Country Report - ALBANIA

FOLLOWING THE DEMISE of the communist regime in the early 1990s Albania has made successful transition into a parliamentary democracy based on a rule of law and an open market economy which is largely in line with the European principles and standards. Albania has become member of important world organizations such as: IMF (1991), WTO (2000), and CEFTA (2007). Albania has also become a full member of the North Atlantic Treaty Organisation (NATO) since April 2009. In 2006, Albania signed the Stabilization and Association Agreement (SAA) with the European Union. It has also presented its formal application for membership in the European Union in 2009. In November 2010, the Council of EU granted visa liberalization to Albanian citizens. This will further boost interaction among Albanian and European businesses.

Albania is a small mountainous country in the Balkan Peninsula. It lies on the coast of the Adriatic and Ionian Seas opposite southern Italy and benefits from a stunning coastline of 427 km. Albania shares land borders with the Republic of Kosovo and the Republic of Macedonia to the east, with the Republic of Montenegro to the north and with Greece to the South. It has a population of over 3.5 million - predominantly Albanian ethnic origin and with less that 5% of other ethnicities; Greek, Vlah, Roma, Serb, Macedonian and Bulgarian. The country is well endowed with natural resources mainly chrome, nickel, copper, petroleum, natural gas, limestone and hydro-electric power. It enjoys a favourable climate for agriculture and tourism. Albania has the fastest growing economy in the region. It possesses a wealth of potential as a tourist destination location and a notable trade potential. Albania’s natural resources such as hydropower capacity, large tracts of fertile agricultural land, excellent tourism potential and valuable mineral deposits make Albania very attractive place for foreign investors. 

Strategically located in the Western Balkans and with its stunning Adriatic and Ionian coast line, Albania offers:  

·         Economic stability

·         Low labour costs

·         Adaptable and flexible skilled labour force  

·         Simple and low cost administrative and business regulations

·         Low inflation

·         Free access to EU markets

·         A liberal regime for foreign investment, which guarantees equal treatment of foreign and local investors

·         Stable currency and banking sector

·         Gateway to the Balkan Free Trade Area

·         Low taxation

·         Unexploited natural resources, especially in the area of tourism

·         Excellent investment opportunities in tourism, agriculture, energy, construction sectors...

Macroeconomic stability

Albania has experienced an economic growth in real terms of approximately 6 percent over the past decade, while inflation has declined and remained low, supported by an improved performance and high growth of industry, as well as by a notable growth of exports and foreign direct investment. According to the 2010 EU Progress Report on Albania, annual GDP was more than 6 percent from 2002 – 2008. During the 2009 global economic crises Albania was the only country in the region which registered a GDP growth of 3.4 percent, and its projections for the year 2010 are the same. During the last years Albania has achieved a degree of macroeconomic stability and low inflation rate at 2-4% which shows that the country provides the economic stability to foreign investors.

Well-educated young work force

Albania has a very young population with more than 50% under the age of 30 and the most multilingual population in the region. Albanians learn Italian and English, as primary foreign languages, Greece is also taught in schools of the Greek minority.

Lowest labour costs in the region

Albania offers not only skilled work force but also the lowest labour costs in the region with the minimal wage ALL 16.000 (approximately 130 Euro) which is based on the “Decision of the Council of Ministers” no. 235. Simple and low administrative costs and business regulations are some other incentives that make Albania an attractive place for foreign investment. Since January 2009 a one-stop shop system has been introduced, whereby companies can register five procedures within 1-2 days. The minimum capital required to start a business is only ALL 100.

Attractive Tax System

Albania offers an attractive tax system with a flat rate tax of 10% in corporate income tax and personal tax income. The 10 % corporate tax has been introduced since January 2009. Albania’s VAT rate stands at 20% of the taxable value. VAT is applicable on sales of goods and services or the import of goods at a standard rate of 20%. VAT is applied at a 0% rate for exports and international services such as international transport of goods and passengers.

Free Trade

Albania has a liberal free trade regime. In this regards Albania has signed Free Trade Agreements with all its Balkan neighbours with Bosnia-Herzegovina, Bulgaria, Croatia, Kosovo, Macedonia, Romania, Serbia & Montenegro, plus Moldova & Turkey. These agreements offer manufacturers based in Albania to use the country as a gateway to markets in southern Europe as well as via transshipment to the EU. Albania has also signed the EU Association agreement that allows all industrial products originated from Albania to be exported into the EU with a 0 % customs tariff, while 83% of industrial goods originating in the EU can be imported into Albania without any custom tariffs.

Protection for foreign investment

Albania has adopted the 1993 Law on Foreign Investments which guarantees equal treatment of foreign and local investors. Foreign investments are protected from expropriation and nationalization. In terms of protecting investors, according to World Bank, Albania is ranked the 15^th. Laws on Concessions and Public Procurement enhances transparency, fairness, efficiency and long-term sustainability, in development of infrastructure and public service projects. It aims to better regulate unsolicited proposals and the public-private partnership in general.

Banking sector

The Albanian economy is now an open economy with fully liberalized trade and a completely privatized and highly developed banking sector. The country has 16 commercial banks (14 foreign-owned) which offer services such as cooperate, retail and finance services. Some of the best known international banks that currently operate in the market including Raiffeisen International, Société Générale, and San Paolo Intensa have boosted financing in the economy. The banking sector allows foreign investor to open and maintain foreign currency bank accounts.

Foreign direct investment

In the last decade Albania has experienced an increase of foreign direct investments. In the 2008, FDIs tripled compared with the 2005. Now, FDI account to 72% of the GDP as a result the country recorded a sustained 6.1% GDP. Currently, there are over 1000 foreign companies mostly from Greece, Italy, Germany, the UK, Turkey, Bulgaria, and the US operating successfully in Albania. Amongst other international brands operating in Albanian such as Albanian Mobile Communication (Greece), Vodafone, Raiffeisen Bank (Austria), Petroleum Bankers (Canada), Kurum (Turkey), Edil Centro (Italy), EVN (Austria), Bechtel, Enka. 

Transport

Located in an excellent strategic position, linking the Western Mediterranean countries with the Balkans and Asia, Albania has significantly worked in improving road, railway, air and sea transportation. In 2009, Albania has invested over €1bn in its largest motorway project to date connecting Albania with Kosovo, shortening the distance from 7 hours to 2 hours. The motorway through Kosovo will connect Albania with the Pan-European Corridor 10 in Nish (Serbia). Major works have been underway to construct Corridor 8 which will link the Albanian port of Durres to Varna (Bulgaria). This corridor will be the main East-West connection through Albania and will become an important link for transportation between the Balkan and Mediterranean countries.