A UN report shows Albania attracted USD 957 million in foreign direct investment in 2012, down 7.6 percent compared to 2011, but remained the second largest FDI recipient among six transition economies of the South-East Europe after Croatia
TIRANA, July 2 – Albania remains one of the top FDI recipients in South-East Europe outperforming even more developed regional economies mainly due to its investor-friendly business environment, according to the 2013 World Investment report published by the United Nations Conference on Trade and Development (UNCTAD).
The report shows Albania attracted USD 957 million in foreign direct investment in 2012, down 7.6 percent compared to 2011, but remained the second largest FDI recipient among six transition economies of the South-East Europe after new EU member Croatia.
At USD 957 million, Albania’s FDI inflows are lower compared to the past four years but yet higher compared to other transition SEE countries such as Bosnia and Herzegovina, Serbia, Montenegro and Macedonia. Unlike other regional countries, FDI in Albania during the global crisis years grew from USD 659 in 2008 to the peak level of USD 1.051 billion in 2010 and slightly dropped to USD 957 million in 2012. FDI outflows from 2007 to 2012 stood at an average of 35 million annually, the report shows.
Since 2008, Albania has been applying a 10 percent flat tax on personal income and corporate taxes, one of the lowest in the region.
FDI stock in Albania rose to 4.885 billion dollars in 2012 up from a mere 247 million dollars in 2000, shows the UNCTAD report.
For the first time ever, FDI inflows rose to more than $1 billion in 2010 making Albania the second largest FDI recipient in South-East Europe after Serbia, according to a previous UNCTAD report.
New IMF data from its Coordinated Direct Investment Survey (CDIS) have unveiled that the stock of inward direct investment in Albania in 2012 was at around 4 billion dollars with Canada topping the list with 19 percent of the total, followed by Greece with 17 percent, Austria with 16 percent, Italy with 12 percent and Turkey with 9 percent.
SEE economies
Foreign direct investment (FDI) inflows to transition economies declined by 9 per cent to US$87 billion in 2012. The UNCTAD report says flows to South-East Europe almost halved, while those to Commonwealth of Independent States (CIS) countries remained relatively resilient.
In South-East Europe, a drop in FDI from $7.2 billion to $4.2 billion was due primarily to a decline in investments from neighbouring countries, which are the main investors in this sub-region. In the CIS, FDI flows fell by 7 per cent from $88 billion to $82 billion. This relatively small decline is due to the fact that foreign investors continued to be attracted by the region’s growing consumer markets and vast natural resources.
Before the onset of the financial and economic crisis, South-East European countries made significant progress in attracting FDI. The surge in FDI to the region, especially after 2006, was driven largely by the economic recovery, a better investment climate, and the start of association (and accession) negotiations with the EU in 2005. This positive trend was reversed in 2009. Croatia – the most seriously hit country – saw FDI flows fall from $6 billion in 2008 to $432 million in 2010. During that period, FDI flows also declined significantly to Bosnia and Herzegovina, Montenegro, and the former Yugoslav Republic of Macedonia. By contrast, Albania bucked the trend, mainly because of its investor-friendly business environment and the opportunities opened up by privatization of state-owned enterprises. The fragility of FDI flows to South-East Europe related partly to the large share of inward FDI from the EU, where economic woes have had particularly negative knock-on effects for FDI in the subregion, the report says.
FDI inflows
Foreign direct investment, one of the key sources of Albania’s growth in the past few years, registered Euro 197 million in the first quarter of 2013, up from Euro 184 million in the final quarter of 2012 but down from Euro 206 million in the first quarter of 2012. Year-on-year, FDI declined by 4.4 percent in the first quarter of 2013, according to central bank data.
FDI stagnated in 2012 when it registered Euro 745 million, exactly the same level compared to 2011 but lower compared to the peak inflow of Euro 793 million in 2010, which made Albania one of the largest FDI recipients in South East Europe.
Central bank data total FDI stock almost doubled in the past few years climbing from Euro 1.8 billion in 2007 to Euro 3 billion in 2011.
With only 1 million Euro in 2007, Canada has emerged as the top foreign investor in Albania mainly due to huge investments in the oil extraction and mining by several companies, taking over even traditional partners such as neighbouring Greece and Italy.
Bank of Albania data show Canadian FDI in 2011 climbed to Euro 566 million, up from Euro 294 million in 2010 and Euro 102 million in 2009. Crisis-hit Greece, the second most important trade partner and top foreign investor until 2010, dropped to the second most important FDI partner with Euro 525 million in 2011, down from Euro 620 million in 2010, and Euro 521 million in 2007 just before it plunged into its worst ever recession. Austria ranks the third most important partner for FDI inflows with a total of Euro 472 million in 2011, up from Euro 375 million in 2010 and Euro 147 million in 2007 with top investments in the banking, insurance and hydropower plants.
Fourth comes top trade partner Italy with 372 million euros in 2011, the same as in 2010 but higher compared to 220 million euros in 2007.
Data show that monetary and financial intermediation has attracted the largest FDI inflows with a total stock of 701 mln Euros in 2011, up from 588 million in 2007, accounting for 23 percent of FDI inflows. Second comes the extractive industry with 630 million Euros, almost double compared to 2010 when it stood at only 326 million euros, and a mere Euro 10 million in 2007.
