The Montenegro Times

ALBANIA – foreign investment in an emerging market

Albania is a Balkan country in Southeast is located on the Adriatic coast of Europe. The country borders in the Yugoslav province of Montenegro, FYRMacedonia, Serbia and Greece in the south. The capital is Tirana. (The World Bank Group, 2009).

Staff Foreign direct investment (FDI) interest arising in Albania to monitor the transformation of Albania into NATO and the future of the European Union (EU) members. The process Albania’s accession to the EU started in January 2003. The admission of Albania to the EU depends on the stability of the countries in economic and political future. Albania is committed to the EU institutions and joined NATO Treaty Organization (North Atlantic) 1 April 2009. (Wikipedia cited Collaborating 2009). Albania has formally applied for EU membership, April 28, 2009.

Ranked as one of the poorest in Europe, many ex-pats living and working in Albania across the EU and Switzerland. A high birth rate of contribution, the country has huge potential foreign direct investment because of its potential for the state of the EU, the location and geographical. Albania is a distinctive classification of an emerging market currency exchange and future euro Lek (improving the power of the purchasing countries and wealth), shows there is an enormous opportunity for multinationals monetary affairs of Australia to invest in a company with a controlling stake.

Foreign direct investment occurs when a company invests resources in business activities in countries outside of its base (Hill, 2009, p11) and Albania. The main areas of foreign direct investment as multinationals in Australia, will be considered are construction (roads, infrastructure), real estate, renewable energy, finance and tourism. The types of businesses that may be interested in this type of investment are the likes of Origin Energy, farms McMahon, Raine and Horne.

Historically, most FDI has been directed toward developed countries. FDI in emerging or developing countries has traditionally been increased sharply (see Chart 1, Annex 1) since 1990 (Hill, 2009, P243-244). Albania Thus FDI is an excellent opportunity that can provide important benefits for companies in Australia. The most recent flows have been directed to emerging economies in Southeast Asia, where there is untapped potential for Australian companies to invest in Albania.

Albania’s real GDP has averaged 6% over the previous year due to increased public investment. The price inflation consumer was under 4 percent upper limit of the central bank’s target unofficial. (See Figure 1, Annex 2). The Albanian lek for continued support in 2009 for large transfers of foreign currency funds from Albanians living abroad and the relatively high interest rates. Exports should grow very strongly in 2009 and estimates of the average current account deficit of around 11% of GDP. (Business Eastern Europe, 2008). (See Table 2 Annex 2).

The viability of the client company to enter the Albanian market is positive. Albania’s democratic government encourages foreign investment, and in an ongoing effort to privatize public enterprises, the government is looking for qualified foreign investors in key sectors, including telecommunications, energy, oil and gas, finance and construction. (Foreign Investment Climate, 2008)

Albania is currently inadequate infrastructure, and there is little money for improvements budget. The Government has inherited a poor road network in the communist period. Major road construction projects are currently underway and an estimated 6000 kilometers of roads will be held in 2013. (Euromonitor International, 2009). Therefore, it is a great opportunity for Australian civil engineering construction enterprises Training tendering for a large part of the work, and opportunities for profitable investment.

Feasibility of the client company to enter the markets of Albania ability Greenfield is varied. Today, Albania is ranked 89 th among 183 countries in the benchmark for ease of doing business. Starting a business, the range Albania from 68 in 2009 and began to move to 46 in 2010. (See Table 1 in Appendix 3). The average time in days for the Starting a business is 5 days to 13 days for all media OECD. This shows that the Albanian government is moving in a positive direction to attract foreign investment. (The World Bank Group, 2009). However, the cost cost of starting a business (% income per capita) is significantly above the OECD average (see Table 1 of Annex 4).

“Companies obtain a foreign credit “and” protecting investors “, shows that this country has made progress in some areas of investment – the 15 projections of 183 countries ranked in two facets in 2010, Albania put at 10%. By contrast, dealing with construction permits (173 in 2010) and the employment of workers (105 in 2010) shows that foreign direct investment companies specializing in renewable energy and construction take into account these factors when major investments and start a totally new project. (The World Bank Group, 2009).

