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ALBANIA – Foreign investment in an emerging market
Albania is a Balkan country located in southeastern Europe's eastern Adriatic coast. The country borders of the former Yugoslav Republic provinces of Montenegro, Former Yugoslav Republic, Macedonia, Serbia and Greece to the south. The capital is Tirana. (Bank Group World, 2009).
Personal investment (FDI) in Albania is derived from interest to monitor the transition of Albania in a NATO country and the prospective Union (EU) members. The process of Albania's accession to the EU started in January 2003. the admission of Albania to the EU depends on the stability of countries in the economic and political future. Albania is committed to the EU institutions and joined NATO Treaty Organization (North Atlantic) April 1, 2009. (Wikipedia contributors above, 2009). Albania formally applied for EU membership April 28, 2009.
Considered one of the poorest European countries, Albania many ex-pats living and working throughout the EU and Switzerland. High birth rate contribution, the country has great potential for foreign investment directly taking into account their status as future EU, geography and geopolitics. Albania is a distinctive classification of an emerging market and changing future euro coin Lek (improved purchasing power and wealth countries) reveals that there is a great opportunity for Australian companies to invest money in a multinational enterprise with a controlling interest.
Foreign direct investment occurs when a company invests resources in business activities in countries outside their base of operations (Hill 2009, p11) and Albania. The main areas of foreign direct investment by multinationals in Australia to be considered are the construction (Roads, infrastructure), Property, Renewable Energy, Finance and Tourism. The types of businesses that may be interested in this type of investment are the likes of origin Energy holdings McMahon, Raine and Horne.
Historically, most FDI has been directed at developed countries. FDI in developing nations or emerging traditionally has increased substantially (See Figure 1, Appendix 1) since 1990 (Hill 2009, P243-244). So Albania is an excellent investment opportunity FDI can provide substantial benefits for Australian companies. Most recent entries have been directed at the emerging economies of Southeast Asia, so there is untapped potential for Australian companies to invest in Albania.
Albania's real GDP has averaged 6% in years earlier due to an increase in public investment. Inflation is under the limit of 4 percent above the central bank's informal target. (See Chart 1, Annex 2). The Albanian lek in 2009 continue to be supported by large foreign-currency remittances from Albanians living abroad, and interest rates relatively high. Exports should grow relatively strong in 2009 and expected current account deficit with an average of 11% of GDP. (Business Eastern Europe, 2008). (See Table 2, Appendix 2).
The viability of the client company to enter the Albanian market is positive. Albania's democratic government encourages investment foreign, which in a continuing effort to privatize public enterprises, the government is seeking qualified foreign investors in key sectors such as telecommunications, energy, oil and gas, finance, and construction. (Foreign Investment Climate, 2008)
Albania's infrastructure is currently inadequate, and there is little money for budgetary improvements. The Government inherited a poor road system from the communist era. The main projects are the construction of roads currently underway, and an estimated 6000 km of road will be carried out in 2013. (Euromonitor International, 2009). Therefore, it is an immense opportunity for the basis in Australia Civil Engineering / construction companies to bid for an important sector of work, and opportunities for profitable investment.
Feasibility the client company to enter the markets of Albania as Greenfield is varied. Currently, Albania ranks 89th out of 183 countries in the benchmark of ease of doing business. Starting a business, the range of 68 in 2009 and Albania began to move to 46 in 2010. (See Table 1 in Appendix 3). The average time in days to open a is 5 business days vs. 13 days for the OECD overall average. This shows that the Albanian government is moving in a positive direction for attract foreign investment. (The World Bank Group, 2009). However, the cost of starting a business Cost (% of income per capita) is substantially higher than the OECD average (see Table 1 of Appendix 4).
"Foreign companies to get credit" and "investor protection" shows that Albania is making progress in certain areas of business investment – 15 projected ranking of 183 countries in both these facets in 2010, placing in the top Albania 10%. By contrast, dealing with construction permits (173 in 2010) and employment of workers (105 in 2010) shows that investment firms Foreign Direct specializing in renewable energy and construction should take these factors into consideration important in investing and starting a new project creation. (The World Bank Group, 2009).
