Doing Business in Albania 2012 REPORT

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Doing Business in Albania 2012 REPORT

  1. 1. Doing Business in Albania: Reforms & Opportunities 0 REPORT DOING BUSINESS IN ALBANIA: REFORMS AND OPPORTUNITIES UK-Albania Business & Economic Reform Forum January 2012Photo Credit: Wikimedia Authors: Rudi Guraziu Epidamn Zeqo IBDE – Integrating World Markets www.ibde.org www.ibde.org Photo credit: Tirana International Airport
  2. 2. Doing Business in Albania: Reforms & Opportunities Albania’s Coastline Photo credit: Wikimedia REPORT DOING BUSINESS IN ALBANIA: REFORMS AND OPPORTUNITIES January 2012 To order a .free copy. in the UK please contact IBDE at info@ibde.org To order a free copy in Albania please contact the British Embassy in Tiranawww.ibde.org IBDE – Integrating World Markets
  3. 3. Doing Business in Albania: Reforms & Opportunities 3DISCLAIMER1. The views expressed in this document are the sole responsibility of the author(s) and do not necessarily reflect the views of the British Embassy in Albania and International Business and Diplomatic Exchange (IBDE), its affiliates or Advisory Board. IBDE is independent and owes no allegiance to any government or to any political body. This document is issued on the understanding that if any extract is used, the author(s) and IBDE and the British Embassy in Tirana should be credited, preferably with the date of the publication or details of the event. Where this document refers to or reports statements made by speakers at an event every effort has been made to provide a fair representation of their views and opinions, but the ultimate responsibility for accuracy lies with this document’s author(s). The published text of speeches and presentations may differ from delivery.2. The information contained in this publication has been gathered by authors during the conference. Other researched information has been compiled from sources believed to be accurate and reliable at the time of publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, IBDE and the British Embassy in Tirana accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication. All information is provided without warranty, and IBDE makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained.3. This Report is intended as a basis for discussion and it constitutes a “marketing com- munication”. All views, opinions and assessments contained in this document may be changed after publication at any time without notice.4. Copyright of this publication is held by IBDE and British Embassy Tirana. You may not copy, reproduce, republish or circulate in any way the content from this publication except for your own personal and non-commercial use. Any other use requires the prior written permission of International Business and Diplomatic Exchange or British Embassy in Albania.About AuthorsRudi Guraziu is Founder and CEO of IBDE and Editor of Exchange Magazine.Epidamn Zeqo is Business Analyst at IBDE and Deputy Editor of Exchange MagazinePublished by:International Business and Diplomatic Exchange1 Northumberland Avenue, Trafalgar Square,London WC2N 5BWBritish EmbassyRruga Skenderbeg 12,Tirana, Albania© IBDE & British Embassy Tirana 2011This report is commissioned by the British Embassy in AlbaniaIBDE – Integrating World Markets www.ibde.org
  4. 4. CITY OF LONDONThe Worlds Pre-eminent Financial Centre Integrating World Markets Principle Objectives:  to provide assistance in increasing international trade and investment flows  to identify and promote new business opportunities and to support wealth creation  to support public private partnerships  to promote good governance and corporate social responsibility  to provide assistance in integrating developing countries into the global markets  to promote the concept of international business and commercial diplomacy  to undertake research to support our promotional activities MEMBERSHIP For membership packages please contact us at: info@ibde.org or visit our website www.ibde.org
  5. 5. Doing Business in Albania: Reforms & Opportunities 5ACKNOWLEDGMENTSThis report draws on the speakers’ presentations and the discussion from each of the ses-sions captured by the authors. A word of grateful acknowledgement goes to the followingspeakers for their excellent contributions:H.E. Fiona Mcllwham, British Ambassador to AlbaniaH.E. Nasip Naço, Minister of Economy, Trade and EnergyH.E. Aldo Bumçi, Minister of Tourism, Culture, Youth and SportsH.E. Genc Pollo, Minister for Innovation and Information & Communication TechnologyH.E. Genc Ruli, Minister of Agriculture, Food and Consumer ProtectionH.E. Ettore Sequi, Ambassador of the European Union Delegation to AlbaniaClive Rumbold, Head of Political Section, EU Delegation to AlbaniaFabio Serri, Head of European Bank for Reconstruction and Development Office, AlbaniaHaris Broumidis, CEO, Vodafone AlbaniaJorida Tabaku, Deputy Mayor of TiranaEneida Guria, Director, Albanian Investment Development Agency (AIDA)Perparim Kalo, Board Member, Foreign Investors Association, (FIAA)Altin Tanku, Director of the Research Department, Bank of AlbaniaMilva Ekonomi, Executive Director, Agenda InstituteArtan Gjergji, Lecturer, European University of TiranaThe authors of the report wish to thank Elizabeth Evans, Deputy Head of Mission, for herinvaluable support and commitment in making this project a success, and all the staff ofthe British Embassy in Tirana. Thanks go also to Evis Karandrea, Vodafone Albania. Warmthanks go to our IBDE colleagues, in particular Penelope Bridgers for her contribution to thisreport and, of course, all participants and contributors to the discussion. Last but certainlynot least we would like to thank H.E. Edmond Haxhinasto, Albanian Deputy Prime Ministerand Minister of Foreign Affairs, for his remarks at a drink reception, hosted by HMAmbassador for participants of the forum.IBDE – Integrating World Markets www.ibde.org
  6. 6. 6 Doing Business in Albania: Reforms & OpportunitiesABBREVIATIONSAlbanian National Tourism Agency ANTABank of Albania BoABusiness Process Outsourcing BPOCentral European Free Trade Area CEFTACommodity Price Index CPIEuropean Bank for Reconstruction and Development EBRDEuropean Commission ECEuropean Union EUEuropean Free Trade Association EFTAExternal Financing Needs EFNForeign and Commonwealth Office FCOForeign Direct Investment FDIFree Trade Agreements FTAGlobal Competitiveness Report GCRGross Domestic Product GDPGroup of States Against Corruption GRECOInformation Communication Technology ICTInstrument for Pre-Accession Assistance IPAIntegrated Coastal Area Management ICAMInternational Business and Diplomatic Exchange IBDEInternational Monetary Fund IMFMinistry of Economy, Trade and Energy METENorth Atlantic Treaty Organisation NATOOffice for Democratic Institutions and Human Rights ODIHROrganisation for Security and Co-operation in Europe OSCEPublic Private Partnerships PPPsRule of Law RoLSmall and Medium Enterprises SMEStabilisation and Association Agreement SAATirana Stock Exchange TSEWorld Bank WBWorld Economic Forum WEFWorld Trade Organisation WTOwww.ibde.org IBDE – Integrating World Markets
  7. 7. Doing Business in Albania: Reforms & Opportunities 7CONTENTSDISCLAIMER 3ACKNOWLEDGMENTS 5ABBREVIATIONS 6FOREWORD 8COUNTRY PROFILE 9EXECUTIVE SUMMARY 111. INTRODUCTION 12 1.1. Background and Purpose 12 1.2. Structure of the Report 122. INVESTING IN ALBANIA: SWOT OVERVIEW 14 2.1. Strengths 14 2.2. Weaknesses 14 2.3. Opportunities 14 2.4. Threats 153. ECONOMIC REFORM – RPOGRESS 16 3.1. Overview on Progress 16 3.2. Challenges 18 3.3. Doing Business Reform 22 3.4. Monetary Policy 234. ALBANIA IS OPEN FOR BUSINESS 25 4.1. Business Opportunities 28 4.1.1. Infrastructure and Construction 28 4.1.2. Energy and Mining 29 4.1.3. Tourism and Education 30 4.1.4. Agriculture and Manufacturing 31 4.1.5. Information and Communication Technology and other Services Industries 31 4.2. Tirana: Destination No. 1 325. CONCLUSIONS 336. RECOMMENDATIONS AND ACTION PLAN 34IBDE – Integrating World Markets www.ibde.org
