Abstraction: Albania has chances to pull foreign direct investings in several sectors of economic systems: agribusiness, industry economic system, touristry etc. Albania has a great possible, but the domestic capital is really low and it is non enable to use these chances. The purpose of our paper is to indicate out some of the obstructions and the chances that Albania offers to the foreign investors. We have tried to demo the place that Albania has in term of foreign direct investings and the easiness of making concern in relation to the other states in the part.
Introduction
The foreign direct investings provide a batch of benefits to a state. They increase employment, increase the productive capacities of a state, give entree to the new engineerings and better work pattern, aid in the integrating into the EU economic systems etc. The important function of foreign direct investings on the economic system, induced us to analyze the development and the function of foreign direct investings in Albania. The paper is devided in seven subdivisions. After holding explained dhe methodological analysis and information set, the 2nd subdivision describes the foreign direct investing since the starting of the passage period, explicating their falling or their growing during these old ages. Following, we have attempted to indicate out some of the chances that Albania offer to the foreign investors and some of the obstructions that the foreign investors have to confront in Albania. The concern clime in Albania is discussed in the subdivision five, based on the indexs of “ Making concern ” studies of the World Bank. An analysis of foreign direct investings and concern clime in Albania in comparing to the part ‘s state is performed in the subdivision six. The last subdivision covers the paper ‘s decisions.
2. Methodology and informations set
The informations used in this paper derives from many beginnings. The information sing the foreign direct investings in Albania have been collected from studies of local establishments ( Instat, Bank of Albania etc ) . The information sing the indexs of making concern in Albania and the part have been taken from the Word Bank studies of the last old ages.
The foreign direct investings in Albania are compared to the foreign direct investings in the part ‘s state, by calculating the foreign direct investings per capita.
The part includes the undermentioned states: Bosnia & A ; Herzegovina, Croatia, FYR Macedonia, Kosovo, Montenegro and Serbia.
Development of foreign direct investings in Albania
The foreign direct investings in Albania have been foremost appeared in 1993. The first foreign companies puting in Albania were Italian companies, because they have more entree to oversee the Albanian market and they have the possibilities to research the countries more likely for investings. Even though really easy, there are ascertained modest growing rates until 1997. The events of 1997 were catastrophic for the delicate market economic system of Albania. The destruction of pyramid ‘s strategies and the politic instability set back the new foreign investors and removed the most portion of the bing investors from Albania. The most portion of them have got really hard to re-start once more their concern in Albania ; therefore they did n’t come back any more. The image-building of Albania as an insecure state, the recession of the economic system, the deficiency of attractive inducements and the delay of the denationalization procedures negatively affected the foreign direct investings in Albania. In 1997 the foreign direct investings were reduced by 47 per centum in comparing to the old twelvemonth. During the undermentioned two old ages, the sum of foreign direct investings has been changeless, until 2000. It is explained by the relation of foreign direct investings with politic stableness of a state. During 1999, some Italian investors have shown involvement on the purchase and grant of the mine industry, owned by the province ; but these endeavors were non finalized. Merely after 2000, the foreign direct investings have been significantly grown up, particularly in production activities on intent of exports.
In 2001, the foreign direct investing amounted in USD 207 mlln, as consequence of denationalization procedure ( in peculiar the denationalization of the nomadic phone operator AMC ) and Albkrom consession contracted by Italian company “ DARFO ” .
The holds in the denationalization procedure of Telechom, the Saving bank and INSIG resulted in the lessening of FDI in 2002 ( USD 135 mlln ) .
Harmonizing to the statistics, in 2003 the foreign direct investings have been increased more than 16 per centum in comparing to the old twelvemonth.
Due to the denationalization of the Saving Bank in 2004, the sum of foreign direct investings was about USD 341 mlln: more than one tierce of that sum belongs to the denationalization of the Saving Bank. The most big foreign direct investings performed in 2004 are: airport spouses together with Hochtief ( USD 80,9 mlln ) , Edil Centro ( USD 10 mlln ) , Kurum Group Company ( USD 2,5 mlln ) etc.
