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Albania: Market Profile

Picture: Albania factsheet
Picture: Albania factsheet

1. Overview

Albania has been transformed from one of the poorest countries in Europe into an upper middle income country. The country is implementing important reforms to revitalise growth and job creation, while advancing the integration agenda of the European Union (EU). Albania is richly endowed with underdeveloped natural resources such as oil and minerals, including chromite, which made it a potentially attractive destination for foreign investors. The Patos-Marinza oilfield is the largest onshore oilfield in continental Europe.

Sources: World Bank, Fitch Solutions

2. Major Economic/Political Events and Upcoming Elections

March 2016
Bankers Petroleum (owner of the concession to develop the Patos-Marinza and Kucova oilfields) was acquired by Geo-Jade Petroleum Corporation of China.

July 2016
The governing Socialist Party and the opposition Democratic Party agreed sweeping judicial reforms needed to move towards accession talks with the EU.

April 28, 2017
Ilir Meta was elected President of the country.

June 2017
Parliament finally approved a second term of government for the Sociaist Party led by Prime Minister Rama.

October 2018
The Albanian Investment Development Agency (AIDA), with the support of the Ministry of Europe and Foreign Affairs, organised a meeting between representatives of ChinaCham Hungary – the Hungarian-Chinese Economic Chamber – and Albanian businesses at the Ministry of Finance and Economy. Discussions were held on establishing business partnerships with China and providing opportunities for investment in Albania.

November 2018
The Albanian and Romanian Chambers of Commerce and Industry announced at a forum in Tirana that they would strengthen co-operation in the sectors of energy, agribusiness, tourism and construction.

Sources: BBC Country Profile – Timeline, Invest in Albania, Fitch Solutions

3. Major Economic Indicators

Graph: Albania real GDP and inflation
Graph: Albania real GDP and inflation
Graph: Albania GDP by sector (2017)
Graph: Albania GDP by sector (2017)
Graph: Albania unemployment rate
Graph: Albania unemployment rate
Graph: Albania current account balance
Graph: Albania current account balance

e = estimate, f = forecast
Sources: IMF, World Bank, Fitch Solutions
Date last reviewed: November 6, 2018

4. External Trade

4.1 Merchandise Trade

Graph: Albania merchandise trade
Graph: Albania merchandise trade

e = estimate
Source: WTO
Date last reviewed: November 6, 2018

Graph: Albania major export commodities (2017)
Graph: Albania major export commodities (2017)
Graph: Albania major export markets (2017)
Graph: Albania major export markets (2017)
Graph: Albania major import commodities (2017)
Graph: Albania major import commodities (2017)
Graph: Albania major import markets (2017)
Graph: Albania major import markets (2017)

Sources: Trade Map, Fitch Solutions
Date last reviewed: November 6, 2018

4.2 Trade in Services

Graph: Albania trade in services
Graph: Albania trade in services

Source: WTO
Date last reviewed: November 6, 2018

5. Trade Policies

  • Albania joined the WTO in September 2000 and it grants at least Most Favoured Nation (MFN) treatment to all its trading partners.

  • Albania's average tariff rate is 1.1%, the lowest in the South East Europe region (out of 12 states) and the third-lowest in the wider Emerging Europe region (out of 31 states).

  • Albania has no significant non-tariff trade barriers. However, administrative bureaucracy, such as the use of sanitary or phytosanitary measures (SPS), can delay the movement of goods and increase costs. Furthermore, the application of market prices, often referred to as “reference prices” in calculating customs duties and other customs taxes, has become a concern, and is a potential barrier for businesses involved in trading activities.

  • In January 2015, Albania eliminated import tariffs on products, such as live bovine animals and swine, live poultry, eggs, wheat or flour, and petroleum oils. The government also reduced import tariffs on new pneumatic tyres of rubber, from 15% to 10%.

  • Albania's Business and Investment Development Strategy 2014-2020 stipulates that its trade policy objectives are guided by WTO principles. The country also complies with the ambitions and objectives of the EU in the area of business and investments promotion. The strategy guarantees the absence of quantitative restrictions on imports and exports (except in cases of environmental protection or assistance to fragile industries, cultural heritage, forestry and arms and ammunitions), export subsidies, any kind of tax on exports and export bans.

