IMF: Albania receives only a tenth of region’s FDI

Tirana Times
By Tirana Times September 20, 2018 18:42

IMF: Albania receives only a tenth of region’s FDI

TIRANA, Sept. 20 – Albania has managed to attract only about a tenth of the inward foreign direct investment stock in the Western Balkans in an FDI race that is led by Serbia, the region’s largest economy.

IMF research shows Albania is the third largest recipient in terms of FDI stock with a 10 percent share among the six Western Balkan economies, lagging behind Bosnia and Herzegovina with a 12 percent share and Serbia with a 55 percent share alone.

FDI stock in the three remaining Western Balkan countries accounts for about a quarter and ranges from 6 percent of the total in Kosovo to 8 percent in Montenegro and 9 percent in Macedonia.

Comparing the six Western Balkan countries which altogether account for 20 million consumers, with eleven new member states that joined the EU in 2004 or after, the IMF says the two regions are quite similar in FDI product composition.

“The two regions are strikingly similar in product composition of FDI with the WB region showing a slightly higher share of manufacturing in total FDI stock and a somewhat higher share of low-tech products (food and beverages) than the new member states. The similarities in product composition in these two regions probably reflect the largely efficiency-seeking nature of investors,” says the IMF working paper.

The IMF attributes the low level of FDI in the region to ethnic tensions and a late start in transition, leading to most FDI inflows to the WB region taking place in the last decade and reflecting significant recent policy efforts geared to court foreign investors.

EU leaders have been backing a regional economic area for Western Balkan countries, a test before their apparent eventual European Union integration, where goods, services, investments and skilled workers can move without obstacles as the EU has hinted regional countries could join by 2025.

If implemented the single Western Balkan market, would make the region much more appealing to foreign investors considering its small size as separate countries of 2 to 7 million each.

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, according to UNCTAD, the United Nations body responsible for international trade.

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

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, says UNCTAD.

FDI concern has recently grown in Albania as TAP and Devoll Hydropower, the two major energy-related projects that led FDI growth in the past four years, are set to complete their investment stage by the end of this year and no major project replaces them.

As in much of the region, corruption is a key concern for potential foreign investors to Albania, where unclear property titles, an inefficient judiciary also remain key concerns.

Tirana Times
By Tirana Times September 20, 2018 18:42