The types of businesses that are attractive for FDI focus on infrastructure construction and energy. Albania's energy crisis has been caused by the rate of annual growth in energy demand. The rate has been above 8% and the generation has struggled to keep pace. In a recent EU report acknowledges that Albania has taken some strong measures to restructure and liberalize the energy sector. The European Bank for Reconstruction and Development (EBRD) indicates that it will provide financing for the vast new power generation. Therefore, renewable energy is also an option attractive foreign investment. (GMB Publishing, 2009).
Hydropower generation has historically provided most of the energy capacity Albania and continues to represent its main source of generation. Through lack of funds, only 35 percent of the development potential is currently being exploited. (GMB Publishing, 2009). Australia-based companies Hydropower has a substantial advantage in the exploitation of market experience Albanian. Studies show that Albania has good potential of solar energy. No large-scale PV projects currently in operation, however the installation of large solar power projects planned by the Albanian government in 2015. (GMB Publishing, 2009). Australia solar companies have the opportunity to explore solar power Greenfield projects.
Several U.S. companies Asset Management launches the Albanian property market to take advantage of the growing nascent mortgage market. Albania is that can benefit from its planned EU membership, which is expected to be completed by 2014 and has received € 100 million in financing. A report by the Bank 2007 World revealed a high GDP growth and a dramatic decrease in Albania poverty. Albania has received substantial investments from international agencies as the International Bank for Reconstruction and Development. (Hirst, T, 2008). Commercial and residential properties is an area of FDI, which is attractive thanks to the high power of $ A, compared with CEL Albanian currency. Today $ 1A = 85.01 ALL CEL (Albania) = 0.1177 and 1ALL $ A. (Quick Rates Cross, 2009). When Albania enters the zone of the EU, its currency will become stronger and in line with the parity of the euro area.
Albania capital markets embryos remain among the most in all of central and Eastern Europe. There are encouraging steps taken to implement the legal and regulatory framework to build a functioning stock exchange. This makes the convergence with the EU more easily and provides banking and financial opportunities through a framework for foreign investment operate within. (Access to Markets, 2008).
Albania recently witnessed an impressive growth in tourism in 2009. Albania's government announced that there were an increase of 42 percent in the number of tourists visiting the country, reported AENews. Albanian government is claiming its coasts are more beautiful than those of Costa Blue. (S Forbes, 2008). With the new hotels, resorts and restaurants, the private sector in tourism in Albania has been growing at an average of 30 percent over five years. The Albanian economy had its best growth in Europe, foreign investments in Albania have increased 59 percent this year. Australia companies can invest in industry child tourism, providing knowledge, with a huge potential profit. (New Europe, 2009).
The Albanian Government has induced a positive attitude towards external investment and its strategy to strengthen the business environment has been supported by the elimination of administrative barriers to investment. The privatization program is gaining momentum and the government is encouraging foreign investment. Nearly a third of the population works outside the country. Remittances offer help alleviate poverty and fostering a boom in housing infrastructure and (Euromonitor International, 2009).
The democratic government of Albania Albania Party knows that a battle looms for foreign investment and that Albania has to catch up. The lowest previous level of interest from abroad is mainly the fact that Albania's international image is poor, but too bad. Albania services sector, especially restaurants and hotels, are exceptional. The hospitality is great and the Albanians are a people to the outdoors. They are ready for an influx of tourists. Albania is also rich in natural resources such as oil, gas, copper, chromium and hydroelectric potential. (Austin RC 2006)
The Albanian government of Prime Minister Berisha has created an excellent environment to attract investors to Albania. Special attention was the improvement of infrastructure. Efforts to improve the legal system to protect investors also significant. It was also reported many West European companies have chosen to escape the high taxes in Europe by investing in Albania, it offers the best tax system in Europe with a tax of 10 percent of background. (NEWEUROPE 2009).
