By Ervin Lisaku
TIRANA, Sept. 14 – Albania’s foreign direct investment registered a considerable recovery in the second quarter of the year fuelled by investment in two major energy-related projects as capital expenditure in the key domestic oil and mining sector has almost been paralysed due to a slump in commodity prices.
Central bank data shows FDI recovered by an annual 24 percent in the second quarter of the year when it climbed to €261 million but the first half performance suffered an annual 12 percent decline to €418 million as FDI in the domestic oil production, one of the key drivers of Albania’s FDI in the past few years, dropped by four times.
Canada-based Bankers Petroleum, the country’s major oil producer and exporter, reported investment of only $20 million in the first half of this year compared to $87.5 million during the same period last year. Since late 2015, Bankers Petroleum, which is about to be taken over by a Chinese company, has suspended drilling new oil wells as it waits for international oil prices to recover in a situation that has affected domestic production, employment and government revenue from taxes.
The poor performance in the first half of this year has also been affected by a slowdown in investment in small hydropower plants due to a revise downward in electricity prices and legal uncertainties over the sale of electricity to state-run power operators.
Small private and concession hydropower producers say some new legal changes the government is undertaking have increased insecurity among foreign and Albanian investors and warned of initiating arbitration proceedings over what they call “unilateral violation of contracts” no longer guaranteeing the sale of their total production.
The major Trans Adriatic Pipeline bringing Caspian gas to Europe and the Devoll hydropower plant by Norway’s Statkraft have been the main drivers of Albania’s FDI in the past year.
Since mid-2015, when the construction of access roads and bridges was launched, TAP has already turned into a driver of economic and social development in the country by improving infrastructure access for rural communities which also benefit from the long-term land lease.
Meanwhile, Norway’s Statkraft is preparing to sell electricity from its newly-built Banja hydropower plant. The Banja and Moglice HPPs, part of the Euro 535 million Devoll Hydropower project, are being built on the Devoll River, about 70 km southeast of Tirana. The two new hydropower plants expected to be made operational by 2018 will increase the country’s wholly hydro dependent domestic electricity generation by around 20 percent.
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.
The increase of the corporate income tax by 5 percent to 15 percent in 2014 and the review downward 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 applying flat tax regimes of up to 10 percent.
However, Albania continued remaining the second largest FDI recipient among five EU aspirant SEE economies for the sixth year in a row, according to a report by UNCTAD, the United Nations body responsible for international trade.
Greece, Canada, Switzerland, Austria, and Italy are the biggest foreign investors in Albania. China is about to emerge as a top foreign investor after preliminary deals by Chinese companies to acquire Bankers Petroleum oil company and the country’s sole international airport earlier this year.
