TIRANA, Jan. 28 – After a slowdown due to the increase of the corporate income tax, the Albanian government targets giving a new boost to foreign direct investment through several legal changes targeted to make Albania a top destination in the region.
Speaking at a meeting with the Foreign Investors Association this week, Prime Minister Edi Rama announced government had prepared three draft laws on investments, tourism and public-private partnership which target improving the business climate and attracting more foreign investments.
“The law on strategic investments will allow foreign investments in the most important sectors to move quickly and avoid the many non-productive obstacles that come across. Meanwhile, the law on tourism will be followed by a support package to the tourism sector in a bid to give a new impetus to the development of this sector,” said Rama.
The Albanian government is planning to award dozens of concessions for public services in a bid to improve the quality and efficiency of current services and reduce costs to the state budget.
Economy Minister Arben Ahmetaj says state institutions have already identified some 65 public-private partnership projects under which the state budget would benefit by 375 billion lek (2.6 billion Euros).
The public-private partnerships include services in the agriculture, health, real estate registration, food safety, road maintenance and operation, tourism and e-taxation.
The key concessions in the transport sector include the Durres-Kukes highway linking Albania to Kosovo which is set to become the country’s first toll road, and the concession of the Arbri road after Chinese interest to complete its construction.
Government also plans concessions for the food safety and the veterinary service in the agriculture sector and basic cheek-ups and administration of hospital waste in the health service.
The shift to progressive taxation, government’s freeze of its stimulating policy on investments in hydropower plants and lack of privatization revenue has moderately affected foreign direct investment during the first three quarters of this year.
A 17 percent decline in FDI for the first three quarters of this year equal to around 120 million euros reflects the business concerns over the corporate income tax which in January 2014 was raised by 5 percent to 15 percent, making Albania less competitive compared to other regional countries which apply flat tax regimes of around 10 percent. Lack of privatizations has also had an impact.
Bank of Albania data shows FDI suffered another blow in the third quarter of the year when it dropped to 207 million euros, down from 298 million euros in the third quarter of 2013. In total, FDI during the first three quarters of this year dropped to 590 million euros, down from 709 million euros during the same period last year.
FDI rose to a historic high of 953 million euros in 2013, up from 666 million euros in 2012 and a previous record of 793 million euros in 2010, says the central bank.
Fuelled by privatization revenue, foreign direct investments reached a record high in 2013, ranking Albania the most attractive economy among five South-East Europe candidate and potential candidate countries, according to a 2014 World Investment report published by the United Nations Conference on Trade and Development (UNCTAD). The 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. 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.
The 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, Austria, and Italy are the biggest foreign investors in Albania.
