TIRANA, June 8 – Albania continued to remain the Western Balkan’s second largest FDI recipient for the seventh year in a row, but its FDI stock at the end of 2016 lagged behind three regional competitors, according to a report by UNCTAD, the United Nations body responsible for international trade.
The report shows FDI inflow in Albania rose by 19 percent to $1.12 billion in 2016, while FDI stock increased to a total of $5 billion, higher only compared to neighboring Montenegro among the five EU aspirant Western Balkans countries included in the report. The 2016 FDI is however lower compared to the peak $1.26 billion in 2013 when Albania was still applying a 10 percent flat tax before shifting to a 15 percent tax on corporate income tax and the withholding tax on dividends, rents and capital gains a year later.
The 2016 FDI inflows in the region ranged from $226 million in Montenegro to $285 in Bosnia and Herzegovina, $397 mln in Macedonia, $1.1 billion in Albania and $2.3 billion in Serbia, the region’s largest FDI recipient.
FDI stock in regional countries varied from $4.6 billion in Montenegro to $5 billion in Macedonia and Albania, $6.8 billion in Bosnia and Herzegovina and $30 billion in Serbia.
The UN report says rising interest by Chinese investors in the region and Albania could give a boost to FDI.
“Albania, another growing recipient of FDI, is attracting both traditional and new investors. Interest from Chinese investors is mounting, through both FDI and other forms of involvement. Twelve Chinese firms have shown interest in road construction projects, acquiring access to natural resources (Geo-Jade Petroleum bought controlling rights in two Albanian oil fields for $442 million), and obtaining the concession for Tirana International Airport,” says the report.
In Serbia, even though overall FDI inflows fell in 2016, the interest of Chinese investors is also on the rise as state-owned Hebei Iron & Steel Group Co Ltd acquired Serbian State-owned Zelezara Smederovo for $52 million.
In other regional countries, the 2016 FDI increased substantially in Macedonia, but decreased in Montenegro and Serbia. Flows to Macedonia grew by 65 per cent as UK-based Hystead Ltd bought Skopje City Mall, a shopping centre operator owned by Albania-based Balfin Group, for $100 million.
The 2017 prospects are moderately optimistic as continued privatization could also enhance FDI in South-East Europe, where regional cooperation plans to attract investment were also initiated under the umbrella of the Central European Free Trade Area, says the UN report.
Albania’s 2016 FDI boost was mainly related to two previously-contracted major energy related projects such as the Trans Adriatic Pipeline bringing Caspian gas to Europe and two big hydropower plants by Norway’s Statkraft.
Lack of newly contracted major FDI projects in the past few years has sparked concern over the future of FDI in the country in the post 2020 when TAP and Devoll Hydropower are completed. However, the implementation of a long-awaited justice reform increasing investor confidence in the country’s highly perceived corrupt judiciary and a revise downward in the tax burden, currently one of the region’s highest, could give a real boost to FDI and know-how especially in non-energy related sectors creating more jobs.
Albania’s recent FDI has mainly been focused in non-tradable and natural resource-based, making it vulnerable to international headwinds such as the 2014 slump in commodity prices paralyzing investment in the oil and mining industry.
“Attracting FDI to higher value-added activities would integrate the economy better into global supply chains, boost productivity and create more and better jobs throughout the economy. This, however, would require wide-ranging structural reform to bring about substantial improvements in the investment environment,” says the European Commission in a recent report.