Types of commercial companies that are attractive for FDI focus on building infrastructure and energy. Albania’s energy crisis has been caused by the annual growth rate of electricity demand. The rate of more 8% and production is struggling to keep pace. In a recent EU report, it is recognized that Albania has taken some bold steps to restructure and liberalize the energy sector. The European Bank for Reconstruction and Development (EBRD) said it will provide important funding for new energy production. Hence, renewables is also a very attractive option for foreign investment. (GMB Publishing, 2009).

The hydropower generation has provided most of the energy capacity of Albania and remains its main source of production. With the lack of funds, only 35 percent of the development potential is currently in operation. (GMB Publishing 2009). Australian businesses based on hydropower has a substantial advantage on experience in the operation of the Albanian market. Studies show that Albania has good potential for solar energy. No major projects photovoltaic currently in operation, but installation of large solar power projects under the government of Albania in 2015. (GMB Publishing, 2009). Australian businesses plots have the opportunity to study solar energy projects Greenfield.

U.S. Asset Management several companies to participate in the emerging market Property in Albania to take advantage of growth in the mortgage market. Albania is expected to benefit from its EU accession, which should be completed in 2014 and has already received € 100 million financing. A 2007 report from the World Bank cited the high GDP growth in Albania and a drastic reduction of poverty. Albania has received substantial investments from international agencies like the Bank of International Bank for Reconstruction and Development. (Hirst, T, 2008). Commercial and residential buildings is an area Live foreign investment is very attractive, with strong power of the $ A against the currency Albanian Lek. Everyone 1A = $ 85.01 (Albanian Lek) and 1Tous $ = 0.1177 A. (Quick Cross Rates, 2009). When Albania enters the area of the EU, its strongest currencies and in line with the parity of the euro area.

Capital Markets Albania remains one of the most underdeveloped in the whole Central and Eastern European region. There are encouraging steps to implement the legal and regulatory framework to create a stock swap. This makes the convergence with the EU easier and offers the potential financial and banking through foreign investment to operate within. (Market Access 2008).

Albania recently experienced an impressive growth in tourism in 2009. The Albanian Government has announced it is 42 percent increase in the number of tourists visiting the country, reported AENews. The Albanian government is reclaiming its coasts are more beautiful than the Riviera. (S Forbes, 2008). With the new hotels, resorts and restaurants, the private sector in Albania in tourism has grown at an average of 30 percent for five years. The Albanian economy has had the highest growth in Europe, the foreign investments in Albania have increased by 59 percent this year. Australian businesses can invest in the tourism industry, providing child experience with large potential benefits. (New Europe, 2009).

The Albanian Government has induced a positive attitude toward investment Abroad, its strategy to strengthen the business environment was created by the elimination of administrative barriers investment. The privatization program is accelerating and that the government encourages foreign investment. About a third of the population works outside the country. The remittances that provide help to alleviate poverty and lead to a boom in housing and infrastructure (Euromonitor International, 2009).

Albania Government of Albania’s Democratic Party knows that battle looms foreign investment and that Albania has to get to do. The previous low level of foreign ownership is largely due to the fact that Albania’s international image is poor, but wrong. Albania services sector, particularly restaurants and hotels, are exceptional. The hospitality is great and the Albanians are open to those seeking. They are ready for the arrival of tourists. Albania is also rich in natural resources like oil, gas, copper, chromium and hydroelectric potential. (Austin RC 2006)

The Albanian government led by Prime Minister Berisha has created an excellent environment to attract investors to Albania. Emphasis has been paid individual infrastructure improvements. Efforts to improve the legal system to protect investors was also significant. It was also reported that many firms Western Europe have decided to escape high taxes in Europe by investing in Albania, as it offers the best tax system in Europe with a flat tax of 10 percent. (NewEurope 2009).

