Openness to Foreign Investment
Albania is open to foreign investment and increasing FDI is a top priority for the Albanian government. Albania has put in place a liberal foreign investment regime, including a 10 percent flat corporate and income tax and has taken measures to improve the business climate by streamlining business procedures through e-government reforms. These improvements along with NATO membership and progress toward EU integration have contributed to the increase in investor interest during the last couple of years. Promising sectors for foreign investors and include: energy (including alternative energies), mining, transportation, telecommunications, and tourism. The country’s geographic position places it at the crossroads of Western and Eastern Europe. A stable U.S. ally, Albania is a member of NATO, the WTO and is in the process of applying for candidate status in the European Union.
Although FDI has increased during the last couple of years, it still remains among the lowest in the region with a significant part of it coming from privatizations. Despite progress in reforms the major factors hindering FDI seem to remain the same: widespread corruption, weak law enforcement, insufficiently defined property rights, lack of developed infrastructure, a sluggish government bureaucracy and frequent changes in the legal framework. Foreign companies continue to face significant challenges in entering the market, particularly in areas that touch on property rights. Despite advancements government bureaucracy and inefficiency greatly hampers the ability to hold successful, open and transparent government tenders.
The legal framework to encourage investment is already in place. Law 7764 "On Foreign Investment,” dated November 2, 1993, was designed to create a favorable investment climate for foreign investors in the country. The law offers considerable guarantees to all foreigners (either physical persons or legal entities) willing to invest in Albania. Such provisions include:
No prior government authorization is needed and no sector is closed to foreign investment.
There is no limitation on the percentage share of foreign participation in companies - 100 percent foreign ownership is possible.
Foreign investment may not be expropriated or nationalized directly or indirectly, except for designated special cases, in the interest of public use and defined by law.
Foreign investors have the right to expatriate all funds and contributions in kind of their investments.
Most favorable treatment for investors according to international agreements is also provided under Albanian law.
There are limited exceptions to this liberal investment regime, most of which apply to broadcasting, health services and legal services. Restrictions on the purchase of real estate are also notable: agricultural land cannot be purchased by foreigners, but may be rented for up to 99 years; commercial property may be purchased, but only if the proposed investment is worth three times the price of the land. There are no restrictions on the purchase of private residential property.
Investors in Albania are entitled to judicial protection of legal rights related to their investments. Foreign investors have the right to submit disputes to an Albanian court. In addition, parties to a dispute may agree to arbitration. Provisions regarding domestic and international commercial arbitration are incorporated into the Albanian Code of Civil Procedure.
The key piece of legislation that addresses the activities of companies and establishes the type of legal structure under which companies may operate is the new law of 2008 “On Entrepreneurs and Commercial Companies,” that replaced the law of 1992. The new law brings Albanian legislation in line with the EU's acquis communitaire and reflects amendments of other Albanian legislation like the Civil Code, the Law on National Business Registration Center, Labor Law, Law on Securities and other important laws. The most common type of organization for foreign investors is a limited liability company. Other forms of business entities allowed under the current law are joint stock companies, joint ventures, unlimited partnership, limited partnership and sole entrepreneur enterprises.
The National Business Registration Center, functional since September 2007, serves as a one-stop-shop for business registration. Starting a business became easier with online publishing of forms and procedures, reduction of the registration cost, and the consolidation of tax, health insurance, and labor registration into a single application. Licensing for businesses has been streamlined with the opening of the Business Licensing Center in July 2009. As a result, many licenses were abolished and a broad simplification of licensing procedures has been completed in many sectors including, mining, hydrocarbons, public works, health, agriculture and the environment.
Albania's tax system does not discriminate against foreign investors and no distinction is made between foreign and domestic investors. The on-going reform in the sector aims at increasing the efficiency of the tax administration and reducing corruption.
Albania has improved public procurement by approving a new law and introducing e-procurement. The new law takes into account the principles of non-discrimination and equal treatment, transparency, and legal protection of interests of bidders on public contracts. Direct tendering has been abolished and criteria to identify abnormally low bids have been introduced. The Public Procurement Advocate was established as an independent institution reporting to parliament. However, it has no particular executive powers and its functions duplicate the monitoring tasks of the PPA. Decisions on appeals are taken by the same unit of the PPA that is responsible for interpreting the law and giving advice to contracting authorities. Current procedures for handling complaints still do not meet recognized international standards. Despite progress, its application is hampered by technical problems, the insufficient IT capacity of many contracting authorities and corruption in drafting tender documents. Companies continue to experience issues with transparency in specifications and communication in competing for public tenders. Overall, the improvements in the public procurement legislation are advancing while the proper enforcement of the law is still a work in progress.
The law “On Concessions,” No. 9663, dated December 18, 2006, established the necessary framework for promoting and facilitating the implementation of privately financed concessionary projects enhancing transparency, fairness, efficiency and long-term sustainability in the development of infrastructure and public service projects. One of its major amendments includes a better regulation for unsolicited proposals and of public-private partnerships in general. The law applies to a wide range of sectors, including:
a) transport (railway system, rail transport, ports, airports, roads, tunnels, bridges, parking facilities, public transport);
b) generation and distribution of electricity and heating;
c) production and distribution of water, treatment, collection distribution and administration of waste water, irrigation, drainage, cleaning of canals, dams;
d) collection, transfer, processing and administration of solid waste;
f) education and sport;
h) tourism and culture;
i) prison infrastructure;
j) recycling projects, rehabilitation of land and forests, in industrial parks, housing, governmental buildings, service of maintenance of IT and data base infrastructure;
k) natural gas distribution;
l) management contracts or provision of public services including those related to sectors specified above.
In order to promote investments in priority sectors the GOA may offer concessions to local or international investors for the symbolic price of one euro. The GOA, with the approval of the Minister of Economy, authorizes concessions in other sectors besides the ones listed above. The law does not apply to concessions that require a separate operating license unless that is included in the framework of the concession agreement.
The privatization process of the past 19 years has almost come to an end with only a few large privatizations remaining. Privatization forms include public auctions and public tenders.
