Subchapters:
- Business Relationships
- Foreign direct investment
- FTAs and Treaties
- Development Cooperation
- Prospective fields of study (MOP)
Business relations
Trade relations with the EU
The EU’s trade balance with Albania is significantly active on the EU side, exports from the EU to Albania are almost twice as high as imports. This is due to the weak export performance of the Albanian economy and, by extension, Albania’s strong dependence on imports of manufactured goods and food. The share of the EU in Albania’s trade turnover is 60.2%, in exports 72% and in imports 54.2%. The deficit of Albania’s trade balance with EU countries increased significantly in 2021. The reason is the increase in imports of machinery, equipment and materials needed for the reconstruction of the country after the earthquake and for the implementation of new transport and energy infrastructure projects.
- Allcountrylist: Overview of major industries in Albania, including mining, construction, transportation, tourism, and foreign trade.
| 2017 | 2018 | 2019 | 2020 | 2021 | |
| Exports from the EU (million EUR) | 2,960.90 | 3,177.80 | 3,173.70 | 2,934.00 | 3,735.80 |
| Imports into the EU (million EUR) | 1,499.00 | 1,751.20 | 1,844.90 | 1,608.70 | 2,129.70 |
| Balance with the EU (million EUR) | -1,461.9 | -1,426.6 | -1,328.8 | -1,325.3 | -1,606.1 |
Source: European Commission
Trade relations with the Czech Republic
The turnover of mutual trade in 2021 increased by 42%. Exports and imports also increased year-on-year in a similar manner. Compared to the EU’s trade balance with Albania, which is strongly surplus from the EU’s point of view, the mutual trade balance between the Czech Republic and Albania is currently balanced, or slightly passive to the detriment of the Czech Republic. The gradual balancing of the balance of the trade balance is caused by the growing import of automotive cables from the newly built production line of the Forschner Albania company.
The main export items of the Czech Republic to Albania: cables (semi-finished products for the production of automotive cables), switches and sockets, detergents and cleaning products, passenger cars and computer components. Main import items: ignition cables for cars, electricity, leather shoes, silver and fresh vegetables.
| 2017 | 2018 | 2019 | 2020 | 2021 | |
| Exports from the Czech Republic (billion CZK) | 0.7 | 1.4 | 1.3 | 1.2 | 1.6 |
| Imports to the Czech Republic (billion CZK) | 1.2 | 1 | 1.3 | 1.2 | 1.8 |
| Balance with the Czech Republic (billion CZK) | 0.5 | -0.3 | -0.1 | 0.1 | -0.2 |
Source: CZSO
Trade relations with countries outside the EU
Albania’s largest trading partners from outside the EU are Turkey (7% share of mutual trade), China (7%), Kosovo (4%), Serbia (3%) and North Macedonia (2%). The trade balance with non-EU countries is significantly more passive for Albania than with EU countries, where more than 70% of Albanian exports go.
| 2017 | 2018 | 2019 | 2020 | 2021 | |
| Exports from countries outside the EU (million EUR) | ON | ON | 4,544 | ON | 3,098 |
| Imports to countries outside the EU (million EUR) | ON | ON | 630 | ON | 840 |
| Balance with non-EU countries (million EUR) | ON | ON | – 3,914 | ON | – 2,258 |
Source: European Commission
Foreign direct investment
The majority of private investments (local and foreign) are allocated to real estate and services (construction of apartments, office space and accommodation facilities), retail (construction of shopping centers), energy (solar power plants), finance and telecommunications. Only a very small part is allocated to industrial production (shoe, clothing and food production), whose share in GDP is only 6%. Foreign direct investment is stagnant and hovers around EUR 1 billion per year. Due to the decreasing interest of European investors (concerns about the local business environment, lack of suitable investment opportunities), the government is trying to attract investors from Turkey (finance, construction, energy) and the United Arab Emirates (Durres port development project with an expected investment of 2 billion EUR).
In 2021, FDI increased by 10% compared to the pandemic year 2020, and the total inflow of foreign investment was EUR 1.03 billion. However, new FDI is stagnating, the majority of investments (approx. 50%) are reinvested in the profits of foreign companies operating in Albania in existing projects. By sector, the largest share of FDI in 2021 was in the mining industry (24%), real estate construction (19%), banking 15% (acquisition of Alpha bank by Hungarian OTP Bank) and telecommunications (acquisition of Albtelecom by Hungarian 4iG). Investments in production amounted to 9%. From a territorial point of view, the largest investment share was taken by the Netherlands (22%), as it is the seat of a branch of the Norwegian firm Statkraft, owner of the Devol hydroelectric plant.