Sources: WTO – Trade Policy Review, South East European Centre for Entrepreneurial Learning, Fitch Solutions

6. Trade Agreement

6.1 Trade Updates

In May 2018 representatives of Durres Port Authority in Albania and the Croatian Rijeka Port Authority signed a memorandum of understanding to widen bilateral co-operation in the field of maritime transport and port industry. The two states also agreed to co-operate on issues related to economic promotion in order to boost trade.

6.2 Multinational Trade Agreements

Active

  1. The Central European Free Trade Agreement (CEFTA): CEFTA came into force on May 1, 2007 and helps to increase trade between regional counterparts and foster non-EU bilateral relations. The signatories are Albania, Bosnia and Herzegovina, Serbia, Moldova, Montenegro, Macedonia, and Kosovo.

  2. Albania and the European Free Trade Association (EFTA): EFTA consists of Switzerland, Norway, Iceland and Liechtenstein. The main focus of the EFTA is on the liberalisation of trade in goods. The agreements with Liechtenstein and Switzerland entered into force on November 1, 2010 and the agreements with Norway and Iceland entered into force on August 1 and October 1, 2011, respectively.

  3. Stabilisation and Association Agreement between Albania and the EU: The bilateral free trade agreement (FTA) entered into force on December 1, 2006 for trade in goods and on April 1, 2009 for trade in services. The agreements stimulate Albania's already large export and import volumes with EU member states, including Germany, Italy and Greece.

  4. The bilateral FTA between Albania and Turkey: The FTA covers trade in goods and entered into force on May 1, 2008. Turkey is Albania's third-largest supplying market as of 2017, with imports from Turkey accounting for 7.5% of Albania's total imports, of which articles of apparel and clothing accessories (knitted or crocheted) made up the highest percentage.

Sources: WTO Regional Trade Agreements database, Fitch Solutions

7. Investment Policy

7.1 Foreign Direct Investment

Graph: Albania FDI stock
Graph: Albania FDI stock
Graph: Albania FDI flow
Graph: Albania FDI flow

Source: UNCTAD
Date last reviewed: November 6, 2018

7.2 Foreign Direct Investment Policy

  1. The Albanian government approved a new Law on Strategic Investments in 2015 to attract FDI. This law outlines investment incentives and offers fast-track administrative procedures to foreign and domestic investors, depending on the size of the investment and number of jobs created.

  2. The AIDA is in charge of promoting foreign investments in the country. The Law on Strategic Investments states that AIDA, as the Secretariat of the Strategic Investment Council, serves as a one-stop shop for foreign investors, from filing of the application form, to granting the status of strategic investment/investor.

  3. The Law on Foreign Investment outlines specific protections for foreign investors and Albanian law does not distinguish between domestic and foreign investment. There are no restrictions on foreign ownership or control of domestic corporations in Albania. Almost all sectors allow 100% foreign ownership of companies. A few exceptions include international air passenger transport (foreign interest in airline companies is limited to 49% ownership for investors outside the Common European Aviation Zone), electric power transmission (must be 100% state owned), and television broadcasting (no entity may own more than 40% of a television company).

  4. Although Albania advocates for hospitable legislation, foreign investors are challenged by rampant corruption and the perpetuation of informal business practices.

  5. Albania has bilateral investment treaties in force with 36 countries, including one with China that entered into force on September 1, 1995.

  6. Albania aims to lead the region in FDI by 2020 through measures such as innovative business development, the cultivation of small- and medium-sized enterprises and entrepreneurship (notably by women) and the use of public and private sector institutions to develop industrial clusters.

Sources: WTO – Trade Policy Review, ITA, US Department of Commerce, Investment Policy Hub UNCTAD, Republic of Albania Ministry of Economic Development, Trade and Entrepreneurship, Albania Investment Development Agency, Fitch Solutions

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
Albania currently has no functional duty free import zones, although legislation exists for the creation of such zones.In May 2015, amendments to the Law on the Establishment and Operation of Technical and Economic Development Areas (TEDA) established the legal framework for the creation of TEDAs, which are similar to free trade zones, and defined the incentives for businesses investing and operating in the development of these zones.