The Albanian Government has worked to make it easier to invest and do business in Albania, is set one-stop shop for registering a new business. Education is also emphasized in particular by the private sector. Since the fall of communism, Albania has been an ally of the U.S., the supply of troops. His positive attitude of foreign policy, economic and anti-corruption successes are models for other nations Muslim. (S Forbes, 2008).
Foreign companies experience various restrictions on investment in Albania. Despite some recent improvements, freedom of Albania business remains constrained by a regulatory framework for consideration. Despite starting a business is relatively quick, obtaining a business license requires 24 procedures and 100 days almost more than the world average of 225 days. (The Heritage Foundation, 2009).
Foreign and domestic companies are treated equally before the law, and nearly all sectors are open to foreign investment. Agricultural land can not be acquired by foreign investors but can be rented for a maximum of 99 years. The Albanian state can expropriate an investment either to the public interest, but no legal provision for compensation. This can be an impediment , or restriction by an Australian company specializing in niche markets in Albania. transparent regulations, inefficient bureaucracy, and corruption also limit and discourage foreign investment in Albania. (The Heritage Foundation, 2009).
The financial system is relatively undeveloped by Western standards, although progress has been made. Although many banks have expanded their services, the use of checks and credit cards still not widespread. While the short-term credit is available, it is extremely expensive and difficult to obtain large unsecured. This may restrict foreign investment in an Australian company. Is Customer service is relatively poor compared to western standards. (Macro-Accessibility, 2007).
The government has set aside the Tirana Stock Exchange of central bank, but the stock market has remained inactive and are not shared yet. Australia financial investment firms currently considering limited Bag is at an infant stage. Albania's judicial system enforces the weak law and institutions is one of the most polluted in the country. Judges are appointed often for reasons strict policies and can be corrupt. Protection of intellectual property rights is weak, and violations of copyrights and trademarks are common, therefore of Australia and foreign companies with proprietary investments are subject to violations, without legal protection. (The Heritage Foundation, 2009). rights land are not well defined, especially in coastal areas, and 70 percent of all civil cases related to property disputes. This could have an adverse impact civil engineering organizations. (The Heritage Foundation, 2009).
Albania Corruption is perceived as widespread. Albania ranks 105 among 179 countries of the Transparency International Corruption Perceptions Index 2007, a very slight improvement from previous years. Corruption permeates all sectors and levels of government. Albania is a major transit country for trafficking in arms, narcotics, smuggling, and human beings. (The Heritage Foundation, 2009).
There is a great advantages and benefits of FDI in Albania. Stimulate economic development and has helped developing countries like Albania when faced with economic difficulties before. (See Economics 2009). Billions of dollars are up projects in the energy sector to produce wind power, solar and sources besides construction of roads and infrastructure. FDI in the tourism industry, employment in the construction of hotels and resorts are under way, also the generation of employment in the services sector of Albania. (New Europe 2009).
FDI in Albania allows the transfer of technologies and contributes to competition between producers in the local market. The gains in the economy include the development of skills and human capital resources of employees Albanian energy, construction and engineering firms that are trained on the operations of a business. The creation of new jobs and increase wages of workers leads to improvement lifestyle. (See Economics 2009).
The benefits generated by FDI taking place in Albania can be used to make contributions to income corporate tax. Allows foreign direct investment for development of the manufacturing sector. (See Economics 2009).
The Albanian economy has been on the rise, with an annual average GDP growth than anywhere else in the region. That's impressive growth has been largely at controlling inflation, plus investment. Previously, Albanian professionals who migrate to other nations. "Brain drain" is used to describe the phenomenon of migration of highly qualified professionals from Albania with other EU countries. FDI in Albania contributes to positive economic growth, and professionals are a source of capital for developing countries such as Albania. Reversing the brain drain has had positive effects on education, income distribution and economic welfare. (Centre for Social and Economic Studies, 2006)
a country's balance of payments accounts and income estimated payments from other countries. If FDI in Albania is a substitute for goods and services, the positive effect can improve the current account of the host countries balance of payments. (CW Hill, 2009). According to UN report FDI inflows of foreign multinationals has been a major driver of exports led economic growth, which can be used by Albania.
