TIRANA, April 4 – Affected by a sharp cut in energy-related investment due to a drastic decline in international oil and base metal prices, Albania’s foreign direct investment stagnated in 2015 when it grew by a mere €12 million to €881 million, according to Bank of Albania data.
At €881 mln, the annual FDI flow was up by only 1.4 percent compared to 2014 and down by 6.8 percent compared to the peak level of €945 mln in 2013.
Experts say the situation is a result of both external and internal factors.
The sharp cut in international oil prices since mid-2014 has significantly affected investments in oil exploration and production with some of the key operators announcing deals to sell their Albania operations. The mining and steel industries have also been severely affected by the slump in commodity prices, with the key steelmaker, Turkish-run Kurum, recently initiating bankruptcy proceedings.
Canada-based Bankers Petroleum, the country’s largest oil producers, more than halved its Albania investments to $144 million in 2015 compared to $291 mln in 2014 when oil prices hit a record high before embarking on a downward trend in the year’s second half. The company has recently signed a preliminary deal with China’s Geo-Jade Petroleum Corporation to sell its major Albania assets and a newly acquired minor oil block in Hungary for a reported C$575 million (€392 mln). The surprise announcement comes as the country’s biggest oil producer has recently been facing tough times after more than a decade of operations in Albania due to a sharp cut in international oil prices and tax and environmental disputes with the Albanian government.
Oil prices have currently recovered to $40 a barrel compared to a 12-year low of $27 last January and around $110 a barrel from 2010 until mid-2014 when they embarked on a downward trend.
Meanwhile, the increase of the corporate income tax by 5 percent to 15 percent in 2014 and the review of electricity prices for private and concession hydro-power plants are also believed to have affected investments, by increasing the tax burden and making Albania less attractive among regional competitors. The Albanian government has revised down electricity prices set for private and concession hydropower plants for the third year in a row in a situation which the HPP owners says risks taking them to bankruptcy and has curbed new investments in small and medium-sized HPPs.
Since 2014, the corporate income tax and the withholding tax on dividends, rents and capital gains have increased by 5 percent to 15 percent, making the tax burden in Albania one of the region’s highest. Albania’s total tax rate as a percentage of commercial profit of rose to 36.5 percent in 2015, up from 30.7 percent in 2014, lower only compared to Serbia among regional competitors.
FDI prospects for 2016 seem more optimistic as the major Trans Adriatic Pipeline bringing Caspian gas to Europe has already launched its construction works in its Albania section and Norway’s Statkraft continues the construction of Devoll hydropower plant, the biggest investment in renewable energy in the past three decades in Albania.
TAP, which is expected to bring gas to Europe through Greece, Albania and Italy will generate one of that Albania’s largest FDI projects, with important benefits for a number of industries, including manufacturing, utilities and transport, experts say.
Albania was the second largest recipient of foreign direct investment among EU aspirant regional countries for the fifth year in a row in 2014, but the FDI stock remains the lowest compared to four other regional competitors, according to a report by UNCTAD, the United Nations body responsible for international trade.
The telecommunication, manufacturing and extractive industries have attracted around half of the FDI stock in Albania during the country’s past two decades of transition into a market economy after the collapse of communist regime and its planned economy.
Greece, Canada, Switzerland, Austria, and Italy are the biggest foreign investors in Albania.