Following some large privatizations which were finalized in 2009, the GOA will most likely start the procedures for the privatization of 100 percent of the state-owned insurer INSIG (following the failure of negotiations with the winner in early 2009 for the sale of 61 percent of the shares, EBRD and IFC exercised the put option for their 39 percent and GOA became the owner of 100 percent of the INSIG shares.) In addition, the GOA has announced its intention to fully privatize Albpetrol, the state-owned company that manages and administers all the existing gas and oil fields in Albania. The company also has the right to sign petroleum agreements with interested parties for the existing gas and oil fields. In addition, the GOA will also privatize through an auction the 16 percent of state owned shares of the fixed line monopoly Albtelecom.
The GOA does not screen foreign investments and the United States enjoys a popular image in Albania. Both the business community and public generally welcome American firms and their products. Companies interested in entering the Albanian market should contact Albanian Business and Investment Agency Albinvest. Albinvest provides direct assistance to investors, promotes SMEs, Albanian exports and FDI.
Albanian Business and Investment Agency (ALBINVEST)
Blv. “Gjergj Fishta”, Pall. Shallvareve, Tirana, Albania
tel: +355 4 252 886; fax: +355 4 222 341
Evaluations by MCC; Doing Business 2010 and Moody
“Doing Business 2010,” a report of the World Bank and IFC that evaluates the regulations affecting ten areas of everyday business and assesses ease and equal opportunity for businesses in 183 economies. Albania has continuously moved up in their rankings as highlight below. Albania has also improved its ranking on its MCC scorecard and for the first time passed the median score for control of corruption for its class.
In June 2007, Moody’s Investors Service assigned Albania its first-ever sovereign rating of 'Ba1' for foreign-currency bonds and an issuer rating of 'B1' for debt obligations of the government. Despite the fact that Albania was rated below its neighbors Macedonia and Montenegro, an international sovereign credit rating was considered as a recognized benchmark for international financial institutions that Albania could be judged by internationally accepted standards. In December 2009, despite the global financial crises, Moody maintained its rating of GOA debt at B1 and forecasted a stable outlook for the future.
|TI Corruption Index||n/a||3.20||3.40||2.90|
|Heritage Economic Freedom||n/a||63.70||63.30||61.38|
|World Bank - Ease of Doing Business (rank)||82.00||86.00||135.00||120.00|
|MCC Government Effectiveness||0.08||0.00||-0.15||-0.33|
|MCC Rule of Law||-0.24||-0.22||-0.20||-0.47|
|MCC Control of Corruption||0.09||-0.12||-0.30||-0.34|
|MCC Fiscal Policy||-4.20||-3.60||-3.98||-4.41|
|MCC Trade Policy||85.80||75.80||63.20||57.40|
|MCC Regulatory Quality||0.60||0.24||0.01||-0.01|
|MCC Business Start Up||0.98||0.97||0.97||0.39|
|MCC Lands Rights Access||0.87||0.81||0.73||n/a|
|MCC Natural Resource Management||97.29||79.65||79.43||n/a|
|MCC median score is zero and reports are for fiscal year noted|
Conversion and Transfer Policies
The Bank of Albania (BOA) formulates, adopts and implements the foreign exchange policy of Albania and maintains a supervisory role in foreign exchange activities in accordance with the Law On the Bank of Albania No. 8269 dating 1997 amended in July 2002, the Banking Law No. 9662 dating December 206 which regulates the operation of commercial banks, and the Regulation on Foreign Exchange Activities (FX Regulation).
As a general rule, the Banking Law does not impose any restrictions on the purchase, sale, holding, or transfer of monetary foreign exchanges. However, the Law on the BOA authorizes it to temporarily restrict the purchase, sale, holding, or transfer of foreign exchanges if the BOA so decides, in order to preserve the foreign exchange rate or its official reserves. In practice, the BOA has not used such measures in an overly restrictive manner and aims to achieve European standards for banking systems. In 2009, BOA tightened supervision rules over liquidity transfers by domestic banks to their foreign mother banks due to the financial global crisis, the widespread lack of liquidity in the international banking sector and its negative effects over the domestic market.
The Albanian currency, the lek, is freely convertible at banks and exchange bureaus. The Albanian foreign investment law guarantees the right to transfer and repatriate profits from Albania into freely usable currency and at a market-clearing rate. Foreign exchange is easily found at a legal market-clearing rate. Most transactions are carried out in cash and both the dollar and euro are legally and commonly used. The lek follows a floating free regime. After remaining quite stable versus the Euro and appreciating against the US dollar, in 2009 it lost ground on both. It has depreciated almost 13% against the Euro from January to the end of 2009 and to a lesser degree against the US dollar due to the U.S. currency fluctuations in the international market. The average exchange rate for the U.S. dollar in 2008 was $1= 90.1 while in 2009 it was $1= 95.1. For the euro the average exchange rate in 2008 was 1€=122.5 lek and in 2009 1€=131.4.
Under the FX Regulation, foreign exchange transactions are those involving the exchange, purchase or sale of foreign currency in cash through a personal account or that of a third party, including the repayment of a loan in a currency different from the one in which the loan was granted or accepted.
Foreign exchange transfers abroad can only be carried out by licensed entities (domestic banks, foreign bank branches and foreign exchange offices) that are required to report their foreign exchange activities to the BOA regularly. These entities are also obliged to complete and keep all documentation required for transfers abroad
Although the FX Regulation provides that residents and non-residents may transfer capital within and into Albania without any restrictions, capital transfers out of the territory of Albania are subject to certain documentation requirements. Physical persons must submit a request indicating the reasons for the capital transfer, the amount of capital transferred outside the territory of Albania, and the address to which the capital is to be transferred. Such persons must also submit a declaration on the source of the funds to be transferred. Legal entities must submit a request setting forth the reason for the capital transfer, the source of the funds, the amount to be transferred, and the address to which the capital is to be transferred; a document from the foreign entity explaining this transfer (if such a document exists); the decision by the legal entities' relevant decision-making body on carrying out the capital transfer; the legal entities' registration decision; and, a certificate issued by the tax office certifying that the legal entities has settled its tax obligations toward the tax authorities.
In May 2008, Parliament passed a new law “On Money Laundering and Terror Financing,” which lowers the threshold for reporting financial transactions to the FIU from the current $20,000 to $15,000 for cash transactions (thereby ensuring compliance with EU standards). Both Albanian and foreign citizens entering or leaving the country must declare assets in excess of Lek 1, 000,000 (approx USD 10,000) in hard currency and/or precious items. Failure to declare such assets is considered a criminal act and punishable by confiscation of the assets and detention.
