During the notorious Communist regime of the egomaniac Albanian dictator Enver Hoxha, who needed 80 autobiographical volumes to hold his memoirs, the little Balkan country on the Adriatic tolerated no Western foreign investment - and didn't permit much direct contact with Stalinist Russia or Maoist China either. When Mr. Hoxha died in 1985, his economic legacy was an oppressed country of three million people - more than one million of whom lived in abject poverty.
For 40 years, Albanians eked out a marginal existence on Mr. Hoxha's pre-industrial collective farms, the poorest people in all of Europe. They remain relatively poor to this day. Albania now boasts GDP of $22.5-billion (U.S.), up from $4-billion in the 1980s, and ranks No. 117 globally (according to the CIA World Factbook). Yet it still registers only $6,200 in average per capita income - ranking No. 131. Eurostat, the statistical agency, says Albanians earned only 25 per cent as much last year as the EU average.
But wait. What's this? From zero dollars in foreign investment only a few years ago, Albania now reports foreign investment equal to 25 per cent of GDP - or $5.5-billion, ranking No. 50 in the world. In the global competition for investment, Albania now punches well above its weight. All else equal, this performance ensures greater prosperity ahead.
Albania has already made enormous progress. As recently as 1997, the country was in violent upheaval - and GDP fell 9 per cent in a single year. As recently as 1999, it attracted a mere $44-million in foreign investment. (With a $10-million bottling plant in 1994, Coke was the first of the big multinational companies to invest.) Now investors are rushing to embrace the comeback country that once had everything going against it.
Remarkably, Albania has thrived through the past three or four years, global recession notwithstanding. Last year, Albania was the only European country (aside from San Marino and Liechtenstein) to post real growth: 3.7 per cent. In 2008, it posted real growth of 7.8 per cent. In 2010, it will post real growth of 3.5 per cent. It is the most economically dynamic country in its own Balkans neighbourhood and it is doing better, in relative terms, than many vastly bigger European economies. (In 2009, Germany's economy shrank 4.8 per cent; France is expected to grow 1 per cent this year, Italy by 0.4 per cent.)
What do the growth statistics mean for the Albanian people? In a report published last year, the World Bank asserted that the country's poverty rate has fallen by half to 12 per cent in the past six or seven years. In 2002, the bank reported, the poverty rate was 25 per cent. Of the 525,000 people who were statistically poor in 2005, more than 200,000 had since escaped poverty. Of the 800,000 who were statistically poor in 2002, more than 435,000 had since escaped poverty. The World Bank defined as poor any person - adult or child - with an income less than 5,700 lek ($50) per person per month.
Citing big advances in incomes in the privatized farms that account for half of the jobs in Albania, the World Bank reported that the average income in the country had increased (in real terms) by 36.5 per cent in the three-year period between 2005 and 2008.
Based on the country's extensive reforms in the past decade, the World Bank said it anticipates "strong economic growth and macroeconomic stability" in the years ahead. And why not? In a single decade, Albania could easily generate more economic growth than it generated in the previous century. Square mile for square mile, Albania is considered by some authorities as Europe's richest country in natural resources. (In 2008, Swiss-based Manas Petroleum Corp. announced the discovery of huge deposits of oil and gas; by some analysts, the discovery could contain 27 trillion cubic feet of natural gas.)
Albania is succeeding for a simple reason: It has put in place the free-market reforms that permit success to happen. It is a member (with Canada's help) of NATO. It is on track for EU membership. It is a democracy based on the rule of law (whatever imperfections remain from the legacy of the past). Aside from these virtues, spiritual and pragmatic, it offers exceptional opportunities for investment (among other things) in nickel, chromium, copper, zinc, gold, silver, iron and coal.
But one reform has worked more effectively than others in making foreign investment feel welcome in Albania. The country's corporation tax is a flat-rate 10 per cent. The country's personal income tax is a flat-rate 10 per cent. The country's levies no tax of any kind on dividends directed back into supplementary investments. Indeed, Albania offers the lowest taxes in all of Europe - and perhaps the world. The result is precisely what you would expect: an investment stampede. It couldn't happen to a more deserving country.