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ALBANIA – Foreign Investment in an emerging market

ALBANIA – Foreign Investment in an emerging market

ALBANIA – Foreign Investment in an emerging market

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Home Page > Business > International Business > ALBANIA – Foreign Investment in an emerging market

ALBANIA – Foreign Investment in an emerging market

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Posted: Nov 03, 2009 |Comments: 0
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ALBANIA – Foreign Investment in an emerging market

By: Konstantinos Barkoukis

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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.

(ArticlesBase SC #1412402)

Article Source: – Foreign Investment in an emerging market

Albania is a South Eastern Balkan country situated on the eastern Adriatic Coast in Europe. The country borders the former Yugoslav provinces of Montenegro, FYR-Macedonia, Serbia and Greece to the South. The capital is Tirana. (The World Bank Group, 2009).

Personal foreign direct investment (FDI) interest in Albania is derived from closely monitoring Albania’s transition into a NATO country and prospective European Union (EU) member. The process of accession of Albania to the EU started in January 2003. Albania’s admission to the EU depends on the countries future economic and political stability. Albania has been engaged with EU institutions and joined NATO (North Atlantic Treaty Organization) April 1, 2009. (Wikipedia Contributors cited 2009). Albania formally applied for EU membership 28 April 2009.

Ranked as one of the poorest European countries, numerous Albanian ex-patriots reside and work throughout the EU and Switzerland. A contributing high birth rate, the country has vast foreign direct investment potential considering its prospective EU status, geographical and geopolitical location. Albania is a distinctive classification of an emerging market and future currency change from the Lek to the Euro (improving the countries purchasing power and wealth), reveals there is a vast monetary opportunity for multinational Australian business to invest in a venture with a controlling interest.

FDI occurs when a firm invests resources in business activities in countries outside its home base (Hill 2009, p11), such as Albania. The main foreign direct investment areas that Australian Multinationals should be considering are Construction (highways, infrastructure), Property, Renewable Energy, Finance and Tourism. The types of companies that may be interested in this type of investment are the likes of Origin Energy, McMahon holdings, Raine and Horne.

Historically, most FDI has been directed at developed nations. FDI into developing or emerging nations has traditionally increased substantially (Refer to Graph 1, Appendix 1) since 1990 (Hill 2009, p243-244). Therefore Albania is an excellent FDI opportunity that may provide substantial profitability for Australian firms. Most recent inflows have been targeted at the emerging economies of South East Asia, hence there is an unexplored potential for Australian firms to invest in Albania.

Real GDP in Albania has averaged 6% in previous years due to a surge in public investment. Consumer price inflation is under the 4 per cent upper limit of the central bank’s informal target. (Refer to Graph 1, Appendix 2). The Albanian LEK will continue to be supported in 2009 by large foreign-currency remittances from Albanians living abroad as well as relatively high interest rates. Exports should grow relatively strongly in 2009 and forecasted current account deficits averaging around 11% of GDP. (Business Eastern Europe, 2008). (Refer to Table 2, Appendix 2).

The feasibility of the client company to enter the Albanian market is positive. The democratic Albanian government encourages foreign investment, thus in an ongoing effort to privatize public enterprises, the government is seeking qualified foreign investors in key sectors, including telecommunications, energy, oil and gas, finance, and construction. (Foreign Investment Climate, 2008)

Albania’s infrastructure is currently inadequate, and there is little budgetary money for improvements. The government inherited a poor highway system from the Communist period. Major road building projects are currently underway, and an estimated 6000 kilometres of roadway will be implemented by 2013. (Euromonitor International, 2009). Therefore there is an immense opportunity for Australian based Civil Engineering/construction firms to tender for a substantial sector of work, and scope for profitable investment.

Feasibility of the client company entering the Albanian markets in a Greenfield capacity is varied. Currently, Albania ranks 89th out of 183 countries in the benchmark of Ease of doing business. Starting a business, Albania rank’s 68th in 2009 and set to move to 46th in 2010. (Refer to Table 1 in Appendix 3). The average time in days for Starting a business is 5 days as compared to 13 days for the overall OECD Average. This demonstrates that the Albanian government is moving in a positive direction to 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

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