Expropriation and Compensation
In the post-communist period, expropriation has been limited to land needed for infrastructure projects, such as roads and airports. However, compensation has generally been below market value and some owners have complained publically about the slow compensation process and low payments.
The restitution process of properties confiscated during the communist regime started in 1993 and is heading towards its completion after multiple postponements. Critics charge that the process and several cases have been mishandled due to corruption and the process has been stalled due to lack of political will. Several U.S. citizens and residents have long-running disputes with the government regarding restitution for property. Many property cases end up in the courts and drag on for years without a final decision.
In 2006 the Albanian Parliament amended the July 2004 law on property compensation and restitution. The law aimed to give a new impetus to the process that was stalled for some time and to resolve any competing land ownership claims resulting from communist-era expropriation of land. Since 2006, GOA has twice extended the deadline for filing property claims. The final deadline was July 2009 and currently the only way to file a claim is through a court decision. In December 2009, Parliament approved a new law which extended the deadline for claims review from the National Agency for Restitution and Compensation to December 2011. This should mark the end of the restitution process for the entire process but is not expected to be fully over to 2014.
The GOA has presented three methods of compensation for expropriation claims: 1) restitution, 2) compensation of property with similarly valued land in a different location, and 3) cash settlement/financial compensation. In 2007 and 2008, the GOA distributed a total of $10 million in financial compensation. In 2009, the amount increased to $13 million but it is still considered inadequate given the large number of compensation requests. The Restitution and Compensation Agency has completed the property valuation mapping for the entire country in order to move forward with the compensation process. Physical compensation has not started yet despite GOA claims that it has identified public assets to be used for this purpose.
The Government of Albania has made efforts to handle investment disputes in an appropriate manner but issues continue to hamper effective resolution of disputes. The judicial system is viewed by the business community to be slow and inefficient in its handling of investment disputes. Albania has signed major arbitration agreements and is legally obligated to enforce international and domestic arbitration agreements.
Albania has a civil law system similar to that of most other European countries. The Albanian Constitution provides for a clear separation of legislative, executive and judicial branches, thus sanctioning the independence of the judiciary. Civil Procedure in Albania is governed by the Civil Procedure Code enacted in 1996. The civil court system consists of District Courts as the first instance courts, appellate courts as the second instance courts, and the Supreme Court, as the third instance court. Outside of the court system, there is another special court, namely the Constitutional Court which, upon request, reviews whether laws or subsidiary legislation are in compliance with the Constitution and also protects and enforces constitutional rights of citizens and legal entities. The District Courts are organized in special sections for adjudication; family disputes, commercial disputes and the section for administrative disputes. Parties may appeal the judgment of the first instance courts within 15 days while the Appellate Court judgments might be appealed within 30 days to the Supreme Court.
Albania does not have a commercial code; legislation is encapsulated in a series of commercial laws. Relevant laws include; Foreign Investment Act, Commercial Companies Law, Bankruptcy Law, Environmental Law, Corporate and Municipal Bonds, Transport Law, Maritime Law, Secured Transactions Law, Employment Law, Taxation Procedures Law, and of specific industries Banking Law, Insurance and Reinsurance Law, Concessions Law, Mining Law, Energy Law, Water Resources Law, Waste Management Law, Excise Law, Oil and Gas Law, Gambling Law, Telecommunications Law, Value Added Law, Sports Law, etc
Albanian have enacted and introduced laws and subsidiary legislation in respect to property rights and contract rights. The courts and the court bailiffs are the authorities empowered by law to (i) issue the writ of execution and (ii) enforce in practice the claims of parties described in the writ of execution. According to the Albanian Civil Procedure Code foreign court judgments are recognized and enforced by the Court of Appeal in a summary proceeding.
Bankruptcy is governed by Law 8901, dated May 23, 2002, "On Bankruptcy" amended in May 2008. It is similar in organization to German bankruptcy law. The Bankruptcy Law, as amended, aims at finding a proper solution through the reorganization or liquidation of insolvent businesses. It sets out non-discriminatory and mandatory rules for the repayment of the obligations by a debtor in a bankruptcy procedure. The new insolvency law established time limits during insolvency, professional qualifications for insolvency administrators, and an Agency of Insolvency Supervision to regulate insolvency administrators. A simplified insolvency procedure for small businesses was introduced as well. In reality, the law on the bankruptcy has reportedly never been utilized and there have been no bankruptcy procedures so far. Generally, there exists only a voluntary liquidation procedure.
The Government of Albania accepts binding international arbitration clauses in specific investment agreements, and in many cases it has been a party to arbitration disputes in foreign or international arbitration tribunals, as agreed in the investment agreements.
Albanian has signed and ratified the New York Convention. In order to have a settlement recognized a case must be brought before the Court of Appeals in order to have the order to enforce directed to the court bailiffs. This is necessary because winning parties cannot directly communicate with bailiffs to enforce settlements/awards.
A new law on commercial arbitration is still in draft form and aims at regulating all domestic and international arbitration procedures and transposes the provisions of UNCITRAL Model law, which in its turn incorporates comprehensively the New York Convention provisions. This means that to date international proceedings arbitration can be conducted based on the aforementioned ratified international conventions. Domestic arbitration continues to be governed by the provisions on the Civil Code Procedure which is more or less in line with UNCITRAL arbitration. There is a private arbitration centre (MEDART), a service center established under a World Bank funded legal and judicial reform project in 2001.
An alternative to the dispute settlement via the courts in Albania is private arbitration or mediation. Parties can engage in arbitration when they have agreed to arbitrate according to a Dispute Resolution clause integrated in the original agreement, or through a separate Arbitration Agreement or by mutual agreement at any time when the dispute is evidenced. Legislation distinguishes arbitration of international disputes from arbitration of domestic disputes in that the parties involved in an international dispute may agree to settle through either a domestic or foreign arbitration tribunal. Under the Albanian Constitution, ratified international agreements prevail over the domestic legislation. Albania has signed and ratified the 1966 Convention “On the Settlement of Investment Disputes” between States and Nationals of Other States (Washington Convention) as well as the Convention of 1958 “On the Recognition and Enforcement of Foreign Arbitral Awards” (New York Convention). It has also ratified the 1927 Convention and the European Convention on Arbitration (Geneva Convention).
