0 Central government debt(2) 56.9 53.7 59.6 60.1 59.2 58.7 58.1 57.6 Public savings (including grants) 1.2 3.0 2.0 1.9 2.2 2.5 3.0 – Distribution of GDP (% of Total) Agriculture 23.0 21.0 21.0 21.0 21.0 21.0 20.0 – Industry 22.0 20.0 20.0 20.0 20.0 20.0 20.0 – Services 56.0 59.0 59.0 59.0 59.0 59.0 60.0 – (1)Annual percent change; (2)As percent of GDP; (3)In percent.
Sources: The Institute of Statistics, (INSTAT), Ministry of Finance, Bank of Albania (BoA), World Bank, European Bank for Reconstruction & Development (EBRD), International Monetary Fund (IMF).
ALBANIA: Fact File Surface area: 28,748 sq km. Population: 3.17mn (2010). GNI per capita: US$3,910 (2010). Capital: Tirana. Exchange rate: Lek 97.9= US$1; Lek 139.2 = EURO €. [August 12, 2011]. Natural resources: Crude oil, natural gas, copper, coal, iron and chrome. Foreign currency Sovereign credit-rating: Standard & Poor’s (B+) stable – June 2011.
Table 2: Balance of payments (In US$mn, unless otherwise indicated) (%) chg 2005 2006 2007 2008 2009 2010 2005-10 Exports of goods & services 2,048 2,629 3,407 4,307 3,836 4,169 103.5 of which: Merchandise FOB 656 793 1,079 1,356 1,048 1,548 136.0 Imports of goods & services 3,914 4,570 5,989 7,688 7,017 6,794 73.6 of which: Merchandise FOB 2,478 2,916 3,978 4,907 4,264 4,305 74.0 Merchandise trade balance -1,822 -2,123 -2,899 -3,551 -3,216 -2,757 51.3 Net current transfers 1,294 1,270 1,432 1,380 1,307 1,222 -5.5 Remittances (%) of GDP 18.6 15.8 15.6 12.6 12.6 12.5 – Current-account balance -571 -671 -1,151 -2,002 -1,875 -1,404 145.9 As (%) of GDP -7.0 -7.4 -10.7 -15.4 -15.5 -12.4 – Foreign direct investment, net 264 325 656 988 979 1,097 315.5 Inward FDI (%) external deficit 46.2 48.4 57.0 49.3 52.2 78.1 – Gross forex reserves 1,404 1,769 2,104 2,319 2,314 2,470 76.0 Import cover (months of imports FOB) 7.0 7.2 6.2 5.7 6.5 6.7 – Total external debt(1) 1,665 2,275 3,126 3,584 4,132 4,086 145.4 Debt stock (%) of GDP 20.4 25.3 25.8 27.6 34.1 36.0 – External debt (%) of total exports 81.3 86.5 91.7 83.2 107.7 98.0 – Gross external financing needs 551 598 1,349 2,413 2,584 2,459 346.3 As (%) of GDP 6.7 6.6 12.6 18.6 21.3 21.6 – (1)Most of foreign debt are owed to the multilateral creditors & comprises long-term liabilities. Principal exports (% of total 2010): Textiles & footwear (34.4): Minerals, fuel & electricity (27.8%); Building materials (20.0%); Food, beverages & tobacco (5.8%); Machinery (4.2%). Major export markets: Italy 45%; China 9.0%; Greece 8.0%; Spain 7.0%; Turkey 5.0%. Principal imports (% of total 2010): Machinery (19.4%); Food, beverages & tobacco (18.2%); Building materials (16.0%); Minerals, fuel (15.4%); Chemicals & plastic products (11.8%). Main origins of imports: Italy 30.5%; Greece 12.3%; Turkey 5.7%; China 4.7%; Germany 4.4%. The EU remains, by far, Albania’s major trading partner, providing 64.0% of Albania’s imports and receiving 70.0% of exports during 2010.
Sources: International Financial Statistics, the Direction of Trade (IMF), World Bank, EBRD, Bank of Albania, World Investment Report 2011.
2011 | INVESTING IN albania 9 Economic Overview
Table 3: FDI inflows to ALBANIA (US$mn) (%) chg 2000 2003 2005 2007 2010 2000-10 FDI inflows (net)(1) 143 178 264 656 1,097 667.1 Total FDI stock(2) 247 1,091 1,680 2,264 4,355 1663.0 As (%) of GDP 15.4 18.1 20.5 21.2 36.4 – Sources: UNCTAD World Investment Reports. (1)After repatriation of interest, profits and dividends (IPDs).(2) FDI stock represents the value of the share of affiliate enterprise at book value or historical cost, reflecting prices at the time when the investment was made and reserves (including retained profits) attributable to the parent firm, plus net indebtedness of the affilitate to the parent company.
Table 4: Investing Across Sectors Foreign equity ownership index (100= full foreign ownership allowed) Country Score Regional average Global average Mining, oil & gas 100.0 96.2 92.0 Agriculture & forestry 100.0 97.5 95.9 Light manufacturing 100.0 98.5 96.6 Telecommunications 100.0 96.2 88.0 Electricity 100.0 96.4 87.6 Banking 100.0 100.0 91.0 Insurance 100.0 94.9 91.2 Transportation 79.6 84.0 78.5 Media 70.0 73.1 68.0 Foreign equity ownership indexes (100= full foreign ownership permitted).
Source: Investing Across Borders 2010, World Bank.
CHART 1: Albania has attracted rising net CHART 2: The Surge in FDI Stock FDI inflows over the past decade (US$mn) (US$mn)
1200 5000 1097 4500 4355 988 979 1000 4000 3537 3500 800 3000 656 2627 2500 600 2264 2000 1680 1514 400 1500 324 325 1284 264 910 1091 207 178 1000 200 143 135 500 247 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: UNCTAD Data for FDI Source: UNCTAD Data for FDI
10 INVESTING IN albania | 2 011 Economic Overview
TABLE 5: ALBANIA’s Business Data
Albania Eastern Europe OECD & Central Asia Average Starting a business Procedures (number) 5.0 6.3 5.6 Duration (days) 5.0 16.3 13.8 Cost (% of GNI per capita) 16.8 8.5 5.3 Paid in min. capital (% of per capita) 0.0 12.3 15.3 Dealing with construction permits Procedures (number) 24.0 22.2 15.8 Duration (days) 331.0 250.1 166.3 Cost (% of income per capita) 381.3 645.5 62.1 Registering property Procedures (number) 6.0 5.6 4.8 Duration (days) 42.0 38.3 32.7 Cost (% of property value) 3.4 2.4 4.4
Paying taxes Payments (number per year) 44.0 41.7 14.2 Time (hours per year) 360.0 313.9 199.3 Profit tax (%) 8.0 9.8 16.8 Labour tax and contributions (%) 31.9 22.9 23.3 Other taxes (%) 5.1 8.5 3.0 Total tax rate (% of profit) 40.6 41.2 43.0 Trading across borders Documents for exports (number) 7.0 6.4 4.4 Time for exports (days) 19.0 26.7 10.9 Cost to export (US$ per container) 725.0 1,651.7 1,058.7 Documents for import (number) 9.0 7.6 4.9 Time for import (days) 18.0 28.1 11.4 Cost to import (US$ per container) 710.0 1,845.4 1,106.3 Enforcing contracts Procedures (number) 39.0 37.3 31.2 Duration (days) 390.0 402.2 517.5 Cost to enforce; in (%) of claim 38.7 26.7 19.2 Protecting investors Extent of disclosure index(1) 8.0 6.3 6.0 Extent of director liability index(1) 9.0 4.0 5.2 Ease of shareholder suits index(1) 5.0 6.2 6.8 Strength of investor protection index(1) 7.3 5.5 6.0 Getting credit Strength of legal rights index(1) 9.0 6.6 6.9 Depth of credit information index(2) 4.0 4.0 4.7 Public registry coverage (% adults) 8.3 13.1 8.0 Private bureau coverage (% adults) 0.0 21.3 61.0 Closing a business Time (years) No Practice 2.9 1.7 Cost (%) of estate No Practice 13.4 9.1 Recovery rate, cents on dollar 0.0 32.6 69.1 Albania ranks (82) out of 183 economies on the ease of doing business. (1)(0-10) - Most 10; Least 0-1. (2)(0-6) – Scope and accessibility of credit information distributed by public credit registries and private credit bureaus; Most 6; Least 0-1.
