Risk of Foreign Investment in Albania

Slowly but steadily the perception of change hovers over Albania. The brutal isolated communist regime of Enver Hoxha is gone and the Albanian leader Sali Berisha makes gestures to appeal to the E.U. The law banning the sigurimi from holding office was revoked in February 2010 after criticism from the E.U. The international image of the country may well surprise the general populace who still face grinding poverty and intimidation in democratic elections. The ruling party show as much elitism as the former communist party did.

The outside world sees a country committed to democratic change. Newsweek has listed Albania as the best low income nation and describes it in complimentary terms: “this new democracy actually outperforms all the other low income countries – consistently ranks highest in education, health and quality of life.” Influential words which will bolster the confidence of investors, and ring as praise in the ears of Mr Berisha.

There is no doubting Mr Berisha’s intent to open the country to foreign investment and the ease of doing business there is a huge plus for investors. Corporate and personal taxes capped at ten percent and no restrictions on foreign investment make a good combination. The rumblings of some of the population that things were better under communist days are a result of transitional change as the country faces rapid development. The move of many from rural life to urbanisation provides for a cheap work force which in turn results in low cost developments. 

Albania desperately wants the additional kudos of joining the E.U., anticipated within the next five years. This almost guarantees the safety of investment there as the government will do nothing to risk its expected invitation. Five years should be ample time to see capital growth on investment made now with an eye on the ball to exit the country if the European merger does not materialise.

Foreign investment is split between Tirana and the coast with Tirana offering better long term prospects if the expected growth in tourism does not happen in coastal regions. It’s a gamble and portfolios could be split to minimise loss if the coast does not develop as well as the capital. Investment in Tirana offers more long term options with foreign businesses needing to rent for their employees and the expected continued migration to the capital from those Albanians currently outside the country. My instinct is towards the capital for lower risk with higher risk on the coast, with preference for off plan development at early stage on the coast and completed apartments in areas with good security in the capital.