Albania: We Need To Attract Productive Investments

Interview With Mr. Olindo Shehu
Last Updated: 20 May 2016
Article by Olindo Shehu

Interview with Mr. Olindo Shehu Partner Deloitte Albania & Kosovo published on the Monitor Magazine

Foreign direct investments can have a greater impact in the socio-economical development of the country, once they can help further in the growth of the nation's productivity. The high level of unemployment and low wage labor are some of the most competitive advantages in Albania, that are enough to attract those foreign investments, (such as call centers, inward processing, etc. ), which have a limited impact on socio- economical development as well as productivity growth. We must compete with professional and/or technological and our know-how services.

How do you assess the performance of foreign investments in Albania and the importance they have on the economic development?

Foreign investments have a great impact in small economies and their development, in terms to their contribution in production, employment, and increase in the standard of living. They are a key incentive in economic growth. Foreign direct investments flows in Albania have had a significant increase in the past 8 years. The value of these flows in the year of 2013 signed a historic achievement with a sum of approx. 923 million euros, making up 10.5% of the GDP. From this amount, approximately 25 % consisting of crude oil extraction industry and minerals.

The service sectors, in which call centres are classified, make up approximately 45% of the total foreign investments in Albania. Whereas foreign investments in the legal fields, economic consultancy, professional technological/informative services, which require advanced skills, are completely missing and do not currently provide any contribution to the economic development of the country.

Albanian governments, one after another, keep reporting a continued economic growth in the country, year after year, something that without any doubt is very positive given the economic situation in the region. Nevertheless, I do not think Albanians feel any less poor from year to year despite the economic growth reported in recent years. The definition of the term "poor" is relative but in economic and social terms, Albania continues to remain a poor country in comparison to the socio-economical development we hope to achieve. In a poor country like Albania, a growth of 2-3% is not only not enough to feel an impact in our daily life, but also negligible in relation to the economic development that we should have to move forward towards the European Union.

What has been the role of increase in foreign direct investments in our country, and why do we not feel a stronger impact in our daily life?

The fact that our level of productivity is among the lowest in the region, while the contribution of foreign investment to GDP occupies one of the highest percentages in the region, means that the current foreign investments in Albania are insufficient to increase or incentivize productivity in the country. Even though we generally say that there is a positive correlation between foreign direct investments and productivity, it should be noted that the high level of productivity in a country can bring higher inflow of foreign direct investment, but not vice versa. In other words, foreign direct investments, which would have a higher impact in the socio-economical development of the country, would be the ones that would help in the further growth of productivity in the country. The following types of investments can be attracted only by having previously achieved high productivity and through the increase of foreign capital, to increase productivity and to target access to a larger consumer market in comparison to the domestic. However, the high level of unemployment and low wage labor are some of the most competitive advantages of Albania, that are enough to attract those foreign investments (such as call centers, inward processing, etc. ) that have a limited impact on socio-economical development as well as productivity growth.

So you believe that in order to attract foreign direct investments we must increase productivity in the country and not vice versa?

Absolutely yes, an increase in domestic production in any industry or economic sector will attract these foreign investments, which are interested in local production and are willing to invest further capital and more specialized know-how, and thus give to the Albanian production access to larger markets. In other terms, a successful Albanian farmer who produces a particular product (e.g. olive oil), is more attractive to a foreign investor that with financial strength and expertise can help to have a greater output, greater quality, and greater marketability in European markets. Such an investment multiplies domestic production, and develops the economy as a whole, as together with the farmer in question is a whole chain of suppliers that will benefit of this production increase. However, when your investment is focused on the exploitation of the cheap labor force in Albania but benefits from this exploitation outside the territory of Albania, it helps us because it creates job opportunities, but the impact on economic and social development of the country remains limited and insufficient.

How do you assess the business environment focused on foreign investments primarily?

According to the index of Economic Freedom 2015, Albania has dropped from last year and this decline is related to the weakening of fiscal freedom. Nonetheless, lower ratings continue to be in terms of corruption and property rights. According to "Doing Business in Albania, 2015 ", businesses in Albania perform 50 payments per year in relation to tax, and spend 357 hours per year to prepare files or serious foreign investment to help domestic companies to further develop.

With the increase of fiscal burden over the past two years, does Albania risk losing a regional competition in FDI?

Even though the tax increase does not help to attract foreign direct investors to invest in Albania, I do not believe it penalizes us in relation to those foreign investments that we would like to attract, because even with the fiscal regime we are many times lower than the fiscal regimes of the countries of origin of these foreign investments. It is the implementation of the tax legislation, the quality of state institutions, fiscal policies and incentives, as well as alleviating procedures of doing business in Albania, which can make us more or less competitive in the region in terms of foreign investment.

In your contacts with investors what extra obstacles do they have in the development of investments in our country?