Source: World Bank Doing Business 2011 report.
2011 | INVESTING IN albania 11 Agriculture
Albania – Agriculture
gricultural land in Albania accounts for approximately 24% In 2010 agricultural products totalled A (696,000 ha) of total land area just over US$796mn or 17% of total and can broadly be divided into three geographic zones: a coastal zone to the merchandise imports. west of the country, constituting 44% of the arable land; a hilly zone in the central part of country, making up 37% and offering for 19% of total Gross Domestic Product 3.3%, and over the last five years it has the possibility of livestock farming; and the (GDP) in 2009 (latest Bank of Albania been below national GDP growth. There upland zone of the remaining 19% with figures, includes hunting and forestry) is much potential to be developed. the potential for arboriculture. Albania’s while private agriculture occupied 55% climate supports a diverse range of of the employed workforce (2011 figure, The sector is in need of investment crops from continental to Mediterranean, estimated by the government’s Institute and faces tough competition from including field crop cultivation such as of Statistics from Albanian Labour Force imported goods. Key challenges are the vegetables, fruit production, vineyards, Survey 2009). Most farming, however, size of farms, improved cooperation citrus, spices and herbs, medicinal crops, is subsistence farming or small family between producers and business sectors, timber production and olive trees. operations and only 30% of livestock improved marketing of products for and crop production is sold in markets. export and facilities to store, process, and Agriculture is an important component Agricultural growth was 2% in 2009 pack products, development of irrigation of the Albanian economy and accounted compared to national GDP growth of and drainage systems and processing
12 INVESTING IN albania | 2 011 Agriculture technology. Farm land in Albania is The Agriculture and Food Sector Strategy environment for business through land fragmented, a legacy from land reforms (SSAF) 2007-13 document lays out the privatisations; and assisting farmers undertaken in the 1990s when large government’s programme for the sector, through training and extension services collective farms were dismantled and in line with the overall objective of and the transfer of knowledge, new the land distributed to former workers. moving towards integration into the EU. practices and technologies. Direct support Regarding privately-owned agricultural It sets out five strategic priorities: to farmers has resulted in an increase in land, Albanian natural and legal persons plantations of permanent crops such as may buy and sell it while foreign natural increase financial support for farms, fruit, olive and citrus trees and vineyards. and legal persons can not buy it but agricultural and agri-processing may lease such land for a period of businesses; The government supported the up to 99 years (Law No 8337, dated agricultural sector in two ways, according 30.04.1998, “On transferring ownership improve management of irrigation to the WTO Review: through measures of agricultural land, forests, pastures and drainage of agricultural land; to stabilise the market when conditions and meadows.”. This is a challenge to are unsustainable and direct payments to producers. It reported that the value Significant attention is being given to improving of such direct payments for agricultural production was US$8mn in 2008, the agricultural and agro-processing sector by US$10mn in 2009 and US$ 10 mn in 2010. The main government support is both the government and donor agencies. in new planting measures like olives and fruit trees (orchards, vineyards, citrus etc) improving agricultural productivity and improve the marketing of organic farms, drip irrigation systems, development of the sector. Furthermore, agricultural and agri-processing products; greenhouses, milk production and fixed agro-food enterprises are in general payments per head for sheep, payments small and medium enterprises and there increase the level and quality of for bee hives, olive oil production, milk is a lack of investment in this sector. technologies, information and production and others. In 2011, the The Ministry for Agriculture, Food and knowledge of farmers and agri investments in new orchards of nuts and Consumer Protection (MoAFCP) is processors; olive trees are a priority. Loan schemes implementing two national schemes to were offered through the Payments support investments in agro-industry. increase quality and safety of agricultural Agency for investments in production Investments to support the corresponding and agri-processing products. technologies, and there were subsidised development policies are needed in interest rates for private bank loans. order to increase the competitiveness of The government estimated that expenses the Albanian food-processing industry. plus investments to implement the SSAF Government agricultural policy is liberal would grow from Lek 5.5bn in 2007 to in accordance with international and In 2010 agricultural products totalled around Lek 22bn over 2011-13 (according regional trade agreements such as just over US$796mn or 17% of total to the World Trade Organization Trade WTO and the Central European Free merchandise imports and the value of Policy Review 2010). The strategic sectors Trade Agreement. Tariff protection and agricultural exports was US$88mn, nearly over the period 2007-2013 are: government support to the sector is 6% of total merchandise exports. Italy is relatively low: Albania’s average applied the principal destination for Albania’s 1. Fruit, olive and grape production MFN tariff on agricultural products (WTO exports. Albania for a number of agro- definition, referring to tariffs on imports food products, according to the MoAFCP, 2. Vegetable production from “most favoured nation” meaning all meet 52% of its wheat (or flour) needs, nations should be treated equally) is 8.8%, 67% of its fruit, 46% of its poultry meat 3. Livestock products the highest tariff being 15%. Albania does and 61% of its pork. The deficit has been not provide export subsidies. improved in 2010, but still is a compelling 4. Industrial processing of fruit argument for investment into the and vegetables Technical and financial aid from external agriculture sector. donors also plays an important role in 5. Industrial processing of grapes supporting the sustainable development Public and Private of agriculture. Aid for projects which were Investment 6. Industrial processing of milk and meat implemented over the period 2003-11 amounted to some EUR48mn, according Despite the challenges, significant Policies are focused on rehabilitating to the WTO Review, citing the MAFCP. The attention is being given to improving the infrastructure, particularly irrigation agriculture sector is eligible for funds from agricultural and agro-processing sector by and drainage, and market infrastructure the European Agricultural Fund for Rural both the government and donor agencies. and laboratories; creating a favourable Development (EAFRD) and the EU
2011 | INVESTING IN albania 13 Agriculture
and for products per export, 50% of the certification cost but not to exceed 70,000 Lek/farm/year (as stipulated by the Instructions of the MAFCP No. 361/1, dated 13/02/2008 and No. 358, dated 26/01/2009. The implementation of the supportive scheme is ensured by the Agricultural and Rural Development Agency (ARDA) attached to MAFCP).
The certified organic surface for 2010 was 4184 ha. The number of organic farms was 116.
One native and seven foreign certificating bodies, are operating at present in Albania regarding the certification of organic agriculture.
According to a study1, only 1%-1.2% of total bank credits have been given to the agricultural sector over a two-year period, but 38% of credits went to the service sector (including trade, hotels and other catering services) 20%-21% went to construction.
With strong domestic demand and large and strategic investments from both the public and donor sectors, private investors are encouraged to recognise the emerging opportunities in the Albanian agricultural and agro-food processing Investors are encouraged to recognise the sector. The fruit and vegetable market is a sensible option, where the quantity emerging opportunities in the Albanian processed domestically is small, demand is strong and there is a current reliance agricultural and agro-food processing sector. on imports. According to the MAFCP’s Agriculture and Food Sector Strategy Instrument for Pre-Accession Assistance to become important players in the 2007-13, the cost of apple production is for Rural Development Programme European food markets. The brand is roughly a third of its price, and the ratio (IPARD). Under the latter, Albania received increasingly being recognised by the retail is even more favourable in the case of EUR2mn for the period 2010-12. USAID’s industry and can be found in supermarkets grapes. Investment in industrial processing Albanian Agricultural Competitive (AAC) in major cities of Albania. It is consistently of grapes would also help to improve the programme focuses on stimulating present in wholesale and retail outlets in quality of Albanian wine and its ability to growth in agriculture. In 2009 some Tirana, as well as in Montenegro, Kosovo compete, at least in the domestic market. Albanian agribusinesses launched “The and Greece. The dairy industry is modernising and Taste of Albania” brand with support consolidating, including several initiatives from USAID to promote high-quality From 2008 onwards, MAFCP supports to improve processing facilities. The food and products, including identifying the certification of agricultural “Bio” industrial processing of milk and meat Albanian fresh fruit and vegetables of products from cultivated plants, is currently among the most advanced the highest quality and bringing back the respectively for products destined for industries in Albania. There have been pride of Albanian entrepreneurs and the the domestic market, 50% of the cost important private investments with the conviction that they have what it takes but not to exceed 20,000 Lek/farm/year; use of contemporary technology.