  8. 8. 8 Doing Business in Albania: Reforms & OpportunitiesFOREWORDFirstly, my thanks go to many Albanian element of that effort and a way to boostGovernment representatives, expert speak- UK and international investment confi-ers, and those from the UK who gave up dence in the Albanian market. Potentialtheir time to share insights and expertise investors need to see Albania as part of awith us at the UK-Albanian Business and larger European market, when devisingReform Forum. The Embassy was delighted their investment strategies.to work with IBDE to deliver, what I believe,was an extremely successful meeting. The Building prosperity is a core objective of theForum attracted over 140 participants, from Foreign and Commonwealth Office (FCO).government, business, diplomacy, civil soci- Commercial Diplomacy lies at the heart ofety and academia. UK foreign policy in Albania and globally. Foreign direct investment (FDI) can act asI also wish to thank our IBDE partners for an important driver of reform in aspirant EUpreparing this Report, which draws on the countries. This Report, as part of the UK-presentations of speakers and Forum dis- Albania Forum, brings together bilateralcussions. In this report, IBDE have sought to and multilateral policy and business per-identify those business opportunities and spectives. It builds on our Commercial In-reform priorities most likely to support and sights Booklet (launched in Autumn 2011),advance Albania’s business, economic which provided a snapshot for business ofand European Union (EU) ambitions. In ad- opportunities in Albania, Kosovo and Mac-dition, it includes policy recommendations edonia. Copies are available for downloadand an Action Plan for business and other from the Embassy’s website:stakeholders. We hope that the Report will http://ukinalbania.fco.gov.uk/en/business/serve both as a basis for discussion on fu-ture reforms, and also as a guide and refer- Albania and the UK share a strong bilateralence for British (and other international) relationship, founded on business links,businesses interested in investing in Albania. friendship, and a wealth of common inter- ests, all of which offer many opportunitiesAs an enlargement champion, the UK gov- for increased trade and investment. Alba-ernment is convinced that Albania belongs nia’s potential is clear – its people arein the EU. We have consistently stated our entrepreneurial, talented, skilled and dy-strategic commitment to the Western Bal- namic. We hope to use this report to capi-kans region and are supporting Albania’s talise on that potential.EU journey. We are working alongside ourAlbanian, EU and other international part-ners to help support the necessary reform Fiona Mcllwhamprocesses (identified in the European Com-mission’s 2010 Opinion and 2011 Annual British AmbassadorProgress Report). We see progress on busi-ness and economic reform as an important Albaniawww.ibde.org IBDE – Integrating World Markets
  9. 9. Doing Business in Albania: Reforms & Opportunities 9 COUNTRY PROFILE Official Name: Republic of Albania Democratic Country: Led by Prime Minister Sali Berisha of Democratic Party since 2005 SHKODER Population: 3,204,284 (World Bank 2010) Capital City: Tirana Official Language: Albanian DURRES TIRANA Monetary Unit: 1 Lek = 100 Qindarka Main Trade Partners: Italy, Greece, Austria, Turkey, Germany and China VLORE GNI per capita: US $3,960 (World Bank, 2010) Internet Domain: .al; Inter. dialing code: +355 NATO Member SARANDE EU Potential Candidate: Working towards EU Candidate StatusFollowing the demise of the communist lation of over 3 million predominantly Alba-regime in the early 1990s Albania has nian ethnic origin and with less than 5% ofmade successful transition into a parlia- other ethnicities; Greek, Vlach, Roma, Serb,mentary democracy based on a con- Macedonian and Bulgarian. The countrystitutional, legislative framework which is is well endowed with natural resourceslargely in line with European principles and mainly chrome, nickel, copper, petroleum,standards. Albania has become a member natural gas, limestone and hydro-electricof important world organisations such as: power. It enjoys a favourable climate forInternational Monetary Fund (IMF) 1991, agriculture and its location possesses aWorld Trade Organization (WTO) 2000, and wealth of potential as a tourist destination.Central European Free Trade Area (CEFTA)2007. Albania became a full member of Macroeconomic stabilitythe North Atlantic Treaty Organisation Albania’s average annual Gross Domestic(NATO) in April 2009. In 2006, Albania signed Product (GDP) growth was around 6% fromthe Stabilisation and Association Agree- 2002 – 2008. During the 2009 globalment (SAA) with the European Union. It also economic crises Albania was the onlypresented its formal application for country in the region which registeredmembership in the EU in 2009. In November positive economic growth of 3.3%, and its2010, the Council of EU granted visa liber- GDP growth for 2010-2011 was estimated toalisation to Albanian citizens. have been the same. During the last de- cade or so Albania has achieved a degreeAlbania is a small mountainous country in of macroeconomic stability and low infla-the Balkan Peninsula. It lies on the coast of tion rate at 2-4% (see section 3.4).the Adriatic and Ionian Seas oppositesouthern Italy and benefits from a stunningcoastline of 362 km. Albania shares land Well-educated and low-cost work forceborders with Kosovo and Macedonia to the Albania has a very young population witheast, with Montenegro to the north and more than 50% under the age of 30 andwith Greece to the South. It has a popu- the most multilingual population in theIBDE – Integrating World Markets www.ibde.org
  10. 10. 10 Doing Business in Albania: Reforms & Opportunitiesregion. Albanians learn Italian and English, banking sector. The country has 16 com-as primary foreign languages, Greek is also mercial banks (14 foreign-owned) whichtaught in schools of the Greek minority. offer services such as corporate, retail and finance services. Some of the best knownAlbania offers the lowest labour costs in the international banks that currently operateregion with the minimal wage ALL 16.000 in the market including Raiffeisen Inter-(approximately 130 Euro) which is based on national, Société Générale, and Intesathe “Decision of the Council of Ministers” Sanpaolo have boosted financing in theno. 235. economy. The banking sector allows for- eign investors to open and maintain foreignAttractive Tax System currency bank accounts.Albania offers an attractive tax system witha flat rate tax of 10% in corporate income Foreign direct investmenttax and personal tax income. Alba- In the last decade Albania has experiencednia’s VAT rate stands at 20% of the taxable an increase of FDI. In 2008, FDIs tripledvalue. VAT is applied at 0% rate for exports compared with 2005. Currently, there areand international services such as inter- over 1000 foreign companies mostly fromnational transport of goods and passen- Greece, Italy, Germany, the UK, Turkey,gers. The government has taken measures Bulgaria, and the US operating successfullyto tackle informal trading standards and in Albania. Amongst international brandshas recently adopted a fiscal reform operating in Albania are companies suchpackage aimed at reducing the large grey as Vodafone, Raiffeisen Bank, Petroleumeconomy and attract foreign investment. Bankers (Canada), Kurum (Turkey), Edil Centro (Italy), EVN (Austria), Bechtel, Enka.Free Trade TransportAlbania has a liberal free trade regime. The Located in an excellent strategic position,country has signed Free Trade Agreements linking the Western Mediterranean coun-(FTAs) with all its Balkan neighbours. These tries with the Balkans and Asia, Albania hasagreements offer manufacturers based in significantly worked in improving road,Albania to use of the country as a gateway railway, air and sea transportation. In 2009,to markets in southern Europe as well as via Albania has invested over €1bn in its largesttransshipment to the EU. Albania has also motorway project to date connectingsigned with EU the SAA that allows all indus- Albania with Kosovo, shortening thetrial products originated in Albania to be distance from 7 hours to 2 hours. Theexported into the EU with 0% customs tariff, motorway through Kosovo will connectwhile around 80% of industrial goods Albania with the Pan-European Corridor 10originating in the EU can be imported into in Nish (Serbia). Major works have beenAlbania without any custom tariffs. underway to construct Corridor 8 which will link the Albanian port of Durres to VarnaProtection for foreign investment (Bulgaria). This corridor will be the mainAlbania has adopted the 1993 Law on For- East-West connection through Albania andeign Investments which guarantees equal will become an important link for transport-treatment of foreign and local investors. tation between the Balkan and Mediterra-Foreign investments are protected from nean countries.expropriation and nationalisation.Banking sectorThe Albanian economy is now an openeconomy with fully liberalised trade and acompletely privatised and highly developedwww.ibde.org IBDE – Integrating World Markets
