**5. Financing the olive oil sector**

After the 1990s, a lot of investments were done in the olive oil processing industry. According to a study done by IFDC in 2002, the total amount of investments in this sector is 1442 million Lekë (or 10.686.230,92 euro). The regions with the highest amount of investment are Vlora with 25.0% of the total, Tirana with 17.6%, Saranda with 17.5%, and Fier with 13.8% of the total investments.

Olive Oil Sector in Albania and Its Perspective 503

Albanian olive oil exports are very encouraging as the industry is maturing and achieving all attributes required for the olive oil quality. The figures however remain modest: 22 tons were exported in 2004; 16 tons in 2005; 54 tons in 2006; 15 tons in 2007 and 4 tons were exported in 2008. The first success was the export of "Shkalla enterprise" certified organic and extra-virgin olive oil to the niche market in Switzerland. This represents a small, but stable export and with potential to increase. This was the first sign of the "recovery" of Albanian olive oil export to the neighboring countries since 1996. The transaction was particularly important because, for the first time, the processing plant was certified. Furthermore, the payment was delivered by the letter of credit, in contrast to cash, that had

Albanian imports on the other side are significant and range between 850 – 1100 Mt per year, of which almost 90% is supplied by Italy and Greece. Large part of the imported oil is in bulk to be than bottled in Albania. Albanian import of olive oil has increased since year 2000. In 2005 and 2006, due to major increase of EU olive oil prices and higher levels of domestic olive production, imports of olive oil dropped. In 2008, imports of olive oil were considerably higher than the same period of the previous years, due to the low olive oil production in 2007, caused by low olive production. This evolution of imports shows how the olive oil demand in Albania is price sensitive. The olive oil price increased by almost 40% from year 2004 to 2005 and was associated with almost 20% reduction in imports. Simultaneously, the continuous increase of domestic production of olives and olive oil has partially compensated the increasing demand, and contributed to lowering demand for imports. Imports usually increase in the last three months of each year, when consumption is higher and the olive oil of the new crop is not yet ready. Imports reach a minimum in summer. In general, the yearly peak of imports of olive oil follows by one or two months that one of table olives. In 2008 imports remained high also in January and February, due to

Fig. 5. Olive oil import trends from EU in terms of quantity and value (INSTAT, 2009)

**6. International trade** 

been the practice until then.

the scarcity of domestic production.

Fig. 3. Olive oil processing presses used in Albania (Ministry of Agriculture, Food and Consumer Protection, 2009)

There are three main investment sources in Albania, as far as the agricultural sector is concerned, own financial sources, bank credits and other funds. The investments are mainly done by the private financial sources of the entrepreneurs. This is followed by a smaller part of those that have taken some bank credits. Figure 4 below, shows schematically the share that each of these forms holds in the total investment structure.

Fig. 4. Sources of financial invetments (Ministry of Agriculture, Food and Consumer Protection, 2009)

#### **6. International trade**

502 Olive Oil – Constituents, Quality, Health Properties and Bioconversions

Fig. 3. Olive oil processing presses used in Albania (Ministry of Agriculture, Food and

Fig. 4. Sources of financial invetments (Ministry of Agriculture, Food and Consumer

that each of these forms holds in the total investment structure.

There are three main investment sources in Albania, as far as the agricultural sector is concerned, own financial sources, bank credits and other funds. The investments are mainly done by the private financial sources of the entrepreneurs. This is followed by a smaller part of those that have taken some bank credits. Figure 4 below, shows schematically the share

Consumer Protection, 2009)

Protection, 2009)

Albanian olive oil exports are very encouraging as the industry is maturing and achieving all attributes required for the olive oil quality. The figures however remain modest: 22 tons were exported in 2004; 16 tons in 2005; 54 tons in 2006; 15 tons in 2007 and 4 tons were exported in 2008. The first success was the export of "Shkalla enterprise" certified organic and extra-virgin olive oil to the niche market in Switzerland. This represents a small, but stable export and with potential to increase. This was the first sign of the "recovery" of Albanian olive oil export to the neighboring countries since 1996. The transaction was particularly important because, for the first time, the processing plant was certified. Furthermore, the payment was delivered by the letter of credit, in contrast to cash, that had been the practice until then.