1 Leksinaj, E. (2010) ‘Analysis of the Possibility for Organic Food and Farming in Albania’
14 INVESTING IN albania | 2 011 ENERGY
Albanian – Energy
Power Sector year until 2020. The government is moving from a vertically-integrated company to overcome a number of historical into one with three independent entities In 2007 Albania produced 2,940 GWh of challenges facing the energy sector in was initiated. KESH was a state-owned electricity, only 51% of its total consumption Albania, including a lack of primary monopoly responsible for production, (which was then 5,719 GWh). By 2009, energy resources, limited production transportation, and distribution of however, mainly due to improvements and interconnection capacities and full electricity throughout the country. Now in hydropower, imports of electricity dependence of its power production on the Transmission System Operator (TSO) had fallen to 21% of total consumption. hydro resources. In 2006 Albania set out and the Distribution System Operator The situation further improved in 2010, a National Energy Strategy (NES) 2006- (DSO) are fully unbundled. In March described as “an extraordinary hydrological 2020 to boost security in the supply 2009 the Czech power utility CEZ was year” with record generation and over through diversification and construction selected as the winner of the tender for 2,900 GWh of electricity was exported of new generation works and inter- privatisation of the DSO, acquiring 76% even though domestic consumption was connection lines and the use of renewable of the shares of the new distributor CEZ up to 6,773 GWh (all figures are from resources of energy. The implementation Shpërndarje, which owns and operates the Annual Report 2010 of the Albanian of the NES has resulted in an increasing the entire 110 kV distribution network Energy Regulator ERE). number of concessions being granted. in the country, covering 69,000 km, and serving 1.1mn customers. Domestic demand shows no indication Privatisation of levelling and the Vienna Institute for In December 2010 the European Bank for International Economic Studies predicts In 2007 the process of unbundling the Reconstruction and Development (EBRD) that growth in electricity consumption in Albanian Power Corporation (Korporata announced plans for a EUR50mn long- Albania will continue to average 4% per Elektroenergjetike Shqiptare, KESH) term senior loan to CEZ Shpërndarje.
2011 | INVESTING IN albania 15 ENERGY
Regulator ERE had criticised the failure of CEZ to improve distribution efficiencies during 2010 and the EBRD says its project is expected to lead to a substantial improvement in the company’s operating performance and will reduce distribution losses from the currently high level of 34%. In order to promote competition, since 2008 all non-household customers have been granted the right to become eligible consumers and choose their own suppliers.
In 2011 the government announced plans for the first privatisation of five hydropower plants and in June economy minister Nasip Naco said that Chinese and Swedish companies had expressed interest.
Hydropower
Albania’s power generation is almost exclusively based on domestic hydropower (100%) 96.3% in 2010, with the remaining 3.7% from the new Vlora installed capacity up to 15 MW) at a price In September 2008 an agreement was Thermal Power Plant. Hydroelectricity approved by ERE. In addition a guarantee signed between the Albanian Government is produced by three main hydropower fund (up to EUR3.5mn) for “Facilitating and the Austrian company Verbund for plants (HPPs) located in the north of Renewable Energy Sources” (REF) the development of a 50 MW HPP at of the country: Koman (600 MW), has been set up by the government to Ashta in northern Albania, the first major Fierze (500 MW) and Vau Dejes (250 support local commercial banks to invest power plant construction in 30 years and MW). The regulator also lists 51 small in the rehabilitation or construction of the first large public-private partnership hydropower plants (SHPPs) with installed SHPPs by covering up to 50% of the risk. in energy. Verbund won concession rights capacity under 15MW, operated by 19 to operate the plant for 35 years in a concessionary and private companies, There have been a number of developments design, build, operate, transfer project. and there are also government-owned in this sector in recent years. Overall in Since then a syndicate contract for the SHPPs in remote areas. 2010 private investors commissioned five Ashta hydropower plant in northern new HPPs given by concession with a total Albania between Verbund and EVN The year 2010 was described as very general installed capacity of 16.1MW and has been signed. Construction started wet with record water inflow and the about 30 SHPPs are under construction. in March 2010. It will be the world’s generating plant was generally in good New plants in the southern part of Albania largest Hydromatrix power plant and is working order. Power generation was (Vjosa and Devoll) have been successful scheduled to commence operations as a record 7,743 GWh (of which private in exploiting nearby rivers. Overhead early as 2012. It is designed to generate sector plants contributed 159.2 GWh) interstate 400kV interconnection lines more than 240 million kWh of electricity up from total generation of 5,230 GWh with 1,000MW capacity were installed per year and thus supply around in 2009 and 3,795 GWh in 2008. KESH and became operational between Elbasan- 100,000 Albanian households with exported over 2,900 GWh, including Tirana and Tirana-Podgorica. Future work power. Verbund and EVN have invested to Kosovo which has a complementary includes interconnection with Kosovo, about EUR200mn. generation system as most of its power Macedonia and undersea cables to Italy. is created in coal-fired plants and the The Ministry has started the concession countries have agreed on a new 400 kV In December 2008 EVN (Austria) and procedures for the constructions of interconnection line. Statkraft (Norway) signed a concession hydropower plants on the rivers: agreement with Ministry of Economy, In 2007, ERE approved a new tariff Trade and Energy (METE) for the 1. Vjosa, with a total installed capacity methodology for existing and new SHPPs construction of three HPPs in Devoll over 300 MW; in order to attract private investment in River (installed capacities will be 173 MW, the sector. KESH is authorised to buy all 138 MW and 28 MW). The investment 2. Osumi with a total installed capacity the electricity produced by SHPPs with an will be around EUR1bn. over 100 MW;
16 INVESTING IN albania | 2 011 ENERGY
3. Drin I Zi with a total installed capacity and CEO Glenn McNamara said: “We the hydrocarbons agreement with over 350 MW; believe our six prospects are compelling Sky Petroelum Inc. for exploration world-class targets”. The company is of hydrocarbons in Block 4 and Despite developments there is still accelerating preparations for a 2012 Block 5 and the Dumre Block, in the significant potential for investment in drilling programme. land (approved by the Council of hydropower in Albania. According to Ministers Decision No. 958, Renewable Energy and Energy Efficiency There are nine existing oilfields in blocks dated 11.24.2010) Partnership (REEEP) the country 2 and 3, outside Petromanas PSCs, and has only exploited 35% of the total Canadian-based Bankers Petroleum on The agreement with the Bankers potential. Total hydropower reserves are the frame of a Petroleum Agreement Petroleum Albania Ltd. hydrocarbon estimated at around 3,000 MW. Potential approved in 2004 by the Council of exploration in block F in the land annual generation may reach up to Ministers of Albania, operates the (approved by the Council of Ministers 16.000 GWh. largest onshore oil field in Europe at Decision No. 939, dated 11.17.2010) Patos-Marinza, discovered in 1928 and Petroleum Sector production started in 1930s. Bankers At the same time, several hydrocarbon announced in March 2011 that it had agreements are approved for the Albania has important oil reserves acquired all the remainder of the interest development of production in existing oil and produced about 740,000 tonnes, of Albpetrol, the historical operator, and fields. Specifically: in 2010. (For 2011 it is foreseen to the company says it hopes to achieve produce about 850 000 tonnes). High target field production of 16,000 – 20,000 Four Petroleum agreements with oil prices, the desire for better energy bpd by the end of 2011. Stream Oil and Gas company for oil security in Europe and close proximity to deposits, respectively Ballsh Hekal, all European oil markets has driven activity Besides the agreements with Manas Cakran Mollaj, Gorisht Kocul and the in Albania’s oil market. Several companies Petroleum Hydrocarbons Ltd. and Bankers exploration block of Delvine. (adopted negotiating or seeking to negotiate for Petroleum Ltd. for exploration and by the Council of Ministers Decision acreage and drilling have been licensed to production of oil and gas in the Albanian no. 509, dated 08.08.2007) a wide range of international companies. territory, land and sea, the Ministry of The government has a clear policy Economy, Trade and Energy has also Hydrocarbon agreement for the oil to attract foreign investment in its signed several other agreements, which deposit in Kucove with the company Sharehood Petroleum Ltd. (adopted by the Council of Ministers Decision There is still significant potential for investment no. 686, dated 19.10.2007) in hydropower in Albania. Hydrocarbon agreement for the oil deposit in Visike with IEC Visoka Inc. natural resource sector. Royalties on oil are currently in force, after approval by company. (adopted by the Council production in Albania is 10%, while taxes the relevant decisions of the Council of Ministers Decision No. 90 dated on net profits are 50%. of Ministers. 01.27.2009)