As consequence of deficiency of denationalization, in 2005 and 2006 we observe a decrease of foreign direct investings. But in the undermentioned old ages the foreign direct investings have been rapidely grown up.
In 2007, foreign direct investing in Albania amounted to more than USD 622 mlln. They have been increased by more than 90 per centum in comparing to 2006.
In 2008 the foreign direct investings peaked to severally USD 988 mlln as consequence of denationalization of “ ARMO ” , 75 per centum of the portions of OSSH, and 61 per centum of the portions of INSIG ( the merely state-owned insurance company ) , etc.
The foreign direct investings in 2009 are 3.8 times higher than in 2005. There are some ground explicating this addition: a sustainable growing of the economic system ( excepting the impact of the planetary crises, in the two last old ages ) , the rank in NATO, which means more security for investings and less instability, low revenue enhancement rates and the labour force still being inexpensive.
Actually there are more than 1000 foreign investors runing in Albania. Sing the engagement of foreign investing capital, the companies which have invested in Albania are of wholly foreign capital or partly foreign capital ( joint venture ) . In more than 85 per centum of the joint ventures, the foreign investors have more than 50 per centum of the portions.
The sectors which have attracted the most the foreign investors in regard to the figure of the endeavors, are commerce sector and industry industry ; late the building industry and energy. Sing the labour force distribution, the industry industry and banking industry have the largest figure of employers.
More so 80 per centum of the foreign direct investings have been located in the countries with highest income and substructure, i.e. Tirana ( the capital metropolis ) and Durres.
The BE states are the chief foreign investors in Albania. Among them Italy and Greece hold the first topographic points, due to geographic place and because the major portion of the exports are destined to these states.
Barriers and chances to foreign direct investings in Albania
In malice of the increasing of foreign direct investings, they are still really low in comparing to the states in the part. During the passage period, the foreign investors have faced several barriers, some of which we have explained below.
During the communism period, Albanian economic system was the closest economic system among all the Central and Eastern states in Europe – hence the people have inherited a negative concern clime ;
The perceived politic and economic hazard of Albania has been high. Particularly as consequence of the events of 1997, Albania has been classified as a state with a high degree of the political hazard. The political hazard is the hazard of loss when puting in a given state, caused by altering of state ‘s political construction or policies.
The hapless substructure in conveyance, electricity, watersupply system and telecommunications at least until a twosome of old ages before has been a serious barrier ;
The corruptness in Albania is one of the obstructions that foreign investors face excessively ( as the Prime Minister Berisha pointed out “ Corruptness was about an industry ” ) . The corruptness index is still high, but there is a lessening of it, every bit good. The Corruption Perception Index 2010[ 1 ]for Albania is 3.3, ranking Albania in the 87th topographic point, go forthing behind B & A ; H and Kosovo, from the part. The same index for 2009 was 3.2, ranking at the 95th topographic point. It can easy detect that there is a advancement of 8 degrees. We have to see that even though this index is high, it ‘s in the same scope ( 3.1-4 ) with the some of the states of the part as Serbia and Montenegro. So, the authorities has a batch to make about the corruptness in the hereafter. It is one of the conditions that Albania has to run into, as one of the status for integrating into the EU ;
The weak regulative system as consequence of the deficiency of certain Torahs ( including weak anti-money wash Torahs or hapless anti-tax equivocation Torahs ) and the bad execution of the process and the corruptness of the juridical system have stopped foreign investors from puting in Albania.