Albanian imports on the other side are significant and range between 850 – 1100 Mt per year, of which almost 90% is supplied by Italy and Greece. Large part of the imported oil is in bulk to be than bottled in Albania. Albanian import of olive oil has increased since year 2000. In 2005 and 2006, due to major increase of EU olive oil prices and higher levels of domestic olive production, imports of olive oil dropped. In 2008, imports of olive oil were considerably higher than the same period of the previous years, due to the low olive oil production in 2007, caused by low olive production. This evolution of imports shows how the olive oil demand in Albania is price sensitive. The olive oil price increased by almost 40% from year 2004 to 2005 and was associated with almost 20% reduction in imports. Simultaneously, the continuous increase of domestic production of olives and olive oil has partially compensated the increasing demand, and contributed to lowering demand for imports. Imports usually increase in the last three months of each year, when consumption is higher and the olive oil of the new crop is not yet ready. Imports reach a minimum in summer. In general, the yearly peak of imports of olive oil follows by one or two months that one of table olives. In 2008 imports remained high also in January and February, due to the scarcity of domestic production.

Fig. 5. Olive oil import trends from EU in terms of quantity and value (INSTAT, 2009)

Olive Oil Sector in Albania and Its Perspective 505

possible to clearly identify several segments of consumers marks a milestone in the process of evolution of agri-food marketing, with major consequences on development policies. Origin is

The confidence on quality and safety of domestic product is low. This conclusion emerges from the analysis of several factors: i) imports are growing notwithstanding the consumers' preference for Albanian olive oil; ii) consumers have little confidence on reliability of domestic industrial producers and controls made by competent authorities, so they prefer to buy olive oil directly from trusted farmers, or from the oil mills or to buy imported products; iii) during the analysis there was a scarce correspondence between low income and preference for low prices, as high prices are considered one of the few reliable proxies

The majority of purchased olive oil is still traded as not bottled product, being sourced either directly from farmers and oil mills or as by quantity in traditional shops. 44% of the interviewed consumers in Tirana confirm that they buy directly from farmer and olive oil mill respectively. This percentage should be much higher in smaller cities or rural areas characterized by olive and olive oil production and consumption. When considering also self-consumption of farmers in production areas, it is possible to conclude that most probably, more than 70% of the olive oil consumed in the country is sold as a non-bottled

Under the current extensive inefficient conditions in which the olive culture is cultivated in Albania, there is however a profitability for farmers to produce. This profitability and comparative advantage can be improved if the olive culture is cultivated more intensively. If the farmers are sure that the processing industry will act as a reliable market for their products, they will increase the production. On the other hand the increased olive cultivation will provide more raw materials for the processing industry, assuring its functioning with full capacity. The better utilisation of existing capacities in processing industry will allow favouring from the low of economies of scale and at the end effect result

In the last years olives and olive oil has become one of the priorities of the Albanian Government policies. Recently Albanian Government is undertaking an extremely ambitious policy for expanding the production base, targeting a fivefold increase of the total number of olive trees, i.e. up to 25 ml trees. For this purpose, most subsidies provided from 2007 to the agricultures sector from the State (scoring about 10 m Euro in 2008) are addressed to the olive cultivation and olive oil production. Focusing investments in increasing yields (production per tree), stabilizing output from one year to another and improving harvesting and pest management practices would be at present a more cost/effective option for ensuring a sustainable development of the sector. Priority actions include: i) improvement of value chain governance tools, including harmonization of laws to EC, ii) increased technical assistance to farmers to increase productivity and stabilize output; iii) support to value chain operators for facilitating access to services, iv) supporting establishment and strengthening of farmers' associations and cooperatives and; v) optimize

a key choice factor for 82% of respondents, in three out of six consumers' segments.

for quality.

product and is subject to little quality control.

**8. The future of olives and olive oil in Albania** 

in lower production cost.

At present, imports cover about 10% of market-based demand, but imports from the highly competitive Mediterranean producers could lead to an increase in market share of imported olive oils in the next years. Increasing domestic demand, years of relatively lower productivity and a general scarce competitiveness of the Albanian products are among the main factors that caused such a situation.