  11. 11. Doing Business in Albania: Reforms & Opportunities 11EXECUTIVE SUMMARY well as active regional market are some of the advantages to invest in Albania.This Report draws on the ideas that were Ensuring the success of reforms is, however,developed and discussed at the “UK- not straightforward, and could be furtherAlbania Business and Economic Reform complicated by the many challengesForum” organised by IBDE in partnership facing the economy and the country as awith the British Embassy in Albania on 25 consequence of the on-going EurozoneJanuary 2012 in the Albanian capital crisis. This report serves to aid reformTirana. The Report includes a set of policy implementation and to promote businessrecommendations and an Action Plan for opportunities in Albania. The conferencedistribution to policymakers, the business material is used under the Chatham Housecommunity and other stakeholders. Rule.The forum participants consisted of high Key Recommendationslevel government and international finan-cial institutions representatives, senior This Report includes a number of recom-members of Albania’s diplomatic corps, mendations designed to enhance theand international business leaders already business and FDI environment so as tooperating in the country, as well as those maintain Albania’s growth momentum,interested in investing in Albania. Discus- strengthen the rule of law (RoL) and movesions focused both on the progress and forward with the needed reforms. One ofchallenges faced by Albania in the process the key issues identified in this Report is theof strengthening its liberal democratic difficulties in accessing credit, as a verymodel, and achieving full integration with determinant factor in limiting businessthe European Union. development in the country, therefore, we recommend the Government to:To answer the central question of theconference - whether investors, as wealth  Improve its macroeconomic conditionscreators, enjoy the right conditions to by decreasing the public debt as per-flourish in Albania? - our focus was twofold centage of GDP (58.3% although justand dynamic. We provide an expert below EU ceiling), to benefit fromanalysis of current macro-economic situa- cheaper credit in the future.tion in the country, taking into account the  Devise a comprehensive strategy in or-impact from the Eurozone crisis, and the der to successfully attract equity firms toeconomic reform process that has now enter Albanian market.entered its third decade. We note that as  Support with funding and policymakingAlbania has embraced the open market a feasibility project to encourage list-economy, the focus has shifted from ings and secondary trading on theliberalisation and privatisation to improving Tirana Stock Exchange (TSE).the business environment and attracting  Take a swift action in finding otherFDI. The latter is the central focus of the growth avenues to compensate for thesecond part of this report. This focus was eventual decrease of remittances dur-thought appropriate since FDI represents ing the Eurozone crisis.the most vital engine of growth for an  Set up, in cooperation with relevanteconomy like Albania’s. Foreign investors stakeholders, an expert group/commis-can find rewarding investment opportu- sion to debate and provide a contin-nities in the various sectors of the economy. gency/action plan to deal with the co-Low corporate and personal income flat ntinuing Eurozone crisis and its immedi-tax (10%), relatively low labour costs and ate impact on the Albanian economyproximity to major European economies as and its banking sector in particular.IBDE – Integrating World Markets www.ibde.org
  12. 12. 12 Doing Business in Albania: Reforms & Opportunities1. INTRODUCTION reform have taken place in the country. The Forum sought to draw out lessons for ensuring successful and sustainable reform1.1. Background and Purpose processes. Under particular consideration were factors that could motivate reform across the economic spectrum.European integration stands alongsidecomprehensive and sustainable growth as We hope the intended outcome of theoverarching goals for Albania. This Report Forum will be a better grasp by businesshelps to identify the business opportunities and other stakeholders involved on theand reform priorities likely to advance political economy of reform processes, theAlbania’s business, economic and EU ambi- problems that political challenges presenttions. to these reforms, as well as enhancing the progress towards achieving EU integrationIn economic terms Albania is one of the goals. It is widely accepted that technicalfew countries in the region that has showed solutions which ignore political realitiesa steady growth track during the recent cannot lead to sustained success in reform,financial crisis. UK and Albanian relations and therefore a greater partnershipare well-established. The UK brand is between all stakeholders is necessary topowerful within the country, attracting achieve the best outcome.strong support for UK investment from alllevels of business and government. In This high level, targeted event broughtaddition, the EU accession process together a wide range of politicians,provides a framework within which to push diplomats, business leaders, economistsfor business friendly reform, stimulating the and experts from participating sectors andadvance of wider economic and the RoL institutions. The first session focused both onreform, vital to growth. the challenges faced by Albania and milestones in the nation’s progress towardsThe Forum’s principal aim was to highlight becoming a liberal democracy with abusiness opportunities as well as to provide functioning market economy. The seconda clear perspective on the economic session of the conference focused on thereform findings in the European Com- notion of Albania being “open formission (EC)’s 2011 Annual Progress Report business”, providing a platform not only for(APR). It also aimed to boost the profile of in-depth discussion of progress onUK business interests and expertise and economic reform but also on thehelped facilitate an exchange of promotion of business opportunities andinformation and contacts between pro- investment potential in areas such as:spective UK and EU investors and Albanian tourism, technology, construction, infra-stakeholders. In line with the goal of structure, manufacturing, environment, themaximising opportunities and relationships agricultural sector, education, finance &in Albania, the authors hope this report will banking, plus professional and other rele-further assist British and EU businesses in vant business services industries.learning more about the Albanian businessenvironment, its opportunities and potentialchallenges. 1.2. The Structure of the ReportThe central question of the conference was The methodology used in this report, inwhether investors, as wealth creators, enjoy support of the issues discussed at thethe right conditions to flourish in Albania? conference, uses other competent sourcesThe UK-Albania Forum attempted to further such as the APR 2011 on Albania, Doingthe debate by exploring what types of Business Report 2011 of the World Bankwww.ibde.org IBDE – Integrating World Markets