The Albanian Government has worked to make it easier to invest and do business in Albania, to establish a single window for registration of a new business. Education is also highlighted, including the private sector. Since the fall of communism, Albania was an ally of the United States contributing troops. His positive attitude towards foreign policy, economic success and corruption are models for other Muslim countries. (S Forbes, 2008).

Foreign companies have been various restrictions on investment in Albania. Despite some recent improvements, the freedom of companies in Albania remains hampered by an onerous regulatory environment. Although the creation of a business is relatively fast, obtaining a business license requires 24 procedures additional days and nearly 100 more than the world average of 225 days. (The Heritage Foundation, 2009).

Foreign and domestic companies are treated equally before law, and almost all sectors are open to foreign investment. Agricultural land can not be acquired by foreign investors, but you can rent for up to 99 years. The Albanian state can not expropriate an investment or asset for public purposes, but no compensation law. This can be an impediment or restriction of an Australian company specializing in niche markets Albanian. Non-transparent regulations, inefficient bureaucracy and corruption, and as restricting discourage foreign investment in Albania. (The Heritage Foundation, 2009).

The financial system is relatively underdeveloped as the Western standards, although progress has been made. While many banks have expanded their services, the use of checks and credit cards is not widespread. Although short of term credit is available, it is very expensive and difficult to achieve without significant security guarantees. This may limit foreign investment to a company Australia. Also the customer service is relatively poor compared to Western standards. (Macro-Access 2007).

The Government separated Tirana Exchange Central Bank, but the stock market remains sluggish, and the shares are not listed yet. Investment Firms Financial Australia are currently limited to the Given the stock market is an infant stage. Albania’s judiciary applies the law is weak and one of the most polluted countries institutions. The judges are usually appointed for purely political reasons and might be corrupted. The protection of intellectual property rights is weak, and violations of copyrights and trademarks are common, and therefore Australian companies with foreign investments are patented offense without legal protection. (The Heritage Foundation, 2009). Rights land are not well defined, especially in coastal areas, and 70 percent of court cases relating to civil law, all property litigation. This could have negative consequences for organizations of civil engineering. (The Heritage Foundation 2009).

Corruption in Albania is perceived as widespread. Albania ranks 105th out of 179 countries in the Corruption Perception Index of Transparency International for 2007, a slight improvement on previous years. Corruption exists in all sectors and levels of government. Albania is a major transit country for trafficking in weapons, narcotics, smuggling, and human beings. (The Heritage Foundation, 2009).

There, a vast and benefits benefits of FDI in Albania. Stimulates economic development and helped developing countries, Albania, when faced financial difficulties before. (Economy Watch 2009). Several billion dollars of projects underway in the energy sector to produce wind energy and solar panels, in addition to roads and infrastructure. With FDI in the tourism sector, employment in the construction of hotels and resorts are under way, the generation of employment in the services sector of Albania. (New Europe, 2009).

Albania IDE allows technology transfer and assistance to competition among producers in the local market. The economic benefits include the development of skills and resources human capital of employees Albanian energy, construction and engineering firms who are trained in the operations of a business. The creation of new jobs and increase the wages of workers can improve lifestyle. (Economy Watch 2009).

Profits generated by FDI, which are made in Albania can be used for contributions to business income tax. The IDE allows development of the manufacturing sector. (Economy Watch 2009).

The Albanian economy has been growing, with annual average GDP growth higher than in other parts of the region. This impressive growth was due primarily to control inflation and investment. Previously, Albanian professionals who migrate to other nations. “Brain drain” is used to describe the phenomenon of emigration of highly skilled professionals from Albania to the EU to other countries. FDI in Albania contributes to positive economic growth, and professionals are a source of capital for developing countries, like Albania. Stop the brain drain has positive effects on education, income distribution and economic welfare. (Center for Social and Economic Studies, 2006)

A national Balance of Payments calculate their payments and receipts from other countries. While FDI in Albania is a replacement of the goods and services, the effect can positively improve the current account balance of payments of the host countries. (Hill, CW, 2009). According to a UN report, FDI inflows by multinationals abroad has been a key driver of economic growth driven by exports, which can be used by Albania.

