Albania is the least attractive country in central and eastern Europe for German investors, as negative perceptions and deteriorating economy hurt the country’s investment potential.
TIRANA, April 10 – If Albania’s EU progress were measured solely on how businesses from Europe’s largest economy see the country in terms of investment attractiveness, Albania would be even further behind in its EU integration path than it already is.
Albania is the least attractive country in central and eastern Europe for German investors, according to a report released last week by the German Association for Industry and Commence. The small Adriatic republic falls behind Bosnia and Kosovo, regionally, and even further behind than former Soviet republics like Ukraine, according to data released last week by the German business association and the country’s embassy in Tirana.
The only positive news for Albania in the report is that 87 percent of the German companies that have invested in Albania would invest again in the country.
Albania received the lowest ranking among 20 countries regarding the attractiveness as business location, from a survey of a total of 1,600 companies in central and eastern Europe. In Albania, 50 percent of the German chamber members – 33 companies – participated.
The study sees the root of the results in the perceptions German companies have about Albania and the deterioration of the economic climate. German business representatives also explain that Albania falls behind because it has weaker economic ties to Germany than some of its neighbors and lacks the sort of infrastructure and manufacturing capabilities the typical German investor is looking for.
Beyond that, there are problems have to do with how Albanian authorities operate which make potential investors think twice. Albania is struggling to project an attractive image for foreign investors, particularly when it comes to law implementation and the arbitrary way authorities deal with foreign investors, according to Andrea Gebbeken, the president of the German Association for Industry and Commerce in Albania.
“There is arbitrariness. Not enterprises are equal before the law,” she said at a press conference. “The point is that businesses expect to find in Albania the same type of professionalism they have in the their home countries, and the survey shows that is often is not the case.”
German businesses are not alone in that sentiment. Businesses with ties to the world’s largest economy, the United States, and their chamber of commerce in Albania, AmCham, have long expressed similar concerns over improper law implementation and arbitrariness on the side of tax authorities.
Germans ‘unfamiliar’ with Albania
Both Gebbeken and German Ambassador Carola Muller explain that the survey’s results also show that German businesses still are not very familiar with the Albanian market at that the country’s general image problem in Germany has translated into perceptions that might not entirely reflect reality. (Ms. Gebbeken said many Germans still make a connection between Albania and the Stalinist regime of Enver Hoxha, for example.)
“Many German journalists will be in Albania for the elections,” Ambassador Muller said at the press conference. “It’s up to you to provide as positive of an image as possible.”
She pointed out that the chamber of commerce and the embassy were releasing the results of the survey in April, instead of June, when they would normally be released, to remove a connection with the elections.
However, politics were part of the discussion as the German business representatives said the fiscal burden has increased, and that despite the fact that they like Albania’s low flat tax rate, it was not the only factor in decisions relating to investment – and that law implementation and how authorities treat businesses were also important.
Economic climate getting worse
Results of the survey on the business climate in Albania 2013 show a deterioration of the economic situation in the country. Last year 64 percent of respondents assessed the economic situation as satisfactory, this year 64 percent think that the current economic situation is negative and 52 percent think that the situation will worsen.
In evaluating the condition of the country as investment destination, surveyed companies continue to see the need for improvements, and Albania gets the worst score in “corruption and criminality.” Fifty five percent of respondents said they were very dissatisfied with the “fight against corruption and organized crime,” and 52 percent of companies surveyed said they are dissatisfied with the public administration, seeking more transparency. Another telling factor is that 48 percent are dissatisfied with predictability of economic policies.
German businesses see as key factors in improving the situation: better law enforcement, infrastructure development, better power supply, improved water supply as well as investments in professional education.
“The improvement in the vocational education sector provides jobs for people who have low qualifications, which are urgently needed for the manufacturing industry,” said Ms. Gebbeken.
Room for improvement
Despite the government’s focus on successes in attracting foreign investors, data shows Albania is losing some of the edge it had several years ago and there is still a lot of room for improvement.
Foreign investors to Albania through their association, FIAA, have expressed many of the concerns detailed by the study and made suggestions in improving the business climate.
They recently brought EU Ambassador Ettore Sequi to one of their meetings, where he expressed support for reforms and asked that more be done to fight corruption.
“That would help in attracting foreign investors, which would ultimately lead in increasing employment in Albania,” he said.
For years, Albania was touted as a success story by the government and some international observers in reforms that made it easier to do business in country. However, the country has lost some of its edge, and it lost three places in the 2013 Doing Business Report released by the World Bank and IFC.
The report ranked Albania 85th among 185 economies, three places worse than in 2012, sandwiched between Croatia and Serbia but far worse compared to neighboring Macedonia and Montenegro which rank 23rd and 51st respectively.