The Ministry of Economic Development has announced three investment opportunities seeking private sector investors or developers to obtain, develop and operate three fully serviced areas located in Koplik and Spitalla near Durres.
General incentivesThe Law on Strategic Investments identified the following sectors to be promoted through special administrative procedures:

- Energy and mining; transport, electronic communication infrastructure; and urban waste industry: Investments greater than EUR30 million enjoy the status of assisted procedure, while investments of EUR50 million or more enjoy special procedure status.

- Tourism: Investments equal or greater than EUR5 million enjoy the status of assisted procedure and investments greater than EUR50 million enjoy the status of special procedure.

- Agriculture (large agricultural farms) and fisheries: Investments greater than EUR3 million and which create at least 50 new jobs enjoy the status of assisted procedure. Investments of more than EUR50 million enjoy the status of special procedure.

- Priority development areas: Investments greater than EUR1 million that create at least 150 new jobs enjoy the status of assisted procedure. Investments greater than EUR10 million that create at least 600 new jobs enjoy the status of special procedure.

- Energy sector: Some machinery and equipment imported for the construction of hydropower plants is VAT exempt.

- Manufacturing: Manufacturing activities are exempt from VAT on machinery and equipment, the employer is exempt from social security tax payments for one year for all new employees and the state pays the salaries for four months for new employees and offers various financing incentives for job training.

Sources: US Department of Commerce, Albania Investment Development Agency, Fitch Solutions

8. Taxation – 2018

NIL

9. Foreign Worker Requirements

9.1 Foreign Worker Quotas

Even though visa, residence, and work permit requirements are simple in Albania and do not pose a burden on potential investors, the Law on Foreigners requires foreign businesses to prove that foreign employees are less than 10% of the total workforce before the government can grant work permits.

9.2 Localisation Requirements

While some workers in the Albanian labour force are highly skilled, many work in low-skill jobs or have outdated skills. The education level of the workforce is low, constricting economic prospects and access to high-quality jobs. The government provides fiscal incentives for labour force training for the inward processing industry, which includes the shoe and textile sectors.

9.3 Visa/Travel Restrictions

Foreign nationals from 85 jurisdictions, from Europe, North America, South America and some parts of Asia (including Hong Kong), can enter Albania without a visa for a maximum stay of 90 days.

Sources: Government websites, Republic of Albania Ministry for Europe and Foreign Affairs, Fitch Solutions

10. Risks

10.1 Sovereign Credit Ratings


Rating (Outlook)Rating Date
Moody's
B1 (Stable)
04/08/2017
Standard & Poor's B+ (Stable)
05/02/2016
Fitch Ratings
Not Rated
Not Rated

Sources: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators


World Ranking
201620172018
Ease of Doing Business Index
97/189
58/190
65/190
Ease of Paying Taxes Index
142/189
97/190125/190
Logistics Performance Index
117/160
N/A88/160
Corruption Perception Index
83/176
91/180N/A
IMD World CompetitivenessN/A
N/AN/A

Sources: World Bank, Transparency International

10.3 Fitch Solutions Risk Indices


World Ranking
201620172018
Economic Risk Index Rank111/202
Short-Term Economic Risk Score41.9
40.6
44.4
Long-Term Economic Risk Score44.64750.2
Political Risk Index Rank61/202
Short-Term Political Risk Score59.8
59.8
59.8
Long-Term Political Risk Score65.871.371.3
Operational Risk Index Rank93/201
Operational Risk Score48.751
50.7

Source: Fitch Solutions
Date last reviewed: November 6, 2018

10.4 Fitch Solutions Risk Summary

ECONOMIC RISK
Albania's economic potential is unlikely to be unlocked unless the government can implement key structural reforms over the next few years – namely to improve labour market flexibility, make exports more competitive and make more progress on eradicating corruption. Although some progress is being made, reforms are unlikely to occur at a satisfactory pace in the coming years.

OPERATIONAL RISK
Despite Albania's gradually improving regulatory framework and streamlined business initiatives, which should help foreign direct investment recover gradually over the years ahead after declines during the global financial crisis. This alone will be insufficient to compensate for limited government spending on infrastructure projects and spending on new productive capacity from businesses.

