German companies become more optimistic, but Albania remains least attractive SEE destination

Tirana Times
By Tirana Times May 8, 2018 11:51

German companies become more optimistic, but Albania remains least attractive SEE destination

Story Highlights

  • Poor fight against corruption and crime, lack of transparency in public procurement, lack of legal security and unpredictability of economic policies due to frequently changing tax laws and regulations are the top concerns for German businesses operating in the country, in barriers that remain almost unchanged to the previous years, according to a survey by DIHA, the German Association of Industry and Trade in Albania

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TIRANA, May 8 – German companies operating in Albania perceive the country’s economic situation to have considerably improved in the past few years and are more optimistic about future prospects, but yet about 40 percent of respondents describe the current economic situation as bad and more than half expect it to remain unchanged or worsen.

The results are unveiled in a survey by DIHA, the German Association of Industry and Trade in Albania.

Some 38 companies from Albania, almost half of the DIHA members in the country, were surveyed as part of a larger study with German Chambers of Commerce in 16 Central and South East Europe countries.

Poor fight against corruption and crime, lack of transparency in public procurement, lack of legal security and unpredictability of economic policies due to frequently changing tax laws and regulations are the top concerns for German businesses operating in the country, in barriers that remain almost unchanged to the previous years.

The tax burden, one of the top concerns for some local and foreign investors due to Albania having increased the corporate income tax and the withholding tax on dividends, rents and capital gains by 5 percent to 15 percent since 2014, is not perceived as a major barrier by German companies who have rated corruption and lack of transparency in public procurement as the top two concerns for the past two years.

Cheap labor costs, the productivity and motivation of employees and their qualification are rated the best doing business indicators in Albania in the ninth DIHA annual business survey.

However, only one out of ten companies think the Albanian work force is well-prepared by the national education system for the German company needs and three-quarters of respondents are willing to provide in-house training.

More than three-quarters of German companies in Albania and joint ventures with Albanian partners, some 77 percent, say they are satisfied with their Albania investment and would reinvest if they were given the opportunity once again, ranking Albania in the bottom five among 16 South East Europe destinations, better only compared to Latvia, Croatia, Kosovo and Macedonia.

When it comes to Albania’s attractiveness as an investment destination, Albania ranks the least attractive among 20 destinations, worse even compared to Kosovo and Bosnia and Herzegovina on a list topped by the Czech Republic and Poland.

German companies in Albania are engaged in important sectors such as banking, construction, production, retail sales and logistics.

Germany is one of the top 10 foreign investors in Albania but the stock of foreign direct investment from Europe’s largest economy remains quite modest and has been declining since late 2016 after a German-led consortium managing the country’s sole airport was acquired by a Chinese joint venture.

German FDI stock at the end of 2017 dropped to €116 million, down from a peak level of €144 million in the third quarter of 2016, €112 million in early 2014 and a mere €52 million a decade ago, according to Albania’s central bank.

Europe’s largest economy, Germany has emerged as the second largest trading partner for Albania in the past couple of years with the 2017 trade exchanges accounting for 6.8 percent of the total, the same to neighbouring Greece, the traditional second largest partner of Albania after Italy, according to state-run statistical institute, INSTAT.

Albania’s trade exchanges with Germany, dominated by Albanian imports of machinery, equipment and spare parts slightly dropped to 61.5 billion lek (€480 million) in 2017.

Since the late 1980s just before the collapse of Albania’s communist regime, Germany has invested more than €800 million in development projects in Albania, mainly energy, water supply and sewerage, becoming the country’s main donor.

Tirana Times
By Tirana Times May 8, 2018 11:51