  13. 13. Doing Business in Albania: Reforms & Opportunities 13(WB), European Bank for Reconstruction recent financial crisis and remain in positiveand Development (EBRD) assessments, the growth territory.Global Competitiveness Report (GCR)2011-2012 of the World Economic Forum Chapter 4 focuses more specifically on(WEF), and other relevant articles and Albania being “open for business” andreports. explores business potential and areas of interest for British and EU investors. It alsoChapter 2 provides a SWOT overview, looks at the impact of the Eurozone crisisexamining the strengths, weaknesses, both in terms of the immediate effects andopportunities and challenges of Albania’s the long-term challenges for FDI.investment climate. Including this sectionwas seen as very important to provide a Chapter 5 offers some conclusions.brief overview of the country’s businessenvironment for potential foreign investors Chapter 6 offers some policy recommend-that are thinking of investing in Albania. ations and an Action Plan for business and other stakeholders. Appendices provide aChapter 3 explores the business and directory of key contacts in Albania.economic reforms, examined in the light ofthe EC APR 2011 and the progress to date.It also looks at the remaining challenges This report will be available to download atand the specific nature of the Albanian the British Embassy Tirana and IBDE web-economy, considering that it has been the sites: http://ukinalbania.fco.gov.uk/en andonly economy in the region to resist the www.ibde.org Image credit: UKTIIBDE – Integrating World Markets www.ibde.org
  14. 14. 14 Doing Business in Albania: Reforms & Opportunities2. INVESTING IN ALBANIA: A SWOT OVERWIEW STRENGTHS WEAKNESSES  Catch-up growth potential  Property Rights  Emerging Market  Corruption  Access to Regional Market (CEFTA)  Rule of Law  Government Support  Liberal Model Adopted  Clear EU perspective  Relatively low labour costs  Young and skilled labour force OPPORTUNITIES THREATS  Consumer Market  Eurozone Crisis:  Energy/ Power Generation  Banking Sector  Tourism  Currency  Mining  Corruption  Information Communication Technology  Technology/Telecoms  Agro-Business  Manufacturing Sector  Services2.1 Strengths: 2.2 Weaknesses:Albania is a fast developing country and Corruption remains a major challenge, butoffers a multitude of investment opportu- progress has been considerable and signif-nities in rewarding sectors of the economy. icant, especially with regard to corruptionProximity with West and Central Europe, as perceived by foreign investors in Albanialow unit costs for labour, and the lowest flat which has fallen by 50% from 2005. For atax regime - only 10% - are some of the more detailed account see Economic Re-competitive advantages Albania offers. form section 3.3. Challenges.Additionally, it offers access to the regionalmarket, regulated by the new-CEFTA for 2.3 Opportunities:the Western Balkans - designed to elim-inate barriers to trade and provide Albania offers a high level of investmentappropriate protection of intellectual potential in infrastructure, telecommunica-property rights in accordance with inter- tions, information technology, energy/po-national standards. CEFTA has been adopt- wer generation and tourism. Althoughed since 2007 as part of the SAA with the many of the strategic sectors have alreadyEU. The latter highlights an all important been privatised, a new wave of statefact that should be kept in mind: Albania property privatisation has been declaredhas a clear EU perspective and we hope by the government. Additionally, Albania iswill be granted a candidate status by the very keen in embracing Public PrivateEC and Council this year - providing the Partnerships (PPPs) in an array of sectorsconditions set by the Commission are including highway maintenance, transportfulfilled. infrastructure in Tirana, waste manage-www.ibde.org IBDE – Integrating World Markets
  15. 15. Doing Business in Albania: Reforms & Opportunities 15ment, and hydroelectric dam concessions. general macro-economic situation remainsHowever, this desire has not been trans- stable and growth-conducing. That said,lated into many partnerships on the ground, the looming external crisis - that of thewhich makes PPPs therefore an enormous Eurozone, could prove perilous for theopportunity. We believe that PPPs are one Albanian economy if it continues over aoption to attract FDI in the country, and we prolonged period, and could possibly haveare pleased to observe this model being a massive impact, as a result of a potentialsteadily adopted by the government. Greek, and subsequently an Italian default. The Albanian government, the Bank of2.4 Threats: Albania (BoA), assisted by international financial institutions, should take theAlbania has handled two external crises appropriate measures to mitigate such awell so far. It avoided recession and main- scenario or be prepared for it. We havetained positive growth levels. Inflation is not included in Chapter 6 some recommenda-a problem, as noted by various consultan- tions that detail some steps that could becy firms, and despite concerns over current taken by the government in this uncertainlevels of public debt (58.3% of GDP) the context.Photos Credit: Albanian National Tourism AgencyIBDE – Integrating World Markets www.ibde.org
  16. 16. 16 Doing Business in Albania: Reforms & Opportunities3. ECONOMIC REFORM -PROGRESS initially, it pursued a robust positive trans- formation from an isolated centralisedThe aim of this section is to evaluate the economy based heavily on outdated,momentum of economic reform against inefficient industry, to an open economythe background of the findings of the EC which it is subsequently integrating not onlyAPR 2011, and identify areas that need to with international markets but most impor-be reformed further. It will further assess tantly with the EU. The accession process isissues that should be addressed in order to easily identified as the most powerful tooldecrease foreign investment uncertainty for transformation and economic andand risk, whether perceived or real. How it political progress in the country. Therefore,was in the past as compared to what the transformation and integration are notstatus is now? Finally, what’s the forecast mutually exclusive processes and only byregarding economic reform implementa- analysing them together we can under-tion? stand the progress Albania has made thus far and try to assess what we can expect inAlbania is reforming fast. United Kingdom the medium and long-term.regulation and law has been adopted Dramatic reforms were undertaken in earlyespecially with regard to enforcement of 1990s, and gained new momentum fromcontracts and liberalisation of markets and 2000 when big privatisations, banks,trade. As part of the accession process telecoms commenced. From 2005, whenwith the EU, Albania has signed numerous Prime Minister Sali Berisha came to powerfree trade agreements such as CEFTA, and for a second time (on this occasion asthe European Free Trade Association Prime Minister) the government has(EFTA), to name but a few. implemented a series of neo-liberal policies to create a business-conducive environ-3.1. Overview on Progress ment intended to improve key indicatorsDuring the past two decades the country shown in Figure 1. This shows that theexperienced two fundamental changes: Albanian economy has moved to the Figure 1: Global Competitivness Intex 2011-2012 Stage of development 1 1-2 2 2-3 3 Factor Transition Efficiency Transition Innovation driven driven Driven Source/Credit: World Economic Forum. World Bank staff calculationswww.ibde.org IBDE – Integrating World Markets