Source: Fitch Solutions
Date last reviewed: December 10, 2018

10.5 Fitch Solutions Political and Economic Risk Indices

Graph: Albania short term political risk index
Graph: Albania short term political risk index
Graph: Albania long term political risk index
Graph: Albania long term political risk index
Graph: Albania short term economic risk index
Graph: Albania short term economic risk index
Graph: Albania long term economic risk index
Graph: Albania long term economic risk index

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Economic and Political Risk Indices
Date last reviewed: November 6, 2018

10.6 Fitch Solutions Operational Risk Index


Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
Albania Score50.749.047.649.656.8
Southeast Europe Average57.4
52.857.959.459.4
Southeast Europe Position (out of 12)11
101111
8
Emerging Europe Average56.954.158.458.556.8
Emerging Europe Position (out of 31)24
272626
17
Global Average49.6
49.749.9
49.149.8
Global Position (out of 201)93
10811394
79

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index

Graph: Albania vs global and regional averages
Graph: Albania vs global and regional averages
Country
Operational Risk Index
Labour Market Risk Index
Trade and Investment Risk IndexLogistics Risk IndexCrime and Security Risk Index
Slovenia
67.954.0
60.973.483.4
Croatia63.851.9
55.471.276.7
Romania62.657.162.162.968.5
Cyprus61.755.161.761.268.8
Bulgaria
60.155.563.660.061.1
Macedonia57.247.268.356.057.3
Montenegro
56.852.858.856.559.3
Serbia56.858.559.456.952.5
Turkey
53.752.055.865.042.0
Kosovo51.355.257.651.940.7
Albania50.749.047.649.656.8
Bosnia and Herzegovina46.045.544.348.445.9
Regional Averages57.452.857.959.459.4
Emerging Markets Averages46.848.047.545.746.0
Global Markets Averages49.649.749.949.149.8

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: November 6, 2018

11. Hong Kong Connection

11.1 Hong Kong’s Trade with Albania

Graph: Major export commodities to Albania (2017)
Graph: Major export commodities to Albania (2017)
Graph: Major import commodities from Albania (2017)
Graph: Major import commodities from Albania (2017)

Note: Graph shows the main Hong Kong exports to/import from Albania (by consignment)
Date last reviewed: November 6, 2018

Graph: Merchandise exports to Albania
Graph: Merchandise exports to Albania
Graph: Merchandise imports from Albania
Graph: Merchandise imports from Albania

Note: Graph shows Hong Kong exports to/import from Albania (by consignment)
Exchange Rate HK$/US$, average
7.76 (2013)
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
Sources: Hong Kong Census and Statistics Department, Fitch Solutions
Date last reviewed: November 6, 2018


2017
Growth rate (%)
Number of Albanian residents visiting Hong Kong937
24.1

Sources: Hong Kong Tourism Board, Fitch Solutions


2017
Growth rate (%)
Number of European residents visiting Hong Kong1,929,824
-0.2

Sources: Hong Kong Tourism Board, Fitch Solutions
Date last reviewed: November 6, 2018

11.2 Commercial Presence in Hong Kong


2017
Growth rate (%)
Number of Albanian companies in Hong Kong N/A
N/A
- Regional headquarters
- Regional offices
- Local offices


11.3 Treaties and Agreements between Hong Kong and Albania

  • There is a bilateral investment treaty between Albania and China that entered into force on September 1, 1995.

  • A double taxation agreement between Albania and China was signed on September 13, 2004 and has been in force since January 1, 2006.

Sources: Investment Policy Hub UNCTAD, State Administration of Taxation of the People's Republic of China, Fitch Solutions

11.4 Chamber of Commerce (or Related Organisations) in Hong Kong

Consulate of Albania in Hong Kong
Address: 23/F, Admiralty Centre Tower II, 18 Harcourt Road, Admiralty, Hong Kong
Email: albania.consulate@gmail.com
Tel: (852) 2867 1362

Source: consulate-info.com

11.5 Visa Requirements for Hong Kong Residents

Hong Kong residents have visa-free access to Albania for a stay of up to 90 days.

Source: Republic of Albania Ministry for Europe and Foreign Affairs
Date last reviewed: November 6, 2018

Content provided by Picture: Fitch Solutions – BMI Research
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