According to the BoA, foreign direct investments for 2006 amounted to 258,6 million euro. This figure counts as 3,6 % of the Albanian GDP. FDI increased during 2006 with more than 34 million euros.
                       

Table 5

Source: INSTAT

Opportunities and Incentives for Foreign Investors

Notwithstanding the difficulties and challenges, Albania is a country that offers many investment opportunities to foreign entities and individuals. The country has considerable natural resources, including oil, gas, and coal, iron, copper, chrome, water and hydroelectric potential.

The privatization process in itself offers a wide range of options. Potentially high profit sectors include mining and oil extraction, both of which are export-oriented industries. Albania is the only country in Europe with substantial reserves of chromium which before 1990 made it the world’s third largest producer of chrome ore. Nevertheless, significant capital investments and capacity upgrades are needed in order to modernize the old, outdated production methods. Other areas of interest include thermal and hydro power production, alternative sources of energy production, infrastructure, agriculture, light industry sectors such as textiles, leather and footwear, confections, and meat processing.

The privatization strategy explicitly seeks qualified foreign firms as strategic investors for these key sectors. The process has already attracted foreign investors, mainly from Greece, Italy and Turkey.

Tourism also offers great investment prospects. Albania has spectacular mountain scenery, a beautiful and pristine coastline, and ancient history and culture. Tourism could be one of the main attractions for foreign investors in the future, but currently Albania lacks the proper infrastructure to promote investments in this sector.

Investors in Albania enjoy full legal protections in regards to their investments. Private investments cannot be nationalized, expropriated, or subject to any similar measure, except in special cases provided by law such as public interest. Parties to a dispute may agree to submit claims for consideration by an arbitration institution. Foreign investors have the right also to submit disputes to an Albanian court.

Other legal incentives include:

• Equal treatment of foreign and domestic investors;

• Full profit and dividend repatriation, after taxation;

• Repatriation of funds from liquidated companies;

• Bilateral agreements on the promotion and protection of reciprocal investments with Austria, Belgium, Bulgaria, China, Croatia, Czech Republic, Denmark, Egypt, Finland, France, FYROM, Germany, Greece, Hungary, Israel, Italy, Luxembourg, Malaysia, the Netherlands, Poland, Portugal, Romania, Slovenia, Sweden, Switzerland, Tunisia, Turkey, United Kingdom and United States.

• Double taxation treaties in force with the following countries: Belgium, Bulgaria, China, Croatia, Czech Republic, France, FYROM, Greece, Hungary, Italy, Malaysia, Malta, Moldova, Norway, Poland, Romania, Russian Federation, Sweden, Switzerland, Turkey, Egypt, the Netherlands, UNMIK Kosovo and Serbia and Montenegro. Double taxation treaties are under negotiation with Austria, Germany, Iran, Lebanon, South Korea, and Ukraine.

Privatization

The privatization process is a key element for Albania’s progress towards a developed market economy. According to the government, the privatization process aims to:

• Stimulate the Albanian economy through the efficient use of natural and human resources;

• Support and further develop the private sector;

• Attract strategic and financial investors;

• Create the conditions for the establishment of the capital market;

• Prepare and deliver a fast, efficient and credible privatization process encompassing all sectors.

The main privatization opportunities in Albania for the near future are:

In Energy
 

• The privatization of the Power Production and Power Distribution sectors at the Albanian Power Corporation (KESH sh.a), with rebuilding preparations underway.

In Hydrocarbons

• The privatization of ARMO ShA, the state oil refining and distribution company (in process since 2004);

• The restructuring and privatization of Albpetrol ShA, the state oil and gas exploration and production company;

In Water Supply and Transportation

• The concession of the Durres Port cereal and grain terminal;

• The concession of the Durres Port Train ferry terminal;

• Water supply systems in Berat and Kucove.

Insurance

• INSIG ShA – the only state owned insurance company in the market. It operates in Albania, Kosovo and in Macedonia with life and non-life insurance products. 39 percent of its shares are owned by IFC and EBRD.

Recently, the Albanian government introduced the Private Public Partnership (PPP) concept, within a new Concession Law, that guarantees more transparency and competitiveness. The government has started using PPP to grant concession to a number of small hydro-powers.

The institutions engaged in the privatization process are:

• Council of Ministers

• Ministry of Economy, Trade and Energy

• The regulatory authorities for the respective sectors

• Other Ministries related to the respective privatization sectors - General Directorates

• Public Procurement Agency

• Concession’s Treatment Unit

The approval of a sale or a concessionary contract is the last step in the privatization process and is granted by the Council of Ministers. Preliminary efforts include an evaluation process approved by the Council of Ministers. 

Sovereign rating

The Government of Albania hired Moody's Investor's Service, to conduct the first-ever sovereign credit rating for Albania. On June 2007 Moody's published the rating and relevant statement which rate Albania Ba1 for foreign-currency bonds and B1 for the government's debt obligations.
Albania also was rated B2 for foreign currency bank deposits, A3 for local currency and Baa1 for local currency bank deposits. In its official press release, Moody's states that the overall ratings assigned to Albania carry a stable outlook.

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