Albania – The Economy

Geographical location
Albania officially known as the Republic of Albania is a country in South Eastern Europe. It is bordered by Montenegro to the northwest Kosovo to the northeast, the Republic of Macedonia to the east and Greece to the south and southeast. It has a coast on the Adriatic Sea to the west and on the Ionian Sea to the southwest. It is less than 72 km (45 mi) from Italy, across the Strait of Otranto which links the Adriatic Sea to the Ionian Sea.

Albania has a total area of 28,748 square kilometers. It lies between latitudes 39° and 43° N, and mostly between longitudes 19° and 21° N (a small area lies east of 21°). Albania’s coastline length is 476 km (296 mi) and extends along the Adriatic and Ionian Seas. The lowlands of the west face the Adriatic Sea. The 70% of the country that is mountainous is rugged and often inaccessible from the outside. The highest mountain is Korab situated in the district of Dibra, reaching up to 2,753 meters (9,032 ft). The climate on the coast is typically Mediterranean with mild, wet winters and warm, sunny, and rather dry summers.

Inland conditions vary depending on altitude but the higher areas above 1,500 m/5,000 ft are rather cold and frequently snowy in winter; here cold conditions with lying snow may linger into spring. The three largest and deepest tectonic lakes of the Balkan Peninsula are partly located in Albania. Lake Shkodër in the country’s northwest has a surface which can vary between 370 km2 (140 sq mi) and 530 km2, out of which one third belongs to Albania and rest to Montenegro. The Albanian shoreline of the lake is 57 km (35 mi).Ohrid Lake is situated in the country’s southeast and is shared between Albania and Republic of Macedonia. It has a maximal depth of 289 meters and a variety of unique flora and fauna can be found there, including “living fossils” and many endemic species. Because of its natural and historical value, Ohrid Lake is under the protection of UNESCO. There is also Butrinti Lake which is a small tectonic lake. It is located in the national park of Butrint.

With its coastline facing the Adriatic and Ionian seas, its highlands backed upon the elevated Balkan land mass and the entire country lying at latitude subject to a variety of weather patterns during the winter and summer seasons, Albania has a high number of climatic regions for so small an area. The coastal lowlands have typically Mediterranean weather; the highlands have a Mediterranean continental climate. In both the lowlands and the interior, the weather varies markedly from north to south. The lowlands have mild winters, averaging about 7 °C (45 °F). Summer temperatures average 24 °C (75 °F).

In the southern lowlands, temperatures average about 5 °C (9 °F) higher throughout the year. The difference is greater than 5 °C (9 °F) during the summer and somewhat less during the winter. Inland temperatures are affected more by differences in elevation than by latitude or any other factor. Low winter temperatures in the mountains are caused by the continental air mass that dominates the weather in Eastern Europe and the Balkans. Northerly and northeasterly winds blow much of the time.
Average summer temperatures are lower than in the coastal areas and much lower at higher elevations, but daily fluctuations are greater. Daytime maximum temperatures in the interior basins and river valleys are very high, but the nights are almost always cool. Average precipitation is heavy, a result of the convergence of the prevailing airflow from the Mediterranean Sea and the continental air mass. Because they usually meet at the point where the terrain rises, the heaviest rain falls in the central uplands. Vertical currents initiated when the Mediterranean air is uplifted also cause frequent thunderstorms. Many of these storms are accompanied by high local winds and torrential downpours.
When the continental air mass is weak, Mediterranean winds drop their moisture farther inland. When there is a dominant continental air mass, cold air spills onto the lowland areas, which occurs most frequently in the winter. Because the season’s lower temperatures damage olive trees and citrus fruits, groves and orchards are restricted to sheltered places with southern and western exposures, even in areas with high average winter temperatures. Lowland rainfall averages from 1,000 millimeters (39.4 in) to more than 1,500 millimeters (59.1 in) annually, with the higher levels in the north. Nearly 95% of the rain falls in the winter. Rainfall in the upland mountain ranges is heavier. Adequate records are not available, and estimates vary widely, but annual averages are probably about 1,800 millimeters (70.9 in) and are as high as 2,550 millimeters (100.4 in) in some northern areas.

The western Albanian Alps (valley of Boga) are among the wettest areas in Europe, receiving some 3,100 mm (122.05 in) of rain annually. The seasonal variation is not quite as great in the coastal area. The higher inland mountains receive less precipitation than the intermediate uplands. Terrain differences cause wide local variations, but the seasonal distribution is the most consistent of any area. In 2009 an expedition from University of Colorado, discovered four small glaciers in the ‘Cursed’ mountains in North Albania. The glaciers are at the relatively low level of 2,000 meters – almost unique for such southerly latitude.