  17. 17. Doing Business in Albania: Reforms & Opportunities 17second stage of its development. Substan- 0.4% in 2009; indicating a low leveltial progress has been made in infrastruc- of state intervention and hardture, maintaining a stable macroeconomic budget constraints;environment, health and primary educa-tion, higher education and training, and • The Albanian Investment Develop-business sophistication. The aim of these ment Agency (AIDA), which serveseconomic and business reforms is to as a one-stop shop for foreignincrease domestic business initiatives and investors, became operational into attract FDI. Such focus does not come June 2011;as a surprise. This is because the economicmodel adopted in Albania relies on the role • The Law on FDI was amended toof private actors in the economy and small grant special protection, undergovernment - through the use of “e-gov- certain conditions, to foreignernment” schemes and also the so-called investors in the event of land“one-stop shops”. ownership disputes.The situation today could not be moredifferent from that of the early 1990s. The APR also noted the impact on foreignCurrently the private sector contributes investment cannot currently be assessed,roughly 80% of the Albanian GDP and as a as the new legislation has not yet been fullyconsequence employs around 80% of the applied in practice.workforce. Such development is importantalso because it exerts pressure on the Despite these positive developments andgovernment to sustain macroeconomic indicators, it is the RoL and political stabilitystability, improve contract enforcement, that must evolve further to a level thatprotection of intellectual and property would give confidence to foreign and do-rights, and finally, yet most crucially, to mestic investors, stimulating them to invest.ameliorate the functioning of the RoL. With Only with political stability and macro-regards to politics, every effort must be economic prudence can the countrymade by all political actors and parties in develop at a vigorous pace and in theAlbania to respect the consensus for EU- near to medium term to fully integrate withconditioned reforms and to work together the EU.to make necessary forward leap in theimplementation of vital structural reforms. Due to serious challenges within the EU itselfThe October 2011 APR noted several pos- the Union has turned much of its attentionitive developments in Albania’s economy. to the Euro and sovereign debt crisis af-To mention a few examples: fecting key member states, which some believe is also slowing up the enlargement • Albania experienced GDP growth, process to the Western Balkans and Turkey. despite the deep and on-going That said, it is important that we take into crisis in the Eurozone; account key facts when it comes to ana- lysing future prospects of EU enlargement. • Business registration and licensing Number one is the successful application of has become easier and quicker; Croatia, joining the EU in 2013, and two, IPA funding for enlargement/potential can- • The banking sector remains well- didate countries has been maintained at capitalised; 2010 levels. With regards to the accession of Western Balkans countries, the President • Subsidies in 2010 are estimated to of the European Council, Mr Van Rompuy, have declined to 0.3% of GDP from noted that “Not only did we officially openIBDE – Integrating World Markets www.ibde.org
  18. 18. 18 Doing Business in Albania: Reforms & Opportunitiesthe door for Croatians, but we also made by addressing key economic and politicalclear that this door will not close behind reforms. So far the country has also improv-them”. Whilst the IPA funding continues as ed perceived corruption levels (50%) asplanned and as Commissioner Štefan Füle shown in Figure 2. The reform momentumstated recently “we remain committed to has to be sustained and even increased incredible levels of financial assistance for order to meet the remaining challengesthe enlargement countries for the 2014- Albania faces.2020 period too - no less than the period2007-2013”. That means more than 14 3.2. Challengesbillion Euros. Although Albania thus far has managed toMoreover, with regards to the crisis in the avoid recession, partly because of a veryEU, it should be highlighted that the history strong liberal reform momentum and highof EU integration during the second half of levels of exports and FDI (especially in thethe last century shows that EU integration energy sector), many challenges must behas an intriguing relation with crises: which met to transform Albania into a key FDIserve as a catalyst to deepen integration – destination in Southeast Europe and theboth positive and negative integration - in Mediterranean. FDI is not in itself a key tothis case fiscal standardisation. We urge the integration and accession process withbusiness leaders to keep this in mind when the EU, but an enhanced FDI climate isassessing the Eurozone crisis and its impacts undoubtedly the means to achieve ec-on the Albanian economy. onomic growth and employment that will improve living standards of the AlbanianThrough the EU prism, we believe that Alba- population. It will also support Albania’s ec-nia can also become stronger and benefit onomy to cope with the competition rules Figure 2: Corruption Perception Index 2010 in SEE % of firms bribing frequently, usually or always (from BEEPS) 50 40 30 20 10 0 Montenegro Macedonia Albania BiH Kosovo Romania Croatia Serbia 2005 2009 (Source: World Bank Business Environment and Enterprise Performance Survey)www.ibde.org IBDE – Integrating World Markets
  19. 19. Doing Business in Albania: Reforms & Opportunities 19of EU integration. Literature of democratic administration courts, which will increasedevelopment shows a clear correlation the speed of dispute resolution and willbetween increasing living standards and represent a new branch of the Judiciarydemocratic consolidation as the middle system in Albania. The establishment ofclass becomes more demanding and poli- such a key institution is an all-importantcymakers more accountable. The EU is condition posed by the EU to grant Albaniaoften seen as a ‘democracy anchor’ and candidate status this year. Such inter-through its accession political and ec- national pressures increase the likelihood ofonomic conditionality, known as the the adoption of administrative courts and‘Copenhagen Criteria’ it pushes for the other vital reforms and institutions.necessary reform. The EC 2011 APR shows political consensusThe EC’s experience with many rounds of has been reached in order to go forwardenlargement in the past has also improved with integration, economic reforms remainthe EU capacities in managing the reform to be resolved for both progressing towardsprocesses in accession and potential can- joining the EU and improving living stan-didate countries. For instance, the lessons dards in the country.learned from the accession process ofCroatia, with particular reference to pend- The Albanian economy maintained macro-ing actions on judiciary and fundamental economic stability and positive growthrights and on justice, freedom and security, during the global crisis and its economyhave made the EU aware that it is impor- continues to remain in positive territorytant to tackle this areas with the remaining during the current Eurozone crisis. It alsoWestern Balkan countries as early as pos- made progress towards becoming asible, in order to allow time for Albania to functioning market economy. Its capacitybuild the necessary track record for reform. to cope with competitive pressures andKey challenges emphasised in the APR market forces within the Union in thewere the following: medium term is on track, provided Albania steps up structural reforms. These include a) Strengthening the RoL and public reinforcing the legal system and increasing administration reform, physical and human capital. Although do- mestic demand was muted, strong exports b) Ensuring freedom of expression in led to an economic growth figure of 3.8% media which is currently vulnerable in 2010. Inflation has remained stable to political interference, insufficient through implementation of good and statutory protection, lack of conservative monetary policy. However, a transparency and concentration of stronger political partnership is needed to ownership, and unfair competition. enhance the capacity of the government to implement structural reforms. Issues of c) Sustainable economic recovery concern that remain are explicit with re- and embracing the Europe 2020 gard to: a) property rights, b) enforceability agenda. of contracts and the RoL, c) informal econ- omy, d) and public debt levels (at 58.3%)Strengthening the RoL, the enforcement of together with an increasing number of non-contract, property rights, the fight against performing loans in the banking sector.corruption and the informal economy arekey challenges faced by both business and With regards to the fulfilment of the twelvegovernment. The current situation is ex- Key Priorities, as outlined by the EC Opinionpected to improve when the Albanian on Albania 2010, there has been someparliament approves the creation of progress in recent months, however muchIBDE – Integrating World Markets www.ibde.org
