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Foreign Direct Investment

FDI flows towards Albania have been rising steadily since the early 2000s, averaging above USD 1 billion per year for the period 2008-2020. According to UNCTAD’s 2022 World Investment Report, FDI inflows amounted to USD 1.2 billion in 2021, marking an 11.3% year-on-year increase and returning close to the pre-pandemic level. In the same year, the stock of FDI reached USD 10 billion, around 55% of GDP. Foreign investments are essentially directed towards the extractive industries, the energy sector, banking and insurance, information and communication technology, and real estate (U.S. Department of State). Data from the Central Bank shows that in the first three quarters of 2022 FDI flows totalled EUR 984 million, with the Netherlands (EUR 147 million), Italy (EUR 98 million) and Germany (EUR 75 million) as the main investing countries. In terms of stocks, Switzerland has the highest share, followed by the Netherlands, Canada, and Italy.

Albania has set up reforms to boost FDI. The state has adopted a tax reform that is advantageous to foreign investors and aims at reducing corruption and administrative difficulties that can be discouraging to investors. The long-winded procedures to obtain operating licences in the trade, construction and tourism industries have slowed down investment progress. A lack of transparency in public procurement and poor enforcement of contracts also hinder FDIs to Albania. In addition, investments continue to suffer from the lack of infrastructure and poorly defined property law; and property rights continue to be a challenge because a clear title is difficult to obtain. The country declared to target foreign investment in the following sectors: energy and mining, transport, telecommunications, infrastructure and urban waste, tourism, agriculture and fisheries. Foreign investors can fully own local companies, except in certain sensitive sectors such as domestic and international air passenger transport and television broadcasting. Albania currently lacks an investment-review mechanism for inbound FDI. The country ranks 84th out of 132 in the 2022 Global Innovation Index and 101st out of 180 in the Corruption Perception Index.

 
 
Foreign Direct Investment 202020212022
FDI Inward Flow (million USD) 1,1081,2341,434
FDI Stock (million USD) 9,60810,08111,397
Number of Greenfield Investments* 537
Value of Greenfield Investments (million USD) 339113160

Source: UNCTAD - Latest available data.

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

Country Comparison For the Protection of Investors Albania Eastern Europe & Central Asia United States Germany
Index of Transaction Transparency* 9.0 7.5 7.0 5.0
Index of Manager’s Responsibility** 7.0 5.0 9.0 5.0
Index of Shareholders’ Power*** 7.0 6.8 9.0 5.0

Source: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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What to consider if you invest in Albania

Strong Points
Albania's strong points are:

  • Economic dynamism with a growth rate of 2.24% in 2019 (IMF)
  • A strategic geographical position (with ports in the Adriatic and in the Ionian Sea)
  • Important natural resources (oil, chromium, copper and coal)
  • A young and low-cost workforce
  • The prospect of its integration into the European Union
  • A currency (lek) that is solid and stable against the euro
  • A competitive tax system
  • Free access to major markets (Albania is part of several FTAs with large markets, as well as the General System of Preferences)

Albania is a developing country that needs foreign investors to develop large parts of its economy, which offers many interesting opportunities.

Weak Points

Albania is one of the least developed countries in Europe and the Albanian economy remains fragile and highly dependent on external institutional support. The main obstacles to the country's development and the attraction of foreign investors are:

  • An ingrained informal economy with a considerable weight on GDP (56.7% in 2019 according to the ILO, latest data available).
  • A relatively poor population with below-European standards, and low public investment in education of 3.6% of GDP (World Bank, latest data available).
  • An economy that is not very diversified and highly dependent on agriculture (18.5% of GDP and 36.4% of jobs in 2019 according to the World Bank, latest data available).
  • High risk of corruption and organised crime undermining the rule of law.
  • Fiscal and customs systems failing.
  • A lack of modern infrastructure.
  • Recurring energy shortages causing power cuts.
Government Measures to Motivate or Restrict FDI
Legislative and fiscal reforms have been enacted in recent years, as well as new laws on public-private partnerships, public procurement, free trade zones, business registration and electronic signatures. The country has ratified the "Investment Charter": a Stability Pact initiative aimed at reforming the legal environment in order to facilitate FDI in the Balkans. Steps are also being taken to halve non-tariff barriers and shorten the time needed to register a business (currently 40 days to 8 days only). The government of Edi Rama, driven by its desire to join the European Union, is working to reform the country and restructure it to consolidate the dynamism of its economy. Reforms have thus emerged to reduce the country's fiscal deficit (in 2019, the government deficit reached 1.9% of GDP - IMF), to reorganise the key electricity sector and to increase pensions.

For a number of years, Albania has implemented measures to attract foreign capital. Guarantees such as equal treatment between nationals and foreign investors and tax measures such as the VAT exemption for international exports and services, as well as importing activities for imported goods and for re-export, are some of the key measures that have been adopted and should facilitate a more dynamic development of FDI in the country.

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Investment Opportunities

Tenders, Projects and Public Procurement
Tenders Info, Tenders in Albania
 Globaltenders, Tenders & Projects from Albania
 DgMarket, Tenders Worldwide
 

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