Only half of annual FDI flows remain in Albania, UN report shows

Tirana Times
By Tirana Times June 11, 2018 12:26

Only half of annual FDI flows remain in Albania, UN report shows

Story Highlights

  • Albania has attracted an average of about $1 million of FDI annually since 2010 when it emerged as the second largest FDI recipient among five transition Western Balkan economies, a position it has maintained for eight years in a row, trailing only Serbia, the region’s largest economy

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TIRANA, June 11 – Albania has been the second largest foreign direct investment recipient among regional EU aspirant Western Balkan countries for the past eight years, but the stock of FDI has not followed the same upward trend, hinting of huge and suspicious withdrawal of FDI.

A report by UNCTAD, the United Nations body responsible for international trade, shows that only about half of the annual FDI inflow in Albania stays in the country and is reflected on the country’s final FDI stock.

Albania has attracted an average of about $1 million of FDI annually since 2010 when it emerged as the second largest FDI recipient among five transition Western Balkan economies, a position it has maintained for eight years in a row, trailing only Serbia, the region’s largest economy.

However, only about half of the energy-dominated FDI is estimated to have remained in the country.

Albania’s inward FDI stock, representing the value of investors’ equity and net loans to enterprises resident in the reporting economy, grew to $6.8 billion at the end of 2017, more than double compared to $3.2 billion at the end of 2010 and a mere $247 million in 2000 less than a decade after the collapse of the communist regime and the country’s transition to democracy and a market economy when key enterprises were still under state control.

At $6.8 billion, Albania’s FDI stock has climbed to the Western Balkans third largest after Serbia’s $37.6 billion and Bosnia and Herzegovina’s $8.3 billion in considerable progress compared to the early 2000s when Albania was the region’s least attractive economy to foreign investors.

Meanwhile, Albania’s outward FDI stock, measuring the value of investment by Albanian companies abroad, climbed to $471 million in 2017, up from $154 million in 2010, representing only 7 percent of the total FDI stock. Albanian companies overwhelmingly invest in neighboring Kosovo and Macedonia, where ethnic Albanians dominate or account for more than a quarter of local populations.

The UN 2018 World Investment Report shows FDI flows to Albania increased by only 2 per cent to $1.1 billion in 2017, registering the country’s second highest level ever, with energy and mining attracting the lion’s share.

Bank of Albania data published in Europe’s single currency shows FDI dropped by 3.7 percent in 2017.

“As two major energy projects (the Trans-Atlantic Pipeline and the Devolli hydropower plant) neared completion, established foreign investors began expanding their presence in renewable energy projects (including Austrian Verbund Company’s participation in the Ashta hydropower plant and Turkish Ayen Enerji’s investment in the Pocem hydropower project),” says the UNCTAD report.

The UN agency says Albania could see increased Chinese investment in road infrastructure as part of China’s ambitious ‘Belt and Road’ and ‘16+1’ initiatives.

“Although the bulk of the 2017 inflows came from developed countries in Europe, Chinese firms also began to invest, in banking, aviation and tourism. The amount of Chinese investment may grow further once Pacific Construction of China starts work on the “Blue Corridor” (the Adriatic–Ionian Motorway),” says the report.

Chinese companies have acquired two of Albania’s key assets in the past couple of years and now run the country’s sole international airport and Albania’s largest oil producer, both of which under concession contracts signed with the Albanian government by previous investors.

FDI to the five transition economies of South-East Europe covered in the report recovered by 20 per cent, to $5.5 billion, after a decline in 2016.

All Serbia, Albania, Bosnia and Herzegovina and Montenegro registered FDI growth except for Macedonia where annual FDI contracted by about a quarter following a prolonged political crisis that slowed down its GDP growth to zero last year.

 

FDI challenge

Foreign direct investment slightly fell in 2017 when TAP and the Devoll hydropower project were at their peak level, signaling tough times ahead as the two major energy-related projects that led FDI in the past four years complete their investment stage by the end of this year and no major project in sight replaces them.

Bank of Albania data shows FDI dropped to €908 million in 2017, down from €943 million in 2016 and a historic high of €945 million in 2013, hinting of headwinds ahead at a time when oil and mineral prices slowly recover from the mid-2014 slump in commodity prices and an ambitious but rather controversial €1 billion PPP program and tax incentives for investment in the tourism sector are the only opportunities to fill an annual gap of more than €200 million left by TAP and the Devoll HPP.

FDI involving the construction of two hydropower plants by Norway’s Statkraft, one of which has already been made operational, and the Albanian section of the Trans Adriatic Pipeline bringing Caspian gas to Europe is estimated at a total of 14 percent of the GDP, about €1.5 billion for the 2014-2019 period.

Albania’s oil and mining investment has sharply slowed down since the mid-2014 slump in commodity prices but is gradually recovering as international oil and mineral prices pick up and could enter a key stage if oil giant Shell, currently engaged in exploration operation, decides to engage in production.

Greece, Switzerland, Canada, the Netherlands and Italy were the main sources of FDI in Albania at the end of 2017.

Tirana Times
By Tirana Times June 11, 2018 12:26