Business Cooperation of Italy and Albania: A Step towards Stronger Ties

Regardless of signs of recovery, Albania’s economic development remains below the pre-crisis levels. In the past few decades, its economy has witnessed a shift from the agricultural sector toward industrial, confirming SME development. In the early 2000s, it had a booming economy with annual growth rates of 6% and SME turnover increasing at double-digit rates. However, this was soon interrupted by 2008-10 global economic crises. As a result, GDP growth rates halved and the country suffered from Euro-zone crisis. It is assumed that if Albania wants to increase its GDP and enter the EU, it should strengthen the private sector. Also, Albania should boost competiveness regionally and beyond. Considering that, EBRD is all set to support the Adriatic-ionian highway, aiming at linking Croatia to Greece.

Since Albania is located right in the middle of the Western Balkans, it can be well linked to the European Union. Western Balkans has been a prominent driving force behind economic as well as structural reforms for most countries. This is because of its strategic location forming a trade link with the Adriatic and the European Union. Therefore, this is the just the right opportunity for Albania that needs to be seized. Significantly, the regional economic prospects with 2.5% GDP growth in Albania can be increased to a great extent. However, this can be only done when the SMEs are promoted well. Besides, the competition between each business should be encouraged, so that they work more to increase the Gross Domestic Product. This can be done with more funding and providing sufficient resources.


Sectors that Albania Needs to Develop

The economy of Albania is comparatively small and in order to attract private investment it must be properly connected to a wide market, in terms of infrastructure as well as harmonization of regulations. Therefore, regional integration is definitely one of the main priorities in the country.

The EBRD in collaboration with the European Commission and the government authorities is making investment in the construction of road and railways to link the Western Balkans with the European Union. Also, the regional banks are financing rehabilitation of roads and railways in Kosovo, Bonsia, FYR Macedonia and Herzegovina. Similarly, investments are made in the Montenegro airport and seaport sectors.

Investments Made and Yet to be Made

The banks are working closely with the WBIF (Western Balkans Investment Framework) ensuring coordination mechanism to bring all the stakeholders together for establishing important projects of common interest. This type of regional projects has an impact on important policies, including trade and custom regulations for simplifying economic collaboration. Similarly, the bank is showing interest to support the highway project, promoted by Croatia, Herzegovina, Bosnia, Albania and Montenegro governments. The highway is expected to be connected with the Central and Western Europe via the Western Balkans with Greece.

The EBRD has carried out a number of projects, contributing to regional integration. Together with the EIB and EU, the Bank is financing the development of the Fier and Vlore roads. Well, these two projects are a part of Corridor VIII. The EBRD is also looking to offer their support to the regional energy security. Therefore, they are seeking options to invest.

Aside, institutional strengthening is also important when it comes to attracting investors in the country. Enhancing the business climate being one of the important government agendas, the EBRD is supportive of Albania developing the Investment Council to build a platform for public and private dialogue.

How to Support Private Sectors

When it comes to supporting the private sector development, there are so many ways that can be implemented. Direct financing can be offered to the SMEs, including equity and debt. Funding can be easily made through the local banks or other financial institutions. Recently, EBRD is working on connecting the agricultural sector and local banks to the businesses. It is believed that there is a lot of potential in this sector. The government is making efforts to figure this out. In fact, it has sanctioned National Guarantee Fund under which both the banks and the several financial institutions can work to develop an Agribusiness Financing Facility.

Encouraging small scale and medium businesses is apparently the main focus for Albanian government as this will help them to become volatile in the Euro zone.

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