In February 2010 an international oil Thus, for exploration of hydrocarbons, Interest has been shown from foreign and gas company Manas Petroleum, in addition to the three agreements and domestic investors for the through its 100%-owned subsidiary with the company Manas Petroleum exploitation of other oil and gas deposits. DWM Petroleum AG, acquired an equity Hydrocarbons Ltd., are also effective These enquiries are being examined interest of 32% in Petromanas Energy Inc, taking into account the plans the listed on the Toronto Stock Exchange. The hydrocarbons agreement with Albanian Government for the Through a subsidiary, Petromanas has Capricorn Albania Ltd. company for privatization of the state owned oil three production-sharing contracts exploration of hydrocarbons in block company “Albpetrol sh.a.”. (PSCs) covering six blocks on the Jon-5 in the Albanian Sea (adopted by northern flank of Albania’s oil-rich “fold the Council of Ministers Decision no. Gas and thrust” belt. The agreements, which 507, dated 08.08.2007) cover blocks A, B, D, E, 2 and 3 have Compared with other South Eastern been negotiated by the National Agency the hydrocarbons agreement with European countries, Albania has of Natural Resources (AKBN) and was Beach Petroleum Ltd. company for underdeveloped natural gas networks. approved by the Council of Ministers of exploration of hydrocarbons in the The natural gas system of Albania is Albania. In late August 2011, Petromanas Durres block in the Albanian Sea 400 km of pipeline, with a transmission released prospective resource estimates (adopted by the Council of Ministers capacity of 100,000 cu. m. per day and on six of its 14 prospects and leads Decision no. 562, dated 27.8.2004) adjoining metering stations.
2011 | INVESTING IN albania 17 ENERGY
The Albanian Ministry of Economy, Trade its shares are owned by “AMRA OIL’ In January 2009 Albania signed a EUR1bn and Energy estimates the country’s gas company and “Refinery Associates of contract with Italy’s energy and financial reserves at 1.5bn cu. m. Demand for natural Texas, Anika enterprises & Mercuria Energy company Marseglia Group to build an gas in Albania is rising, but consumption is Group” consortium. Because ARMO energy park. Government officials say the constrained due to low local production doesn’t process all of the oil production, Italian company will build a 140 MW liquid volumes and missing connections with the considerable quantities of crude oil have biomass energy plant and two 234 MW regional gas network. been exported. In 2010, 500,000 tonnes wind farms. The deal also provides for an of crude oil have been exported. undersea power link between Italy and The proposed Trans Adriatic Pipeline Albania and convertor substations in the (TAP) could connect Albania to other Since June, 2009, the export-import of Lezha district, 100 km north of Tirana. In pipelines and well-developed gas markets crude oil, petroleum derivates products, December 2008, Albania signed two major including Italy, Greece and Western Balkan and the liquefied petroleum gas LPG, energy deals with other Italian companies, countries. In July 2011 the TAP Consortium has been operated through the oil during a visit by Italian Prime Minister Silvio (EGL, Statoil and, E.ON Ruhrgas) signed terminals “Vlora I” and “Porto Romano” Berlusconi. Falcione Group (Italy) agreed an agreement with the Ministry of situated respectively in the coastal towns to invest EUR1bn to build a liquid natural Economy, Trade and Energy to cooperate of Vlora and Durres. “Vlora I” terminal gas (LNG) regasification terminal and on developing a major regional natural is administered through a concession power plant in Fieri in the south-west of gas project in South Eastern Europe, agreement by “La Petrofiliera Italo Albania. Power engineering and alternative by a connection point to the Ionian Albaneze” company; “Porto Romano” energy concern Moncada Group (Italy) Adriatic Pipeline, near Fier in Albania. The is administered through a concession said it would invest EUR1.15bn to build connection would supply the region with agreement by “Romano Port” company. a 500MW wind farm. Moncado will do new and reliable gas from the Caspian the construction work through its local region and the project is backed by the The Albanian oil, gas and by-products subsidiary Enpower Albania. This agreement Western Balkan Investment Framework market is a free, open and liberalized also includes a 400 kV underwater power with EUR 3.5mn for a feasibility study market, predominately operated by transmission line to Italy. and environmental impact assessment. private companies, and where the Agreements have been signed with gas Government of Albania plays only a With regards to the potential for solar energy, system operators in Croatia, Bosnia and regulatory role. Albania’s climate is typically Mediterranean, Montenegro. This would make Albania with hot and dry summers. This climate a key hub for energy security for the Renewable Energy is a good precondition for use of solar European Union, according to TAP, and energy (about 129.3 Kcal/cm2 per year). could bring over EUR 1bn of investment. Albania has significant renewable energy The government has formed a partnership resource potential from hydro, wind with the United Nations Development Another important project for the gas and solar energy. The development Programme (UNDP) and the Global sector development in Albania is the Ionian of renewable resources is one of the Environmental Facility (GEF) to help create Adriatic Pipeline Project (IAP Project). objectives of the NES. There are no a functioning market for solar water-heating, This project foresees the interconnection restrictions on access to the electricity part of a global initiative. They believe into a gas network of four Western grid and regulations for issuing certificates Albania can reasonably aim to install 90,000 Balkan countries: Albania, Croatia, Bosnia of guarantees of origin for electricity sq. m. of solar-water heating collectors over & Herzegovina, and Montenegro. In 2007, production from renewable sources have the next five years, the duration of the a Ministerial Declaration was signed by been defined. project. If the project succeeds, demand representatives of these countries. for solar water heating could grow by The EBRD indicates that it will provide 20% annually and reach 580,000 sq. m. of The IAP Project, together with the TAP immense financing for new power installed solar water heating collectors by gas pipeline project to which it could be generation. Therefore, renewable energy 2020. In the process, the country will be connected, are part of a regional project is also an extremely attractive foreign able to reduce its emission of greenhouse called Energy Community Gas Ring. investment option. Studies show that gases by 1.5mn tons over the next 20 years. the construction of 20 windmills near to Processing, 20 pumping stations along the Adriatic The Italian Government has created Transportation and cost is feasible and expected capacity a fund of about EUR5mn to help the Trade of Hydrocarbons of this implementation is 400 GWh/ government to develop its public and in Albania year of electricity by year 2020. ERE has private-sector capacities to access given licences to private investors to carbon finance for projects eligible for There is also an oil refining industry in build wind farms with a total installed the Clean Development Mechanism and Albania. Currently, there are two refineries capacity of 1,350MW and investment of other carbon market mechanisms, in operated by ‘ARMO’ company. After the around EUR2bn, according to its Annual terms of the United Nations Framework privatization of ARMO in 2008, 85% of Report 2010. Convention on Climate Change.