The capital market remains developing. It consists of the formal market ( Tirana Stock Exchange ) , traders licensed to merchandise securities and informal market of joint-stock companies portions minutess. There are promoting stairss taken by the authorities to set in topographic point the legal and regulative model, in order to construct a working stock exchange. This makes convergence with EU easier and provides fiscal and banking chances through a foreign investing model to run ( Market Access 2008 )
But, nevertheless during the last old ages the addition of foreign direct investings has been one of the precedences of the authorities. The Albanian authorities has induced an affirmatory attitude towards foreign investing ; its scheme to beef up the concern environment was incorporated by the remotion of administrative barriers to investing.
The jurisprudence of foreign direct investings in Albania ensures a favourable investing clime in Albania. There is no limitation sing foreign investings entry, and the foreign investors are treated every bit as the domestic investors. Foreign investors are entitled merely to rent land ( non to buy ) in state-owned countries but there is no limitation on acquisition or leasing of private owned land ;
Foreign investors are every bit treated with domestic investors for revenue enhancement and legal intent ;
Albania has an attractive geographic place, situated on the eastern Adriatic seashore. It has the possibilities to develop mountain touristry, seashore touristry and cultural touristry every bit good.
About tierce of the state ‘s population works outside the state. The remittals they provide assist relieve poorness and drive a roar in lodging building every bit good as substructure ( Euromonitor International, 2009 ) .
The denationalization procedure is traveling on. Recently ( on February 2011 ) Albanian authorities has decided to privatise all the rest portion of the state-owned objects encouring the foreign direct investings.
“ Albania 1 euro ” enterprise is lunched from Albanian authorities in 2006. It is aimed to pull the foreign investors by offering them the entry in Albania for one Euro, the land for one Euro and technological aid for one Euro.
As assesment of concern clime in Albania
This subdivision examines the concern clime in Albania based on the “ Doing Business ” World Bank ‘s studies from 2007 to 2011. Making concern nowadayss measure indexs on concern ordinance and protection of investor rights. For illustration, the study of 2011 provides rankings of 183 economic systems in regard to the easy of making concern in nine classs with a rank “ 1 ” being the best. The higher the ranking, the worse is the economic system esteeming the footings of easy of making concern. As shown in the Table no.1, we observe that the ranking of Albania during the last five old ages has been truly improved by 38 ranks. In general, with exclusion of the indexs “ Covering with building licenses ” and “ Paying revenue enhancements ” , the other indexs have been improved, as consequence of the recent macroeconomic reforms undertaken by the authorities.
More specifically, we easy observe that:
“ Get downing concern ” index is improved by 63 per centum. Therefore Albania is ranked from 121st in 2007 to 45th in 2011. This is consequence of electronic concern enrollment, decrease of necessary initial capital and canceling of the demand for concern enrollment in the Chamber of Commerce.
“ Covering with building licenses ” index is somewhat made worse, which means that harmonizing to this index, Albania is ranked from 161st in 2007 up to 170th in 2011. In Albania, a concern needs 331 yearss to hold a license and it have to pay a monetary value about four times more the mean income per capita.
“ Registering belongings ” index has non been alter excessively much. In 2011 Albania is ranked the 72nd harmonizing to this point. The “ belongings ” issue in Albania is really delicate. Transferring of the belongings from one proprietor to another requires a figure of six processs and about 45 yearss. The cost of papers transferring is about 4.2 per centum of the belongings ‘s value. The most portion of the belongingss are registered in a “ Impermanent registry ” opened in 1994, but the paperss issued based on it are no more valid. In 2004 a “ Permanent registry ” is created, but the propertiy transferring is manually executed and merely harmonizing to the demand of the concerned individual.
“ Geting recognition ” index is improved by 69 per centum. The rank of Albania is improved from 48th in 2007 to 15th in 2011. The Albania was one of the economic systems who have reformed the most. It created a new public recognition register with full information on loans of all sizes, for persons and for houses.
“ Protecting Investors ‘ index has been fallen down by more than 90 per centum, bettering the rank of Albania from 167th in 2007 to 15th in 2011. This index has been improved the most. It is due to the reforms performed in 2008 sing the increased revelation demands, regulated blessing of related party minutess and a new company jurisprudence.