  20. 20. 20 Doing Business in Albania: Reforms & Opportunitiesmore is needed in order for Albania to done in implementing the key laws re-receive a positive opinion from the Com- quiring qualified majority voting. Progressmission in 2012. When examining the Key towards the strengthening of indepen-Priorities, with relevance to foreign invest- dence and efficiency in the judiciaryors, together with the progress achieved so system is slow. There has also been limitedfar, Albania has made progress on the progress in developing a comprehensivefollowing issues: the proper functioning of strategy for resolving property rightsthe parliament on the basis of a con- disputes - caused also by the fragmen-structive and sustained political dialogue tation of responsibilities and a lack ofamong all political parties (political coordination between various governmentconsensus reached on November 2011); agencies. It should be said, however, thatadoption of pending laws requiring a the issue of property rights is more of areinforced majority; reform of the electoral problem near the big cities of Albania andcode in line with the Organisation for less so in the countryside and not an issue inSecurity and Co-operation in Europe (OSCE) designated industrial and technological- Office for Democratic Institutions and (free trade zone) parks.Human Rights (ODIHR) ; the fight againstorganised crime through anti-corruption According to the GCR 2011-2012 the mostmeasures, and strengthening the legal problematic factor for doing business inframework by implementing GRECO (Group Albania is the limited access to financingof States against Corruption) recommen- which is slowing investment levels (see sec-dations. tion Monetary Policy for more information on the issue). Given that access to financeHowever, reform of public administration has been a serious challenge for thehas been delayed, and therefore, remains economies worldwide since the financialless effective. With regard to the RoL, crises began in 2009, this is not surprising.judicial reform strategies and an action Figure 3 also demonstrates that there hasplan were adopted, but more needs to be been considerable progress with regard to Figure 3: The most challenging factors for doing businessAccess to financing 19.2Tax rates 12.0Corruption 10.9Tax regulations 10.2Inefficient government bureaucracy 8.7Inadequate supply of infrastructure 7.7Policy instability 7.5Foreign currency regulations 6.7Poor work ethic in national labour force 4.9Inadequately educated workforce 3.8Inflation 3.4Government instability/coups 2.1Crime and theft 1.5Restrictive labour regulations 1.1Poor public health 0.3 0 5 10 15 20 25 30 Percent of responses Note: From a list of 15 factors, respondents were asked to select the five most problematic for doing business in their country and to rank them between 1 (most problematic) and 5. The bars in the figure show the responses weighted according to their rankings. (Source: The Global Competitiveness Report 2011-2012. World Economic Forum)www.ibde.org IBDE – Integrating World Markets
  21. 21. Doing Business in Albania: Reforms & Opportunities 21political uncertainty, skilled and compet- should create more training schemes, suchitive labour force, government bureauc- as vocational training, in order to increaseracy and public infrastructure (see ‘Doing the skills of the labour force. Interestingly,Business’ section for more details). the crisis in the Eurozone is proving to be an opportunity for Albania with returning skilledInternational financial institutions such as migrants from Italy and Greece acting asthe EBRD, aware of how these challenges the engine for growth of SMEs in Albania. Incan translate into barriers for receiving FDI, addition, the country has profited substan-are supporting and encouraging foreign tially from its brain gain scheme. Theinvestment projects in the country. EBRD concentration of this wave of ‘brain gain’ isbenefits from 19 years of experience in in the major cities of Albania, especially inAlbania and has already invested 650 mil the capital, Tirana, which is also a magneteuros to date. Contrary to the popular for Albanian talent from Kosovo andbelief, e.g. that the EBRD supports only the western Macedonia. This is undeniably agovernment; the current portfolio of the benefit the country can offer to potentialbank is divided by half into public and investors.private investments. EBRD has beenespecially active in infrastructure and the However, the Eurozone crisis and theenergy sector. Interested foreign businesses slowdown of Albanian growth levels meansthat plan to invest in Albania can also the country finds itself at a crossroads, andreceive financial support from the well- must decide upon the economic strategycapitalised Albanian banking system. in which specific areas need to be reformed and promoted. The governmentLow cost of labour is another incentive to has already declared the pillars of theinvest in the country, but a skilled labour economy are exports, energy, tourism,force is also a requirement in today’s agriculture, education, infrastructure, asglobal competition for FDI, therefore, we well as the digitalisation of Albania. In orderrecommend that the Albanian Government to develop a comprehensive strategy, the Figure 4: EBRD Portfolio in Albania Current portfolio of € 453.1 million  56% Private & 44% Public  92% Debt & 8% Equity (Source: EBRD, Fabio Serri, Presentation at UK-Albania Business & Economic Reform Forum Jan ’12)IBDE – Integrating World Markets www.ibde.org
  22. 22. 22 Doing Business in Albania: Reforms & Opportunitiesgovernment could also make use of, and The aim is to measure the regulation andexploit, the expertise of various consultancy red tape relevant to the life cycle offirms and UK/International agencies to domestic small to medium firms (based onbetter face the challenges ahead. This standardised case scenarios). The fourassistance is crucial in also creating a main cities assessed in the country arepowerful network that can promote invest- business-friendly and are competitive withment in the country. This year, IBDE togeth- important cities in Southeast Europe. Figureer with its partners in the region will organise 5 shows the results from key Albanian cities,a Southeast European Economic Forum to which make up the majority of economicpromote PPPs in the region and a Mediter- activity in the country.ranean Business Summit to examine thereshaping of the Mediterranean develop- Although Albania ranks high for businessment. Such forums will serve as a powerful start-ups in the region - for instance charg-platform to promote different sectors of the ing only a nominal amount and notAlbanian economy. requiring fixed capital – more reforms need to be adopted in order to attract more FDI.3.3 Doing Business Reforms For example, the government should con- solidate governmental approvals at aAlbania is a fast growing, business-friendly, single access point (one stop shop), simplifywith improving infrastructure country that registration with municipal authorities, andoffers a plethora of investment opportuni- promote the use of electronic services. Alsoties. The improving legal and regulatory a single tax and business identificationframework towards European standards, number should be adopted whilst re-market size of Western Balkans, dynamic moving the need for a company to have alabour with relatively low cost, and ranking seal, logo or brand. We note, however,15th in the world with regard to protecting that since almost all transactions andforeign investors and access to credit are registrations are based on the Tax Identi-some of the reasons to invest in Albania. fication Number, (NIPT) and that the logo and brand could be useful for companiesThe World’s Bank Doing Business Report to have them for commercial reasons they2011 identifies four main areas to assess the should not be compulsory. The seal inbusiness environment in Albania. These are: particular is inconvenient for small busi- nesses and should be removed. a) Starting a business, b) Construction permits, An area that Albania has not gained many c) Registering property, and points in is dealing with the construction d) Enforcing contracts. permits, especially in the capital Tirana - Figure 5: Doing Business in Albania’s Key Cities - Ranking (1-22) Economy City Ease of Ease of Ease of Ease of starting a dealing with registering enforcing business construction property contracts permits Durres 9 11 13 14 Albania Shkodra 8 3 9 11 Tirana 10 N/A 16 18 Vlora 7 9 10 10 (Source: Doing Business in South East Europe 2011, World Bank)www.ibde.org IBDE – Integrating World Markets