From the long-term perspective of the accumulation of investments, the largest investors are Switzerland (headquarters of the consortium of the largest investment of all time in Albania – the TAP gas pipeline), the Netherlands, Greece, Canada, Italy (banks), Turkey (Calik Group, BKT bank, construction company Limaq, energy company Ayen energy ) and Austria (Raiffeisen bank, insurance company Uniqa).
The government’s reluctance to improve the transparency of the business environment and support fair competition between local and foreign companies, introduce higher law enforcement, simplify the tax system, reduce the level of corruption, resolve property ownership relationships (duplicate ownership) and prevent the outflow of qualified labor is a significant brake on the growth of foreign direct investment . Unequal conditions for local and foreign companies tend to be a very frequent criticism of the American-Albanian Chamber of Commerce. In the World Bank’s Ease of Doing Business index, Albania ranks 82nd (after B&H, the second worst of the Western Balkan countries, e.g. North Macedonia ranks 17th), Albania ranks even worse in the Corruption Perceptions Index issued by Transparency International, where in 2021 it ranked 110th (down 6 places from 2020 and 27 places from 2016).
According to the statistics of the Czech National Bank, the state of Czech FDI in Albania is zero. Nevertheless, the Albanian Investment Development Agency registers 12 companies with a Czech share and 7 companies with 100% Czech capital participation. However, these are mostly small and unknown companies engaged in business, production and consulting activities. Many of these companies are in liquidation or no longer actively carry out their activities.
FTAs and treaties
Albania’s trade regime is liberalized, the country has been a member of the WTO since 2000. Albania has concluded the following FTAs: Stabilization and Association Agreement with the EU (establishes duty-free access for all Albanian industrial products to the EU market and currently also all industrial products produced in the EU on market of Albania and includes preferential tariffs on agricultural products), CEFTA (Central European Free Trade Agreement) – members: Albania, Bosnia and Herzegovina, North Macedonia, Moldova, Montenegro, Serbia and Kosovo, EFTA (European Free Trade Association) – members: Albania, Iceland, Liechtenstein, Norway and Switzerland, Free Trade Agreement with Turkey. The United States, Australia, Japan, New Zealand, the Russian Federation, Belarus and Kazakhstan grant the General System of Preferences to Albania.
Treaties with the EU
Albania has concluded the following agreements with the EU: the EU-Albania Trade and Cooperation Agreement (1992) and the EU Stabilization and Association Agreement with Albania (2009), which also includes a mutual preferential trade agreement.
Contracts with the Czech Republic
For Czech companies intending to invest in Albania, the most important agreements are the Agreement on Avoidance of Double Taxation and the Agreement on the Promotion and Protection of Investments, which were concluded in 1995.
Other important bilateral treaties are:
- Agreement between the Government of the Czechoslovak Republic and the Government of the People’s Republic of Albania on air transport (Tirana, 20/05/1958)
- Agreement between the Government of the Czechoslovakia and the Government of the People’s Socialist Republic of Albania on International Road Transport and Protocol (Prague, 7 January 1991), No. 90/1991 Coll.
- Agreement on cooperation between the Ministry of Industry and Trade of the Czech Republic and the Ministry of Economy, Trade and Energy of the Czech Republic (Tirana, 18 April 2008)
- Agreement between Czechoslovakia and ALR on legal assistance in civil, family and criminal matters (January 16, 1959).
Developmental cooperation
Albania is a recipient of both bilateral and multilateral development aid. Each year, the Czech Republic, through the Ministry of Foreign Affairs, implements two “Small local projects” subsidized by the Ministry of Foreign Affairs in the amount of CZK 0.5 million. In some cases, Czech companies can also participate in these projects through a local implementer, e.g. in the case of medical equipment supply projects.
Czech companies can also use the tools of the Ministry of Foreign Affairs and the National Development Bank, which are the Foreign Development Cooperation Guarantee. This guarantee is provided for Czech investments abroad up to 80% of the principal amount of the loan, or up to a maximum amount of CZK 50 million. The warranty can be valid for up to 8 years.