Performance Requirements and Incentives
Legal incentives include:
- Equal treatment of foreign and domestic investors
- Full profit and dividend repatriation (after taxation)
- Funds from the liquidation of a company may be repatriated
- Bilateral agreements on the promotion and protection of reciprocal investments
- Double taxation treaties
In order to attract FDI, the GOA has applied a set of liberal fiscal policies and has developed some incentives for investors that include:
- Reduction of corporate tax from 20 to 10 percent as of January 2008;
- Reduction of the fiscal burden of social security contributions payable by employers were reduced to 15 percent as of May 2009
- Tax exemption of dividends designated for investments.
- Importers of machinery and equipment are eligible for VAT deferral if the machinery and equipment will solely serve its taxable economic activity (Instruction of the Minister of Finances No.3, dated 30.01.2006.)
- Apparel producers are exempt from VAT on raw materials as long as the finished product is exported. This is based on Law 7928, dated April 27, 1995, "On Value Added Tax," Article 25/6.
- Subsidized leases of state-owned premises: Investors are eligible to lease state-owned property such as land or buildings at rents below market rates. In the case of production activities, the level of rent reduction will be made according to the level of investment made and the number of new jobs created. This is based on the decree of the Council of Ministers, No. 315, dated April 24, 2006 “On the leasing of state enterprises and institution’s property.”
Incentives are regulated by Law 9374, dated April 21, 2005, “On State Aid,” for the implementation of important projects, to facilitate the development of specific economic activities, and to promote national culture and heritage conservation. “On State Aid” applies to all sectors of manufacturing and services and all measures undertaken by central and local government, as well as other entities acting on behalf of the state, that confer benefits to particular enterprises, except those acting in the agriculture and fisheries sectors.
Energy Sector Incentives: Investors establishing new, or rehabilitating existing power generation plants with an installed power capacity of more than 5 MW using liquid or solid combustibles, are entitled to an exemption of custom duties on imported machinery and equipment used in the capital investment. They can also be reimbursed for the customs and excise duties paid on the import of liquid or solid combustibles used in the production of electric energy. This is based on Law 8987, dated December 24, 2002, “For the creation of facilitated conditions, concerning the establishment of new plants for the production of electric energy.”
The law on concessions established the necessary framework for promoting and facilitating the implementation of privately financed concessionary projects enhancing transparency, fairness, efficiency and long-term sustainability in the development of infrastructure and public service projects. It aims to better regulate unsolicited proposals and the public-private partnership in general. The law applies to a wide-range of sectors.
There are no excessively onerous visa, residence, or work permit requirements, or any similar requirements inhibiting foreign investors' mobility. There are no discriminatory or preferential export policies and import policies affecting foreign investors. There are no requirements in Albania for foreign investors to purchase from local sources or to export a certain percentage of the output. One of the non-tariff barriers which reportedly is one of the major concerns of the business community are the reference prices (alternately called market prices) that are used for the calculation of custom dues of imported goods. However, the Albanian government claims that the use of reference prices in customs is limited.
Right to Private Ownership and Establishment
Albanian law permits private ownership and establishment of enterprises and property. Foreign investors do not need additional permission or authorization to do so over and above that required of domestic investors. Albania applies restrictions only on the purchase of real estate; agricultural land cannot be purchased by foreigners, but may be rented for up to 99 years; commercial property may be purchased, but only if the proposed investment is worth three times the price of the land. There are no restrictions on the purchase of private residential property. Both foreign and domestic investors continue to experience significant issues in resolving property disputes arising from unclear or incomplete documentation.
Foreigners can acquire concession rights on natural resources and on resources of the common interest, as defined by the law on concessions. For some business operations licenses are needed. The National Licensing Center (NLC) became functional on July 2009 and the center serves as a one stop shop for business licenses. More information on the types of licenses and application procedures can be found at www.qkl.gov.al.
Based on the Law No. 9723, dated 03.05.2007 “National Registration Center” and following the opening of the National Registration Center for Businesses (NRC) on September 2007, business entities can be registered in a single place and in one day for one euro. More information on NCR can be found at www.qkr.gov.al. Both NLC and NRC were established with assistance from the Millennium Challenge Corporation Albania Threshold Program, as e-government initiatives, and save investors valuable time in establishing and carrying out business operations, while also increasing transparency and reducing opportunities for corruption.
The foreign and domestic investors have numerous options available for organizing business operations in Albania. According to the new Law No. 9901, dated April 14, 2008 “On Entrepreneurs and Commercial Companies” (“Commercial Law”) and Law No. 9723, dated 03.05.2007 “On National Registration Center”, the legal types of business entities that can be registered with NRC are as follows:
The Sole Entrepreneur trades under his own name and such trade must be registered as a business name. Individuals interested in establishing this type of business should file an application and an identification document with the NRC in the district where the business will be conducted. The application form includes the identification data, address, type of business and exemplar of the sole proprietor’s signature.
All partners are unlimitedly and jointly liable for the debts of the entity. Creditors can claim against a partner for the debts of the partnership, only if they have failed in their claims against the partnership as a whole. In unlimited partnerships, the partners are all considered administrators of the partnership, unless the contrary is stipulated in the bylaws. Each partner represents the partnership with third parties. An unlimited partnership should issue annual financial reports. The rights, duties and obligations of partners are governed by written bylaws, which should be filed with the National Registration Center
A limited partnership, which is seldom used in practice, consists of one or more general partners (unlimited) with unlimited liability and one or more limited partners whose liability is limited to the amount of their agreed contributions of the initial capital. A limited partner may not take part in the management of the partnership even if he is given a proxy, otherwise he incurs unlimited liability. The Articles of Incorporation of the limited partnership should contain:
The total amount or value of the contributions of all partners;
The amount or value of the contribution made by each general or unlimited partner;
The percentage of the participation of all general partners and of each limited partner in the partnership’s profits and in the remaining value after its dissolution.
All decisions are made in conformity with the Articles of Incorporation.