  23. 23. Doing Business in Albania: Reforms & Opportunities 23where issuing of permits was blocked for and introduce fixed fees. Simplified pro-two years for political reasons. This however, perty registration as well as standardisedis promised to change under the Mayor, sale and purchase agreements should beLulzim Basha, who has promised a series of provided. Communications technologyreforms in the municipality in order to give would link government agencies and makea second boost to the construction sector documents available online. We note therein Tirana. Mayor Basha’s administration is progress in this direction (see ICT sectionshould continue consolidating pre and post for more details).construction clearances, enforce statutorytime limits for permit approvals, and The challenges to market entry should notconsider the reduction in cost of building be underestimated. The annual progresspermits. Also, we recommend the adminis- reports of the EU describe other concretetration shift responsibility for quality control areas of progress in Albania, and theto private professionals, authorised inspec- challenges outstanding that need to betors, as was the case in the Czech Republic addressed in the future.and other Central and Eastern Europeancountries. 3.4. Monetary PolicyThe One Stop Shop model is also spilling Inflation is expected to remain low duringover into other government services. Other 2012 due to global commodity pricesmodels should be adopted in order to cooling and the Eurozone crisis, demon-create a complementary and modern strating a lack of inflationary pressures.integrated system. For instance, for license Price stability is one of the key mandates ofrenewal business people will benefit from the Bank of Albania (BoA). Inflation isthe creation of an online ‘nonstop shop’. expected to be on target this year at 3.6%, well inside the Bank’s target of 3%, minus orMore should be done however, with regard plus 1%. However, the Commodity Priceto enforcement of contracts, although the Index (CPI) falling levels also demonstratesigning by Albania of various international that aggregate demand is decreasing intreaties that regulate and manage dis- the country. Falling consumption levelsputes (New York Convention and Washing- should alter the government, responsibleton D.C. Convention) is a step forward. The for fiscal policies, and the BoA, whichgovernment should set up specialised handles monetary policy. A fiscal stimulus incommercial courts or commercial sections the current situation is almost impossible,within the general jurisdiction courts in cities due to current levels of public debt (58.3%beyond the capital. Moreover, it should of GDP 2011) which constrains fiscal action.also increase the capacity of courts and Such a situation makes BoA the key playerpromote alternative dispute resolution in mitigating a crisis in Albania, which canmechanisms. In order to decrease waiting drive growth to pre-2009 levels. What hastimes ICT (Information and Communication the BoA done so far?Technology) should be widely adopted soas to enhance communications between The liquidity situation in the country is posi-various judiciary offices. tive. Albania has not fallen into a liquidity trap, also because the official interest rateLastly, Albania ranks as average in the remains at 4.5%, despite a decrease by 25region for registering property. In order to points on 25 January 2012. This action wasimprove this, the government could take taken because BoA recognised the needsome of the following steps: first, it could to stimulate aggregate demand, whicheliminate pre-sales certificates and clear- directly affects growth levels – forecast forances, reduce the property transfer tax 2012 downgrade expectations from 2.5% toIBDE – Integrating World Markets www.ibde.org
  24. 24. 24 Doing Business in Albania: Reforms & Opportunities Image credit: ECB1%. Since 2009 there have been a few more will be needed to mitigate theinterest rates decrease rounds (in total 125 negative effects the Eurozone crisis has onpoints from 5.75% to 4.5%) but this has not the Albanian banking system which istranslated into a 125 point decrease in composed of mainly foreign subsidiaries,loans interest rate. Banks remain liquid with more than half of the banks beingmainly as a result of high profits from high Italian and Greek owned. Intesa Sanpaolo,interest rates and high levels of commission Raiffeisen, and Société General, togetherfor services, which can mean Albanian with the National Bank of Greece, Emporiki,business suffers from a lack of liquidity. and other Greek financial institutions operate in the country. A potential default,Another problematic area remains the in any of the Eurozone members wouldnon-performing loans (currently at around certainly cripple the core of the banking18%) which have made commercial banks system in Albania. As a response to thisincrease their reserves thus decreasing perceived threat, the BoA imposed re-credit for the economy. This credit squeeze strictions on financial transactions of foreignaffects directly the economy and invest- owned banks to their parent banks.ment levels. However, it is worth noting thatloans to SMEs and important projects have We believe that a “new” Vienna Initiative iseasier access to liquidity, supported by necessary to avert the potential of a sud-international financial institutions such as den deleveraging by western banks fromthe EBRD. The BoA decreased the interest Southeast European countries (Albania in-rates in order to stimulate lending, while cluded) that depend on their capital. Inconstantly supervising and stress-testing the this regard it is worth noting that on 16commercial banks’ exposure to non-per- January 2012 the public/private sectorforming loans. Another interest rate de- officials from within the European Bank Co-crease is highly likely in 2012. ordination "Vienna Initiative” met in Vienna with the aim to enhance the coordinationSo far the BoA has pursued a cautious of national policies that could impact theconservative monetary policy, however, economies of emerging Europe.www.ibde.org IBDE – Integrating World Markets
  25. 25. Doing Business in Albania: Reforms & Opportunities 254. ALBANIA IS OPEN FOR BUSINESS! global commodity prices. Albania already ranks 46th for starting a business and 15th inPrincipally, for a country to enjoy foreign protecting investors. This comes as a resultinvestment input it must first enjoy macro- of the implementation of a liberal frame-economic and political stability, have low work for FDI, together with the adoption ofregulations and taxes, RoL, competitive Foreign Investment Law in 2010 whichdynamism, and of course the size of the makes the state the guarantor in settlingmarket comes into play. Are there good any land dispute claims, thereby aiming toconditions for doing business in Albania? decrease uncertainty and related risksThe answer is yes. There are strong reasons when investing in Albania.to invest; however, some challenges The GCR 2011 identifies 12 areas thatremain, and we encourage the govern- foreign business looks to when deciding toment to closely cooperate with business to invest in a country. These areas also formfurther improve the investment climate. the 12 pillars that are a part of any modernAlbania is an emerging economy in the economy. We will look at 10 of them takingheart of Europe, opportunities are abun- into consideration that Albania is at adant, the potential for profit is high, and second stage of development, beingfuture potential to do good business is categorised as an efficiency-driven eco-bright. nomy. The data in figure 6 shows thatThe country enjoys low inflation, which is Albania fares quite well on many indicatorsexpected to further decrease in the con- making it a very competitive economy intext of the Euro crisis and cooling of the the world’s emerging markets. The GCR Figure 6: The Global Competitiveness Index – Albania INDICATOR RANK/142 INDICATOR RANK/142 1st pillar: Institutions 6th pillar: Goods market efficiency Burden of government regulation 9 No. procedures to start a business (5) 23 Transparency of government policymaking 43 No. days to start a business (5) 9 Efficacy of corporate boards 27 Extent and effect of taxation 24 Strength of investor protection, 0–10 (best) 15 Business impact of rules on FDI 33 2nd pillar: Infrastructure 7th pillar: Labour market efficiency Quality of roads 58 Cooperation in labour-employer relations 21 Quality of air transport infrastructure 56 Hiring and firing practices 21 Mobile telephone subscriptions/100 pop.