18 INVESTING IN albania | 2 011 infrastructure
Albania – Infrastructure
ears of neglect and isolation Europe and to link its urban and rural Albania with its ancient neighbour, under the Communist regime of dwellers. The development of crucial Kosovo. Prime Minister Berisha described Y the twentieth century meant that sectors – from agriculture to tourism – it as “one of the greatest dreams of the newly democratic Albanian nation is dependent on the country’s transport Albanians becoming a reality”. He called of the 1990s inherited one of the most infrastructure and to this end, a number it an “Albanian masterpiece” and said: challenging country infrastructures found of key road development projects have “Inauguration of the highway Durrës- anywhere in the world. In the decades been undertaken in the last decade. Kukës- Morinë brings the separation since then, successive governments, of the Albanian nation to an end. This aided by donor funding and working One of the biggest infrastructure projects is a tunnel of a united nation. Today we in partnership with the private sector, was the completion of the Durrës-Kukës- decided that there are no obstacles, have done much to tackle the problem Morinë highway, which reportedly cost nothing that can separate us, not only – especially in massively developing over EUR1bn. Construction was led in the spiritual sense but also physically”. and rehabilitating the road network by the Turkish-American consortium The highway currently stretches from the to increase efficiency and capacity and Bechtel-Enka and began in 2007. In port city of Durres, on the Adriatic coast, improve both regional and continental June 2009 the Rrëshen-Kalimash Road to Morinë on the border with Kosovo. transport links. stretch of the highway was opened in an In April 2010 work began in Kosovo inauguration ceremony attended by the on the first section of the road there, Roads Prime Minister of Albania, Sali Berisha, and which is planned to reach eventually to the Prime Minister of Kosovo, Hashim the Merdare border crossing between Albania has close to 20,000km of roads Thaçi. The opening of Rrëshen-Kalimash Kosovo and Serbia for a total length of and road construction is increasing was hugely significant both symbolically 272 km. The road will open up Albania’s fast. The country relies heavily on its and geopolitically as it formed a much- trade routes to the Eurozone and road network both for transit trade needed 5.5 km-long tunnel, located beyond, dramatically reducing the journey into landlocked southern and central on the 57th km of the highway, linking from Durres to Kosovo from seven to
2011 | INVESTING IN albania 19 infrastructure
two hours and will also expand Albania’s tourism and activity at Durres port.
Another milestone project awaiting completion is the Albania section of Corridor VIII. Defined at a Pan-European Transport Conference in 1994, Corridor VIII is one of ten “Pan-European corridors” which aim to revolutionise travel, trade and communication between the Balkan states, central Asia, the established EU countries to the West, and Eastern Europe through the creation of a pan-European road network fit for the 21st century. Access to oil reserves and energy supplies in the region will be greatly improved and the scale and scope of the project will encourage foreign direct investment, boost employment and bring economic regeneration on both national and sub-national levels.
When the corridor is completed it will link transport flows from Bari and Brindisi in Italy via the Adriatic and Ionian Seas through Durres port and Tirana in Albania before reaching its destination on
Road construction continues to be a high Saranada whilst at Durres Port there are priority for the government. projects to construct a container terminal and cement storehouses, in an effort to open it up to foreign companies. Bulgaria’s Black Sea coast. In Albania, three Durres accounts for the largest volume of sections currently under construction freight by far, handling 75% of the nation’s Recognising the value of its port include Librazhd-Qafa Thana, Lushnje-Fier total. As Albania modernises its transport infrastructure, the government has a and Levan Vlora. links from its ports to mainland Europe so development agenda to meet increasing it is increasing the capacity of its ports to needs and demands better and FDI can Road construction continues to be a high cope with increasing volumes as well as play a huge role in the future of this priority for the government. In April 2011 improving their efficiency levels. thriving sub-sector. the government launched a US$400mn project to build a four-lane highway In 2009, a 35-year concession contract Aviation between Tirana with Elbasan, some 40 km was awarded to British-Swiss Zumax AG south. Other roads include Tirana – Klos group for a EUR1.8bn container terminal Tourism is Albania’s fastest-growing and Berat – Tepelene. Roads such as these as a trans-shipment hub and transit port sector as increasing numbers of visitors can transform the country’s capacity for to the region for ships visiting Vlora in discover the attractions on offer. This trade and travel and they represent a south-western Albania. Construction positive trend, coupled with Albania’s huge opportunity for foreign investment. is expected to be completed in four growing political and financial integration years, providing a terminal which can with Europe, has necessitated heavy Ports handle 3mn containers (TEU) a year. In investment in air transport. March 2010 Zumax also won a bid to With its Adriatic coastline and close be developer of a nearby industrial park Tirana’s Mother Teresa Airport has proximity to North Africa and the Middle with free zone status. It is anticipated undergone significant modernisation and East, Albania is strongly positioned as a that over 4,000 companies will make expansion in the last decade – with annual regional hub for maritime trade. There use of the terminal and free-trade zone. passengers increasing from around 785,000 are four major seaports – Durres, Vlora, Donor funding is aiding much-needed in 2005 to 1.5mn in 2010 and the number of Saranda and Shengjin – and of these modernisation programmes at Port international air operators increasing from
20 INVESTING IN albania | 2 011 infrastructure seven to 14. The airport is being operated links to rural communities will greatly first quarter of 2009, making it one of the and upgraded under a 20-year build, enhance the efficiency and mobility country’s most dynamic industries. own, operate, transfer (BOOT) contract of farmers and agro-processors and awarded in 2005 to Tirana International energise the sector, cutting journeys from In recent years government measures have Airport SHPK (shareholders are 47% rural to urban areas by more than 50%. been introduced through an ICT strategy HOCHTIEF AirPort, 31.7% DEG Deutsche In December 2010 the EBRD disclosed that aims to bring Albania up to speed Investitions- und Entwicklungsgesellschaft plans for a EUR50mn long-term senior in the digital age. Government legislation and 21.3% Albanian-American Enterprise loan to CEZ Shpërndarje (Electricity has liberalised the telecoms industry, Fund). In September 2009 the second Distribution Company of Albania) to bringing it into line with the EU regulatory phase of upgrading was completed. A new upgrade and modernise the electricity framework for communications, air traffic control tower, financed by Air distribution network and improve which encourages competition whilst Traffic National Agency, was inaugurated financial and operational performance. safeguarding universal access. The on 3 May 2011 after a US$60mn project National Agency for Information Society to upgrade air traffic management, The World Bank cites Albania as a (NAIS), set up in 2007, aims to increase implemented in collaboration with US success story, saying that it cut poverty Internet penetration across the nation. Lockheed Martin Corporation. To date from 25% to 12% between 2002 and Aided by UNDP funding, it has initiated Mother Teresa Airport has attracted 2008 and graduated into the ranking major programmes such as the e-schools internationally recognised airlines such of upper-middle income countries. project – which has benefited some as British Airways, Lufthansa and Austrian The bank is financing the reconstruction 450,000 students and 25,000 teachers. Airlines. The government is planning that and rehabilitation of around 110km of Indeed, projects such as these saw the airports at Kukes and Saranda will be “secondary and local roads”; this work percentage of the population using the operational in the future but their success has led to US$400mn of commitments Internet rise from 2.4% in the middle of will be dependent on partners in the from other external partners to expand the decade to 43.5% by 2010. ICT usage investment community. the project. Albania’s tourist industry has should continue to rise steeply in coming massive potential as the country offers years – with large tariff reductions in the Donor funding a mild climate, breathtaking coastline, first quarter of 2009 sharply increasing stunning mountain scenery and historical broadband uptake and a boom in internet Since its rebirth as a democratic nation, locations. The World Bank has supported cafés. At the same time, the growth in Albania has received vital support significant improvements in the country’s SMEs and influx of foreign companies is from multi-lateral institutions such as water supply and investments in fuelling ICT expansion. the European Bank for Reconstruction sewerage and wastewater treatment – and Development (EBRD) and the particularly in coastal (touristic) areas. As with much of the world, Albania’s World Bank. This has been achieved under the mobile phone market