Limited Liability Company (Shpk)
This is the most common legal form of conducting business in Albania. Its members enjoy limited liability and, unless the articles of the bylaws provide otherwise, members have the right to transfer their shares to other persons, upon decision of three fourths of the shareholders. It can be established by one or more partners, legal or natural persons, who are responsible for losses only to the extent of their contribution to the capital of the company. The minimum required capital for this form of company is approximately $1 USD. The capital is divided into shares and there are no mandatory requirements for their nominal value. The contributions to capital can be in cash or in any asset, tangible or intangible. The law does not permit contributions in services. Administrators nominated through the General Assembly of the shareholders manage the limited liability company. Extraordinary decisions, increases or decreases in the share capital, mergers and acquisitions are to be approved by at least three quarters of the capital shareholders. The law requires annual financial statements to be prepared by the company. The transformation of this form of business into unlimited and limited partnership is subject to decision of general assembly of the shareholders that takes valid decisions upon majority vote of ¾ of shareholders and after approval of financial statements for the last two years.
Joint Stock Company
Its capital is divided into shares, with shareholders held responsible for losses only to the extent of their contribution to the capital. The minimum initial capital required is ALL 2 million for companies with no public offering, and ALL 10 million for public offerings. The Commercial Law provides for the adoption by joint stock companies of a flexible administration system. This type of companies may choose to adopt either the “monistic” system (with a board of directors/administrators conducting both management and supervising functions) or the “dualistic” system (with board of directors/administrators and supervisory board conducting supervising functions). The supervisory council exercises control over the board of director’s performance. This council should have not less than 3 and not more than 21 members. The capital is fully subscribed when the partners have promised to bring assets to the company in cash or in kind for an amount equaling the capital. In the moment of the subscription, at least one quarter of the nominal value of the shares representing contributions in cash must be paid in. Payment of the remaining value shall be made in installments upon the decision of the management bodies of the company. Shares of contributions in kind must be fully paid in at the moment of subscribing. The law does not permit contributions in services. The shares of a joint stock company may be ordinary or privileged
Branches and Representative Offices
Under the Commercial Law, a foreign investor can also operate in Albania through a branch or representative office. The branch or representative office should be registered in the National Registration Center and should have a legal representative empowered by the head office to administer the office. For tax purposes, the branch is treated in the same manner as an Albanian entity.
Albanian legislation recognizes the joint ventures under the term of simple company, since it is based on an agreement only and no legal personality is granted to this partnership. Joint ventures are foreseen by the provisions of the Civil Code (articles 1074 -1112) and may be concluded by two or more persons, whether individuals or legal entities, foreign or national, agreeing to engage in an economic activity in order to share profits deriving there from. There is no minimum capital requirement. Partners are liable to perform the contributions provided in the contract. Unless otherwise agreed, every partner may take part in the management of the partnership and has full power to carry out any acts which are within the scope of the partnership. Every partner is entitled to receive its share of the profits after the accounts have been approved, unless otherwise agreed. Partners are jointly responsible for fulfilling the obligations imposed upon them by law and by the partnership agreement; unless they prove they were not at fault.
Protection of Property Rights
Intellectual Property Rights
The principal law that covers intellectual property rights and protects copyrights, patents, trademarks, stamps, marks of origin, and industrial designs is Law No. 9380 which is dated April 2005. In July 2003, GOA passed Anti-piracy law No 9124 which required television stations to broadcast only those shows and movies that they had legally licensed for broadcast. The law was successful in forbidding the broadcasting of pirated movies and programs, but it did not cover satellite or cable television programming. In order to close the loophole in the legislation and regulate adequately digital broadcasting, in May 2007 the Parliament approved the Law No. 9742 "On Digital Broadcasting". Albania is a signatory of different international agreements on Intellectual Property Rights Patents and Trademarks.
A new industrial property law was approved in July 2008. The new law brings Albanian legislation for the protection of industrial property into harmony with EU legislation, directives of the European Commission, the European Convention on patents, the TRIPS agreement (commercial aspects of industrial property rights) as well as other international agreements ratified by Albania in the field of industrial property.
In addition, amendments to the provisions implementing the Customs Code relating to intellectual property rights and brand controls were adopted in order to allow products to be classified as "fake," "pirated" or "liable to infringe the rights of patent or certificate owners."
Implementation of Copyright Law
There has been limited progress on the proper implementation of intellectual property rights. In 2006, the Albanian Copyright Office was established. It operates under the Ministry of Culture, Sport and Youth and has signed agreements with different stakeholders including the Competition Authority, the National Council of Radio and Television, the National Cinematography Centre, the Forum for the Protection of Producers and Screenwriters and the tax and customs administrations, with the aim of fighting piracy and enforcing the copyright law. However, the most successful institution in combating broadcast piracy remains NCRT which has tried to ensure that only licensed programming is allowed to be broadcast on television and penalized those stations in noncompliance. Nonetheless, law enforcement remains incomplete and violations of copyright and other intellectual property rights are common. The most frequently pirated products are western movies and sport events broadcasted by TV channels. Also pirated copies of DVDs and CDs, imported from other countries, are easily purchased in shops all over the country. The number of cases of violation of copyright law brought to court remains low.
The Directorate General for Patents and Trademarks (GDPT) was restructured, and registration and administration of patents, trademarks and industrial designs has been computerized. This has improved the processing of applications and the supply of information. A Board of Appeal was established in the Directorate for Patents and Trademarks and the Directorate completed the reorganization of its computer system. A bulletin of industrial property rights containing records of registrations and changes of intellectual property rights titles is published and an on-line version is available on the GDPT website. The Administrative Council of the EPO approved Albania’s request for accession to the European Patent Convention and its ratification is underway.
Further capacity strengthening and additional human resources for both the Copyright Office and the GDPT are still required. The general level of knowledge about IPR and infringements remains poor and the main factors that hamper the enforcement of IPR laws are the lack of appropriate experience and qualifications of judges, prosecutors, customs administration and staff and low level of fines under the current law. Further efforts are needed to improve inter-institutional cooperation and the ability of customs authorities to detect counterfeit products.
