Shooting in Kosovo Prevents Investments in Albania

AIM Tirana, 20 June, 1998

Demolitions from 1997, echoes of explosions in Kosovo, lack of clear political prospects, and the still high level of crime rate, continue to fear and paralyse foreign investments causing losses of millions of dollars in Albania. A big fair of a few hundred Italian enterprises and companies downtown Tirana, the opening of which was attended by Italy's prime minister Prodi and Albania's prime minister Nano seems to be an attempt to change things for the better.

However, the optimism of illuminated exhibits and noisy variegated hallways dies down just a few hundred metres further away, in silent offices of the Albanian centre for stimulation of foreign investments. "The fair is a realization of the good will of the two governments for stimulating Italian investments in Albania, as well as a message to other investors", says Selami Xhepa, director of the Albanian centre for stimulating foreign investments. But, regardless of that, concrete initiatives for investments in Albania are still uncertain.

The year 1998 proves that re-building of confidence among foreign investors is a very difficult process. As if by some ill fate of the Albanians, the fear and the terror caused by chaos last year are now amplified by danger of spreading of the conflict in Kosovo. In the Albanian centre for stimulating foreign investments they are explaining that the echo of the war in Kosovo has intimidated a large number of potential investors, but that it nevertheless had no negative effect on the existing investments. They also say that what is paralysing activities of foreign business which is present in Albania, is not just the echoes of explosions in Kosovo, but also the high crime rate and banditism inherited from March 1997 when the state collapsed as the result of armed revolt caused by falling apart of pyramidal systems. "Information coming from the prefectures of various towns in the country", Xhepa says, " show that a part of existing foreign investments are still in a state of paralysis. For the time being", he continues with his explanation, "we are not able to say whether thea are temporarily frozen or whether they have decided to leave Albania".

However, experts insist on the hypothesis that departure of foreign investors from Albania remains a very threatening tendency and danger. On the other hand, it is very hard to tell what the course of foreign investments in Albania is for the current year. At the centre for investments, as if trying to intensify the impression of the existing stagnation, they are not capable of presenting a single figure on the amount of foreign capital which has entered the country since January this year. When eight years ago Albania was coming out of isolation, still having its pride of the "land of eagles", many inhabitants believed that foreign capital would flood it in order to make good use of natural resources unused for decades by the communist regime. However, it soon became clear that there is a very small number of investors who were willing to invest into "beautiful nature and Albanian riches". During 1991, western capital invested into eastern countries in transition only two billion 374 million dollars in 1991.

Investment aspirations of the West towwards the East remained very low, so the competition among countries in transition for every dollar or other foreign currency intensified.

Although extremely poor, Albania was caught in the maelstrom of competition, presenting its charms. The centre for stimulating foreign investments was established, very liberal legislature was passed to support them, and a few promotive conferences were organized. But, to no avail. According to the data of the International Monetary Fund it can be seen that from not a single dollar of foreign investments in 1991, 10 million dollars were registered in 1992, and the curve started gradually going up and reached 70 million dollars in 1996. If one keeps in mind Albania's exit from complete isolation, its extreme poverty, small domestic market, and almost absolute absence of tradition of market economy, such development is estimated as satisfactory. With 70 dollars of foreign direct investments (FDI) per capita, attracted during the five-year period, Albania has ranked 13th out of the 26 countries of the East in transition.

Then the fatal 1997 came and everything achieved was levelled to the ground almost like after an atomic bomb explosion. According to the official statistics of the centre for foreign investments, the damage suffered by foreign investors during March 1997 turmoil and later on reached the figure of about 70 nillion dollars. According to the words of the director of the centre, the most unfortunate thing for the economy is loss of the attractive image created with such difficulties. "Maybe another five years will be needed", claims Xhepa, "for Albania to re-establish confidence of the world investment circles". He also says that at this moment the level of risk for investing in Albania is greatly increased. The echo of the chaos in the state datin back from March 1997 made foreign investors feel safer in other eastern countries than in Albania. That is the reason why foreign investments have dropped down to 26 million US dollars in 1997 from 70 they amounted to in 1996. Nowadays, there is also the uncertanty coming from Kosovo.

What does reduction of foreign investments mean for Albanian economy? In the period 1992-1996, foreign business invested 248 million US dollars, according to statistical sources of the IMF. This is in fact a much smaller amount of money in comparison with other sources of financing, such as the income from the emigrants which for the same period reaches the figure of one billion 600 million US dollars. But, it is known while the income from the emigrants stimulated family consumption, foreign investments had a greater influence on business. This is highly significant for Albania where industrial production is on a very low level. On the other hand, it should be added that increase of foreign direct investments is not accompanied by the increase of foreign debt, as it is the case with financing or loans of various international institutions. The fair of more than 260 Italian and Albanian enterprises opened a few days ago in the centre of Tirana is perceived as an endeavour to send an optimistic message. But, there is a small number of those who do not find it hard to believe that the lights at the fair will be able to muffle the roar of cannons from Kosovo and mitigate the bitter taste which the investors still feel due to the lack of public security and the still very aggressive political environment.

AIM Tirana

Andrea STEFANI