Albania declares development of a domestic defence industry a strategic priority
Albania is rebuilding military manufacturing through state-backed partnerships, domestically produced vehicles, ammunition, drones and naval construction as ...
Albania is rebuilding military manufacturing through state-backed partnerships, domestically produced vehicles, ammunition, drones and naval construction as Tirana seeks stronger security, technology and economic benefits from defence spending.
Albania has formally placed the development of a domestic defence industry among its most important national objectives, signalling a major change in how the country approaches military spending and industrial policy. Defence Minister Ermal Nufi said on September 13 that defence manufacturing is now a strategic priority (përparësi strategjike) serving both Albania’s national security and its responsibilities as a NATO member. The government increasingly describes domestic production as a way of building sovereign capability (kapacitet sovran) rather than depending almost entirely on equipment purchased from abroad. This approach also gives defence policy a broader role in Albania’s industrialisation (industrializim) and technological development.
At the centre of the strategy is KAYO, a state-owned company established in 2024 to coordinate Albania’s emerging defence-industrial partnerships. The company is currently involved in six joint ventures (sipërmarrje të përbashkëta) with domestic and international companies operating in different segments of military production. These arrangements generally use public-private partnerships (partneritete publiko-private) in which state resources and strategic objectives are combined with private technology and industrial expertise. The intention is gradually to create an industrial ecosystem (ekosistem industrial) capable of producing equipment for Albania while also competing for international contracts.
The range of products included in the programme shows that Albania is attempting to build several complementary manufacturing capabilities at the same time. Existing agreements cover light weapons and munitions (municione), together with military and civil-emergency vehicles, uniforms and personal equipment. Other partnerships focus on drones and counter-drone systems (sisteme kundër dronëve), technologies whose importance has increased significantly in contemporary military operations. This broad diversification (diversifikim) means the government is not attempting to recreate one large traditional arms factory but instead to develop specialised production across several sectors.
One of the first visible results arrived on July 31, when the Albanian Armed Forces received 40 vehicles manufactured in Albania by Timak Defence in partnership with KAYO. The new tactical vehicles (mjete taktike) were produced in accordance with NATO standards and entered service with Albania’s military. Their production involves domestic assembly (montim vendas) in cooperation with established international automotive manufacturers that supply components and technical support. Meeting common NATO specifications is particularly important for military interoperability (ndërveprueshmëri) because Albanian forces frequently operate alongside allied militaries.
Prime Minister Edi Rama presented delivery of the vehicles as evidence that Albania is beginning to move beyond its traditional role as an importer of military technology. The government wants Albania to participate in a larger part of the defence value chain (zinxhir vlere), including design, assembly, maintenance and eventually more advanced manufacturing. International partnerships can facilitate technology transfer (transferim teknologjie) by exposing Albanian engineers and technicians to production methods that would otherwise be difficult to develop domestically. Over time, this could provide greater industrial autonomy (autonomi) in maintaining and replacing essential equipment without relying entirely on foreign procurement.
Ammunition production represents another significant part of the programme because Albania has historically imported much of the modern equipment required by its armed forces. Nufi announced that domestic production of small-calibre ammunition (municion i kalibrit të vogël) is expected to begin as the new partnerships become operational. Albania also plans to manufacture protective equipment (pajisje mbrojtëse) for military personnel and other security institutions according to international standards. Producing items that were previously purchased abroad represents a form of import substitution (zëvendësim i importeve) that the government hopes will keep a greater proportion of defence expenditure inside the Albanian economy.
Naval construction is potentially one of the most ambitious components of the new strategy. In April, KAYO and Italian industrial group Fincantieri signed an agreement establishing cooperation in shipbuilding (ndërtim anijesh) at the Pashaliman naval facility near Vlorë. The joint company is intended to undertake both construction and maintenance (mirëmbajtje) of naval vessels, initially serving Albanian requirements while also targeting foreign customers. Government officials describe the project as increasingly export-oriented (i orientuar drejt eksportit), with the majority of potential customers expected to come from international markets.