Multilateral aid is received by Albania mainly from European Union instruments and funds (the IPA instrument with the possibility of Czech companies participating in its tenders) or combined instruments, the most important of which is the WBIF (Western Balkans Investments Framework), which is a joint initiative of the European Commission, the Development Bank of the Council of Europe, the European Bank for Reconstruction and Development, the European Investment Bank and several bilateral donors (including the Czech Republic). The World Bank Group, KfW Development Bank and AFD (Agence Française de Dévelopement) subsequently joined the framework. Mainly large infrastructure projects are financed from this instrument, in the form of grants and loans.
Prospective fields of study (MOP)
The restart of the Albanian economy after its significant decline in 2020 caused by the pandemic is primarily to be ensured by investments in public infrastructure. Long-delayed projects for the construction of airports, roads, tunnels, railways and ports are being launched. Sectors with development potential and thus opportunities for Czech companies are listed below.
Transport industry and infrastructure
In connection with the process of Albania’s integration into the EU, the construction of a modern transport infrastructure and its connection with pan-European corridors is a strategic goal of the government. Modernization of the railway network, main road corridors, reconstruction of ports and the construction of two new international airports are underway. A project to build intelligent transport systems for extra-urban transport with a cost of CZK 2 billion is in the study stage, with air transport there are opportunities in the supply of technologies for aircraft guidance and air traffic control.
The Emirati developer’s CZK 50 billion project to transform the port of Durres into a tourist zone will bring opportunities from design work, through the supply of building materials, technical security of buildings, information and communication technologies, to furnishing the interiors of luxury hotels and shopping centers.
Rail and rail transport
The very outdated railway transport is undergoing significant modernization of the track infrastructure and rolling stock. In the medium term, 200 km of tracks will be reconstructed with expected investments of CZK 8.7 billion. The projects will be financed mainly from EU money. Opportunities for Czech companies are in the supply and installation of security, signaling and communication systems for modernized lines.
Following the reconstruction of the tracks, opportunities will open up for the supply of locomotives, passenger and freight cars and suburban passenger train sets. A possible alternative is the modernization of existing diesel-electric locomotives of Czech origin.
Energy industry
The predominant dependence of electricity production on water resources has forced the government to diversify electricity production. The share of solar energy in the total capacities should increase by 30% (approx. 800 MW) in the next 5 years. A program for the construction of wind power plants is also prepared. The transmission and distribution network is gradually being modernized, where the state transmission operator OST plans to invest a total of CZK billion in the modernization of the 400 kV and 110 kV transmission network in the years 2022–2024.
Opportunities for Czech companies arise in the supply of solar technologies, technologies for wind parks, technological equipment for substations, power and distribution transformers, control elements and, last but not least, technologies for monitoring losses and optimizing transmission and distribution.
Mining, mining and oil industry
The government is expanding the mining of non-ferrous metals and oil and continuously calls out auctions for their prospecting, mining and processing. The country’s gasification strategy is being prepared following the recently opened TAP transit pipeline and the construction of the 165 km long Albanian section of the IAP transit pipeline. Opportunities arise not only in the area of investments, but especially in the supply of equipment for mining, transportation, sorting and processing of chromite and copper ores, basalts, bitumen and aggregates.
In connection with the gasification and construction of the IAP gas pipeline, opportunities will arise in the supply of gas fittings, technologies for compressor stations and control systems.
Healthcare and pharmaceutical industry
The covid-19 pandemic has forced the government to increase funding for public health. The medium-term plan includes the construction of 300 primary care centers, the construction of a surgical clinic with 120 beds and seven operating rooms, the construction of an internal hospital with 345 beds, and the expansion of the obstetrics and gynecology clinic. The construction of a new clinic specializing in infectious diseases is also being prepared.
Opportunities are in the supply of medical beds, diagnostic equipment, maternity incubators, equipment for operating rooms and biological protection systems.
Agricultural and food industry
Agriculture belongs to the strategic sectors of the country’s development, as it contributes to the creation of GDP in the amount of 20% and employs 48% of the workforce. The sector is significantly supported by the EU, the IPARD III program provides for subsidies in the amount of CZK billion until 2027. Opportunities for Czech companies are mainly in the supply of agricultural machinery, tractors and small tractors and technologies for processing local agricultural products. Possibilities also arise in the export of selected food products.
Details on the development of individual sectors and a more detailed description of opportunities for Czech companies are given in the Map of industry opportunities.
