Starting a new year is always one of the best times to review your investment strategy. New Year 2020 is a chapter waiting to be written. Also, let us not forget that this year also coincides with the beginning of a new decade.
Entrepreneurship nowadays is one of the main levers of economic growth. Human capital and entrepreneurial behavior are classified as two of the most important indicators of world economic growth and development. Before making the decision to invest and find a profitable opportunity, it is very important to know when, where and how to invest. Entrepreneurship nowadays is one of the main levers of economic growth. Human capital and entrepreneurial behavior are classified as two of the most important indicators of world economic growth and development.
Whatever the reason, smart investing directly helps in increasing your wealth. Because there are so many reasons to invest, there are so many ways to invest. The initiative to invest does not necessarily mean "all or nothing". You can decide to use relatively safe instruments to invest your money.
In order to make an intelligent and profitable investment, a detailed analysis of those elements that make possible the implementation of an investment project must be performed, which on a case-by-case basis are related to:
Financing is one of the most important functions of any investment that plays an important role in managing business growth. Before you take the initiative to make an investment you need to be clear about the financing, how much money you will need to fully implement your investment plan as well as the funding sources you will use, be it personal savings, borrowing, financial partnership with individuals or legal entities, etc.
2. Level of exposure to financial risks:
There are different definitions and treatments for risk, depending on the situation, perspective and objectives. Risk has to do with uncertainty, with the possibility of losing, but also of winning. For a business, risk represents the possibility of occurrence of events that cause fluctuations and non-achievement of objectives. Risk can be measured, assessed and of course managed (managed). This is an ongoing process for a business, while the risks associated with running a business are also ongoing. Risk factors for a business can be factors of the business environment (external) or factors of the business itself. Every business is subject to the risks posed by the economy in which it operates, the economic and financial system, the culture and the laws of the country in which it operates. Each business also has its own characteristics, unique and specific, which in addition to adding value to the business, reduce or increase risk exposure.
3. Return on equity:
Investment research has shown that not all investments provide return on invested value. Depending on the investment and the risk that accompanies this investment, the return or volume of return on investment also depends. The return on equity ratio is sometimes called the return on net worth, it is the most important ratio of all profitability for business owners. Return on equity allows business owners to see how effectively the money they have invested in their firm is being used. It is basically a measure of how owners have come out regarding their investments in the firm. Simply put, return on equity is commonly seen as measuring a firm’s performance line.
4. Fiscal policies / Subsidies:
By fiscal policy we mean certain legal initiatives that are taken from time to time by the state, in the field of taxation, which aim to affect the level of economic growth. Targeted fiscal policies can motivate investors to orient their investment in a specific sector which is a priority for the Government.
Subsidies are a form of financial assistance, in the form of cash or tax cuts, provided by the Government to help carry out commercial activity in a particular sector. The purpose of subsidies is to alleviate the financial burden of a particular sector or to provide health and social welfare assistance to persons in need in the general interest of the public.
5. Other elements that make an attractive opportunity (contribution to the community, etc.):
Social responsibility is the idea that investments (businesses) should balance profitable activities with activities that benefit society as a whole. The relationship with society and the environment in which businesses operate is "a critical factor in their ability to continue to operate effectively and is increasingly being used as an appreciated element of their overall performance." Social responsibility means that investors have a duty to act in the best interest of their environment and society as a whole.
Realpas after a careful research has identified some of the sectors that are rated as extremely attractive for investment in 2020 as follows.
Real Estate Investments
In recent years in Albania there is a growing trend of demand for investment in real estate and especially investment in residential and tourism projects. There have always been various discussions and assessments, but it seems that a good part of experts in the field of economics agree with the fact that investing in real estate in the Albanian market is one of the safest investments and provides income continuous. Real estate investments provide a stable and higher income than other ventures because when bought at the right price they have a quick return on capital. In general, investing in real estate in the real estate market has fewer risks than investing in others.
The food industry
Albania still has a low number of food processing factories and the main food products are imported from other countries. The Albanian market has great needs for such products and the future offers many opportunities for investors because the demand for food products will continue to remain at high levels. The food industry has always been an attractive area for investment, as companies that produce food and beverages are more resistant to crisis phenomena than other industrial sectors. Steady cash flow, due to small changes in consumer demand, allows the food industry to withstand long periods of recession, making this sector less exposed to risks. Food is needed every day, so the food industry promises a return on capital in the short term. Also, regarding fiscal facilities and policies, the state occasionally takes measures to help investors and increase domestic production.
