Albania looks to raise its investment game

By bne IntelliNews February 28, 2014

Guy Norton in Zagreb -

Albania is strongly committed to improving the business climate in an attempt to create sustainable long-term economic growth in the country: that was the clear message delivered by Albanian Prime Minister Edi Rama in a confidently delivered speech at a high-level regional forum, "Investing in the West Balkans", hosted by the European Bank for Reconstruction & Development in London on February 24, which featured no less seven prime ministers from the region.

While Albania has registered relatively respectable economic growth since the onset of the global debt crisis and associated economic downturn in 2008 - GDP increased by an average of 3% in 2009-2011 - in the last two years economic growth has since slumped to less than half of that level.

But Rama, who heads a left-wing coalition which came to power after winning the June 2013 parliamentary elections, claimed in his speech in London that new policy initiatives recently introduced by his administration would help to establish the conditions for sustainable long-term growth over the next 20 years. "We are making a major effort to change the economic future of Albania," said Rama, adding: "We aim to be better today and even better tomorrow."

In an acknowledgment that Albania needs to replace its traditional reliance on remittance payments from the Albania diaspora - before the 2008 financial crisis cash sent home by Albanian expatriates, principally working in Italy and Greece, accounted for 12-15% of GDP but has since dropped to 6-8% - Rama said Albania was targeting a major increase in foreign direct investment (FDI) as a result of an improved business climate. "The message for Albania is that the days of its old economic model are over, we know that it's unsustainable. No economic model can function without FDI," said Rama. "It's said that admitting you need a cure means you are halfway to discovering a solution. We intend to go all the way to finding that solution."

Instead of relying on remittances and what he termed "irrational public spending" to prop up the Albanian economy, Rama said that the authorities in Tirana were looking to target greatly increased investment in a number of key sectors - agriculture, manufacturing, mining, energy generation, oil and gas, and tourism.

He admitted that the challenging business climate in Albania had hitherto meant the country failed to realise its full economic potential. "There are huge gaps [in development] between Albania and other economies in the region - our tourism industry lags far behind for example. Albania is a country blessed with many natural endowments and we are committed to developing those gifts in a sustainable manner."

Getting connected

As well as pushing through socio-economic reforms to boost the competitiveness of domestic economy, Rama said Albania was also looking to boost its connectedness with the regional and global economy, admitting that, with a population of just over 3m, Albania needs to boost its trading ties with the 25m-strong Central European Free Trade Agreement and the 500m-strong EU markets.

Albania's EU aspirations received a boost last year when the European Commission recommended that Albania be granted EU candidate status, on the condition that it continues to fight corruption and organised crime. Rama said that EU accession was the county's main politico-economic objective.

Speaking at the same EBRD conference, Arben Ahmetaj, Albania's trade minister, said the economic downturn in the country's main trading partners, Greece and Italy, had been deeply felt in the country, and that as a result "Albania's economy is underperforming its potential".

While historically the bulk of FDI in Albania has been targeted towards the financial services and mining sectors, the government was looking to boost overseas investment in such previously neglected areas as the upgrading and expansion of its rail, road and port network. "We want to create an Albania of opportunity... to improve the image of Albania to one of economic success and openness to investors."

In particular he said the country was looking to facilitate the ease of doing business in Albania through a series of reforms to the taxation system, a clampdown on the black economy and the slashing of red tape.

Finally, Damian Gjiknuri, the energy minister, pointed to the fact that Albania is looking to leverage the potential of the energy sector in the country with a new energy law that he claimed would "create a truly free market for independent producers."

He said the country had already attracted investment commitments from companies from Norway, Turkey and Israel for power plant projects. "Energy is a key sector for any economy... and in Albania represents a great opportunity."

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