has undergone Municipal Water and Wastewater Project, rapid growth in the last decade – latest At March 2011 the EBRD had 53 ongoing the Integrated Water and Ecosystem government statistics show growth from projects in Albania with project value of Management Project and the Integrated 2.1mn mobile users in 2007 to 4.2mn in EUR1.96bn, ranging from grant subsidies Coastal Zone Management and Clean- 2009. Market leaders such as Vodafone for small and medium enterprises (SMEs) Up Project (ICZMP). Improvements are firmly established in Albania, creating through the Local Enterprise Facility to include equitable new water supply for jobs and profiting from brand awareness supporting the modernisation of oilfields around 1,000 families and businesses and and early uptake. Eagle Mobile is an such as Patos Marinza in southern Albania. repairing local water supply and sewage Albanian company that was born of An area for which it provides ongoing systems, access roads to beaches and Albtelecom, which was fully privatised support is road development, especially historical monuments and resurfacing of in 2007 when Cetel Telekom (Turkish in rural areas. In 2010 the bank invested village roads. As well as improving the Çalik Group 80% and Turk Telekom 20%) EUR73mn in eight projects, including lives of the local population, work such bought 76% of the shares. It now has over a EUR25mn sovereign loan to finance as this improves amenities for a rapidly- 800,000 subscribers and its growth is one improvement of regional and local roads. increasing number of foreign visitors – up of the sector’s business success stories. The World Bank, the OPEC Fund, the 31% from 2008 to 2009 and a further Council of Europe Bank and others are 30% between 2009 and 2010. With one of Europe’s youngest and most financing a wider national programme to multi-lingual populations (the median age rehabilitate 1,500km of regional and local Information and of the Albania population is 30.4 years), roads. Despite an increase in domestic Communications the government’s long-term aim is to a migration to urban areas in recent years, Technology develop an IT-literate, knowledge-based Albania has a large rural population and society increasing its worth as a business relies heavily on its agricultural sector, According to government statistics, the destination and prospective member which provides the largest contribution to ICT sector grew by almost 35% in the of the European Union and bringing the country’s GDP. Improving transport first quarter of 2010 compared with the opportunity to her people.
2011 | INVESTING IN albania 21 Remittances
Albania – Remittances
lbania is a country with a What are remittances? 10-25%). The additional consumption Diaspora of over 1 million, boosts economic performance via the A equivalent to around 25% of the Remittances are defined as person- multiplier effect. Whilst this is of course total population and 35% of the active to-person transfers of funds, often of extremely important, it offers little in the population. Over the past twenty years relatively low values (on average about way of broader, longer-term sustainable Albanians have emigrated and now provide £250 per transaction) that are sent development, be that for the individual a valuable flow of funds into the country on a regular basis to immediate family or the community. A range of different in the form of remittances. Remittances in members and friends by members of tools and mechanisms are therefore 2008 accounted for 12.2% of GDP at almost the Diaspora. Although individually small starting to be investigated, piloted and USD1.5bn, although inflows may have fallen in value, collectively these flows amount implemented whereby governments as a result of the world economic crisis. to considerable value. These private flows can, by strategically addressing their Global remittances are estimated to have of capital are often sent by migrants that remittance market, increase efficiency, fallen by 17% in 2009, however in 2010 have made great personal sacrifices in leading to greater flows of funds, which they were on the rise again. Nonetheless, leaving their country and continue to do can then be leveraged to provide finance remittances remain a vital source of income so in sending a significant proportion of for a range of developmental needs. to individual Albanians. Thus the efficient their earnings home. operation of the remittance industry is of The structure of great significance to the Albanian people. Money received is primarily used for remittances in Albania Whilst remittances already play an integral immediate consumption, including food, role in the Albanian economy there are clothing, health and education. Once a The Albanian Diaspora is present in a also a number of other ways that these steady flow of funds is established then number of countries but is concentrated flows can be harnessed to benefit the receiver often purchases larger items, in Greece (41%) and Italy (30%) with government and assist with raising funds on such as TVs, motor-scooters, etc. and a large groups also present in the UK, international markets. small amount is saved (in the order of Germany and USA.
22 INVESTING IN albania | 2 011 Remittances
Money is sent to the country by using a range of methods, including both formal and informal methods. The formal methods are dominated by international money transfer companies (MTOs), particularly Western Union and MoneyGram. These two organisations have by far the largest market share of the formal operators. Although it is possible to send money from an overseas bank account to an account in Albania this method is generally not used by the Diaspora as many members do not have bank accounts and the method is slow and expensive compared to the MTOs.
It is estimated that the official volume of remittances (USD1.5bn) is only around 60% of the total inflow of funds and that 40% goes through informal channels. These include: people hand-carrying funds when they visit home; money being handed to other travellers to bring back; and through unregistered or illegal money that can be used to encourage more transactions to raise finance by securitising transfer operators. Whilst these flows are funds through the formal channels and to against the future flow of remittance used for consumption in Albania by not harness the power of remittances. Lower revenues in order to raise funds in the passing through formal channels they are prices not only put more money into the shorter term. This mechanic has been not accounted for in the current account hands of the sender or receiver of the used by countries such as Egypt, Nigeria of the balance of payments which limits money but it will also encourage more and El Salvador in the past. Furthermore the government’s macroeconomic money to be moved via formal channels. countries such as India, Israel and Ghana management of the country, weakens the Increasing competition and improving have issued Diaspora bonds (instruments capacity in the governance of international transparency in the market can help to that encourage the Diaspora to invest in transactions and limits the ability to reduce the cost of sending remittances. It national bonds as a sign of their loyalty) leverage off these flows for raising capital. is estimated that if the current prices are to try and orientate remittances away halved an additional USD50million would from consumption into investment In the current market sending money to be injected into the Albanian economy and raise funds for the government for Albania is not particularly cheap. Research per annum. specific investments, e.g. infrastructure, conducted by DMA for the World or for general-purpose usage. Greece is Bank’s price comparison site (http:// One of the methods commonly used to currently in the process of issuing one. remittanceprices.worldbank.org) showed improve transparency in the market place that in September 2010 it cost on average is price comparison databases/websites. A valuable asset 6.91% to transfer USD200 from Italy and Examples are www.moneymove.org in 9.22% to transfer the USD200 from the the UK and www.sendmoneypacific.org Remittances to Albania form such UK. This is compared with a global average in Australasia. To aid this goal, the money a significant part of its GDP that to of 8.82% and low cost corridors such as transfer industry in the UK has developed a increase their volume by relatively the UAE to Pakistan and Singapore to customer charter which clearly sets out the modest percentage terms can have Philippines priced at 3.24% and 4.84% of standard of service that the consumer can significant impact on the economy. the send amount respectively. High prices expect. Removal of exclusivity clauses which There are near term solutions that discourage people from using formal restrict banks and partners to only operate represent a great opportunity to add methods in favour of the informal which with one MTO is also a common method real value to the economy - by making are often cheaper and just as efficient. used to promote competition. Furthermore, the market more competitive there are Most transfers take less than 24 hours to broadening the types of organisations that immediate benefits to recipients, the arrive whether they are formal or informal. can payout money transfers to include retail government and the economy. New stores further enhance competition and technological advancements, such as Opportunities access in the market. mobile payments, will reduce the cost of sending remittances and improve access Although remittances are private flows Aside, from these tactical solutions benefiting recipients throughout Albania of funds there are a number of options some governments use their remittance and improving financial inclusion.
