Greece regains top foreign investor position as it gets out of recession

Neighbouring Greece, whose position as Albania’s second top trade partner sharply weakened during the past six years, registered a surprise increase in foreign direct investment in 2013 with its FDI stock exceeding 1 billion euros.
By ERVIN LISAKU
TIRANA, Sept. 30 – After six-years of recession expected to come to an end only in 2014, neighbouring Greece has regained its top foreign investor position in Albania, overtaking Canada which emerged as a top foreign investor in the past couple of years due to huge investments in oil and mining.
Neighbouring Greece, whose position as Albania’s second top trade partner sharply weakened during the past six years, registered a surprise increase in foreign direct investment in 2013 with its FDI stock exceeding 1 billion euros, according to annual Bank of Albania data published for the first time under IMF’s sixth edition of the Balance of Payments and International Investment Position Manual (BPM6) which has updated the fifth edition (BPM5) released in 1993.
Data shows Greece increased its FDI stock to 1.088 billion Euros in 2013, up from 782 million euros in 2012, according to revised BoA data.
Crisis-hit Greece, the second most important trade partner and top foreign investor until 2010, dropped to the second most important FDI partner in 2011 with Euro 507 million, down from Euro 601 million in 2010, and Euro 521 million in 2007 just before it plunged into its worst ever recession, according to Bank of Albania data. Greek businesses are present in almost every sector of the Albanian economy, including strategic ones such as telecommunications, the banking system, energy, industry, construction, trade and tourism, significantly contributing to the country’s economic growth.
Neighbouring Greece which experienced six consecutive years of recession is expected to register positive growth rate of 0.5 percent this year, but experts say the recovery road will be long. Its recession in the past six years has also considerably hit trade exchanges between the two countries.
Greece now ranks the sixth most important destination of Albanian exports after Spain, Kosovo, China and Germany and Turkey with only 3 percent of the total and the second most important destination only for imports with around 10 percent, according to INSTAT data for the first eight months of this year.
The share of Albanian exports to Greece almost halved dropping to 4.4 percent in 2012, down from 8.8 percent in 2008 while the share of imports from neighbouring Greece dropped to 9.5 percent in 2012 down from 14.6 percent in 2012, according to INSTAT data.
The Greek crisis has also considerably affected remittances from around half a million Albanian living and working in the neighbouring country, a considerable number of whom have returned home permanently.
A huge wave of migrants returning home, lower trade exchanges, investments and remittances are some of the most obvious impacts that the economic crisis in neighbouring Greece, the top investor and second most important trade partner, has had in Albania in the past five years, according to a study conducted by the Albanian Centre for Competitiveness and International Trade (ACIT). The study published in late 2012 found that around 180,000 Albanian migrants, or 18 to 22 percent of the total Albanian migrants in Greece, have returned home during the past five years.
Canadian, Italian FDI grows
Canada which has emerged as a top foreign investor only in the past few years thanks to huge investments by its Canada-based Bankers Petroleum, increased its FDI stock to 797 million euros in 2013, up from 705 million euros in 2012 and a mere 8 million euros in 2008.
With only 1 million Euro in 2007, Canada emerged as the top foreign investor in 2011 mainly due to huge investments in the oil extraction and mining, taking over even traditional partners such as neighbouring Greece and Italy.
Bank of Albania data show Canadian FDI in 2011 climbed to Euro 529 million, up from Euro 270 million in 2010 and Euro 102 million in 2009. 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.
Albania’s top trade partner Italy which accounts for around half of Albania’s exports and 30 percent of imports increased its FDI stock to 503 million euros, up from 457 million euros in 2012, ranking the third most important foreign investor. Italian investments in Albania are mainly focused on garment and footwear manufacturing, energy, banking, health.
With huge investments in the banking, energy and insurance sector, Austria increased its FDI stock to 425 million euros in 2013, up from 391 million euros in 2012.
The Netherlands and Turkey rank the fifth and sixth largest investors in Albania with Euro 390 million and 370 million respectively, with key investments in energy and banking and telecommunication.
Czech FDI stock in Albania is estimated at a negative 308 million euros after its CEZ Group had its licence revoked in Albania’s electricity distribution operator in early 2013 and quit its operations in the country.
Albania’s FDI stock climbed by 7.5 percent to around 4.2 billion euros in 2013, according to Bank of Albania data.
“Transport, storage and communication” has attracted the largest share of FDI inflow with a stock of 1.1 billion euros, up from Euro 789 million in 2012, mainly due to investment in the post and communication sector.
Monetary and financial intermediation ranks second with a FDI stock of 816 million euros, followed by the extractive industries with 742 million euros and the processing industry with 329 million euros.
The agriculture sector, which employs around half of the population and accounts for 20 percent of the GDP, is one of the least attractive sectors with FDI stock of only 1 million euros.
TAP Pipeline
A United Nations report says that in Albania, the Trans-Adriatic pipeline bringing Caspian gas to Europe will generate one of that country’s largest FDI projects, with important benefits for a number of industries, including manufacturing, utilities and transport. “The pipeline will enhance Europe’s energy security and diversity by providing a new source of gas,” says a UNCTAD report.
Findings by Oxford Economics study show that during its four years of construction (2015-18), inclusive of direct, indirect and induced effects, TAP will contribute a total of Euro 370 million to Albanian GDP, create an average of 9,900 jobs per year and generate Euro 90 million for the Albanian treasury.
Albanian experts have described TAP as an opportunity that would benefit Albania both economically and politically, making the country an important hub of the international gas pipeline for the Western Balkans.
TAP is scheduled to start construction in 2015 and carry the first gas by 2019. The pipeline will transport natural gas from the giant Shah Deniz II development in Azerbaijan through Greece and Albania to Italy, from which it can be transported farther into Western and Central Europe.