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    O’Brien, T., et al., 2020

    Accelerating Growth in Albania through Targeted Investment Promotion

    The investment promotion process in Albania is underperforming versus its potential. Between 2014 and 2018, the Albanian economy saw accelerating growth and transformation, which has been tied to the arrival […]
    Growth Lab

    The investment promotion process in Albania is underperforming versus its potential. Between 2014 and 2018, the Albanian economy saw accelerating growth and transformation, which has been tied to the arrival of foreign companies. However, Albania has the potential to realize much more and more diversified foreign direct investment (FDI), which will be critical to accelerating growth in the period of global recovery from the COVID-19 pandemic. As the Albanian economy weathers the storm of COVID-19, it is critical to look to the future by enhancing the investment promotion process to be more targeted and proactive such that Albania can attract transformative global companies aligned with the country’s comparative advantages. This is not only a critical step toward faster and more resilient economic growth in Albania; it also happens to have very high returns in comparison to the limited fiscal spending required to implement the actions required.

    The targeted investment promotion approach discussed in this note would capitalize on Albania’s many existing comparative advantages for attracting efficiency-seeking FDI. It would not displace Albania’s Strategic Investment Law nor the activities of the Albanian Investment Corporation (AIC), which aim to expand the country’s comparative advantages. Efficiency-seeking FDI — global companies that expand into Albania to serve global markets because it makes them more productive — do not need extensive tax incentives, regulatory exemptions, or other subsidies. In fact, an overreliance on these approaches can crowd out firms that do not want or need to rely on government support. Adding targeted investment promotion to Albania’s growth strategy would lead to more jobs, better quality jobs, more inclusive job growth, faster convergence with the income levels of the rest of Europe, and ultimately less outmigration.

    This note summarizes the Growth Lab’s observations of the investment promotion process in Albania, over the last year in particular, and lays out recommendations to capture widespread opportunities for economic transformation that have been missed to date. The recommendations provided at the end of this note provide a roadmap for building an enhanced network for targeted investment promotion that is specific to Albania’s context. These recommendations recognize the current constraints that the COVID-19 pandemic creates but also look past the pandemic to prepare for opportunities that will emerge during the global recovery.

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  • Head shot of Eduardo Lora

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    Eduardo Lora

    Former Associate

  • Noel Maurer head shot

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    Noel Maurer

    Former Associate Professor of Business Administration, Harvard Business School

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    Tim McNaught

    Former Research Fellow, BSC

  • Head shot of Gustavo Grobocopatel

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    Gustavo Grobocopatel

    General Manager of the Los Grobo Group

  • Head shot of Pedro Rosas Bravo

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    Pedro Rosas Bravo

    Former Resident Fellow

  • Matt Andrews head shot

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    Matt Andrews

    Edward S. Mason Senior Lecturer in International Development, HKS

  • Head shot of Salimah Samji

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    Salimah Samji

    Director, Building State Capability

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