Since the outbreak of the global financial crisis, FDI has been constantly growing from Euro 665 million in 2008 to Euro 923 million 2013.
TIRANA, April 1 – Double digit growth rates in foreign direct investment and exports were Albania’s key drivers of growth in 2013 when the economy registered its poorest growth rate in more than a decade.
Boosted by investments in hydropower plants and privatization revenue, foreign direct investment registered a record high for the past decade in 2013. Central bank data show FDI in Albania rose to a historic high of 923 million euros in 2013, up from 666 million euros in 2012 and a previous record of 793 million euros in 2010.
Since the outbreak of the global financial crisis, FDI has been constantly growing from Euro 665 million in 2008 to Euro 923 million 2013.
The growth rate in times of crisis is related to several privatizations and concessions especially in the energy sector. The application of a 10 percent flat tax regime in force from 2008 to 2013 has also helped attract foreign direct investment.
Experts and representatives of business associations have warned Albania’s shift to progressive taxation and a 15 percent corporate income tax since January 2014 will have negative impacts on the attraction of FDI and the country’s competitiveness considering that regional countries apply flat tax regimes of 10 percent. However, government is confident the reduction of bureaucracy and corruption will help increase the confidence of foreign investors.
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.
Revised data published by the Bank of Albania show total FDI stock rose to 3.5 billion euros at the end of 2012, up from 3.4 billion euros in 2011 and 2.4 billion euros in 2010.
Since 2007, the FDI stock in Albania has almost doubled, climbing from 1.8 billion euros to 3.5 billion euros.
Central bank data show Canada remains the top foreign investor in Albania with the FDI stock having climbed to 706 million euros in 2012, up from 529 million euros 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. While Canadian companies such as Bankers Petroleum, Petromanas and Stream Oil invest heavily in oil and gas development in Albania, Tirex Resources and Empire are involved in mining.
Switzerland has surprisingly climbed to the second top foreign investor in the new review with FDI stock of Euro 507 million at the end of 2012, down from 544 million euros in 2011 and only 68 million euros in 2010. The situation is a result of new investments in energy, tourism and trade sectors.
Third comes Austria with an FDI stock of 498 million euros in 2012, up from 444 million euros in 2011, with top investments in the banking, insurance and hydropower plants,
Top trade partners Italy and Greece rank only the fourth and fifth largest investors.
Greece, which has been the traditional top foreign investor in Albania, and is expected to escape its six-year recession only this year, has seen its FDI continuously drop since 2008. The FDI stock from Greek investors dropped to 451 million euros in 2012, down from 521 million euros in 2007.
Italy which is the top trade partner with more than one third of total trade exchanges saw its FDI stock climb to 434 million euros in 2012 up from 427 million euros in 2011 and 348 million euros in 2009.
The Czech Republic has a deficit of 200 million euros because of the withdrawal of CEZ Group from Albania in early 2013 after having its Albania licence revoked. CEZ Group invested around 102 million euros for the purchase of the 76 percent in Albania’s distribution sector in 2009 and claims it invested around 100 million euros in the distribution grid.
The manufacturing sector has attracted the largest share of FDI stock with an estimated 892 million euros at the end of 2012, down from 952 million euros at the end of 2011.
Data shows the extractive industry has climbed to the second biggest holder of FDI with an estimated accumulated FDI of 810 million euros at the end of 2012 thanks to investments in oil exploration and mining.
Third ranks monetary and financial intermediation with euro 749 million, followed by transport, storage and communication with 402 million euros.
FDI in the long ailing construction sector rose to 80 million euros in 2012, up from 11 million euros in 2011 and 196 million euros just before the outbreak of the global financial crisis.
The agriculture sector which accounts for 20 percent of the GDP and employs almost half of the country’s population is one of the least attractive sectors for foreign investments with total FDI stock of Euro 2 million at the end of 2012, down from 19 million euros in 2008.
Transfer of profits
Since the onset of the global financial crisis, foreign companies operating in Albania have considerably increased the transfer of profits to their parent companies.
Foreign companies in Albania continued transferring considerable amounts even in 2013, even though at a lower level compared to the past six crisis years.
Bank of Albania data show the transfer of profits dropped to 202 million euros in 2013, down from 260 million euros, compared to 241 million euros in 2011, 376 million euros in 2010 and a record 407 million euros in 2009.
“Under these conditions the increase in transfer of profits implies that foreign companies are reinvesting their profits in Albania less and sending back more in cash profits to their parent companies affected by the debt crisis,” experts say.
The transfer of profits from 2004 to 2009 ranged from Euro 23 million to euro 64 million annually, according to the Bank of Albania.
