Albania Woos Foreign Investment

08/08/2005

Albania has yet to fully realise its potential for foreign investment, analysts say. However, companies increasingly are taking note of the country's favourable geographical location, proximity to Greece and Italy, and labour resources.

By Erlis Selimaj for Southeast European Times in Tirana -- 08/08/05

Herbert Stepic, deputy director of Austria's Raiffeisen Group (left) and outgoing Albanian Prime Minister Fatos Nano unveil the logo of Raiffeisen Bank in Tirana in October 2004. The Group purchased the Bank of Albania. [Gent Shkullaku]

Foreign companies operating in Albania have made about 145m euros of direct investments -- about 48 euros for every Albanian -- in the country during the last year, according to official data. The firms are mostly based in Greece and Italy -- the two countries with which Albania has the highest levels of imports and exports.

Overall foreign investment totalled some 242m euros, the statistics show. That includes the privatisation of the Savings Bank of Albania, which was bought by Austria's Raiffeisen for 97m euros.

For more than seven years, the economy has been on the rise, with an average annual GDP growth of 6 per cent -- a higher rate than anywhere else in the region. Such impressive growth has been largely due to controlling inflation, which has been kept to between 2 per cent and 4 per cent.

At the same time, Albania's geographic position and labour supply are proving attractive to entrepreneurs and investors. Many production companies, for instance, have located their plants in Albania, with materials imported from abroad and the final product then exported to international markets. A number of Italian firms have shown interest in the Albanian mining industry.

At the same time, privatisations continue to be an avenue for investment. In mid-June, the government signed a contract with a Turkish consortium for the sale of 76 per cent of the Albanian state phone company Albtelecom. The 120m-euro deal also includes the license for the country's third mobile phone operator. Before it can be implemented, however, the contract must be endorsed by the new parliament, voted in during the 3 July elections.

Albania has the potential to attract up to 2.6 billion euros in foreign direct investment, according to a recent IMF report. So far, most of this potential has been unrealised, with less than 1 billion euros invested since 1992. As the country continues to take steps towards establishing a business-friendly climate, however, the situation is changing.