The adverse effects of foreign investment in Albania suggest that increased competition, while a positive aspect could lead domestic firms bankruptcy. In addition, foreign multinationals may raise prices causing inflationary pressures in the Albanian economy. Key decisions affecting the host country (Albania) the savings can be made by a company in which investment foreign remains fully committed to the Albanian economy. (Hill, CW, 2009)

Whereas it is well established small businesses in place in Albania, Greenfield investment may be an option but may have some advantages for the acquisition of an existing business skills, integrated skills and culture through the purchase of an established organization. (Hill, 2009, P506). However, the process of establishing a new hierarchy may be the only Greenfield viable method in some cases, in Albania, engineering and lack of infrastructure and experience in the construction of the former communist countries.

Modes income of adequate investments in Albania, we must invest in the Overseas Private Investment Corporation (OPIC) is an agency of the U.S. government selling services investment in emerging markets. The largest of the funds for the region of U.S. is $ 150 million Southeast Europe Equity Fund (SEEF), managed by Soros Fund Management Private. (Macro-Access 2007).

Trade and Development Agency is also a body of U.S. government promoting private sector participation in the developing countries. In Albania, TDA has recently funded projects for roads, ports, energy and various private sector projects. (Macro-accessibility 2007).

The Company (IFC) is a member of the World Bank offers a wide range of financial products to companies in developing member countries such as Albania. The European Bank for Reconstruction and Development (EBRD), which promotes competition, privatization and entrepreneurship, taking into account the different stages of transition of developing countries. The EBRD has equity positions with the National Commercial Bank of Albania and the Albanians in the reconstruction Equity Fund and the Italian-Albanian bank. (Macro-Access 2007). In addition to acquiring an existing business, obtaining financing for these companies is a possible entry point for an Australian company in a new project in Albania.

Poor Transport, Telecommunications and other infrastructure are seen as major obstacles and barriers to investment. Albania was the poorest country in Europe but the levels of income per capita has more than doubled in the last 10 years. But the economy remains vulnerable on several fronts, due to a culture of tax evasion, large amounts of long-term debt and weak national laws against money laundering. (Euromonitor International, 2009).

Questions of corruption in government and a weak judicial system problem in Albania’s efforts for greater cooperation with the EU. EU members are concerned about the commitment of countries to improve the Law and crime. (The World Bank Group, 2009). The multinational companies can consider the lack of law as an impediment to FDI. (Euromonitor International, 2009).

A major obstacle to investment may be the subject of free trade development to attract foreign investment. The current law has the authority to establish free trade areas and a Special Committee zone was established by the Albanian Government to identify potential sites for the free zone. However, no free trade area have not yet been established. (Macro-Access 2007).

In addition to potential monetary benefits and related businesses in Australia and countries of origin establishing the FDI received, there are opportunities as for the host country (Albania) of these foreign investments. Albania young literate population is more work, as evidenced by the unemployment rate 14 percent. While some members of the highly skilled workforce, many of them working in inefficient industries with outdated technology. Via foreign companies investing in Albania, the sets of skills and technological capabilities of the young workforce of Albania has strengthened. (Macro-Access 2007). Albania learn quickly business practices and the market often display impressive entrepreneurship. (Macro-Access 2007). Certainly, there are significant opportunities for the country host, Albania by FDI.

References

Austin RC 2006, “new investment strategies of Albania “SETimes.com, accessed October 22, 2009 <http://www.setimes.com/cocoon/setimes/xhtml/en_GB/features/setimes/articles/ 2006/10/02/reportage -01>

Business Eastern Europe, 2008, “Business Outlook – Albania, October 10, 2008, vol. The number 37 377, P3-3.

