ALBINVEST

A lba n ia Key Facts

Area

28,748 km2

Population

land: 27, 398 km2

water: 1,350 km2

3,142,065

Labor Force

1,085,000 (2005)

Capital

Tirana

Language

Albanian

Currency

Albanian Lek (ALL)

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Economic Situation Albanian macroeconomic performance is strong and has been steadily improving since the beginning of this decade. The country has experienced rapid growth which, together with the large amount of remittances, has significantly reduced poverty. Debt is declining and Albania is experiencing sustained macroeconomic stability2.

Over that last few years, the Albanian economy has had an economic increase in real terms of about 5-6%. Furthermore, inflation has remained stable at approximately 2-3%, with an average of 2.4%.

Estimates for inflation figures in 2007 predict a continuation of this trend.

In 2006, unemployment declined by 0.3%, to 14% from 14.3% in 2005. National income per capita has reached US $2,903. At the same time, Albania offers low labor costs, skilled labor availability, and a rate of 74% of high school students entering college.

Inflow of foreign direct investment (FDI) for 2006 experienced a 14% increase compared to 2005, reaching 260 million Euros (this figure does not 1 2

include strategic privatizations). It is forecasted that FDI will reach 400 million Euros in 2007.

The largest influence on economic growth is attributed to the success of the private sector, which currently yields about 80% of the GDP. Albania has a privatized banking sector which has progressively financed the economy, significantly contributing to economic growth each year.

Government Regulatory Reform Government

reforms are focused on:

– Reduction of administrative obstacles for the improvement of the business climate: • Shortening of the business registration process to one day, with a cost of only 1 Euro, through the creation and implementation of the One-Stop-Shop, which begins in September of this year.

• Simplification of licensing procedures in all sectors.

Labour force defined as people in work plus registered unemployed (Albania in Figures 2006 – INSTAT. www.instat.gov.al) IMF Country Report 06/286, July 2006.

• Reform to allow the filing of e-taxes and e-procurement.

– Reforms in the fiscal framework. Reduction of fiscal burden by implementing a “flat-tax” of 10% through the end of 2007.

– Improving the Public-Private framework.

The new “Concession Law”, in conformity with European Union regulation, is greatly improving Public-Private partnerships.

– The “Interim” commerce agreement with the EU is being successfully accomplished through liberalization and further opening of the economy. Recently, the High Commissioner for EU Enlargement, Mr. Olli Rehn, declared, before the Foreign Commission of the European Parliament: “… It is fair to say that Albania has taken us positively by surprise as far as the implementation of the Stabilization and Association Interim Agreement is concerned...”

– Albania has ratified the CEFTA agreement,which is a social, economic, and legal achievement for a region with a market of 30 million people.

Overview of Investment Opportunities: There are many excellent opportunities for investment in several Albanian strategic sectors.

Some of the most lucrative of which are the privatization of the government-run oil processing company ARMO, the distribution branch of the electricity company KESH, and INSIG, which operates in the insurance market. There is currently much interest in the energy sector, particularly in the construction of Hydro and Thermal Power Plants through concessions.

Other attractive sectors stem from Albania’s natural resources such as copper, chrome, nickel, oil, and natural gas.

Albania’s garment industry and shoe and leather production have immense opportunities. These sectors comprise 60% of the country’s exports.

Albania’s qualified labor force, low wages, and proximity with the European countries, make it an ideal location for these industries.

Tourism is also become an increasingly attractive sector. The number of tourists visiting Albania increased by 40% in 2006 and is likely to do the same in the coming years.

– Albania has taken major steps towards the reducing of the informal economy.

This will produce many benefits including increasing competitiveness, producing greater opportunities for progress, and increasing the interest of foreign investors.

– Crediting has increased by 60% in 2006, compared to 2005, thanks to reforms in the financial sector.

Blv. “Gjergj Fishta”, Pall. shallvareve, Tirana, Albania tel: +355 4 252 886; fax: +355 4 222 341 e-mail: info@albinvest.gov.al website: www.albinvest.gov.al