Barriers that foreign investors, but domestic ones as well, encounter in Albania are different and they highly depend on the industry in which they operate. However, typically the quality of government institutions remains particularly important for developing countries like Albania since their low level increases corruption, which leads to higher investment costs and lower profits. Consequently, this increases the uncertainty in foreign investors. The functioning of the judiciary, corruption, property rights, bureaucratic procedures, fiscal system, and the permits of planning and building, are key sectors in the foreign investments that remain problematic in Albania. If the government does not take concrete structural reforms to address these issues, foreign investment in Albania can remain on project basis until the end of the payment process and lead to a tax total of 30.7% of their profit. Such news certainly does not help to attract serious foreign direct investments, or to help local companies to develop more.

Albania is known for its cheap labor, but is it equally competitive in know-how?

Absolutely not, even though we do have every chance to be competitive in relation to professional services and / or technology or our know-how, yet we initially need to develop such expertise. The geographic position of Albania enables access to the Western European market, which represents a competitive advantage in the region for export of the Albanian products (agriculture, light industry, professional services and technological services, etc.), for the development of nautical and mountainous tourism, as well as the "importation " of knowledge, experience and know -how that we are lacking in most of the industries that we want to develop.

One of the best examples of the use of professional services and technology comes from Estonia, a small country with very similar characteristics to Albania which now acts as a "player" in an important market for the provision of specialized services and products in the technological field. Fundamentals were laid in 1992 when Mart Laar, the Estonian prime minister took a series of incentive reforms, fiscal policy easing, and privatizations, fitting for a concrete strategy in regards to the economic and social development of the country. Part of this strategy was the education of generations to come, and focus on the development of the technological sector. In 1998, the Estonian government launched a nationwide project to enable equip classes with a computer as well as connecting all schools online. Last year, in public and private cooperation, a program was launched with the purpose of teaching 5 year-olds the basics of software coding. These are initiatives that may seem hard for Albania, but the biggest struggle lies in the confusion that young Albanians have in relation to their education, and/or their professional future. As a result of this confusion and lack of a concrete stimulus from part of the Albanian government towards specific sectors, who can contribute to the development of the country, most of the youth in Albania continue their higher education without having any clear idea about their professional future. This is evident as the student participation is greater in the Faculty of Law and Faculty of Economics, even though these two areas do not have any particular development, or guarantee jobs and professional development for recent graduates. As many people probably know, Skype was developed in Estonia, and only from the sale of Skype to eBay in 2005 for the value of 2.6 billion dollars, a new class of investors in Estonia was created, who made tens of millions of Euros through their shares and put their experience and their incomes in well-use to further develop this industry. This industry developed in Estonia, certainly doesn't only serve the Estonian market but international one as well, starting from developed neighboring countries. If young Albanians would be directed towards specific fields, which with the respective development could also be offered to the market of Western Europe, Albania could start resembling Estonian terms of socio-economical development, and not only in population or geographical area.

Do you have any proposals to the government of what needs to alternate from the fiscal part as well as the business environment?

By making the reforms needed to address the current problems that we have in regard to the procedures and the quality of state institutions, education and legal system; and having a concrete strategy with regard to attracting foreign investment of this kind, Albania has all the potential to have an economic growth in higher levels, significant in our daily lives, and that will help the economic and social development of our country.

Almost all of the facts and arguments mentioned above are not unheard, and much less created by me. Estonia's example is not the only one. Policies or reforms that need to be implemented to increase foreign investment in the country are not new, and policy makers in Albania do not need to create something new. I believe it is time to start taking concrete actions towards a more developed Albania by having a clear long-term vision and significant objectives. From the fiscal point of view we have made many proposals, but what I believe will make a revolution in regards to fiscal legislation is the certification of declarations by auditing companies licensed to complete these certifications. Realization of certification of tax can serve as one of the key factors in the growth of tax revenues, the improvement in the application of fiscal laws in Albania, increase in the reliability for foreign and local businesses associated with investments in Albania, and a very good preventive measure of passive and active corruption. Tax audit, conducted in view of the certification of tax declaration by third parties licensed by the Ministry of Finance and subject to amendments to the criteria set by the Ministry, would enable a significant increase in the control over private entities without adding any cost for Tax Administration as well as not consuming any of the current resources of the Tax Administration. This would ensure risk reduction in regard to tax avoidance by these entities as well as automatically have an impact in reduction in the level of informality in Albanian economy.

All of this process will have an impact on the reduction of informal economy, in the decrease in the level of corruption, and financial stability, unified applicability of tax legislation nationwide would increase our countries reputation to the EU as well as states that are interested in investing in our country. Therefore, the increase of direct fiscal credibility would affect directly the increase of foreign investments in our country.

Originally published in Monitor Magazine

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions