Albania- economic developments, achievements and challenges

Albania is a country with great economic potential, due to its location, demographics, and its natural resources.

The new model of economic growth that we are applying is starting to yield results. The economy is beginning to expand and the trend is positive, people's confidence in the system has increased, the production structure of Albania is being consolidated while adding weight and value to export. The focus of the government is to support and promote the industries, increase exports and attract foreign direct investment as the main sources of sustainable economic growth.

Economic reforms, market opening and expansion of the Balkan region and beyond (implementation of CEFTA uniqueness), SAA with the EU, the FTA with Turkey and the signing of the FTA with the EFTA countries, are important factors that are affecting the growth of production for export.

The total trade volume in 2014 amounted to Euro 5,762.1 million, marking an increase of 5.7% compared to 2013. Exports will remain based mainly in the textile industry (textiles and footwear) and in natural resources (crude oil).

Albanian export has a new, healthy structure where the loss of exports from fuel, oil or minerals, is replacing and growing export agriculture, agricultural products, construction materials and goods, machinery and equipment. This increase shows that the economic model has started to work focused on production in manufacturing, mechanical industry, as well as in other industries.

For 2015, we expect an economic growth of 3.5%. Exports of goods and services, especially tourism services are expected to be realized better in the medium run. The main source of economic growth will also be exports mainly manufacturing, minerals and fuels as well as foreign direct investment.

Albania's fiscal challenge is to lower the high level of public debt to less than 66% in 2017 and below 60% by the end of 2019. The fiscal strategy envisages a significant reduction in the overall budget deficit to around 3.8% of GDP during 2014-2017, helped by tax increases implemented in 2015 and the implementation of administrative measures and the reduction of problem loans.

Monetary policies aim to maintain price stability in the context addressing inflation and taking into account the need to maintain levels of reserves to support financial stability.

Economic policies are designed to promote the development of entrepreneurship, fair taxation, support for SMEs, providing guarantee free competition and accountability and ensuring effective communication with the business community.

2014 has been a difficult year, but has marked the country's economic recovery and the beginning of the reforms necessary to consolidate sustainable economic growth;

Former sources of growth, such as the construction sector or remittances, are being replaced with new sectors that have development potential in the country, such as manufacturing, agro-industry, food processing, chemicals and plastics, but also energy, transportation, infrastructure and tourism.

We are building our economy based on a regional approach, involved in a market within the member countries of CEFTA with 26 million customers, and on top of less than 10 years we will be economically and fully integrated into the larger European market.

2014 was the year of a brand new relationship between the government and the enterprise, to establish a constructive dialogue and cooperation as co-shareholders of the country's economic fortunes. It has been created and it is functioning, the National Economic Council, where any reform and any problem of entrepreneurship is discussed, to find a solution; and in cooperation with the EBRD the  Investment Council was established, where the strategic sectors will be discussed and matters set will receive an official response from the higher authorities of the state.

The government paid over 360 million dollars business arrears and continues even today to pay those debts; there were many changes and reforms aimed at a radical business and investment climate change in the country. It took a series of measures to relief in various sectors, such as inward processing packages, the package of farming and meanwhile more support packages are developing for some other sectors, such as tourism, recycling and plastic materials, agro-processing and mechanical industry.

Some of my country's achievements during 2014 which are well appreciated by international institutions:

  • According to the EBRD, in 2014 Albania was ranked as the country with the highest reforms in the region;
  • Albania climbed 40 positions in the report "Doing Business", moving to 68th place in the world rankings, from 108th place a year ago;
  • According to "Standard & Poor ', Albania was ranked twice, evaluation B negative (-) to B (stable) to B positive (+) as improved;
  • Our goal is to be in the order of 20 leading countries in the "Doing Business" in 2016 and among the 25 countries under the "Index of Economic Freedom" by the Heritage Foundation;
  • According to the "Journal" L'Express "Albania was ranked as one of the 15th best tourist destinations to visit in 2015, calling Albania as" a new Pearl of the Balkans ".

2015 is the year of deepening reforms that have already started and economic transformation. The vision is to turn Albania into an important center of production and regional trade.

New sectors with high potential will continue to be actively assisted, producing support packages that will have a direct positive impact on the economy and citizens, the fight against informality will continue with the reforms for fiscal rectitude, foreign investments and further increase in employment.

Also a reform will begin which will bring together the National Registration Center and the National Licensing Centre, in order to simplify and solve problems with procedures, reduce costs, time and number of procedures for the enterprise and to make an overall more efficient system.

