TIRANA, May 24 – Albania holds an advantage when it comes to its geographical position and access to ports and cheap labour costs but its tax burden is one the region’s highest, being a barrier in the attraction of foreign direct investment, according to a report by the Investment Council, a government advisory body facilitating dialogue with the private sector.
Situated in the Adriatic, Albania’s geographical position is a strategic hub between the East and the West and the Durres Port also serves other regional landlocked countries to handle trade exchanges. The country’s minimum wage at €157 is the lowest among six Western Balkan EU aspirants. However, the country total tax rate at 36.5 percent of the commercial profits is the second highest after Serbia’s 39.7 percent which is a much bigger economy. The total tax rate among other regional competitors ranges from 12.9 percent in Macedonia to 23.3 percent in Bosnia and Herzegovina.
“Albania performs well in the region in relation to FDI value, but the content and number of greenfield projects as well as technology and innovation-oriented products is relatively low and debatable compared to regional countries while the investment climate is conditioned by the reform in the judicial, sustainability of public administration, especially tax administration, and fight against corruption and informality,” says Diana Leka, the head of the Investment Council Secretariat.
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 factors related to the sharp cut in commodity prices and internal factors related to the business climate and tax burden.
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.
