The Albanian National Security Commission has approved a draft law paving the way for the establishment of a state-owned company dedicated to the production and trade of weapons, ammunition, equipment and military technologies, a statement from the parliament said on July 24. 

This initiative is part of Albania's broader efforts to revitalise its dormant arms industry in response to escalating military conflicts in Europe and the Middle East. Albania, a Nato member since 2009, is a staunch supporter of Ukraine. 

The National Security Commission reviewed and approved the draft law "On the Creation of the State Company for the Production and Trade of Weapons, Ammunition, Equipment and Military Technologies” on July 24. 

As well as the security implications, Albanian Defence Minister Niko Peleshi, who was present at the meeting, outlined the potential economic benefits of the military industry.

"The military industry, since the demand is greater than the supply in the global market, is a good opportunity to increase the income in the state budget, either from taxes or through this instrument which is a joint stock company," Peleshi said, according to the parliament statement. 

He highlighted the potential for job creation, the promotion of scientific research, and the development of small businesses around this industry. "The KAYO Company will not be the only entity to develop the military industry in our country. It will serve as an instrument for state participation in partnerships with local and foreign operators," he added.

MP Antoneta Dhima said: "the draft law brings some necessary innovations, such as the empowerment of such an industry, and the ability to be a competitor in this market can be considered a profitable activity for the country's economy." 

Earlier this year, Peleshi outlined plans to rejuvenate Albania’s weapons and ammunition production facilities, citing the escalating conflicts in Europe and the Middle East as key motivators. In a parliamentary speech on April 17, he revealed the government's strategy to attract foreign investors to reinvigorate the country's three idle production sites in Polican, Elbasan and Gramsh.

“Revitalisation will be a process aimed at promoting innovation. We no longer pretend that the industry will be developed by the state, but by attracting investors from Nato,” Peleshi said at the time. He confirmed that efforts to revive the three factories had already begun, focusing on assessing the necessary investments and market demand for potential products.

The move comes as Albania aligns itself with other European nations boosting ammunition production in response to Russia’s invasion of Ukraine. Arms imports by European states surged by 94% between 2019 and 2023, according to the Stockholm International Peace Research Institute (SIPRI). Ukraine has been a major recipient, accounting for nearly a quarter of Europe’s arms imports during this period.

A 2024 SIPRI report highlights the increased demand for arms in Western and Central Europe following Russia's initial invasion of Ukraine in 2014. By the end of 2023, European states had collectively ordered hundreds of combat aircraft and helicopters, accelerating their defence procurement processes.

Globally, the volume of international arms transfers decreased by 3.3% over the past five years, with Europe being the only region to increase its imports.