During the last years, the economical and political debate in Albania has been focused in the increase of competition of Albanian products in the international markets. The fiscal pressure, the very very low labor costs of the market and the attraction of foreign investments in the last years have not given the expected results, have not helped in being competitive in the external markets nor have had impact in the country’s market or the domestic consumption.
Recently, some think that government must encourage foreign enterprises in order to divert a part of the production in our country. Speaking more precisely, we have been seeking for foreign enterprises which operate in traditional sectors with production compartments, using a intensive and non-specialized work.
According to modern economy theories, the low labor cost is one of the primary indicators that causes the deviation of enterprises abroad, or in other words, the low labor cost causes the excerption of the international production. Speaking about “low labor costs”, we must not confuse it with low wages, because not always a low wage coincides with a very low labor cost.
If we take a look at the Italy’s economic performance in recent years, our primary partner in trade exchanges and for foreign investments, we notice that in the last ten years, about 27.000 Italian enterprises have established their company branches in other countries that provide cheap labor force, by opening in this way circa 1.5 ml workplaces and by burdening their country with a 15 bl EUR bill as a social assistance. Only 10% of these enterprises established their branches in Asia, and others in countries as Austria, Switzerland, Germany, Balkan countries and Albania as well. These countries have shown e great potential of economic growth and improvement in the institutional aspect.
The above mentioned countries have welcomed a high number of foreign companies, even why they have dissimilarities in characteristics in the social and economical fields compared to Italy. A figure that illustrates this, is the fact that Balkans GDP for 2012 was about $191 bl, or the 1/10 of the Italy’s GDP for 2012. The same we can say about the demographic overview since Balkan countries have about 40 ml inhabitants, approximately as 70% of the Italy’s population. In the last 10 years, 17.700 Italian enterprises opened their branches in Balkans, 15.700 of them in Romania and 600 currently operate in Albania. These companies have employed circa 900.000 people.
After Romania became an EU member country, many of these Italian companies started leaving the country and moving to other Balkan countries, mainly in Albania. This interesting phenomenaon brings us to the conclusion that when an enterprise from a western country diverts its production in Balkan countries, looks like they are not seeking only for cheap workforce, but for an “unprotected workforce”. They are more able to break deals and contracts with their employers in countries as Albania, than in EU member countries.
When an enterprise seeks for employers in another country, its aim is to maximize profits and to reduce costs. I have had the opportunity to speak many times with different Italian entrepreneurs which have opened their company branches in Albania. They confirm that in the most of cases, they hire non very qualified employers, since the products that need high qualified workforce continue to be produced in their workplaces in Italy.
Such companies come to Albania for the low labor costs; the geographical location of Albania which impacts in the reduction of transport costs and time. The products that these companies produce in Albania do not go for the domestic consumption, by not having any impact in the decrease of imports and in the improvement of the trade balance. The Italian businessmen also confirm that they come to Albania to work in a total “freedom”, in order to benefit in a short time. Since Balkan countries aren’t part of the EU, they are considered as a reality in expansion and with a high potential for benefits from businesses in the garment industry or in client service field. This continues until a developing country becomes part of the EU but at the time they win the member status, it is not easy to work in these countries due to the strengthen of labor law.
The problem here is that these entrepreneurs do not create a long term collaboration with the countries in which they establish their company branches. This was noticed in Romania after many Italian companies closed their companies there and reopened them in Albania, the same example as what happened with garment companies which initially established their branches in Madagascar and then moved to Morocco and Kenia. So we can say that these companies do not bring an added value in the stable economic development and do not cause what Hirschman defines as an “imbalanced development” where the employment in a sector must have caused the domino effect in investments and employment, and employment in similar sector to the previous one.
It is also noted that the economical globalization for Balkan countries and particularly for Albania is not bringing a stable development, but remains only a temporary solution until the moment something better comes out, even why if its without a clear vision for the future.
In order to have an economic development which is not a synonym of the economic growth, on one side it is needed a specific analysis on the domestic consumption in order to orientate investments, and on the other side we must encourage and support such foreign investment companies that aim to establish a long term report with our country, by investing in the proper way. All this must be done by respecting the rights of employers and the right of poor people in order to provide for them a dignified life, by respecting the environment where we live and to not exploit nature brutally. I hope Albania becomes as soon as possible an EU member state, but we must develop economically based on our resources and not to expect that Albania will develop after being part of the EU.
Photo credits: Flickr / hobvias sudoneighm