The gradual strengthening of the economic activity will come as a result of the growth of private domestic demand, improving the liquidity of the business sector, easing financial conditions, and   will also be supported by several key projects provided by foreign direct investment.

Albania is making efforts to further resolve important structural weaknesses that slow economic performance, including the weak rule of law, the high level of informality, structural problems in the energy sector, strengthening the medium-run budgetary framework, and including and adopting fiscal laws.

The measures identified in human capital are oriented by labour market requirements and suggest an educational system focused on professional training.

A special attention is being paid to agriculture, including food security, taking into account the contribution of 20% of the sector in GDP, employment (almost 50% of total labour force), and the potential for exports. For 2015 agriculture aimed at expanding the geographical map for exports in other European countries and beyond, and is heading towards a pilot scheme.

Structural reforms undertaken by the government in these 20 months have sought to bring a functional economic model, reforms in the service of citizens and the rule of law, sustainable economic growth, employment and welfare improvement.

The Albanian government will soon pass to the Parliament a package of amendments concerning the format of public-private partnership, and that will completely change the relationship of the private sector with the public in terms of concessions, supporting small enterprises and attracting foreign investment direct. This new relationship public-private contracting, public-private concessions will not only enable the standardization and facilitation of procedures going to specific projects but will bring more revenue to the state budget, and more money to the Albanian economy.

In order to attract foreign investment and encourage the private sector development, we are working to remove structural barriers to FDI, such as unclear property rights and combating corruption, further improving the rule of law, fighting effectively corruption and the informal economy, improving the regulatory framework and the procedures related to resolving insolvency, paying taxes and registering property.

In cooperation with the World Bank, and also with other partners, we are working for Albania to develop in some key sectors of the economy, from tourism to energy, from professional education, up until agriculture, production, manufacturing and definitely export.

Recently the Albanian Parliament approved two very important laws, strategic investments and the economic zones law.

The law of strategic investment gives the maximum legal guarantees for foreign investors. The Law is the founded upon two main elements: increasing contractual and judicial security of foreign and domestic entrepreneurship and the second is the adoption of a fast road or "fast track" to benefit administration contracts, licenses or contracts to foreign investment direct. The law encourages and supports domestic and foreign investment in sectors such as energy, mining, transport and infrastructure, telecommunications, tourism, agriculture, economic zones and priority development areas.

This law has approximately 17 basic definitions which will help investors and force the administration to be too quick to respond to investors, to be assisting and administrative escort during all technical and administrative process so that domestic or foreign investors, or various projects in general, go on to the bureaucratic process.

The law "On the creation and functioning of economic zones" is one of the most positive changes in economic framework legislation because it will create the premises for attracting direct foreign investment, large and that bring value to the economy. According to this law facilitations will be offered that have a direct impact on the balance sheet items of the companies, so that not only the enterprise benefiting , but it is also directly controllable.

Currently we have announced the "expression of interest" for three technological areas and economic development. One is in Spitallë, 500 hectares; one is in Vlorë, about 200 hectares; and one is in Komplik, 67 hectares. In July we will open an international competition for developers and if everything goes well, in October or November we will announce the winner, which can then be ready in early 2016-s.

Fiscal facilities:

  1. provides a reduction in the tax burden, especially on direct income tax with half of it,
  2. intends to balance the companies increase productivity, which means it will not pay tax for infrastructure
  3. will not pay tax on transfer of property;
  4. will take away double spending on employee training;
  5. shall cease state cost;
  6. shall cease amortization by 120% in a very short time for 10 consecutive years;

 

Another important law which has just approved is the Law of tourism, an organic law supporting the tourism industry, offering various incentives to investors in the tourism industry in order to raise the standard and quality based on the value of investment and will make our country more competitive in the region for investment.

Tourism is a strategic sector. Albania is the beauty of Balkan, and today is referred to as "The Undiscovered Europe". Our aim is to turn Albania into the most attractive destinations in the Mediterranean. The new law on tourism will bring a new consolidated structure in terms of the tourism industry. The law makes it a discipline of the road towards complete formalization of the industry. This law follows the support given by the State tourism industry investments. One of the elements is making available public grounds with competitive builders, developers, resorts, hotel or accommodation structures 99 years and a 1 euro, will depend on the investment and will be the case after case with DCM.

After removing the exclusivity of international flights Airport "Mother Teresa" 3 are the new government projects: the opening of two other airports that allow Low cost flights, plus an airport that will have another standard. (Airport of Vlora, Saranda and Kukes). Removing or visa facilitation 12 or 13 countries that can supply destinations Albanian tourism with tourists, as is China, (Middle East countries, Russia) in order to have a much more simplified mobility.