How Globalization has Affected Albania - Essay Example

? Globalization-Albania Introduction Economies of the 21st century require a strong growth model. They also require implementing the growth model successfully, at every geopolitical dimension of a country, through regional co-operation. It is in this context that globalization often tends to be one of the fruitful concepts at the present century throughout the world to support effective economic growth models. This particular conception can be evidently observed with reference to the historic and present structure of Albania. Over the last two decades, the Albanian economy has undergone noteworthy structural changes through various economic activities and newly established international trade affairs, which have undoubtedly fuelled the country’s economic growth and societal prosperity. Apparently, Albania has also been strongly affected by the impacts of globalization in almost every sphere of its economic environment (Fulani, 2012). Based on this notion, the discussion henceforth will attempt to analyze the history of Albania and the transactional era of the country, considering its post-independence era since the 1990s. Historians and economists have often argued that most of the changes witnessed in the economic structure of Albania took place during the 1990s, after its independence. For instance, at the post independent era, Albania began moving towards global open market operations, increasing the effects of globalization on the economy (Barolli, n.d.). These economic interventions in Albania will also be analyzed to review the prosperity of the nation, on the basis of several parameters. Contextually, this paper will aim at analyzing the political conditions of Albania and the governmental structure of the country, treating it as a parameter to achieve economic prosperity. The legal and regulatory business environment of Albania will also be discussed in the paper, captivating the concern of international trade rules and legal policies followed by the country. This paper will further concentrate on the economic advantages of the country, by analyzing the natural resources of Albania along with its financial and monetary policies. Furthermore, the several cultural dimensions of the Albania and the impact of this diversity on its economical growth will also be defined in the further discussion. In addition, the discussion will render due emphasis on identifying the key competitive advantages associated with the current economic model in Albania and accordingly, suggest few recommendations for the country to sustain its growth in the global context. History of Albania Albania is situated in the South-Eastern border of Europe. The country has an ‘emerging democracy’. Officially, it is well known as the ‘Republic of Albania’. Its capital is Tirana or Tirane (CIA, n.d.). However, the mystery is today solved and the people of Albania are referred as ‘Albanians’, the most Ancient Race in the South-Eastern Europe. Contextually, several theories have been established in order to solve the problems associated with the country and to reach the current state (Barolli, n.d.). According to Gjata (2013), “Albanian history is one long tale of epic struggles against one invader after the other”. Apparently, historical factors have impacted the identity of Albania through several centuries in terms of foreign dominations and also due to the two consequent World Wars. In the beginning of the 9th century, particularly because of the weaknesses possessed by the then authoritative Byzantine Empire in Albania, Angevins of the Southern Italy, Venetians as well as Serbs obtained the opportunity to invade Albania and consequently, obtain a dominating position within the dynasty. This further paved the way to the fall of Byzantine Empire in the country. As a result, in the mid of 14th century, the rule of Byzantine Empire came to the end, which was controlling the nation for almost 1000 years. After few decades, the country faced another threat which came from Ottoman Turks in the year 1388 and after four decades, in 1430, the country was fully captured by them. Through an assortment of struggles, after few centuries, Albania succeeded to gain independence from the rule of Ottoman Turks, in the beginning years of the twentieth century. Later, during the phase of World War II, it was observed that communist partisans as well as nationalist guerrillas fought with the Italian and German forces to take control of Albania. Therefore, Albania had to take help of the British and American forces to defeat the German and Italian forces in a civil war in the year 1943 (Barolli, n.d.). With their success in the battlefield with Germans and Italian forces, Albanians were elected as a new people assembly in the year 1945, by the candidates of democratic front. Correspondingly, with the aid of an advanced economic model, the country undertook several economic measures for the overall development of its society. It is worth mentioning in this context that the country is rich with natural resources such as oil, hydropower, chemicals, cements and agriculture among others. Studying the historic growth of the nation, it can be observed that Albania started experiencing a sustainable growth since the early twentieth century, when globalization effects became apparent within the nation. Accordingly, the country was able to obtain industrial growth with technology advancements and better FDI opportunities (Fullani, 2012). Political Condition of Albania The political history of the Albania is often argued to be one of the unique examples in the Eastern-Europe due to its size, location and abundance of natural resource availability. Politically, the involvement of the Albania in the European Union has rewarded it with a distinct prosperity for the growth of the country. Albania has always maintained a good relationship with neighboring countries, which successfully advocates the significance of regional co-operation in the applied economic model of the country. After the independence of Albania in 1991, the political system of the country was divided into two large parts, i.e. the Democratic Party (DP) and the Socialist Party (SP). These two parties have been dominating the country’s parliament, since the 1996 parliamentary election (Gurney, 1997). The election method followed by the country played a vital role to bring