TIRANA, June 3 – With the remittances-fueled construction boom almost over, more and more Albanian enterprises are turning to agriculture as a growth opportunity, engaging mostly in egg, fruit and vegetable production, a considerable part of which are destined for exports, according to offcial data released this week.
The country’s state statistical institute, INSTAT, reports in its 2014 business register shows the number of new businesses engaged in agriculture, forestry and fishing quadrupled in 2014 when it rose to 1,031, up from only 259 in 2013.
A considerably number of the start-ups are subsidiaries of long-ailing construction companies which are turning to agriculture to diversify their investments. Some 244 construction companies closed down in 2014 when the number of active enterprises dropped to 4,575. The long-ailing construction sector, once a key driver of the economy, has seen its GDP share drop from 18 percent in 2008 to 12 percent in 2013. The situation is also a result of a sharp drop in remittances, whose overwhelming majority comes from crisis-hit top trading partners Italy and Greece, the hosts of around 1 million Albanian immigrants.
The total number of businesses engaged in agriculture reached 2,260 at the end of 2014, accounting for only 2 percent of total active enterprises, the overwhelming majority of which are engaged in services and trade.
INSTAT data shows some 54 enterprises engaged in agriculture are joint ventures, of which 18 companies are overwhelmingly foreign-owned.
Albania continues remaining the most agriculture-based economy among the seven enlargement economies, according to a report published by Eurostat, the statistical office of the European Union.
Eurostat data shows Albania’s agriculture, forestry and fishing sector continues remaining one of the key drivers of the Albanian economy accounting for 22.2 percent of the GDP and 44.6 percent of total employment.
Agriculture, a sector which employs around half of the country’s population, is one of the least productive sectors in Albania’s economy. Although it has been the sector with the most stable growth in the past six global crisis years, the Albanian economy continues remaining largely dependent on agriculture imports which are around six times higher compared to exports.
The Albanian government spends only 0.5 percent of the GDP on agriculture while credit to the agricultural sector represents only 1.3 percent of total credit to businesses, according to central bank data.
Around 500,000 people work in agriculture, of whom 55 percent are full time and 45 percent part time. “Labour productivity in agriculture is only 30 percent of labour productivity in the rest of the Albanian economy and 20 percent of the EU labour productivity in agriculture. More than 50 percent of the total population live in the rural areas where agriculture is the main economic activity,” says the European Commission.
Experts say the small size of farms, lack of appropriate management of land and agricultural infrastructure and technology make the Albanian agricultural sector more problematic compared to other countries in the region.
Agricultural cooperatives are now legally recognized as joint enterprises created on a voluntary basis, giving the Albanian farmers more opportunities to maximize their production and benefit more in funding from government and financial institutions but are not popular due to negative connotations to communist farm structures before the early 1990s.
Lack of organization creates a vulnerable position for farmers in Albania in the value chain, making them an unattractive segment for most banks, a study financed by the Dutch embassy in Tirana has found out.
“Although climate and soils are excellent for farming, targeted agri policies, infrastructure in rural areas, a solid regulatory framework and effective monitoring quality and food safety standards by the government, transparent land ownership systems, access to good quality agri inputs and access to markets, enforceable securities for banks are partly absent or poorly developed,” the study found.
As a result, banks typically finance the larger agribusiness enterprises, leaving farmers dependant on credit from informal money-lenders, family and middlemen. “In combination with the fragmentation of farm land into plots of little more than 1 ha (1.2 ha on average split in 4 parcels), it is clear that Albania is not well prepared to compete on international markets,” showed the study.
Albania is exporting particularly vegetables and fruits to some of its neighboring countries and herbs/aromatic plants to the EU and the US mainly due to low labor costs and excellent natural conditions are key drivers behind these exports.