2011 | INVESTING IN albania 23 tourism
Albania – Tourism
ith a tourism offering that Tourism guide publisher Lonely Planet’s released includes skiing, vast lakes, spas, W some 450 km of coastline on its Best in Travel 2011 award in October 2010 the Ionian and Adriatic Seas, UNESCO World Heritage sites and an average of and Albania is number one in the top ten 120 days each year with temperatures countries for 2011. of +20˚C, all within a couple of hours’ reach from Europe’s major cities, it is unsurprising to learn that tourism is Lek 169.9bn (8.5% of GDP) by 2021, or 4.6% of total investment in 2011 and Albania’s fastest-growing industry. in constant 2011 prices. The travel and to grow by 5.7% a year to Lek 39.7bn by tourism sector directly employs 67,000 2021. The Albanian government expects According to the World Travel and people, accounting for 6.8% of total travel and tourism to continue to be a Tourism Council, the total contribution employment in 2011 and is forecast to major source of income in the future as of travel and tourism is expected to rise rise by 2.8% a year to 88,000 jobs (7.8% of foreign visitor revenues (‘exports’) soar from Lek 344.2bn (US$3.55bn) or 26.3% the total) by 2021. The total contribution, from the current Lek 238.0bn (51.7% of to GDP in 2011 to Lek 582.7bn (29.0% including jobs indirectly supported by total exports) to Lek 387.5bn (47.3% of of GDP) by 2021 with annual growth the industry, is put at 233,000 jobs and total exports). forecast at 5.4%. The direct contribution expected to rise to 304,000 by 2021. is expected to be Lek 99.8bn (7.6% of Investment in the travel and tourism sector According to the Albanian Institute of GDP) in 2011, rising by 5.5% a year to is estimated at Lek 22.8 bn (US$S235mn) Statistics, 2.4mn foreigners visited Albania
24 INVESTING IN albania | 2 011 tourism in 2010, up 30% on 2009, which was also 31% up on 2008. Leisure travel spending, both domestic and foreign, is expected to make up 71.5% of direct travel and tourism GDP and foreign visitor spending or international tourism receipts were expected to be 87.7% of the figure in 2011. Holidaymakers from countries such as Kosovo, Macedonia, Montenegro, etc have been flocking to Albania’s beach resorts in their hundreds of thousands. Encouragingly, these trends have been maintained despite the economic downturn. In addition to its growing regional popularity, the sector is benefiting from major boosts to Albania’s international profile in recent years, such as the first visit from an incumbent US president and the country’s membership to the North Atlantic Treaty Organization (NATO).
Since opening its doors to the world after the fall of communism, Albania has made rapid progress towards becoming one of the most popular tourist destinations in South East Europe. The country shares its borders with Montenegro and Kosovo to the north, Macedonia to the northeast Albania has made rapid progress towards and Greece to the south. With over 270 km of coast on the Adriatic Sea and over becoming one of the most popular tourist 150 km of southern coast on the Ionian destinations in South East Europe. Sea, Albania boasts sandy as well as rocky beaches, mountains, forests, and many beautiful lakes. reached from its neighbouring countries ease access to some of its internationally by bus, car or ferry. acclaimed world heritage sites. “There aren’t many undiscovered countries left in Europe, but Albania is certainly one Travel and The government is well aware of the of them – tourism is still in its absolute Tourism Economy challenges that need to be met in order infancy,” says Derek Moore, chairman to realise the huge potential in the tourism of the Association of Independent Tour As tourist numbers continue to climb, sector, many of them stemming from Operators. “It has a stunning coastline with Albania has an urgent need to increase essential infrastructure development miles of empty beaches, and many cultural its capacity in terms of hotel rooms. and reform such as land-title problems. sites to discover”. According to the Albanian Tourism Agency, The government has an agenda for in November 2009 there were 630 rapid development of the country’s Albania has a favourable geographic hotels with capacity of 25,000 beds, rising infrastructure. This has been aided by position in close proximity to Western to 35,000 including family establishments. investment and support from international Europe and a warm climate, with an There is much opportunity for expanding organisations such as the European Bank average of 120 days per annum with its offering to the would-be travel for Reconstruction and Development temperatures over 20˚C. Albania is readily operator and hoteliers. More capacity is (EBRD), the United Nations Development accessible by air from a number of major required if Albania is going to meet with Programme (UNDP) and the World airports and its modern, international foreign demands and international hotel Bank, as well as loans from countries such airport is situated just 15 minutes from chains are now beginning to establish a as Austria and Japan. Improvements in Tirana. Albania is not yet accessible by presence in Tirana and coastal resorts the Mother Theresa Airport, new roads train internationally, but once in the such as Saranda. There is much scope including a tunnel to Kosovo and better country it is possible to travel from region for growth but the country still has a electricity supply are all expected to help to region by rail. Albania can be easily number of infrastructural challenges to the tourism sector grow.
2011 | INVESTING IN albania 25 tourism
Projects currently underway include the UNDP-Albania Eco-Tourism Programme, Japanese-backed upgrades to the port of Durres, and the World Bank-sponsored Integrated Coastal Zone Management and Clean-Up Project (ICZMP) with its targets including access roads to beaches and historic sites and sewage improvements.
Private investments
The government offers private investors 35-year concessions, with renewal rights. The former Director of Albanian Tourism Agency Mrs. Kallciu in a recent speech mentioned a study by the World Bank with the Albanian Government and interest groups, for “Creating an Integrated Plan for the Development of the Albanian Southern Coast”, also called “The Albanian Riviera”. She also referred to a project to by Omnix Albania SHPK, subsidiary of Dubai’s Omnix Group, to develop a large real estate project including residential, hotel and recreational facilities in the coastal area of Lalësi Bay area, near Durrës. She said it will cover 14.5 ha and will cost nearly EUR2.3bn, creating more than 20,000 and multi-purpose rooms. The marina skiing and other winter sports. The best new jobs. has created permanent jobs and training locations are Voskopoja in the district of and was designed in an environmentally Korça, Dardha, Drenova and Boboshtica. During 2010 a group of investors held sensitive manner to maintain the beauty meetings with Prime Minister Sali Berisha of the coastline. Development of winter sports over a EUR1.2bn Gose Island tourism requires investments not only in skiing project. This is to be constructed in the In October 2010 the Albanian-American infrastructure but also in the construction Gose Commune, Kavaja district, and will Enterprise Fund (AAEF) announced that of accommodation. include sport complexes, accommodation it had raised US$140mn to fund projects for 30,000 holidaymakers, including in tourism and education and will use this Spas day visitors. The site offers golf courses, for non-profit ventures, including eco- real estate and an adventure park. tourism. The fund was started in 1995 Curative tourism has a longstanding International property developers are with a US$30mn US Government grant tradition in Albania. Albania has an marketing apartments and villas which and has successfully backed private sector abundance of thermal water fountains are being constructed in places such as projects and provided management which are perfect for spa retreats. Durres and near Saranda. In coming years support and training, its track record Albania will have several four- and five- includes completing 62 investment Cultural Tourism star resorts on its coastline, although large transactions and creating over 3,500 jobs areas of beaches and coastline are still by January 2011. Albania has a rich cultural and historic untouched by development. heritage with Illyrian prehistory, medieval Skiing and byzantine relics, castles, churches, In its first project in Albania, in 2000 monasteries and museums as well the Multilateral Investment Guarantee The Alps of Albania have pyramid-shaped as cultural and folk activities. Albania Agency (MIGA) issued a guarantee for peaks (Jezerca 2,694 m) and deep valleys, is attracting the well-educated, well- USD1.6mn to an Italian company Ge.Por. numerous rivers and glacial lakes which travelled tourist who is drawn to the Tur. s.a.s. for its equity investment in Giorgi impart a magnificent beauty to the region. country’s historical sites (three of which, Alfo. Marina di Orikum started operating The abundant snow falls during winter Butrint, Berat and Gjirokastra, are listed as in July 2004 and has 350 berths for boats provide good natural terrain for the UNESCO World Heritage Sites) and its up to 30m, as well as accommodation development of “white tourism”, which is scenic beauty.