“ Paying revenue enhancements ” index has been somewhat improved from 149th to 138th. Albania made it easier and less dearly-won for companies to pay revenue enhancements by amending several Torahs, cut downing societal security parts and presenting electronic filing and payment. But despite the reforms undertaken by the Albanian authorities, it still is ranked the last in the part.
“ Trading across boundary lines ” index rank has fallen down from 101 in 2007 to 75 in 2011. The undergoing reform in Albania has in focal point simplification and harmonisation of processs including certifications, debut of hazard based direction system for reviews and mechanization of trade clearance processs.
“ Enforcing contracts ” index has fallen down from 99 in 2007 to 89 in 2011. Juridical system in Albania faces serious jobs. The figure of processs needed to implement a contract is 39, while the clip necessary to finish the processs is 390 yearss. The cost required to finish the processs is about 39 per centum of the claim value. The processs would be facilitated, for illustration through the constitution of the Administration Court. But due to the recent political differences in Albanian parliament, the blessing of the jurisprudence on Administratiuon Court has been postponed.
“ Shutting concern ” index ranks Albania the last out of 183 economic systems. The new jurisprudence on bankruptcy has been approved in 2008, but there is no pattern taken in consideration in the universe study ‘s bank.
6. FDI and Business Climate in Albania versus part ‘s states
The states in the part have been less effectual in pulling foreign direct investings, than the other states of Eastern Europe because of political instability the little sized markets, informal economic systems, hapless substructures, developing fiscal systems etc.
The foreign direct investings in the part amounted to USD 8,052 mlln: approximately 36 per centum of that sum belong to the foreign direct investing in Croatia, 24 per centum belongs to Serbia and 17 per centum belongs to Montenegro. But if we calculate the foreign direct investmet per capita ( as Figure no.2 shows ) , Montenegro holds the firs topographic point in the part with USD 2144 per capita, followed by Croatia with USD 656 per capita.
Montenegro was the lone state in the part, go oning to bask a roar in investings, thanks to its broad revenue enhancement, policy and publicity of public-private partnerships particularly in touristry.
Croatia holds the 2nd topographic point in the part sing the foreign direct investings per capita. The denationalization of strategic state-owned assets has been a major beginning of foreign direct investings in Croatia. Besides Croatia has a important comparative advantage in touristry sector.
Albania is ranked the 3rd with USD 310 per capita.
Sing the concern clime in the part ‘s states, the Table no. 2 shows the ranks of each state in the part. FYR Macedonia holds the first topographic point, ranked at 36th, followed by Montenegro ranked at 66th and Albania ranked at 82nd.
aˆzStarting concern ” – Business enrollment reforms in FYR Macedonia made it one of the easiest topographic points to get down a concern today. In 2006 the concern enrollment is changed from e juridical one to an administrative 1. The publication demand in an official newspaper was replaced with the automatic enrollment in website registry. The figure of new companies is increased. Therefore, the necessary clip to get down a concern in Macedonia is three yearss, while in Albania it is 5 yearss. Both these states are included in the 10 states with the fastest processs. But in 2010 Croatia and Montenegro are improved the most. Kosovo made more hard by replacing the revenue enhancement figure antecedently required with a financial figure which take longer to publish and requires the revenue enhancement disposal to first inspect the concern licenses.
aˆzDealing with building licenses ” – Croatia has improved the most in covering with building licenses, O.K.ing a new edifice codification. It replaced the location license and undertaking design verification with a individual certification simplifying and rushing up the building allowing procedure. Although the Eastern Europe was the part with the most reforms sing the building permits in the last old ages, all the states in the part are still ranked at the terminal, sing the needed processs, clip and the minimal capital every bit good. The covering with building licenses is more hard in Serbia, which rank is 176. Kosovo and FYR Macedonia keep the first topographic points sing to the aˆzDealing with building licenses ” index.