The adverse effects of foreign investment in Albania means more competition, as well as being a positive aspect could lead to local companies out of business. On the other hand, foreign multinationals could raise prices, causing inflationary pressure within the Albanian economy. Key decisions affecting the country host (Albania) the economy can be done by a foreign investment company has total commitment to the Albanian economy. (Hill, CW 2009)
Taking into account that are minimal and firms established office in Albania, a greenfield investment may be an option, although there can be benefits in the acquisition of an ability of existing firms, embedded skills and culture through the purchase of an established organization. (Hill 2009, p506). However, the process of creating a new hierarchy of Greenfield may be the only feasible way in certain cases in Albania to engineering and construction due to lack of infrastructure and experience in a former communist country.
Suitable modes of investment income include investment in Albania with the Overseas Private Investment Corporation (OPIC), a U.S. government agency that sells investment services in emerging markets. The most important background for the region is $ U.S. 150 million in the Southeast Europe Equity Fund (SEEF), managed by Soros Private Funds Management. (Macro-Accessibility, 2007).
The Trade and Development Agency is also a U.S. government agency promoting private sector participation in developing countries. In Albania, the TDA has recently funded projects to implement the road ports, energy, and various private sector projects. (Macro-Accessibility, 2007).
The International Finance Corporation (IFC) a member of the World Bank Group offers a full range of financial products to companies in developing member countries as Albania. The European Bank for Reconstruction and Development (EBRD), which promotes competition, privatization and entrepreneurship, taking into account the different stages of transition from developing countries. The EBRD has equity positions with the National Commercial Bank of Albania, and the reconstruction of Albania Equity Fund and the Italian-Albanian bank. (Macro-Accessibility, 2007). In addition to acquiring an existing business, to obtain funding from these companies is a viable starting point for an Australian company that enters a new building project in Albania.
Poor transport, telecommunications and other infrastructure are considered the main obstacles and barriers to investment. Albania was the most Poor Europe, but the per capita income levels have doubled in the last 10 years. Nevertheless, the economy remains vulnerable on many fronts due to a culture of tax evasion, a significant amount of long-term domestic debt and the weakness of laws against money laundering. (Euromonitor International, 2009).
The government corruption problems and a weak judicial system pose problems in the efforts of Albania for greater cooperation with the EU. The EU member countries are concerned about the commitment to improve the rule of law and crime. (The World Bank Group, 2009). Multinational Enterprises may consider the lack of law as an impediment to foreign direct investment. (Euromonitor International, 2009).
A major barrier to investment may be the problem of developing free trade zones to attract foreign investment. Current legislation provides the right to establish free trade areas and a commission special area has been established by the Albanian government to identify possible sites zone. However, there are free trade zones have been established yet. (Macro-accessibility 2007).
Apart from the monetary and income opportunities for firms to benefit Australia and the countries of origin are establishing FDI, there are opportunities for the host country (Albania), such foreign investment. young people from Albania, literate population represents a surplus of labor, which is reflected in the unemployment rate of 14 percent. Although some members of the workforce are highly skilled, many work in inefficient industries with outdated technology. Through foreign companies that invest in Albania, the set of skills and technological capabilities of the young labor force is growing Albania. (Macro-Access 2007). In Albania are quickly learning the economic and market practices often display impressive entrepreneurship. (Macro-Accessibility, 2007). Definitely there are significant opportunities for the host country Albania through FDI.
References
Austin RC 2006 "Albania's new investment strategies, SETimes.com, viewed 22 October 2009
Business Eastern Europe, 2008, "Business Perspectives – Albania", October 10, 2008, vol. 37 No. 377, p3-3.