26 INVESTING IN albania | 2 011 political history Albania – A Political History, the last one hundred years
s Europe entered the twentieth century, the Albanian people were A approaching the conclusion of their centuries-old struggle for sovereignty from the ruling Ottoman Empire to begin their path to independence and to today’s multi-party democracy.
Independence
The rise of nationalism in the preceding century had led to the formation of the Albanian League of Prizen in 1878 whose twofold aim was to reawaken Albanians to their cultural heritage and create a self- governing Albanian nation. This ambition was realised in November 1912 following the collapse of Ottoman rule in the Balkans. The Vlore Proclamation officially declared the country’s independence. It came at a price, however, with Europe’s ‘Great Powers’ (Britain, Germany, Russia, Austro-Hungary, France and Italy) ceding by six occupying armies and, were it staged a military coup a year later. Zogu – the ethnically Albanian territory of Kosovo not for the intervention of the then first as President and then as King – went to Serbia and Albania’s southern most American President Woodrow Wilson on to rule Albania until Mussolini’s Italy lands to Greece. In effect, the new nation at the Treaty of Versailles following the invaded in 1939. of Albania was born having lost half of her German surrender, it would have lost its people and half of her historical territories. nationhood altogether, with Britain and During his reign, despite his ties to France planning to partition it amongst its tribalism and the days of the Ottoman Still, in 1912, a newly nationalised Albanian Balkan neighbours. Empire, Zogu began to take some steps had reason to anticipate the new century towards modernisation – particularly with pride and expectation, little knowing In 1920, at Britain’s behest, Albania was with his reforms in education. However how the ravages of two world wars, admitted into the League of Nations, his reliance on Italy for financial relief and the forces of fascism, and then acquiring international recognition of left Albania vulnerable to the effects communism, would radically shape the its sovereignty for the first time and of the Great Depression of the 1930s country’s future. invigorated by a new sense of hope and which led to famine amongst the already purpose in peacetime Europe. However, impoverished rural classes. This hardship The First World War broke out in 1914, the 1920s saw the country’s politics led thousands to join the widespread plunging Albania into chaos. Prior to polarised by two dominant figures – the Albanian Diaspora and fostered a climate the outbreak of hostilities, the young modernising liberal, Fan S Noli and the of revolt in which the country’s first nation had suffered from a lack of conservative feudalist, Ahmed Bey Zogu communist groups were formed. governance and direction, underpinned (King Zog), whose respective followers by the fact that the Great Powers saw vied with one and other for political Communism and its independence as nothing more than supremacy. Noli established a left-of- Isolation a token offering aimed at appeasing the centre government in 1924 but, with no nationalistic fervour that had sprung up funds in the treasury to carry out vital Albania was primarily used as an amongst the Albanian people. During the reforms, and with no foreign support, the occupation zone during World War II four years of war Albania was invaded country struggled to move forward. Zogu (1939-45), first by Italy and then by Nazi
2011 | INVESTING IN albania 27 political history
Germany. Despite this occupation a spirit with the Soviet Union lasted until the the West, spurred on – and financially of revolt persisted in the beleaguered early sixties when Hoxha aborted the assisted – by the G7, the International country during the war years. In fact, friendship, believing Stalin’s successor, Monetary Fund and the World Bank. Albania was the only country occupied Khrushchev to have abandoned the The transition from years of communist by the Nazis to come out of World principles of Marxism-Leninism for an rule to a western style market economy War II with a larger Jewish population increasingly pro-western stance. He would not be an easy process. than before the war. It provided refuge moved his allegiance to the world’s other not only for its own Jews – by refusing communist giant, China. However, after Significantly, Albanians – now free to travel to comply with Nazi witch-hunts and Mao’s death in 1976 and the end of the – were moving abroad in search of better providing fake identities and hiding places Cultural Revolution., the alliance came opportunities at the staggering rate of one – but also for those fleeing from other to an end, with Hoxha once again citing in six. Gradually, though, over the course occupied countries. ideological differences for the split. of the decade, the liberalisation of prices, exchange rates, workers’ salaries and the In 1944, when the depleted German Hoxha’s devotion to Stalinism proved imposition of import duties helped the army was withdrawing its forces from the very damaging for the Albanian economy economy to grow. At the same time, the region, Albania fell under the dictatorship which had, over the years, come to rely Albanian Diaspora – whose number had of the Albanian Communist Party whose heavily on the backing of the communist grown dramatically through the mass Secretary-General, Enver Hoxha, became behemoths, and it was this fanaticism emigration of the early nineties – were the country’s leader. that created the isolationism (even from remitting increasingly large volumes of the communist world) for which Albania money back from countries with far The communists had seized control of became notorious in the latter half of the stronger currencies. This crucial inflow a country riddled with poverty, illiteracy, twentieth century. of money into the Albanian economy tribal feuding and disease. In the tradition helped to underpin the measures that of Stalin’s extreme reforms in the Hoxha’s handpicked replacement, Ramiz were already in progress. Soviet Union in the 1930s, and those Alia, who assumed power in 1985, was, that Chairman Mao would employ in in communist terms – a man of his time. In January 1997, the country’s optimism China, the new government embarked His attempts to revive an ailing economy ground to a shuddering halt with the on a programme industrialisation. In while preserving the constitution led collapse of the government-backed 1946 Albania’s new leadership officially to the legalisation of some foreign pyramid financial scheme. Millions of established a communist constitution, investment and the tentative building savings and investments were lost. As a renaming the country The People’s of diplomatic bridges with the west. result the government lost control of much Republic of Albania. In December 1990, with communism of the country amidst demonstrations collapsing throughout Eastern Europe, and rioting. After two years, by the end Like most of Eastern and South-Eastern and under intense pressure from the of the twentieth century, Albania was Europe, Albania retained this constitution long-repressed Albanian people – with receiving praise from the international until after the collapse of the Berlin Wall students and intellectuals in the forefront community as she opened her borders in 1989. Hoxha ruled the country with an – Alia ended forty years of post-war to half a million refugees from the 1999 iron grip until his death in 1985. dictatorship by endorsing the creation of Kosovo crisis. independent political parties. Hoxha’s totalitarian regime has been The new century has seen Albania much criticised by history. He left behind Democracy flourish. It has become a stable European a country that had become arguably the Republic, re-electing Prime Minister Sali poorest and most isolated in Europe, a In March 1992, Albania held its first Berisha’s Democratic Party by a narrow country where foreign travel was banned democratic elections since the 1920s, majority in 2009, the same year in which to all but those on diplomatic business, with the Democratic Party sweeping to accession to NATO was achieved. Poverty where religion had effectively been power and Prof. Dr. Sali Berisha as the reduction levels are impressive, with shut down and where periodic purges new President. the ‘absolute poverty’ rate decreasing (which could result in incarceration or from nearly 30% to less than 18% over even execution) of any perceived or After decades of isolationism, fiercely the last decade. An annual GDP growth ‘manufactured’ dissent amongst the long- centralised government and heavily rate of around 5-6% (between 2005- suffering population had created a climate nationalised industry, the new, democratic 2009) makes it the best performing of fear and suspicion. Albania was faced with the enormous economy in the region and, in June 2006, challenge of creating a future for itself Albania signed the EU Stabilisation and Albania’s first post-war alliance was with in post-communist Europe, a continent Association Agreement, bringing her neighbouring Yugoslavia but when Tito fell where the countries of the old Eastern ever nearer to EU membership and full foul of Moscow in 1948, Hoxha turned to Bloc were now, one by one, embracing European integration, a goal that should his hero, Stalin, for support. The alliance the capitalist economic philosophies of be achieved next few years.
28 INVESTING IN albania | 2 011 The conference is supported by
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