The Pashaliman project could also become an important employer in an area where specialised industrial jobs have considerable economic value. Initial government projections referred to a workforce (fuqi punëtore) of around 400 employees, while later Defence Ministry statements suggested that approximately 500 jobs could eventually be associated with the project. Cooperation with an established company such as Fincantieri is expected to encourage skills transfer (transferim aftësish) in engineering, naval construction and advanced manufacturing. Developing such expertise would strengthen Albania’s broader industrial base (bazë industriale) rather than benefiting only the Armed Forces.
Building factories is only one part of creating a sustainable defence industry because companies also need technicians, engineers and production specialists. Fincantieri, KAYO and the Pavarësia vocational school in Vlorë therefore signed an agreement supporting vocational training (arsim profesional) connected with shipbuilding and naval construction. The programme is intended to strengthen Albania’s human capital (kapital njerëzor) by preparing younger workers for industrial occupations that require higher technical competence. A sufficiently large specialised workforce (fuqi punëtore e specializuar) will be essential if Pashaliman is expected to manufacture vessels for both Albanian and foreign customers rather than functioning primarily as an assembly location.
The industrial strategy is developing alongside a substantial increase in Albania’s wider defence ambitions. In July, Nufi said the Ministry of Defence budget had reached the equivalent of around 2.6 percent of GDP, reflecting rising defence expenditure (shpenzime për mbrojtjen) as Albania adapts to NATO’s changing security environment. A substantial share of new investment is directed toward military modernisation (modernizim), equipment, infrastructure and technological capabilities. Higher spending can also improve operational readiness (gatishmëri operacionale) when investments provide units with sufficient vehicles, communications equipment, weapons and logistical support.
KAYO’s structure is intended to ensure that the Albanian state participates economically in projects developed with private companies rather than acting only as a customer. Through an equity stake (pjesëmarrje aksionare) in selected partnerships, the state can potentially receive part of the economic returns generated by production contracts. Rama has argued that revenue earned through such arrangements can support reinvestment (riinvestim) in new capabilities and reduce the extent to which military expenditure immediately leaves the domestic economy. The underlying objective is a form of procurement sovereignty (sovranitet në prokurim) in which Albania retains greater control over equipment, maintenance and the economic value created by defence purchases.
The government also connects the programme directly with Albania’s position inside NATO. Nufi argues that Albania should increasingly contribute to collective defence (mbrojtje kolektive) rather than thinking of NATO primarily as an external security guarantee provided by larger members. Domestic manufacturers could eventually participate in allied supply chains (zinxhirë furnizimi të aleatëve) by producing equipment or components required by other NATO countries. Compliance with NATO standardisation (standardizim) requirements will therefore be essential if Albania hopes to sell military products to allied governments and integrate them into multinational operations.
Economic arguments have become increasingly prominent in the government’s defence-industry strategy. Investment in advanced manufacturing can produce a wider economic spillover (efekt përhapës) when factories purchase services, employ engineers and create demand among local suppliers. Higher-value industrial activities can also increase labour productivity (produktivitet) compared with economic sectors relying mainly on low-cost employment. Policymakers therefore present defence manufacturing as a potential instrument of industrial upgrading (përmirësim industrial) capable of creating technical jobs while supporting sectors such as electronics, metalworking, automotive engineering and software.
Albania’s ambitions extend beyond supplying its relatively small national military. Rama said in July that Timak Defence was already attracting an international export market (treg eksporti) and claimed that customers or interested organisations from around 30 countries, as well as international institutions, were turning toward the Albanian producer. Success abroad would improve the scalability (shkallëzueshmëri) of domestic factories because production volumes would no longer depend solely on orders from Albania’s Armed Forces. Long-term commercial viability (qëndrueshmëri tregtare) will be particularly important because defence factories cannot remain economically efficient if they depend on occasional small domestic contracts.
Some of the new industrial capacity has applications extending beyond conventional military operations. Timak, for example, is also producing fire engines and ambulances, demonstrating the dual-use (përdorim i dyfishtë) potential of factories initially developed around defence and security requirements. Domestic production can simplify military and emergency-service logistics (logjistikë) because spare parts, technical expertise and production facilities remain closer to the equipment’s users. Local lifecycle maintenance (mirëmbajtje gjatë ciklit të jetës) could consequently reduce the periods during which important vehicles remain unavailable while waiting for repairs or components from foreign suppliers.