Immovable Property Rights
Enforcement of immovable property rights in Albania remains an evolving issue. Overall there has been some progress on strengthening property rights, but proper coordination and further acceleration of restitution and compensation plans are needed. Unresolved property issues have undermined efforts to develop a functional land market and keep FDI well below its potential. Immovable property rights (land rights) are still far from well defined, especially in the coastal areas where there is potential for tourism development. Large-scale property confiscation during communist rule and the subsequent nationalization of the economy completely altered Albania’s economic landscape. Property restitution, corruption, illegal buildings and enforcement of court decisions are among the most serious challenges facing Albania in its economic development.
Currently, enforcement of property rights is pursued civil court system. Almost 70 percent of all civil cases in the Albanian courts involve property disputes; many of these cases linger for years before reaching a final ruling. To date, 216 Albanian citizens have filed suit with the European Court for Human Rights in Strasbourg against the GOA over property claims. To address this issue, and relieve an increasingly burdened court system, the GOA, with USG and other donor assistance, is finalizing an immovable properties registration system to establish proper title to private claims to land ownership.
The property registration process has begun in approximately 95% of the country but has only been finalized or completed in 25% of urban areas and 85% of rural areas. More lucrative land in high value coastal areas has not yet been fully registered due to existing disputes over property title. The main institutions dealing with property restitution and registration are the Agency for Restitution and Compensation and the Office for the Registration of Immovable Properties.
The presence of a large number of informal (unlicensed or unregistered) buildings spread all over the country has been another major impediment to secure property titles. In 2006, Parliament approved the law on the legalization of the informal buildings. The Agency for the Legalization, Urbanization and Integration of Informal Areas (ALUIZNI) is in charge of implementing the legalization process. The number of informal buildings is estimated to be 350,000 and the surface occupied is estimated to be 320,000 hectares. The first stage of submissions of self-declaration requests for legalization is completed. To date, the process is almost half way through since 50% of the informal constructions have been identified and approved for legalization.
Transparency of Regulatory System
Albania’s regulatory system is not fully transparent but the situation is improving. Businesses have difficulty obtaining copies of laws and regulations especially in their draft form. Laws and regulations are sometimes inconsistent, leading to unreliability in their interpretation. Proposed laws and regulations are sometimes not published in draft form for public comment. There has been modest improvement in this area recently as several state agencies operate well-organized websites which are updated regularly. Some agencies have undertaken steps to consult with business, civil society and affected groups about issues in proposed laws and regulations. Although Albania has taken some steps forward to improve business advocacy by reforming the legislation on Chambers of Commerce and by establishing the Business Advisory Council, business participation in the legislative processes remains limited.
Efficient Capital Markets and Portfolio Investment
The financial sector in Albania has in general been spared from the global financial turmoil, primarily due to the low amount of loans in relation to total deposits. Also the lack of a housing/construction bubble has minimized pressure on the banks. However, a significant reduction in bank deposits took place in the fall of September 2008 as individuals withdraw their money due to fear from losing their savings. Since October 2008 deposits dropped by about 15% and during 2009 they were below their top level. After summer 2009 there has been a stable increase in bank deposits and by the end of 2009 they reached their pre-crisis level. Lower deposits created some liquidity issues but banks were well equipped to face the situation. Banks have increased their equity capital to better face the situation and also BOA has an active monitoring program to ensure enough liquidity in the banking sector.
The financial sector is totally dominated by commercial banks funded with private capital. Currently, 16 banks are operating in the country – two domestically owned banks and 14 foreign or joint ventures. The degree of market concentration remains fairly high as the five largest banks dominate the market with about 75 percent of total assets. The performance of the financial sector in channeling savings towards productive investment has substantially improved, but still remains weak in comparison to Western standards. Banks in Albania offer standard banking services such as deposit accounts, foreign transfers, trade finance and, increasingly, mortgages.
Market competition has greatly strengthened and the quality of banking services provided to the public have significantly improved. Major Western banks, such as the Italian Intesa SanPaolo Group and Societe Generale, entered the market through the purchase of domestic banks. Raiffeisen (Austrian) and several Greek Banks are also very active in the banking sector. The banking network has extended to most parts of Albania and developments in this respect are promising. In November 2009, there were 517 branches, up from 392 at the end of 2007 and 127 in 2005. Several banks offer ATM and Point-of-Sales terminals and their number is growing rapidly. In November 2009 there were 725 ATMs up from 335 at the end of 2006 and 3,936 Point-of-Sale terminals up from 1,183 at the end of 2006. Since 2005, most state employees receive their salaries through electronic transfers and have been offered debit cards for all their transactions. In 2008 the private sector also switched to paying salaries through electronic transfer. By September 2009 banks had issued 557,000 electronic payments cards (97 percent debit cards and 3 percent credit cards) up from 353,465 or 36.6% at the end of 2006. However, due to the negative effect of the financial crisis, there has been a reduction in the number of cash/credit cards that individuals use. The banking system has been a profitable investment sector and has companies have had significant profits over the past several years.
In the absence of a stock market, banking sector remains the main channel for business financing. Credit to the economy has experienced an impressive growth since 2005, in part due to the low starting point. The credit growth rate was 74 % in 2005, 56 % in 2006 and 50% in 2007 and even in 2008, loans grew by almost 30%. The growth has slowed down considerably during the first nine months of 2009 to about 16%. In November 2009 loans constituted 50.3% of total banking assets compared to 25% at the end of 2005. Credit to businesses made up 67% of banks' credit portfolios. The fast growth of credit has increased non-performing loans as well. Their share to total credit increased to almost 10% by November 2009 compared to 4.3% in July 2008 and just 2.3% at the end of 2005.
In order to keep credit growth at sustainable levels, supervision was strengthened during the last two years. The Law on Regulation of Credit Risk Management was amended, establishing higher capital requirements for banks that record credit growth exceeding set benchmarks. The credit information bureau opened in January 2008 and is contributing to an increase in the information and transparency in the banking sector. Its main responsibility is to track consumers’ credit histories. The regulatory framework for banking supervision is, following its recent comprehensive overhaul, well-developed and continuing the process of adapting standard international practices.
In addition to banks, lending through micro finance institutions and savings and credit associations is effective in serving those segments of the population that do not have easy access to bank financing.
The service of e-banking transactions as a banking product appeared after 2004 and has slowly expanded but still remains underutilized by the public. Multiple banks offer this service for certain clients (mainly businesses for carrying out transfers and other specialized payments). The rest of the sector is likely to follow as e-banking transactions gain popularity.