Center for Social and Economic Studies, 2006, “From brain drain to Brain Gain: Skilled Albanian Diaspora Mobilization”, Centro Research for Development Migration, Globalization and Poverty, University of Sussex, United Kingdom

Economy Watch 2009, “Benefits of Foreign Direct Investment” Accessed October 23, 2009 <http://www.economywatch.com/foreign-direct-investment/benefits.html>

Euromonitor International, July 3, 2009, “Albania: Country Profile” Viewed October 21, 2009, <http://www.portal.euromonitor.com/passport/ResultsList.aspx>

Forbes S 2008, “Success Story of Muslim,” Business Source Premier, July 4, 2008, vol. 181 Number 7 p15-16

Foreign investment climate, 2008, “The overall investment of Albania 2008 review, read in October 21, 2009.

GM Publishing, 2009, “Renewable energy in SEE – Albania, observed on October 21, 2009.

Hill, CWL, 2009, International Business – Competing in the global marketplace, 7th, McGraw-Hill International Edition, Washington, USA.

Hirst, T, 2008, launch of the Fund, Fund Strategy, observed on October 20, 2009. <www.fundstrategy.co.uk>

Macro-accessibility in 2007, “Icon Group International, Inc., taken October 23, 2009, <www.icongrouponline.com>

Market access, 2008, “Albania: Creating of a stock market “from October 20, 2009, <www.emergingmarketsmonitor.com>

NewEurope 2009, “Albania has the highest growth of global investment in tourism, neurope.eu, viewed October 23, 2009, <http://www.neurope.eu/articles/96778.php>

Quick Cross Rates, 2009, “the exchange rate XE.COM ‘visited October 25, 2009 <www.xe.com?

The Heritage Foundation, 2009, “Index of Economic Freedom – Albania, April 22, October 2009, <http://www.heritage.org/Index/Country/Albania>

The World Bank Group, 2009, “Doing Business in Albania” seen October 18, 2009 <http://www.doingbusiness.org/ExploreEconomies/?economyid=3>

Wikipedia contributors, 2009 September 30, “Albania’s accession to the European Union. [Internet]. Wikipedia The Free Encyclopedia, Watched October 21, 2009, http://en.wikipedia.org/w/index.php?title=Accession_of_Albania_to_the_European_Union&oldid=305088136

Appendix 1

Figure 1 – the FDI inflows by region (billions of U.S. dollars). (Hill, 2009, p244).

Appendix 2

Figure 1 – Albania. GDP and consumer prices% change on year. (Business Eastern Europe, 2008).

Table 2. Albania – Data and forecasts. (Business Eastern Europe, 2008).

Category

2008 Row

Ranking 2009

Ranking 2009

Population, MN

3.10

3.11

3.12

All exchange rates / EUR

120.25

119.40

119.45

Imports billion U.S. $

4.50

4.90

5.30

Exports of millions of dollars

1.30

1.50

1.70

Trade balance, million USD

-3.20

-3.40

-3.60

Current Account% GDP

-6.90

-5.50

-4.20

Foreign exchange reserves (gold) billion dollars U.S.

2.50

2.95

3.43

Foreign debt,% of GDP

18.2

17.5

16.3

Appendix 3

Table 1. This table shows the summary Doing Business Albania selected data 2010/2009 to the economy (among 183 countries), and the rankings by each topic. (The World Bank Group, 2009)

Easy … ….

Doing Business 2010 rank

Doing Business 2010 rank

Change Category

Doing Business

82

89

+7

Starting a Business

46

68

+22

Getting Credit

15

12

+3

Investor protection

15

14

-1

The employment of

105

105

0

Dealing with licenses construction

173

170

-3

Annex 4

Table 2. This table presents the challenge to start a business in Albania. Includes entrepreneurs can expect to measures the time it takes, on average, cost and minimum capital required as% of GNI Capital. (The World Bank Group, 2009).

Indicator

Albania

Eastern Europe and Central Asia

OECD Average

Procedures (number)

5

6.7

5.7

Time (days)

5

17.4

13.0

Cost (% Of income per capita)

17.0

8.3

4.7

Min of capital (% of income per capita)

0.0

21.5

15.5

About the Author

Konstantinos Barkoukis is a Global IT consultant and property developer. Born in Australia, has worked in Ireland, UK, USA, and resided in Greece.

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