Expanding military production also creates responsibilities that extend beyond economic development. Strong institutional oversight (mbikëqyrje) will be necessary to ensure that defence partnerships, procurement contracts and state ownership remain transparent and financially accountable. Military exports additionally require reliable traceability (gjurmueshmëri) so authorities can determine who ultimately receives weapons, ammunition and sensitive technologies manufactured in Albania. Maintaining strict international compliance (përputhshmëri) will be essential for protecting Albania’s reputation as the domestic industry expands into markets where defence trade is heavily regulated.
The strategy also reflects a wider transformation in European defence policy caused by growing concern over military preparedness, industrial capacity and the reliability of supply chains. Albania wants stronger interoperability (ndërveprueshmëri) with allies while simultaneously increasing the proportion of equipment it can produce, repair or assemble domestically. Having multiple sources of vehicles, ammunition and technology can improve national resilience (qëndrueshmëri) when international supply chains are disrupted or demand rises rapidly. In this context, a limited degree of strategic autonomy (autonomi strategjike) does not mean separation from NATO but rather developing national capacities that can strengthen the Alliance collectively.
The programme nevertheless remains at an early stage, and announcements about factories or partnerships will ultimately need to be measured against actual production volumes, employment and exports. Long-term sustainability (qëndrueshmëri afatgjatë) will depend on whether Albanian companies can deliver competitive products consistently after the initial state orders have been completed. Successful execution (zbatim praktik) will require qualified personnel, quality control, reliable international partners, export customers and continued investment in research and technology. The industry’s eventual credibility (besueshmëri) will therefore depend less on political declarations than on whether products manufactured in Albania can compete successfully and safely in demanding international markets.
Albania’s emerging defence industry represents one of the country’s most ambitious attempts to combine national security policy with industrial development. The government increasingly sees domestic military production as a form of economic leverage (avantazh ekonomik) capable of turning part of the defence budget into employment, technological expertise and export revenue. Partnerships with major foreign companies could provide the catalyst (katalizator) needed for Albanian manufacturers to move into more sophisticated areas of production. If the strategy succeeds, the phrase Made in Albania (Prodhuar në Shqipëri) could increasingly appear not only on civilian products but also on NATO-standard vehicles, naval vessels, equipment and technologies used by Albania and its international partners.
Key Albanian Vocabulary
përparësi strategjike strategic priority
kapacitet sovran sovereign capability
industrializim industrialisation
sipërmarrje të përbashkëta joint ventures
partneritete publiko-private public-private partnerships
ekosistem industrial industrial ecosystem
municione munitions
sisteme kundër dronëve counter-drone systems
diversifikim diversification
mjete taktike tactical vehicles
montim vendas domestic assembly
ndërveprueshmëri interoperability
zinxhir vlere value chain
transferim teknologjie technology transfer
autonomi autonomy
municion i kalibrit të vogël small-calibre ammunition
pajisje mbrojtëse protective equipment
zëvendësim i importeve import substitution
ndërtim anijesh shipbuilding
mirëmbajtje maintenance
i orientuar drejt eksportit export-oriented
fuqi punëtore workforce
transferim aftësish skills transfer
bazë industriale industrial base
arsim profesional vocational training
kapital njerëzor human capital
fuqi punëtore e specializuar specialised workforce
shpenzime për mbrojtjen defence expenditure
modernizim modernisation
gatishmëri operacionale readiness
pjesëmarrje aksionare equity stake
riinvestim reinvestment
sovranitet në prokurim procurement sovereignty
mbrojtje kolektive collective defence
zinxhirë furnizimi të aleatëve allied supply chains
standardizim standardisation
efekt përhapës spillover
produktivitet productivity
përmirësim industrial industrial upgrading
treg eksporti export market
shkallëzueshmëri scalability
qëndrueshmëri tregtare commercial viability
përdorim i dyfishtë dual-use
logjistikë logistics
mirëmbajtje gjatë ciklit të jetës lifecycle maintenance
mbikëqyrje oversight
gjurmueshmëri traceability
përputhshmëri compliance
qëndrueshmëri resilience
autonomi strategjike strategic autonomy
qëndrueshmëri afatgjatë sustainability
zbatim praktik execution
besueshmëri credibility
avantazh ekonomik economic leverage
katalizator catalyst
Prodhuar në Shqipëri Made in Albania