* 18 Pay and productivity 17 3rd pillar: Macroeconomic environment 8th pillar: Financial market development Government budget balance, % GDP* 73 Legal rights index, 0–10 (best)* 8 Inflation, annual % change* 67 Ease of access to loans 121 4th pillar: Health and primary education 9th pillar: Technological readiness Business impact of malaria/HIV/AIDS 1 FDI and technology transfer 42 Life expectancy, years 40 Internet users 53 Quality of primary education 49 Internet bandwidth, kb/s/capita 69 5th pillar: Higher education and training 10th pillar: Market size Quality of the educational system 45 Domestic market size index, 1–7 (best) 99 Quality of math and science education 42 Foreign market size index, 1–7 (best)* 107 Extent of staff training 32 *It is recommended that Foreign Market size is considered as described earlier, in the regional context, which would substantially improve the rankings (SOURCE: The Global Competitiveness Report 2011-2012 - World Economic Forum)IBDE – Integrating World Markets www.ibde.org
  26. 26. 26 Doing Business in Albania: Reforms & Opportunitiesreport also emphasises that while all of the business impact from tuberculosis. On lifepillars will matter to a certain extent for all expectancy at 78.6 years Albania ranks 40theconomies, the reforms needed to best and on the quality of primary educationimprove the competitiveness of selected ranks 49th.countries depends on the stage of devel-opment for each country. For instance, Fifth pillar: Higher Education and TrainingAlbania’s need for reform is different from Albania has one of the youngest popula-that of the UK which is at a different stage tions in Europe. Low cost qualified labourof development. As Albania’s economy force remains the most competitive advan-moves along its development path, wages tage of Albania. It ranks 45th for the qualitywill increase and in order to sustain higher of education and 42nd for maths andincome and competitiveness the need for science; for the extent of staff training thethe improvement of the business sophisti- country ranks 32nd.cation (11th pillar) and technological inno-vation (12th pillar) increases. Sixth pillar: Goods Market Efficiency The number of procedures to start a busi-First pillar: Institutions ness are minimal and Albania ranks 23rdAlbania ranks 9th (out of 142 countries) for and 9th for the number of days it takes forburden of government regulation; 15th for issuing of the permit/license; The intensity ofprotection of investors; 27 for efficacy of local competition remains low, with Albaniacorporate boards and 43rd for transparency ranking 122nd. This means that there isof government policymaking. plenty of opportunity for foreign investors to enter the market.Second pillar: InfrastructureThe overall infrastructure has improved Seventh pillar: Labour Market Efficiencysubstantially and Albania now ranks 58th for As mentioned above foreign investors canthe quality of roads and 56th for the quality expect to be satisfied by the Albanianof air transport infrastructure; electricity sup- labour force not only for their qualificationsply has also improved at a similar pace and and low employment cost but also due tonow the country ranks 63rd; the use of Mo- the labour-employer relations, which is verybile phones is especially high, ranking 18th. cooperative with respect to hiring and firing practices. For both cooperation in labour-Third pillar: Macroeconomic Environment employer relations and hiring and firingKey challenge remains the levels of public practise Albania ranks in a competitive 21stdebt (58.3%). That said, the current level of place. Pay and productivity are even morepublic debt is below the statutory limit of competitive ranking 17th.60% of GDP. The IMF and WB have alreadyraised their concerns about the servicing of Eighth pillar: Financial Market Developmentdebt by the government and have ad- The banking system remains sound andviced further cuts in investment. This could profitable, however, there are difficultieshurt Albania’s growth and therefore the accessing loans for which Albania ranksgovernment has resisted any further auster- 121st. Foreign investors are advised to seekity measures in the 2012 budget. financial support from alternative financial markets and international financial institu-Fourth pillar: Health and Primary Education tions such as EBRD. A form of partnershipAlbania fares very well in terms of having a with City of London, where over 250 majorhealthy work force. It ranks 1st of having international banks are based could offerminimum business impact of diseases such certain benefits. IBDE is happy to facilitateas malaria and HIV/AIDS and 4th in terms of this process.www.ibde.org IBDE – Integrating World Markets
  27. 27. Doing Business in Albania: Reforms & Opportunities 27Ninth pillar: Technological Readiness also advisable to contact and hire ex-Albania has a good standing in the FDI perienced lawyers, which can providetechnological transfer ranking at 69th, and invaluable local knowledge and regulatoryhas a good Broadband infrastructure with framework. IBDE would be happy to assistmore opportunities to invest. As regards the in this process through its strong network ofnumber of internet users Albania ranks 53rd commercial lawyers in the UK and theout of 142 countries. region. Although not formally resourced to do trade work the British Embassy in TiranaTenth pillar: Market Size also provides support and advice to UKAlthough Albania has a small domestic business interest in Albania. The Albanianmarket size (ranking 99th) and foreign Embassy in London offers assistance in themarket size (ranking 107th), since 2007 initial process.Albania has singed the CEFTA and has afree trade agreement with its main trading The public administration has been reform-partner the EU. Recent research has ed in order to provide better services toidentified the integration of the ‘Albano- business, specifically through embracing e-sphere’ – territory where Albanian nationals government and a One Stop Shop forlive including Albania, Kosovo, southern business licenses, for example like theMontenegro, western Macedonia, and the National Registration Centre. This hasPresheva Valley in Serbia - increasing the simultaneously increased transparency thusAlbanian market potential substantially. decreasing corruption and increasing efficiency in the public administration.The above pillars clearly indicate that Figure 7 shows the largest strides made byAlbania is very competitive in the global Albania in improving commercial regula-market and in particular on the pillars that tions, crucial in creating a business-condu-determine the current stage of its develop- cive environment.ment, which is the efficiency-driven eco-nomy. Sectors awaiting foreign investment are the following: apparel industry, extraction ofWhen entering Albania foreign investors are minerals and gas/oil (including off-shorerecommended to contact AIDA, explicitly drilling), green energy (hydropower in par-set up to support foreign businesses. It is ticular) trade and infrastructure, ICT, tourism, Figure 7: Albania* has made large strides in improving commercial regulation Improvement in the ranking on the ease of doing business, Doing Business 2008-2011 1 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 183 ALBANIA 136 to 82 9 REFORMS 37 87 96 117 137AVERAGE EUROPEAN EAST LATIN SOUTH SUB-SAHARIANRANKING ON THE UNION ASIA & AMERICA & ASIA AFRICAEASE OF DOING PACIFIC CARABBEANBUSINESS, 2011 MIDDLE EAST AND NORTH AFRCA *Represented by its capital city. (Source: Doing Business in South East Europe 2011, World Bank Report)IBDE – Integrating World Markets www.ibde.org

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