By Alba ȥla
The 2nd Albania Business and Investment Summit kicked off today at the luxurious ambiances of Hotel Sheraton in Tirana. Serious companies with representatives in smart suits and black suitcases filled air-conditioned halls where video projected presentations gave a picture of the opportunities to invest in the country.
Discussing foreign investment in Albania comes at a good timing, given the priority of this administration to bring economic development. Albania does not lack the assets to lure foreign investors. Unexploited but rich mineral resources can serve to attract industrialists while tourism industry has an even higher margin of success with the wonderful Albanian nature, the rich cultural and historical heritage and the Mediterranean friendly climate and sunny days. On the other hand countries in the region seem to be doing far better in attracting foreign investors with aggressive marketing strategies and offering facilities for setting up new businesses. According to an OECD report the FDI stock in Albania is the lowest in the region.
Such initiatives coupled with good will have not lacked on the Albanian side as well. Lowering the number of days required to set up a new activity with the National business Registration center as most importantly launching the “Albania 1 euro” project, the Albanian administration is trying to be creative. The problems that remain to be identified and solved for foreign investors to seriously consider Albania as a potential site for their money though need a less creative and more efficient approach.
Among the reasons that the OECD report identifies on why foreign investment is still lacking in Albania the most important are: High level of taxes, Lack of sufficient transparency and consistency in tax and custom offices; Corruption in tax and custom offices; Unfair competition from the unofficial economy; Poor road infrastructure; Telecommunication problems; Energy; Policy instability. While taxes have been slashed by the government to a historical low of 10 percent luring even global financial magazines to declare Albania a heaven for tax haters, the other significant issues remain. Energy and road infrastructure seem to be the cancers that have grown deep roots and are paralyzing all chances of Albanian economic development. In an interview with Managing Director of Albanian Airlines, Christian Heinzmann, he confessed that every time he wanted to tell his German business men friends about chances to invest in Albania they brought up the same wall of excuses: bad roads, no electricity! With an ongoing crisis and power shortages as high as 8 hours in urban centers, can anyone blame them?
Policy inconsistency and corruption are also plagues related to bad governance and identified in subsequent reports form international organizations, reports which serve as reliable sources of information to any serious investors interested in Albania. Regarding informality, although the administration has waged a fierce war against it, the results are yet to come.
Two other issues remain to be addressed: problems related to ownership in Albania are still not resolved and give grim expectations to any investor. The usual nightmare scenario of someone investing here is that one day the legal owner of the land will claim it, after the investor who has been deceived that he has done everything regularly will have to close down or pay a significant cost. The ALUZINI national agency has been trusted the responsibility to resolve al property claims and issues but the process is complex and will need serious efforts as well as time to be resolved in the long term. The second issue is labor costs. One of the main attractions that bring foreign investment in Albania is cheap labor. Even those are increasing with the administration forcing a higher minimum wage and stricter regulations of social security contributions. The contradiction here is that while fighting informality through formalizing labor the unintended consequence of driving wages up is the loss of competitive advantage. The situation draws close to a “Damn if you damn if you don’t” paradox.
While Albania still needs international exposure and media coverage, hence Summits like these are welcomed opportunities to present the country’s economic potential, which is not lacking. On the other hand the calculations and expectations of foreign investors are made in much more coo-headed context, considering all the potential risks associated with their projects. Thus while the structural impediments persist one can not avoid considering the enthusiasm of such events with a grain of skepticism.