back the SP in the political power by the year 2005. Ideologically, the country was ruled by two political powers, the SPs and the DPs. As a result, the struggle for domestic power reached its climax, and a violent riot broke out in January 2010 against the ruling government. As a measure to reduce such fluctuations in the national context of Albania, its European partners as well as international representatives began to put pressure on the Albanian government to increase the cooperation between them and stand against the country’s internal political problems which gave rise to an unconventional concept of ‘emerging democracy’ (Barolli, 2005). However, even though the two largest assemblies in the European Parliament, i.e. the European People’s Party (EPP) as well as the Progressive Alliance of Socialists and Democrats (PASD), tried to mitigate the political problems of Albania, their effort had abruptly failed. As a result, on 23rd June of the year 2013, again a parliamentary election was held in the country to create political alliance and successfully run the entire system (European Forum for Democracy and Solidarity, 2013). Governing Structure The country of Albania is a parliamentary republic whereby the sovereignty of the country mostly belongs to the people. The constitution of the country is the prime law that was adopted in the year 1998. Although the governmental system is based on the notion of treating religion as an entirely distinct issue from its official functions, which can be apparently observed with reference to its youth policy, being in action since 1912. With the aid of such a political regime, the government in Albania has been able to derive a clear balance in its legislative judicial power and executive systems operating within the economic as well as social contexts. The parliament structure of the country comprises 140 seats allotted for each state and likewise, are proportionally distributed among the several zones (CIA, n.d.; Ministria e Turizmit, n.d.). Legal and Regulatory Environment for Business in Albania Fundamentally owing to its open trade policies implemented since its independence, Albania has been able to achieve the 58th position in the global business index as on the year 2013. To develop its economic conditions, the country has recently shown significant concern about towards developing its small and medium size enterprises with the intention to lessen its dependency over foreign investors. Initially, after its independence, Albania was observed to practice conservative policies towards foreign investment. However, in the current phenomenon, the legal implications of the country to bind the operations of foreign investors have been observed to be substantially minimized. To be precise, nowadays, operations of foreign investors within the nation are no more subjected to the prior authorization under the national regime; rather, such operations are considered subjected to international laws practiced by the EU to regulate the foreign investment within the political regions. However, during the early 1990s, foreign investment in Albania was restricted under law no.7491, law No. 7501, Law No. 8047 and Law No. 8312 among others (Pbosnia, 2008). Notably, Small and Medium Sized Enterprises (SMEs) sector have a vital role in the economic transition of Albania. In the current day context, the SME sector of Albania is identified as one of the major sources of employment. It is also a key basis of modernization, which has apparently encouraged entrepreneurship as well as economic productivity within the nation. Although the government of Albania prioritizes its SME sector when allocating resources, primarily with the intention support national adequacy, the country also offers global investors with a stable and promising economic environment. Notably, the country also facilitates global investors by offering one of the lowest inflation rates in comparison to other EU countries. The country also offers a stable currency exchange rate to its global investors along with the availability of skilled human resources with the aid of a strong educational structure. Besides, following its participation in the EU, Albania has been able to develop a liberalized foreign trade policy. Taking the virtues of its participation with the EU, the country also obtained the benefits of double tax treaties, facilitating its trade relations with an excess of 30 countries (Price Waterhouse Corporation, 2011). Economic Environment Albania had been quite successful in managing its transition from its communist past to the current open-market economic structure. Its geographic position can also be observed as highly favorable for the development of the country’s economy. As can be observed, the country is situated in the South-Eastern border of Europe that integrates the region with European transportation networks through its two most important ports, Durres and Vlora. For the better understanding of the geographical advantage of the country, the map of the country is given below. Figure 1: Map of Albania Source: (CIA, n.d.) Besides, Albania is a territory with is rich with natural resources including oil, coal, gas, copper, thermal power and hydroelectricity among others. The agriculture sector of the country is also very rich. The recent statistical reviews depicted that almost 60% of the Albanians are associated with the agriculture sector in the country. Therefore, the potentiality as well as stability of the country is very strong that strongly attracts foreign direct investors towards Albania (Weiblen, 2011). As the consequent effect, during the period from 2002 to 2009, Albania achieved a solid economic growth at an annual average rate of 5.8%. Currently, the country enjoys a stable growth in its Gross Domestic Product (GDP), which was recorded as $12.69 billion in the year 2012. It was further calculated to decipher a 1.3% real growth rate in the same year. It is worth mentioning in this context that the economic structure of the country mainly comprises three sectors, i.e. agriculture, industry and service. These sectors have been observed to have contributed 20%, 18.7% and 61.3% respectively in the aggregate GDP of the country as on 2012. Another major indication of the good health of the economy is its stagnant unemployment rate, which was accounted as 13.3% of the total population of Albania, in the year 