The low level of financial intermediation remains an impediment to the development of the private sector, particularly to small and medium enterprises (SMEs). Business report that the following issues affect access to credit in Albania; high interest rates, distrust of the banking system, high operating costs of banks and poor business/project proposals.
Credit lines can be obtained on the local market, but interest rates can be high; under some circumstances, between 10 and 15 percent. To obtain credit, applicants usually need to fulfill the following criteria which, varies from bank to bank: satisfactory business plan, credit security (usually by mortgage), applicant's own contribution in the investment project (about 40 percent of the value) and the entity requesting credit needs to be at least 51 percent privatized.
The insurance industry has also experienced high rates of growth over recent years but, relative to neighboring countries, the market for insurance in Albania remains largely untapped, especially for life insurance. The insurance market experienced an increase of 9.43 % for the period January – November 2009 compared with the same period of the previous year. Gross insurance premiums amounted to $75.2 million for the same period. Non-life insurance represents 91% of the total premiums while the rest is life insurance.
The sector is expanding and has attracted foreign investors as two Austrian companies and one Greek have entered the market through the acquisition of controlling shares of domestic companies. American Reserve Life Insurance became the most recent company to enter the domestic market through its privatization of INSIG. There are ten companies present in the insurance market, eight in the general non-life insurance and two offering only life insurance. GOA has launched the privatization process of the state owned company INSIG but the process has been unsuccessful mainly due to the lack of interest by international companies.
Albania held parliamentary elections on June 28, 2009. The new government was formed with a coalition between the ruling Democratic Party (DP) and the Movement for Socialist Integration (LSI). The Socialist Party (SP) has boycotted parliament since it convened in September 2009 and has called for investigations into alleged electoral fraud in the June 28 elections. Despite a highly polarized political atmosphere, the elections and the ensuing boycott have been peaceful and political violence has been avoided. Small crime, specifically incidents of extortion, theft and robbery, continue to be of some concern to the business community. Nonetheless, the domestic climate has been steadily improving and the violent crime rate has substantially decreased. Albania is a steady source of stability in the region and relations with neighboring countries are friendly. The U.S. enjoys a particularly amicable bilateral relationship with Albania, which is a staunch American ally in the fight against international terrorism and has contributed troops to the war efforts in Iraq and Afghanistan. Albania joined NATO in April 2009 and has begun the process for European Union accession.
Corruption, including bribery, raises the costs and risks of doing business and remains an area of concern in Albania. Corruption has a corrosive impact on both market opportunities overseas for U.S. companies and the broader business climate. It also deters international investment, stifles economic growth and development, distorts prices, and undermines the rule of law. The government has made progress in reducing corruption through strengthening judiciary and police capabilities and introducing new technologies that automate government processes and increase transparency. Corruption is still believed to be endemic in Albania and a major challenge to economic development.
Albania has ratified several international treaties and conventions relating to corruption and is member of some of the major international organizations and programs dealing with corruption and/or organized crime. Albanian legislation has been amended and changed frequently in recent years to strengthen the framework dealing with anti-corruption and organized crime in order to bring the Albanian legislation in line with civil and criminal conventions of the European Union.
Albania has ratified The Civil Law Convention on Corruption (Council of Europe); The Criminal Law Convention on Corruption (Council of Europe); The Additional Protocol to Criminal Law Convention on Corruption (Council of Europe); the United Nations Convention Against Corruption (UNCAC). Albania has also ratified a number of key conventions in the broader field of economic crime, including the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime (2001) and Convention on Cybercrime (2002). Albania has been a member of the Group of States Against Corruption (GRECO) since the ratification of the Criminal Law Convention on Corruption in 2001 and has been following the recommendation of GRECO related to incrimination and transparency of political party funding. Albania is also a member of the Stability Pact Anti-Corruption Network (SPAI).
Bribery is illegal in Albania. Under the Albanian penal code both active and passive bribing, abuse of office and undue influence are considered criminal offences. In addition to basic corruption offenses, there are specific criminal provisions addressing corruption by persons exercising public functions, high State officials and locally elected persons, judges, prosecutors and employees of the judicial bodies, private sector, foreign public officials, etc. According to the EU progress report 2009, out of thirteen recommendations from the Council of Europe Group of States against corruption (GRECO) report on Albania, two recommendations regarding the rules on political parties financing remain to be addressed.
The implementation of the Intersectoral Strategy on the Prevention and Combating of Corruption 2008-2013 adopted in October 2008 has started. However, realistic implementation mechanisms and timeframes are missing, together with monitoring indicators and adequate resources. The government has also embarked on reforms that aim at tackling corruption by minimizing direct contact between the private sector and the administration. E-government reforms like e-procurement, e-taxation, one-stop-shop for registration and licensing of businesses have had a positive impact in reducing corruption as a result of direct contacts.
Main institutions involved in combating corruption include the Inter-Ministerial Anti-Corruption Task Force headed by the Prime Minister. This structure replaced the former Anti-Corruption Monitoring Group and according to the law serves as a coordinating body for anti-corruption initiatives. The Anti-Corruption Task Force is supported by the Department of Internal Administrative Control and Anti-Corruption (DIAC) which has relatively wide-ranging powers to investigate allegations of irregularities by public officials. DIAC serves as an Inspectorate for all central executive public institutions and is mandated to investigate allegations of procedural irregularities and irregularities in the handling of public finances. It reports to the Prime Minister. The High Inspectorate for the Declaration and Audit of Assets (HIDAA) established in 2003 collects and audits the annual declaration of assets and properties of mid-high level public officials in central and local executive agencies as well as politicians, and supervises the prevention of conflicts of interest situations. Police authorities and the Prosecutor General’s Office are in charge of criminal investigations and law enforcement while the State Audit Commission and internal auditing units within different state institutions inspect, assess and report alleged cases of corruption. The Joint Investigative Unit against corruption and economic crime was established in 2007 in the Tirana District Prosecution Office. The unit is a multi-agency taskforce composed of prosecutors and judicial police officers working together on specific investigations. Based on the success of the unit, six more units are being established in regions throughout Albania to prosecute corruption and economic crimes outside Tirana. The High State Control is the highest institution of economic and financial control. It supervises the economic activity of state institutions and other state juridical persons as well as the use and preservation of state funds by the organs of central and local government. It is subject only to the Constitution and laws, and the Head of the High State Control is appointed and dismissed by the Assembly upon proposal of the President. In the Judiciary, the High Council of Justice is in charge of appointment and removal of judges and prosecutors in the first and second instances. Specialized inspectors investigate allegations of misconduct of judges and the High Council of Justice then takes the relevant disciplinary measures, including removal. However, corruption remains a major problem. Conviction rates in corruption cases remain low.