In recent years, significant progress has been made in agriculture, also as a result of the favorable conditions that Albania offers in its geographical position. However the agricultural sector is exposed to a range of frequently encountered risks. These include climate and weather risks, insects and diseases, which make the quantity and quality of production very unpredictable. Production risks are intensified by price risks, credit risks, technological risks and institutional risks. Risk management in agriculture varies from informal mechanisms such as avoiding high-risk crops, plant diversification, and revenue sources to formal mechanisms such as agricultural insurance, the minimum price support system, and futures markets. Recent trends show that Albania has the potential for a modern and competitive agricultural sector and the right environment to create sufficient private investment. * The program of direct subsidies from the state budget initiated in 2008 and onwards, has borne fruit by doubling domestic production and significantly reducing the trade deficit. This has affected the increase of planted areas and the benefit from subsidies of an average of about 7,000 farmers per year. Agricultural land in our country occupies only 24% of the total land and in this area lives today 50% of the country's population. Agriculture remains one of the sectors with the greatest potential in Albania. According to World Bank data, the contribution of this sector to gross domestic product in 2017 was about 20%, almost double the contribution of the same sector in the region (Kosovo 13.7%, Macedonia 11.2%, Montenegro 10.2% , Serbia 9.46%). Also, this sector dominates the employment market by employing about 44.26% of the total number of employees. Rural areas in Albania still have untapped potential in the agricultural sector to increase productivity, product quality, increase access to export markets and diversify the incomes of rural households.
Digital / IT Services
In this technological age, everything is online, so it needs to be fast. This is why digital services are at the peak of development! There is no time, what could be better than doing things with one click? When a person wants something, he wants to get it right away, without waiting too long! Digital services are a trend because it is very "easy" to handle business. Not because it requires less effort, but because of the speed and convenience that these services offer. Service in the field of digital technology is an important sector that presents potential for investment. A year ago, the government took an initiative to reduce the profit tax for companies that produce software from 15% to 5%. An investment in the field of digital services has a low financial cost, as it mainly exploits intellectual potential. If we talk about the service and the benefits it brings to the community, this is not one of the strongest points of this sector because the exercise of this activity does not require interaction with the community. Services in the field of digital technology are quite well paid and therefore can guarantee satisfactory profits and safe and fast return on capital.
Biotechnology is the field of applied biology that includes genetic engineering as well as tissue and cell culture technologies. Biotechnology is a meeting point of two important industries these days: health and STIM (Science, Technology, Engineering and Mathematics). These engineers develop the equipment, software, and computer systems used in medical devices. The concept encompasses a wide range of procedures for modifying living organisms according to human purposes ranging from taming animals, cultivating plants, and "improving" them through grafting programs that use artificial selection and hybridization. This type of investment requires a lot of financing and a good way to finance is borrowing. Another problem that this type of investment faces is the lack of a regulatory legal framework. Referring to the latest developments, it is one of the most interesting and profitable investments of recent years, as it promises big profits in a short time. The Biotechnology industry in Albania is very little applied. What is noticeable is that the information on biotechnology is often insufficient, which has often caused misunderstandings in this area and concerns about product safety. It has already been proven that biotechnology, if applied under well-defined conditions, is not only safe but also beneficial. It is important that communication and informing the public about biotechnology should be a priority. As it is already clear: we can not feed the humanity of tomorrow with the technology of yesterday.
Our country has a large number of attractions for historical and cultural tourism as well as a coastline about 450 kilometers from north to south. Tourism has had service shortages for years but the improvement of infrastructure has made this sector one of the most popular for investment. According to data reported by AIDA (Albanian Agency for Investment Development), it results that in 2021 tourism revenues will reach 29% of GDP. The Law "On Tourism" offers very competitive incentives for investors (for more see the specific article on the blog). The law offers a series of changes for the tourism sector in Albania, aiming to make it one of the most important sectors of the economy in future. For Investors, Albania is an attractive growing market, with a stable economic, political and legal structure, as well as a liberalized economic framework and suitable conditions for doing business. The legislation on investments in the tourism sector aims to promote Albania as an attractive tourist destination for domestic and foreign visitors, supporting the development of a sustainable tourism, ensuring that tourism service providers meet the demands of tourists, in a healthy environment. and safe, and respecting the needs of today and future generations of host communities.
Renewable energy in Albania includes the production of energy through the use of hydro resources, solar and wind. Albania relies mainly on hydro resources, therefore, there are difficulties when rainfall levels are low. The climate in Albania is Mediterranean, so it enjoys a considerable potential for the production of solar energy. In recent years, as a result of the favorable policies of the government, a profitable electricity market has been created and in particular the renewable energy market has developed. Albania ranks among the top countries in Europe for hydropower and relies almost entirely on electricity generation by hydropower plants to meet its growing electricity demand (98% of all domestic energy produced). One of the main priorities of the Albanian government is for the country to be able to meet all its energy needs and turn it into an important regional player in terms of the energy market. To further the energy plan of Renewable Development Fund for the Western Balkans * has worked with the Albanian government to support the establishment of an institutional framework to support and implement renewable energy projects. The Norwegian state has managed to provide a fund of 650,000 Euros for assist the Ministry of Economy, the Ministry of Trade and Energy, and the Electric Power Corporation of Albania to develop capacity building for large-scale hydropower projects, including tendering, control of concession agreements, and regulation of licensing procedures. The project will also provide specialized technical assistance for wind energy integration, indicating the amount of wind energy that the Albanian grid can safely accept and the cost of integrating this power. In order to achieve this goal, a large number of concession contracts have been awarded to foreign and Albanian investors, who build and operate hydropower plants of different capacities. Strengthened legislative framework and technical knowledge based on international best practice will attract investment in the hydropower and wind energy sector, as well as help Albania.