2012. The country has also been successful in maintaining a low inflation rate of 2% as on 2012. It is worth mentioning in this regard that all these factors have altogether accelerated the position of Albanian domestic economy in the global context (CIA, n.d.). However, the economy also had to witness certain disadvantages in its global positioning and continuous growth objectives, owing to the effects of the recent economic crisis in the EU (Minassian, 2002). Hofstede Cultural Dimension Geert Hofstede, a Dutch management researcher, propounded six dimensions of culture, which are widely accepted by industry as a useful tool for measuring cultural differences. These cultural dimensions were labeled as power distance, individualism, masculinity, uncertainty avoidance, long term-orientation and indulgence (Bakacsi, Sandor, Andras & Viktor, 2002). Based on these dimensions of culture, the cultural prospects of Albania will be discussed below. Power Distance Power distance, as per Hofstede, is related to the degree to which, the less powerful individuals in a society or an organization, assume and accept that power is distributed unequally. Accordingly, high power distance status reveals that there persist inequalities of power and wealth within the society; while, a lower degree of power distance indicates that society places importance on equal opportunities for everyone. Correspondingly, it can be affirmed that power distance is relatively high in the Albanian society. Hence, people in Albania are treated differently based on the degree of their power possession in a given societal or organizational context (Bakacsi, Sandor, Andras & Viktor, 2002). Individualism According to Hofstede, individualism is presumed to be high in the society where there exist lenient relations between individuals. In simple words, high individualism status indicates that individuals in the society are more concerned about their individual rights and their close relatives. On the other hand, a low individualism ranking signifies close ties among the individuals residing in the society. Correspondingly, in relation to the Albanian society, the degree of individualism can be observed as quite high. It reveals that the people in Albania are more concerned about their personal interests and their family members (Bakacsi, Sandor, Andras & Viktor, 2002). Masculinity According to Hofstede, the degree of masculinity represents the preference of society towards achievement, assertiveness and heroism. In this context, a high masculinity ranking indicates that the society values less on relationship building from a long-run perspective, while a lower degree of masculinity position reveals that society duly respects, care and value among the people within the society. Correspondingly, it has been identified that Albania ranks moderately low in terms of masculinity dimension. This ranking of the Albanian society reveals that individuals in the society are more concerned and willing to establish a healthy relationship with others in the society (Bakacsi, Sandor, Andras & Viktor, 2002). Uncertainty Avoidance In the Hofstede’s model, uncertainty avoidance reflects the level of tolerance for uncertainty within the society. Accordingly, the country ranking high in the uncertainty avoidance dimension reveals that people in this country have low tolerance level for uncertainty. On the other hand, a low level of uncertainty avoidance ranking signifies that people of the society are less concerned about ambiguity and have high tolerance level. Accordingly, Albania is identified to rank relatively low in terms of uncertainty avoidance, which suggests that people in this country have high tolerance level for uncertainties (Bakacsi, Sandor, Andras & Viktor, 2002). Long Term Orientation As per Hofstede, long term orientation reflects the extent to which a society respects tradition and the propensity towards saving for the future. Contextually, the country ranking high in long term orientation reveals that people in this society are more concerned about their long term prosperity and are committed towards saving for the future. On the other hand, the individuals in the country ranking low in long term orientation have relatively low propensity to save. In this relation, it has been identified that Albania ranks relatively low in long term orientation. This signifies that people in Albania are less concerned about future deciphering almost insignificant propensity to save (Bakacsi, Sandor, Andras & Viktor, 2002). Indulgence According to Hofstede, the dimension for indulgence reflects the level to which people in the society enjoy their life. The country ranking high in the indulgence dimension, commonly comprise people with free gratification, where individuals can be observed to place equal importance on fun and enjoyment. On the other hand, the people, in the country ranking low in the indulgence dimension, are observed to be regulated with strong social norms and have minimum place for gratification. Accordingly, it has been ascertained that Albania ranks relatively low in its indulgence dimension. Thus, it can be affirmed that people in this society are strongly regulated with rigid social norms (Hofstede, 2011). Implications towards Achieving Globalization Globalization, as a process, has paved a way for the countries across the world with the continuous opportunity to integrate the national economy with the global economy. In this context, Albania, during the early 1990s, embarked on the way to reform its economic position towards liberalization, privatization and stabilization with an intention to integrate its economy within the global plethora. As a consequent result, globalization has imposed vital impacts on the overall Albanian economy. Contextually, Albania has been significantly involved in integrating its economy with the world economies. In this course, the country has been engaged in pooling various resources towards the sectors and areas, where it can obtain competitive advantages. Furthermore, the industries in the country have also been observed to be involved in making best possible use of the available resources. This has in turn facilitated in expanding the national economy to a large extent (Sevrani, Gorica & Matraku, n.d.). At the same time, the Foreign Direct Investment (FDI) trend in the country has also been deciphering a steady growth over the past few