Foreign direct investments on the rise in Albania

20/03/2008

Albania is seeing more foreign investors then ever before and the government expects this trend to continue if the country is asked to join NATO following the April summit in Bucharest.

By Manjola Hala for Southeast European Times in Tirana – 20/03/08

Experts expect investments in the energy sector this year. [Getty Images]

With fiscal reforms under way, progress in the fight against corruption, low inflation rates and a negative trade balance, Albania is attracting more foreign direct investments (FDIs) with high profitability and low labour costs.

Because of the ability of FDIs to generate jobs and contribute to long-term economic development, the government has made attracting them a priority.

Experts expect to see investments mainly in the energy sector this year, as well as the natural resources and tourism sectors. Hydro and thermal power plant construction, along with the privatisation of the state-run electricity distribution division and oil and insurance companies, offer opportunities to foreign companies looking to invest in Albania.

A foreign investment incentive programme launched by the government is already yielding results. Under the "Albania 1 euro" initiative -- which aims to attract investors by offering overseas firms entry to the Albanian market for 1 euro -- the Greek consortium Atermon SA - Roder & Blackwell Consulting won the tender to rehabilitate a six-unit thermal power station.

Although the consortium paid 1 euro to enter the market, it will invest at least 100m euros in the power station, which was built in 1966 by the Chinese and restructured in the 1980s with Czech technology.

Privatisation of state-run entities is also being used to lure investors. Austrian, Czech and Italian companies have expressed interest in buying the distribution division of the state-owned electricity company, KESH. The Ministry of Economy, Trade and Energy says the division will become the property of a large foreign energy company this year.

Additionally, the privatisation of the state-owned oil company, ARMO, has generated interest from at least 20 companies. The sale could raise 84.7m euros.

The state insurance company, INSIG, is also planned for privatisation, while the three largest private insurance companies in Albania were purchased partially or entirely by international insurance groups.

Albania's natural resources are also attracting investors. At the end of January, the Austrian power company EVN won the bid for a contract aimed at exploiting the hydropower potential of the Devoll River with an annual production of 985,400 mWh.

Austrian and Canadian consulting companies are studying exploration of mineral-rich areas in Albania following increased exports of chromium, according to government sources.

With a developing infrastructure, government promotion, and an increase in the number of tourists -- due in part to the rise in tourism in neighbouring Adriatic countries, Albanian tourism is becoming increasingly attractive to foreign companies. For example, a 500m-euro railway system investment planned by China Railroad Construction Corporation is expected to boost travel opportunities.

Although low by regional standards -- attracting only 195m euros as of October 2007 -- investments in Albania have been increasing in recent years. The Economist Conferences analyst Richard Eames has told journalists that if the government significantly improves the climate, investments would come. It would appear the government is heeding that advice.