Albania: Investors Concerned at Protests

Alarm at political protests masks underlying questions about how foreign investors are treated.

Albania: Investors Concerned at Protests

Alarm at political protests masks underlying questions about how foreign investors are treated.

Monday, 21 February, 2005

A week after street protests turned violent in Tirana on February 7, Albania's most famous singer was praying that his Italian band would show up so that a concert could go ahead.

Ardit Gjebrea had a struggle to convince his band that the wave of protests organised by the right-wing opposition had not made Albania unsafe.

That first protest march ended in violence when police broke up thousands of demonstrators marching towards the government building and calling for the resignation of prime minister Fatos Nano. A further demonstration on February 20 - involving up 20,000 people - passed off peacefully.

As political stability remains uncertain, Italian musicians are not the only foreigners threatening to stay away.

Investors planning to invest in the Balkans' most impoverished state are also warning that their patience is running out.

Luan Bregasi, head of Albania's Chamber of Commerce, says foreign businesses feel threatened by a "possible repetition of the violent acts of February 7".

Bregasi was speaking on February 17, three days before the second, larger demonstration that went off without incident. But as long as the atmosphere remains tense - opposition leader Sali Berisha has promised new protests on March 20 - foreign businesses cannot relax.

Albania's economy had been slowly recovering from the anarchy of the late Nineties. Investors' reports rated Albania higher in 2003 than they did in 2002. America's Exim Bank, for example, upgraded the country's risk rating by one point in its annual assessment.

The biggest injections of money into the economy still come from foreign donors and lenders rather than commercial investors. The World Bank, the European Union, Italy and Germany lead the way, targeting the country's dilapidated infrastructure.

Much of the foreign funding goes into telecommunications, banking and manufacturing - although the lack of electricity and water supplies deters many potential investors in the latter area.

Albania has recently begun attracting more interest from other west European countries and the United States. At the end of 2003, Austria's Raiffeisen Zentralbank Oesterreich bought Albania's largest bank, the Savings Bank of Albania, for 126 million US dollars in one of the largest deals of this kind.

Last year, two American corporations, General Electric and Lockheed Martin, negotiated agreements to work in the energy sector and Albanian ports. Meanwhile, the government has granted a concession to a German-American consortium, Airport Partners, to invest 80 million dollars and build a new international air terminal within three years.

But the recent political turmoil and a more general sense of instability leaves some investors feeling jittery.

Zenel Hoxha, head of the British Chamber of Commerce in Albania, says British investors feel "asphyxiated" by the current political impasse, and if they encounter more hurdles, there is a danger they will pull out.

Floreta Faber, director of the American Chamber of Commerce, told IWPR that at least one major investor from the United States is putting a key investment decision on hold, although she would not name the firm for reasons of confidentiality.

"Protests create destabilisation, and destabilisation is not good news," said Faber.

But it is far from clear whether opposition protests are solely to blame for the lack of investor confidence. All the signs are that underlying problems with the way foreign investors are treated by the government are also a factor.

Artan Hoxha, an independent economist and vice-president of the Institute for Contemporary Studies, ICS, says the government is using the protests as an excuse to cover up for its own failings.

"Every country has protests, but investments still continue under a new government," he said.

According to Hoxha, the real problem lies in over-centralisation of government, which creates a culture in which no decision can be made without it being referred up to ministerial level.

"The administration cannot act or decide anything without the approval of a government minister," he said.

A 2003 report from the German foreign ministry appears to support Hoxha's claim, saying that investors "have difficulties in finding responsible persons in the administration" to grant them the licenses they need to work.

Even after contracts have been signed, business agreements remain so dependent on the individual ministers concerned that foreign investors fear they could be at risk if there is a change of administration. "[They] worry that they might have to repeat all their procedures if the government gets a new face," said Hoxha.

As Faber explained, "When a minister or government changes, every director and every chief in every office of every ministry is replaced by someone else, who wants to start afresh."

Dalina Buzi is a journalist with the Albanian private TV station Top Channel.

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