Governance way
Albania is a parliamentary democracy and a transition economy. The Albanian capital, Tirana, is home to approximately 600,000 of the country’s 3,000,000 people. Free-market reforms have opened the country to foreign investment, especially in the development of energy and transportation infrastructure. Albania was chosen as the top country in Lonely Planet’s list of ten top countries for 2011. Albania is a member of the United Nations, NATO, the Organization for Security and Co-operation in Europe, Council of Europe, World Trade Organization, Organization of the Islamic Conference and one of the founding members of the Union for the Mediterranean. Albania has been a potential candidate for accession to the European Union since January 2003, and it formally applied for EU membership on 28 April 2009.

Economy of Albania
Albania has one of the lowest standards of living in Europe. Approximately 60% of the workforce is engaged in agriculture; the balance is involved in services or industry. The country’s economy contracted in the early 1990s as Albania attempted to move quickly from a tightly controlled state-run system to a market economy. During this period, the unemployment rate was about 40%, but by the end of the decade it was closer to 20%.
Foreign trade is carried by sea, Durrës and Vlorë (also the terminus of the oil pipeline) being the major ports. Albania exports textiles and footwear, mined natural resources, foodstuffs, and tobacco and imports mostly machinery, other industrial products, and consumer goods. Its chief trading partners are Italy and Greece. In the early 1990s Albania joined the International Monetary Fund and the World Bank.

Its GDP per capacity (expressed in PPS-Purchasing Power Standards) stood at 26 percent of the EU average in 2010. Still, Albania has shown potential for economic growth, as more and more businesses relocate there and consumer goods are becoming available from emerging market traders as part of the current massive global cost-cutting exercise. Albania, Cyprus and Poland are the only countries in Europe that recorded economic growth in the first quarter of 2009. International Monetary Fund (IMF) predicted 2.6% growth for Albania in 2010 and 3.2% in 2011. These are signs of increasing investments, and power cuts are reduced to the extent that Albania is now exporting energy.

Streets Under Construction
Economic zones ‘Economic zones’ is a concept that primarily aims at encouraging investments. An economic zone is a zone with a specific economic status and it can be a free zone or an industrial park. The economic zones in Albania besides the capital city of Tirana, which has 800,000 inhabitants, the other main cities are: Durrës, Korcë, Elbasan, Shkodër,Gjirokastër, Vlorë and Kukës. Operating a business within such zone implies exemption from some fiscal obligations. Any juridical person (Albanian or foreigner) with a business project can propose the creation of such a zone and the development of that zone by exercising the business within that zone, given that some conditions are met.

Information about Economic Zones:

The Industrial Park of Spitalla
Surface: 850 Ha – state and private owned property which lies at the north of Durres City, only 15 km away from the biggest port of the country
Bids for developers to start soon

The Industrial Park of VLORA
Surface: 125 Ha
Investment: 20.819.797 Euros
Developer: Idea Vlora
Employment: 18,586 jobs

The Industrial Park of KOPLIK
Surface: 61 Ha
Investment: 18.510.539.27 Euro
Developer: The Industrial and Trade Zone of Koplik
Employment: 16,734 jobs
Activities: Manufacturing, industrial, agro-processing, trade, export-import

The Industrial Park of SHENGJIN
Surface: 3.2 Ha
Investment: 17,054, 152 Euro
Developer: ATX – International Tirana
Employment: 3,000 jobs
Activities: Manufacturing, industrial, agro-processing, trade activities, export-import

The Industrial Park of ELBASAN
Surface: 254.7 Ha
Developer: To be decided after studies are complete
Activities: Industrial, trade activities, services

The Industrial Park of SHKODRA
Surface: 137 Ha
Developer: Some offers presented
Activities: Manufacturing, industrial, grocery, services, trade, import – export

The Industrial park of LEZHA
Surface: 54.3 Ha
Activities: Manufacturing, industrial, agro processing, trade, import – export and services

Albania is coastal country, near the seas Adriatic and Jon, in front of Italia and Greece, in an average of nearly 40 miles far away from them. It is a Mediterranean country, with over 300 days of sun in the year and this makes it a country with great opportunities in tourism. It has many rivers across mountains and across fields, it has lakes and many water fountains where can be built hotels and modern tourism spots, and can be developed fluvial and mountain tourism. It has many antique towns, from the oldest that are discovered archeological excavations, and this makes Albania one of the oldest township in the world and creates opportunity for grater development of archeological – cultural tourism, but are rare the recourses of free Euros for investment. There are many properties like lands, pastures and forests that may be sold. In the same way, also many hotels and other business buildings are for sale because their owners don’t have investment opportunity.