Centre for Social and Economic Studies 2006, "From brain drain to brain gain: Expert Albania Diaspora Mobilization", Centre for Development Research Migration Globalisation and Poverty, University of Sussex, United Kingdom
Economy Watch, 2009, "Return on Investment Foreign Direct ", viewed October 23, 2009, <> Http: / / www.economywatch.com / foreign-direct-investment / benefits.html
Euromonitor International, July 3, 2009, "Albania: Country Profile Visto October 21, 2009
Forbes, S 2008, "Success Story Muslims, Business Source Complete, July 4, 2008, vol. 181 Issue 7, p15-16
Summary of Foreign Investment Climate, 2008, "An investment in Albania Albania Revision 2008, Viewed 21 October 2009.
GM Publishing, 2009, "Renewable Energy in South East Europe – Albania, viewed October 21, 2009.
Hill, CWL 2009, International Business – Competing in the global market 7 ed McGraw-Hill International Edition, Washington USA.
Hirst, T, 2008, "Fund launch," Fund Strategy, viewed October 20, 2009.
Macro-accessibility of 2007, "ICON Group International, Inc ', viewed 23 October 2009
Market Access 2008, "Albania: Building a Stock Market" viewed 20 October 2009
NEWEUROPE 2009, "Albania has the strongest growth in tourism investment world, "neurope.eu, viewed 23 October 2009
Quick Rates Cruz, 2009, "XE.COM exchange rates, seen October 25, 2009,
The Heritage Foundation, 2009, "Index of Economic Freedom – Albania ', viewed October 22, 2009,
The World Bank Group, 2009, 'Doing Business in Albania visited on October 18, 2009, < http://www.doingbusiness.org/ExploreEconomies/?economyid=3 >
Wikipedia Contributors, 2009 September 30, "Albania's accession to the European Union." [Internet]. Wikipedia The Free Encyclopedia, viewed October 21, 2009, http://en.wikipedia.org/w/index.php?title=Accession_of_Albania_to_the_European_Union&oldid=305088136
Appendix 1
Graphic 1 – foreign direct investment by region (U.S. $ Billions). (Hill 2009, P244).
Appendix two
Figure 1 – ALBANIA. GDP and Consumer Prices% change, year. (Business Eastern Europe, 2008).
Table 2. Albania – Data & Forecasts. (Business Eastern Europe, 2008).
Category
2008 Rank
2009 rankings
2009 rankings
Population, mn
3.10
3.11
3.12
Exchange rate ALL / EUR
120.25
119.40
119.45
Imports, billion U.S. $
4.50
4.90
5.30
Exports, $ million U.S.
1.30
1.50
1.70
Trade Balance, U.S. $ Bn
-3.20
-3.40
-3.60
Current account,% GDP
-6.90
-5.50
-4.20
Forex reserves (gold) million U.S.
2.50
2.95
3.43
Foreign debt,% of GDP
18.2
17.5
16.3
Appendix 3
Table 1. This table shows the summary Doing Business Albania 2010/2009 economic data for selected (out of 183 countries) and the classification of each item. (The World Bank Group, 2009)
Easy … ….
Doing Business 2010 Rank
Doing Business 2010 Rank
Change classification
Doing Business
82
89
7
Starting a Business
46
68
22
Getting Credit
15
12
3
Protecting investors
15
14
-1
Employing Workers
105
105
0
Management building permits
173
170
-3
Appendix 4
Table 2. This table shows the challenges of starting a business in Albania. Included are steps that employers can be expected, the average time it takes and the cost and minimum capital required capital as% of GNI. (The World Bank Group, 2009).
Indicator
Albania
Eastern Europe and Central Asia
OECD average
Procedures (number)
5
6.7
5.7
Time (Days)
5
17.4
13.0
Cost (% of income per capita)
17.0
8.3
4.7
Min of capital (% of income per capita)
0.0
21.5
15.5
About the Author
Konstantinos (Kosta) Barkoukis is an Australian born Greek national who works as a global IT consultant and property developer. His native ancestry is traced to Epirus, and the Greek state of Macedonia, just like Alexander the Great.
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