years. The considerable influx of FDI has thus facilitated the country to attain continuous improvements in respect to its economic environment. The record flow of FDI in the country has stimulated international purchases, which has contributed towards the increasing employment rate as well. Regardless, the uprising trend of FDI, the intensity of foreign investors has not been much positive for the country, owing to social violence and constant political changes. It can be ascertained in this regard that the country, over the last decades, have been able to improve its agriculture production, which has facilitated the country with an opportunity to emerge as an exporter for the agricultural products in the world trade. It is worth mentioning that Albania has developed exceptional strategies in order to attract potential investors towards the country. The country, in order to take the advantages of globalization process, is also extensively involved in developing territory marketing. Thus, it can be affirmed that the implications of the country towards globalization has been gradually facilitating Albania in changing its orthodox economy to a more open, globalized platform (Sevrani, Gorica & Matraku, n.d.). Globalization Issues Globalization has been a highly controversial and complex concept in terms of acceptance, which is particular owing to the fact that it can impose both positive and negative impacts on the country’s economy and society. To be noted, globalised economy is usually strongly involved in international trade through import and export. In relation to Albania, it is notified that the country possesses a unique strength of abundant natural resources; therefore, globalization has helped the country to export many of these resources to other countries and earn a huge amount of foreign investment for the development of the country. Inversely, in the economic context, over-dependency with other countries also increases economic risks for the dependent economy at many instances. Besides, it is also observed that politically, Albania is not quite stable; therefore, successfully maintaining its sovereignty, with the strong influences of globalization, has emerged as a crucial challenge for the country. Additionally, globalization also imposes quite a significant challenge for the traditional culture of the country, as other more developed economies often tend to reframe the societal context of developing smaller countries like Albania (Hatziprokopiou, 2006). It is worth mentioning in this regard that Albania is yet recognized as a developing nation. Therefore, to improve the economy, society, culture, education as well as healthcare among others huge amount of invest is required. Besides, the enhancement of its technology infrastructure through globalization is also strongly beneficial for the country to develop its agriculture and service industries, which often act as the main pillars of the economy. Thus, the country requires inviting the foreign players in the country with the expectation that FDI would facilitate the country to attain continuous improvement by mitigating its limitations of resource availability. With the help of international trade, Albania shall be able to stabilize its national income growth substantially, facilitated through exchange rate, freight charge, customs, import and export tariff and industrial taxes among others. Subsequently, it would also be beneficial to enhance the country’s economy, society, employment, education, infrastructure among others (Hatziprokopiou, 2006). Competitive Advantages In relation to competitive advantages, it can be affirmed that Albania possesses several positive aspects to acquire a strong economic position within the global economy. It is worth mentioning in this context that in the post communist era, i.e. after the independence of Albania, the country had been struggling through continuous political instability, which the nation has been recently able to stabilize to a certain extent. The geographic location of the country, which has rewarded it with an assortment of abundant natural resources, has also facilitated the country to achieve a sustainable economic growth by motivating foreign players to invest in Albania. It is also worth mentioning that Albania has developed significantly in respect to its agricultural production in the last two decades when compared in the global context. It has also assisted the country with an opportunity to emerge as a global exporter of agricultural products in the world trade. Additionally, the concern of the government regarding foreign trade with the enforcement of several positive trade policies, have also assisted the foreign players to invest in the economy and thereby, fortify its growth rate at a steady pace. Besides, the fiscal strategies of Albania, along with its monetary policy, have strongly assisted the country to achieve industrial competitive advantages in the global context (Tabaku, 2009). Conclusion With reference to the analysis conducted above, it can be ascertained that Albania has gradually moved towards high productivity and economic prosperity in the present context, especially since the last two decades. A major transformation within the economy has therefore been notified in the fields of employment and capital market. This transformation can be signified as a consequent advantage of Albania’s participation in the EU. Stating precisely, the investors from the EU have deciphered significant interests in several sectors of Albania, which mainly comprises of natural resources in the economy. It is worth mentioning in this context that Albania produces a substantial amount of natural resources such as oil, coal, mine, gas, and copper, thermal power and hydroelectric among others every year. Apart from its natural resources, the open trade policies, monetary policies and the governmental laws have also encouraged foreign investors to contribute in Albania. In the present situation of Albanian economy, political stability of the country can also be observed to have imposed strong effects towards attracting foreign investors and therefore ensuring its long-term sustainability. References Bakacsi, G., Sandor, T., Andras, K., & Viktor, I. (2002). Eastern European cluster: tradition and transition. Journal of World Business 37, pp. 69-80. Barolli, B. (n.d.). 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