Opportunity of investment in Albania

The possible investment can be in these fields:

  • transport (railway system, rail transport, ports, airports, roads, tunnels, bridges, parking, public transport);
  • generation and distribution of electricity and heating;
  • production and distribution of water, treatment, collection
  • distribution and administration of waste water, irrigation, drainage, cleaning of canals, dams;
  • collection, transfer, processing and administration of solid waste;
  • education and sport;
  • health;
  • tourism and culture;
  • prison infrastructure;
  • recycling projects, rehabilitation of land and forests, in industrial parks, housing, governmental buildings, service of maintenance of IT and data base infrastructure;
  • natural gas distribution;
  • management contract or provision of public services including those related to sectors specified above
Fiscal policy for investment includes:
  • A low corporate tax of 10%
  • Reduction of the fiscal burden of social security contributions payable by employers from 29 to 20 percent
  • Introduction of a flat tax of 10 percent on personal income tax
  • Tax exemption of dividends designated for investments

Incentives to investors are regulated by the law on state aid approved by Albanian government and parliament with the aim to promote the implementation of important projects, to facilitate the development of certain economic activities, to promote the culture and heritage conservation, etc. The state aid may take the form of subsidies or grants; exemptions, reductions, deferrals or tax credit and other fiscal contributions; writing off of overdue fees and penalties; debts write offs or offsetting of losses; loan guarantees or loans at reduced rates; reduction in the price of goods supplied and services provided, including sales/leases of public property below market price; increase of state owned equity at enterprises or increase of its value.

10 Reasons why you should invest in Albania

1. Our domestic economy and exports are expanding
Albania is building a consistent track record of economic expansion built on export growth, a low inflation rate and increasing per capita income. Underlying graph shows that the GDP growth rate and the export growth rate have been substantial during the last years.

2. Low inflation rate
Businesses prefer a predictable environment in which to operate. Consistent low annual inflation rates in recent years have shown that Albania provides the economic stability that gives investors the confidence to invest.

3. Established trading with the EU
EU remains the major trade partner since 64.6% of foreign trade is with the European Union countries. 96.6 % of Albania’s exports are designated for EU markets and this export partner is an important predictor for future growth.

4. Site availability from production facilities to high quality office space
With the Concession Law in place, various sites are available to the foreign investors. These range from basic production facilities throughout the country to high quality serviced office space in our main cities. Industrial sites are better priced in Albania than in Eastern European or other Balkan countries. Electricity and water costs are also at or below those of other countries. Factory units, which in many cases are government owned, are available for refurbishment and are offered along with attractive leasing arrangements based upon the number of jobs created.

5. Gateway to the Balkans Free Trade Area
Albania benefits from many Free Trade Area agreements with Balkan nations to the east of Albania. Investors can manufacture in Albania for export to the 50 million-strong Balkan market as well as throughout the European Union.

6. Total labor costs are lower than comparable countries
Gross wage costs are a fraction of our competitors’ levels within the region, including Romania and Bulgaria, while social security ‘on costs’ in Albania amount to just 30.7% of gross wages.

7. Adaptable and flexible skilled labor force
Albania’s working population of slightly fewer than two million has a median age that is young by European standards, just 29 years compared to 40 years in Italy. A high proportion of under-40s speak two languages, many of them after returning from studying and/or working abroad. The current unemployment rate of approximately 15% shows that there is no complacency in the job market while the number of students in social sciences, business, and law accounts for more than one-third of all those in higher education.

8. Extensive language skills
Most Albanians learn either Italian or Greek from childhood, and are well able to perform customer-relation positions in these near-mother tongues. The younger generations learn English, which is rapidly becoming the primary foreign language taught in schools and universities.

9. Administrative & business regulations are being simplified
Albania is working hard to improve its administrative procedures. According to the World Bank, starting a business in Albania requires only a few more procedures than the average EU country while the flexibility to release workers is rated far better in Albania than in the EU or other Balkan or Eastern European countries. With a pro-business government in place, simplifying the administration remains a priority that will benefit all businesses.

10. Investment opportunities through privatization
Since the government has reviewed its privatization strategy the privatizations represent an important source of investment and an opportunity to transform some key strategic sectors of the Albanian economy. The main tool used to realize this is the law on concessions which has been passed with the support of the World Bank and is designed to stimulate the development of key sections of the county’s infrastructure and public services.