By Alba ȥla
1st part
The Albanian government priority has been declared loud and clear: increasing foreign investment in the country, bringing in the foreign capital in order not only to realize major public projects especially in infrastructure but also to increase employment and make economic growth sustainable in the long term. This has been accompanied by several legal and implementation initiatives in order to reduce bureaucracy, time and cost required for setting up business and other promontory moves such as “Albania 1 euro” initiative which provides setting up conditions at the cost of 1 euro to businesses that decide to invest in the country. Tirana Times takes a closer look at the recent investment dynamics, summarizes the basic legal conditions as well as initiatives to facilitate investments and brings the perspective of foreign investors that have to deal with this issue as part of their daily routine.
Taking the first step: information on Albania
Reza Imani, is a British developer that is currently having thoughts about Albanian real estate market. His line of work is property development and investment and he focuses his work mostly in London. “The market is turning slightly here so I have been looking at some opportunities abroad, in places like Poland, Cypress, Turkey, Spain and Italy. And now Albania. So I have to make a decision about which one to pick, or maybe even stay put in London,” he says. In order to make the decision at this stage the sort of things he would want to know would be general points such as the political stability of the country, the security of title deeds in Albania, any incentives the government might provide for foreign investors with regards to non residential developments, and last but certainly not least, any research and data as well as predictions on where the property market is heading in Albania. The first point of information which can provide accurate and comprehensive information on these diverse questions is AlbInvest, the national investment agency launched in order to serve as a portal of information and suggestions for all those who would consider investing in Albania, for the promotion of the small and medium business activities and for curing image issues abroad.
For some major companies the choice of Albania is between many other countries in the region. For example, when the managers of Altinbas holdings asked Ibrahim Aktoz whether they should invest in Albania he answered “Yes, because we would be working not in a foreign country but in a friendly and brotherly place where people respect us.” Hence the firm let go of other alternatives like Croatia or Romania and took the decision to open in Albania the now easily recognizable brand of gas stations Alpet. This illustrates that there are many factors to be taken into consideration and Albania offers more than just a suitable economic environment, more than anything it offers its human assets at a generous price.
Property Market
becoming attractive
The interest expressed in property markets has been overshadowing other successful sectors. “With a low cost of living, no capital gains, no VAT, no transfer tax, and the cheapest prices in Europe, Albania is the new place for property investors,” says Home property, a prestigious British magazine. The advantage of Albanian developments in making entry-level property investment in the country easy, affordable and attractive has multiple dimensions. The magazine enumerates the laissez faire legislation on investment returns, the tourism potential and political stability.
The country presents tremendous scope for development of the tourism industry as tourism growth is estimated at 5.6% per year. Rental yields of at least 6% should be realized, and once Albania’s bid to join NATO the European Union has been accepted, the potential for rental yields to increase is high. The financial benefits of property investment in Albania is a large plus point for the country’s growth; there are currently no restrictions on foreigners to purchase residential property, no capital gains tax, as well as low buying, running and selling costs. The currency is stable and strong, and the country has an annual wage growth of around 10% per annum. Albania already has mortgage facilities in place for foreign property investors, which is unlike many other Eastern European countries who took some time in building a foreign investor product base. Local agents are currently reporting prices of between 550 euro and 800 euro per square meter. The Financial Times also reports that property markets in Albania have become very enticing to foreigners especially in the areas on the coast and in the metropolitan capital of Tirana. The newspaper writes that “Albanian property markets have a huge potential for profit margin earnings [and good prospects] for returns.” The times praises the development of the foreign investment from companies such as Hewlett- Packard, Citroen and Peugeot, which have opened distributing branches in the country. According to expert David Hentsell, the property values in Albania can go up as much as 25 percent. Other advantages of investing now in Albanian property markets are the notary fees which do not surpass 1 percent of the property price and the lack of stamp duty.
Legal Environment
for Foreign Investment in Albania
In 1993, the Albanian Parliament enacted a foreign investment law that greatly liberalized foreign investment and provided a number of basic guarantees and protections for foreign investors. Law 7764 on “Foreign Investment” parallels World Bank guidelines and addresses the admission, treatment, expropriation and settlement of disputes concerning foreign direct investment in Albania. Those guarantees have been reaffirmed by the new Constitution of 1998. Gian Piero Cigna of the law firm Tonucci in Tirana argues that is “a clear signal of the political willingness to proceed towards the European Integration.” In compliance with those constitutional provisions, Art. 2 of Law 7764 states that foreign investments in the Republic of Albania have not to be subject to prior authorizations and are permitted and treated on conditions no less favorable than those that apply to domestic investments in similar circumstances. The right of private property is guaranteed: expropriation may be decided only for public interests, by law and upon fair compensation. Compensation has to be paid without delay and will include interest at the commercial market rate from the date of expropriation.
Law 7764 further permits foreign investors to freely transfer abroad all assets and revenues related to the investment in Albania, subject to nondiscriminatory laws of general application, including laws on taxation, foreign exchange and the satisfaction of claims and court decisions. Any disagreement pertaining to a foreign investment in Albania may be submitted to a dispute resolution procedure of choice. In the event of a dispute arising between the foreign investor and either a private Albanian party or any body of the Albanian government, the dispute may be submitted to arbitration. Albanian Constitution recognizes the validity of international agreement and laws. In this respect, under the foreign investment law, Albania agrees to recognize and enforce any international arbitration award based on a foreign investment dispute. It is therefore recommended that in planning an investment in Albania, investors determine beforehand the preferred dispute resolution procedure to ensure that any contract entered into with either a private Albanian party or body of the state government clearly sets forth the chosen procedure.
(continues next issue)
