Competitive Advantages for Attracting FDI in Improving the Business Climate in the Agricultural Sector of the Albanian Economy

Abstract

Knowing the value of Foreign Direct Investment (FDI) as a mean for encouraging investment, stresses the need for accurate measurements and detailed statistics of FDI for assessing their relationship with economic growth and its impact on various economic sectors, mainly in the agricultural sector. The main purpose is to identify the role, both in terms of increasing the flow of FDI in Albania. An important aspect of the aim of the research is to identify and evaluate the role and impact of FDI in Albanian agriculture, trends and issues or major obstacles to FDI in this sector, focusing in Korca and its municipalities. Over the past decade, the flow of foreign direct investment played an important role in increasing the productivity and efficiency of production, employment and domestic exports. The objectives of this study deal with the analysis of FDI as an important factor for developing countries in terms of globalization of the world economy as well as the direct or indirect impact they have on the Albanian economy with the main focus on agriculture. The business climate is negatively affected by high levels of tax, fiscal instability, unfair competition in the market and the relative insecurity of property rights and lower demand for agricultural products as a result of limited income of the population. In the agricultural sector the business climate is affected negatively by the controversial political stability, perceptions of high level corruption, bad agricultural policies, farm size and its fragmentation, low quality of agricultural inputs, the disapproving trend of collective action and problems with irrigation and drainage infrastructure. The business climate is affected positively,in the medium term, by relatively low standards of food safety, low environmental regulatory norms and the cost of manufacturing resources, mainly land and labor. The research concluded in some general results as follows: The inflow of FDI has contributed positively to employment and economic growth in Albania, but Albania has more spaces for FDI. The inflow of FDI in Albania has contributed to increasing productivity, facilitating access to markets and improvement of the trade balance. The small estate and other structural problems in agriculture are serious obstacles to FDI. These obstacles are expected to be long, hindering the growth of FDI in the long term. Business climate, in particular, fair competition, fiscal facilities and facilities of capital entry and repatriation of profits, safety and property investment, are fundamental factors of the increase of the flow of FDI in Albania. The business climate in Albania has been improving. Agriculture has a competitive advantage in relation to other branches of FDI, but policies are needed to reduce structural barriers, increasing security of property and fiscal facilities.

DOI: 10.5901/mjss.2016.v7n4p105