The government’s pro-business climate reforms and its position as an important gateway for south-eastern European and Balkan countries have helped Albania to attract around 13 percent of the foreign investments volume in the region.
Foreign direct investments (FDI) to surpassed one billion dollars in 2017, while the FDI inflow is expected to be higher in 2018.
To the country’s Prime Minister Edi Rama, foreign investments are vital drivers of economic growth and top priority for his government.
Albania has already adopted a completely new regulatory framework specially designed to attract foreign investments or awaken the domestic capital.
The new legislation – which again categorizes strategic investments and further strengthens legal guarantees for the investors – offers two novelties in relation to the strategic investors.
The first focuses on the legal guarantees and the second offers the “fast track” instrument, a fast lane in the public administration to support investors to receive due permits and kick off their investment.
Foreign investments that would have a greater impact on the country’s social-economic development would also further productivity growth in the country.
Sectors offering most promising strategic investment potential
A variety of sectors offer the most promising investment opportunities, including energy, mining and respective subsectors, namely the energy, hydrocarbons or mining; transport sector, infrastructure and electronic communications and urban waste, with subsectors of maritime, air, and rail transport networks, electronic communications, urban waste, as well as water supply and sewage; the tourism sector with its structure of travel and tourism industry; agriculture and fisheries sector, with subsectors of agricultural production, stockbreeding and fishing infrastructure; and the area of technology and economic development, with the sub-sector of industrial and technological parks.
Strategic investment selection criteria
According to new legal definitions, strategic investments are private, public or public-private investments with an impact on the national economy and are carried out by domestic, foreign legal entities or in the form of cooperation between legal, domestic and foreign legal entities.
The criteria for determining the public interest in selecting a strategic investment are: the value of the investment, time to complete the investment; productivity and added value of investment, creation of new jobs, sectorial economic priority, regional economic development, development or improvement of conditions and standards for the production of goods and service provision; use of new technologies to enhance competitiveness and investment effectiveness; increase the overall safety and quality of life of citizens and environment and consumers protection.
Tax incentives for strategic tourism investments
The Albanian government has approved a package of tax incentives on strategic investments mainly on tourism sector which has been one of the country’s fastest growing in the past few years.
Official data show that tourism industry generated about €1.5 billion, about 8.4 percent of the country’s GDP, in 2017 alone, whereas government expects another surge in tourists and the tourism revenue to increase to over € 1.7 billion in 2017.
The package envisages that as of 1 January 2018, the newly built four and five-star hotels will benefit from 10-year tax exemptions and these properties also aren’t required to pay infrastructure taxes. It also envisages reducing VAT on tourism from a current 20 percent to six percent.
But, the tax incentives are not the only offer the government provides for business. A deregulation reform aimed at simplifying procedures and reducing business costs will further encourage investments in the country.
Import and export trade statistics
Albania’s exports were valued at 273 billion lek, registering a growth of 12.1 percent compared to the previous year, whereas imports were valued at 626 billion lek, up by 8.1 percent compared to 2016.
The annual growth in export volumes was mainly driven by constructions materials by 4.9 percent, textile and footwear by 4.4 percent, food, beverages and tobacco groups by 1.9 percent. The annual change in exports was negatively influenced by the minerals, fuel, and electricity energy by -1.4 percent, mainly due to the prolonged drought that hit the country during the second half of the year.
Albania exports to Italy, Kosovo and Spain registered highest growth in 2017 compared with the previous year, increasing respectively for 9.9 percent, 26 percent and 87.5 percent.
Structure of imports
The annual growth in imports was mainly pushed by minerals, fuel and electricity by 2.8 percent, “textiles and footwear by 1.2 percent, chemical and plastic products by 1.2 percent.
Trade exchanges with EU countries accounted for 66.3 percent of all trade volume in 2017, with exports making up for 77.1 percent of the total and imports with EU member states accounting for 61.6 percent of the total volume. Albania’s main trading partners remain Italy, Greece, Germany and China, respectively accounting for 36.2 percent, 6.8 percent and 6.4 percent of the all trade volume.
Standard and Poor’s assesses Albania’s economic outlook positive
The international ratings agency “Standard and Poor’s” positively assessed Albania’s economic outlook in its last week’s report, underlining that a series of major investment projects, including the Trans-Adriatic natural gas pipeline project (TAP) that will transport gas from the Caspian region to Albania and Italy, and the Devoll hydropower plant, are supporting the country’s economic growth.