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Ekonomia

Foreign investments are growing at a record pace, but here are how many foreign companies will leave Albania in 2022

Foreign investments are growing at a record pace, but here are how many foreign

Foreign direct investments have marked an upward trend both in 2022 and in 2023.

The data of the Bank of Albania earlier revealed that in 2022, the flow of foreign investments was 1.37 billion euros, with a record increase of 33% compared to the previous year (see foreign investment chart).

The expansionary trend continued in 2023, but at a slower pace. In 2023, foreign investments reached another record of almost 1.5 billion euros, but growth was slower at 8.7%.

Despite the record growth of investments in 2022, the number of foreign enterprises in the country decreased.

According to other INSTAT data, the number of enterprises with 100% foreign capital was 4934 in 2022, with a decrease of 6.1%, or 316 closed enterprises that have left the country.

The share of 100% foreign enterprises in the total has fallen to 2.4% in 2022, from 2.9% a year ago.

The most detailed data show that the number of closed companies is higher from Kosovo (-37), Greece (-19), Switzerland (-7) as well as other countries, with 438 less enterprises, including the Kingdom United, as it is no longer part of the European Union.

Italy is the leading country for the number of enterprises that its citizens open in Albania, with 44% of the total, with an increase of 4% on an annual basis, or 2171 entities.

Companies from Italy are generally small and in the service and fashion sector.
In second place are the enterprises from Kosovo, with 356, or 7.2% of the total.

Their number decreased by almost 10% in 2022. (see the graph of the progress of 100% foreign enterprises, by country).

Until 2021, foreign investments were led by large works such as the TAP gas pipeline and the Devolli and Ashta hydropower plants, which also attracted other companies that were subcontractors.

In 2022-2023, they were "replaced" by high flows of real estate purchases by foreigners, which do not require the opening of companies, which would also bring job openings and increased value added in the country.

Other data from the Bank of Albania show that in recent years foreign investments are led by the Netherlands. This trend is more related to the fact that the Netherlands is one of the preferred countries in Europe to register holding companies, in order to control the international investments of various business groups.

The Netherlands is a preferred jurisdiction for the registration of holding companies because it has a wide network of agreements with other countries of the world for the avoidance of double taxation, but also because the legislation there guarantees a high degree of confidentiality regarding the ownership of shares on a company.

According to INSTAT, in 2022, the number of companies with 100% foreign ownership from the Netherlands reached 65, with an increase of 22% on an annual basis.
In 2022, a high increase of enterprises from Serbia was also noted, with 64%, although their number remains small, in 23 entities.

In total, in the country at the end of 2022 there were 6955 foreign and joint enterprises, 75% of which are 100% with foreign capital.

Compared to the previous year, the total number of foreign and joint ventures decreased by 0.7%, as a result of the contraction of 100% foreign enterprises by 6%, while those with joint capital increased by 19%, reaching 1,655 (see chart of total foreign and joint ventures).

Foreign enterprises in the country

According to the INSTAT report, in 2022 foreign and joint ventures account for 3.2% of active legal entities operating in the territory of the Republic of Albania.

In 2022, companies originating from European Union countries account for an average of 62.7% of foreign and joint companies, while Western Balkan countries represent 10.3% of these companies.

In the Albanian economy, foreign and joint enterprises from the States of the European Union are dominant in the following activities: Other Services (26.2%), Trade (13.0%) and Industry (10.0%).

During 2022, enterprises from EU countries with 1-9 employees cover 83.8% of all EU enterprises, while enterprises with 250+ employees cover 1.3%.

In 2022, foreign and joint ventures accounted for 18.9% of total employment and 19.8% of net sales.

EU countries account for the majority of employment in foreign and joint ventures. In 2022, these countries accounted for 73.9% of total employment.

The highest percentage of employees in enterprises with foreign and joint ownership for the year 2022 is in the Manufacturing Industry sector with 35.5%.

For the sales indicator, the highest percentage of enterprises with foreign and joint ownership for the year 2022 is in the Trade sector with 26.7%.

In the Extractive Industry sector, the majority of net sales are realized by enterprises owned by the group of other States (91.5%), where China is the dominant country with 77.1%. In other sectors, the majority of net sales were made by EU countries; Manufacturing Industry (53.5%), Electricity & Water (70.7%), Construction (60.3%), Trade (52.6%), Accommodation & Restaurants (44.4%), Transport & Communication ( 62.0%) and other Services (75.9%).

In the group of EU countries, Italy dominates in the Manufacturing Industry sector (32.8%), Construction (27.5%), Trade (21.9%), Other Services (36.5%)./ Monitor