aˆzRegistering belongings ” – FYR Macedonia cut the clip to register belongings by 40 yearss: as consequence twice every bit many belongingss were sold in 2009 as in 2007, despite the fiscal crises.
aˆzGetting recognition ” – Good patterns back uping entree to recognition have been followed by Serbia ( leting out of tribunal enforcement ) , Bosnia & A ; Herzegovina and Montenegro ( keeping an incorporate registry ) , and Albania ( administering informations on loans below 1 per centum of income per capita ) . These states have improved their secured minutess system during last old ages. Serbia ‘s volume minutess increased by 4346 in 2005, to 24,059 in 2009, while Albanian ‘s rose from 4105 in 2005 to 9860 in 2007.
aˆzProtecting investors ” – Albania has adopted new statute law. It is ranked among the first states sing the extent of manager liability index. ( It is nine from the upper limit of 10. ) Most economic systems that strengthened investor protection did so as portion of wider corporate administration plans, as Albania and FYR Macedonia. A Deutsche Bank Study of the Standard and Poor ‘s 500 shows that the companies with strong and improved corporate administration system exceeds those with hapless 1s by 19 per centum within a clip period of two old ages. Sing the extent of revelation index, Croatia is one the of the states with the lowest index ( The Croatia ‘s revelation index is one from a scope 0-10 ) .
aˆzPaying revenue enhancements ” – The most portion of the part has simplified revenue enhancement payment during the last old ages: FYR Macedonia in 2008, Albania and Montenegro in 2009. FYR Macedonia has the lowest revenue enhancement rate in the part 10,6 per centum. It has reduced the corporate net income revenue enhancement for undistributed net incomes from ten to zero per centum. It has simplified revenue enhancement conformity procedure. It is ranked the fifth in the lowest revenue enhancement rate list of the universe. Bosnia & A ; Herzegovina and Montenegro have merged the revenue enhancements other than net income revenue enhancement. FYR Macedonia and Montenegro have simplified the revenue enhancement conformity procedure, while Albania has established the electronic revenue enhancement system.
aˆzTrading across boundary lines ” – Among the states which have improved the most in trading across boundary lines, Montenegro is ranked the Forth. But it holds the first topographic point among the part ‘s states. It has reduced the figure of the needed trade paperss. Montenegro ‘s usage disposal simplified trade by extinguishing the demand to show a terminal handing reception for exporting and importing of goods.
aˆzEnforcing contracts ” – Kosovo is ranked the last sing the reforms made in the bench system. It is one of the states which require most processs ( The figure of needed processs is 53 ) .
aˆzClosing concern ” – Serbia is ranked the 2nd among the states which have improved the most sing the shutting concern. Serbia has passed a new jurisprudence on bankruptcy, which among others, has reduced the length of insolvency processs and it has introduced unified reorganisation processs. Besides, in 2008 Albania has passed a new jurisprudence on bankruptcy, but it has no impact yet.
7. Decisions
In this paper, we have tried to reply to these inquiries:
– Why foreign investors have invested in Albania?
– Why foreign investors still hesitate puting in Albania?
Sing the first inquiries, there are many factors which have attract foreign direct investings to Albania, as geographic location, low labour cost, denationalization procedure, natural beginnings, qualified labour force, the battle of the authorities to better the clime concern in Albania ( take downing the revenue enhancements, handling foreign investors every bit to the domestic 1s etc ) .
Sing to the 2nd inquiry there are many barriers to foreign direct investings in Albania excessively: high degree of corruptness, weak juridical system, informal economic system, undeveloped fiscal system, hapless substructure, instability in the part etc.
However, comparing to the other states in the part, Albania is making good. But the Albanian authorities still do non hold a well defined scheme to pull foreign direct investings in long-term, although the foreign direct investings have been announced as one of the precedences of the existent authorities ( aˆzOne Euro ” enterprise ) .