It is important for U.S. companies, irrespective of their size, to assess the business climate in the relevant market in which they will be operating or investing, and to have an effective compliance program or measures to prevent and detect corruption, including foreign bribery. U.S. individuals and firms operating or investing in foreign markets should take the time to become familiar with the relevant anticorruption laws of both the foreign country and the United States in order to properly comply with them, and where appropriate, they should seek the advice of legal counsel.
The U.S. Government seeks to level the global playing field for U.S. businesses by encouraging other countries to take steps to criminalize their own companies’ acts of corruption, including bribery of foreign public officials, by requiring them to uphold their obligations under relevant international conventions. A U. S. firm that believes a competitor is seeking to use bribery of a foreign public official to secure a contract should bring this to the attention of appropriate U.S. agencies, as noted below.
U.S. Foreign Corrupt Practices Act: In 1977, the United States enacted the Foreign Corrupt Practices Act (FCPA), which makes it unlawful for a U.S. person, and certain foreign issuers of securities, to make a corrupt payment to foreign public officials for the purpose of obtaining or retaining business for or with, or directing business to, any person. The FCPA also applies to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the United States. For more detailed information on the FCPA, see the FCPA Lay-Person’s Guide at: http://www.justice.gov/criminal/fraud/docs/dojdocb.html.
Other Instruments: It is U.S. Government policy to promote good governance, including host country implementation and enforcement of anti-corruption laws and policies pursuant to their obligations under international agreements. Since enactment of the FCPA, the United States has been instrumental to the expansion of the international framework to fight corruption. Several significant components of this framework are the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Antibribery Convention), the United Nations Convention against Corruption (UN Convention), the Inter-American Convention against Corruption (OAS Convention), the Council of Europe Criminal and Civil Law Conventions, and a growing list of U.S. free trade agreements.
OECD Antibribery Convention: The OECD Antibribery Convention entered into force in February 1999. As of December 2009, there are 38 parties to the Convention including the United States (see http://www.oecd.org/dataoecd/59/13/40272933.pdf). Major exporters China, India, and Russia are not parties, although the U.S. Government strongly endorses their eventual accession to the Convention. The Convention obligates the Parties to criminalize bribery of foreign public officials in the conduct of international business. The United States meets its international obligations under the OECD Antibribery Convention through the U.S. FCPA. Albania is not a signatory country of the OECD Convention on Corruption.
UN Convention: The UN Anticorruption Convention entered into force on December 14, 2005, and there are 143 parties to it as of December 2009 (see http://www.unodc.org/unodc/en/treaties/CAC/signatories.html). The UN Convention is the first global comprehensive international anticorruption agreement. The UN Convention requires countries to establish criminal and other offences to cover a wide range of acts of corruption. The UN Convention goes beyond previous anticorruption instruments, covering a broad range of issues ranging from basic forms of corruption such as bribery and solicitation, embezzlement, trading in influence to the concealment and laundering of the proceeds of corruption. The Convention contains transnational business bribery provisions that are functionally similar to those in the OECD Antibribery Convention and contains provisions on private sector auditing and books and records requirements. Other provisions address matters such as prevention, international cooperation, and asset recovery. Albania signed the UN Anti-Corruption Convention on December 2003 and ratified it in 2006.
OAS Convention: In 1996, the Member States of the Organization of American States (OAS) adopted the first international anticorruption legal instrument, the Inter-American Convention against Corruption (OAS Convention), which entered into force in March 1997. The OAS Convention, among other things, establishes a set of preventive measures against corruption provides for the criminalization of certain acts of corruption, including transnational bribery and illicit enrichment, and contains a series of provisions to strengthen the cooperation between its States Parties in areas such as mutual legal assistance and technical cooperation. As of December 2009, the OAS Convention has 33 parties (see http://www.oas.org/juridico/english/Sigs/b-58.html)
Council of Europe Criminal Law and Civil Law Conventions: Many European countries are parties to either the Council of Europe (CoE) Criminal Law Convention on Corruption, the Civil Law Convention, or both. The Criminal Law Convention requires criminalization of a wide range of national and transnational conduct, including bribery, money-laundering, and account offenses. It also incorporates provisions on liability of legal persons and witness protection. The Civil Law Convention includes provisions on compensation for damage relating to corrupt acts, whistleblower protection, and validity of contracts, inter alia. The Group of States against Corruption (GRECO) was established in 1999 by the CoE to monitor compliance with these and related anti-corruption standards. Currently, GRECO comprises 46 member States (45 European countries and the United States). As of December 2009, the Criminal Law Convention has 42 parties and the Civil Law Convention has 34 (see www.coe.int/greco.)
Free Trade Agreements: While it is U.S. Government policy to include anticorruption provisions in free trade agreements (FTAs) that it negotiates with its trading partners, the anticorruption provisions have evolved over time. The most recent FTAs negotiated now require trading partners to criminalize “active bribery” of public officials (offering bribes to any public official must be made a criminal offense, both domestically and trans-nationally) as well as domestic “passive bribery” (solicitation of a bribe by a domestic official). All U.S. FTAs may be found at the U.S. Trade Representative Website: http://www.ustr.gov/trade-agreements/free-trade-agreements.
Local Laws: U.S. firms should familiarize themselves with local anticorruption laws, and, where appropriate, seek legal counsel. While the U.S. Department of Commerce cannot provide legal advice on local laws, the Department’s U.S. and Foreign Commercial Service can provide assistance with navigating the host country’s legal system and obtaining a list of local legal counsel.
Assistance for U.S. Businesses: The U.S. Department of Commerce offers several services to aid U.S. businesses seeking to address business-related corruption issues. For example, the U.S. and Foreign Commercial Service can provide services that may assist U.S. companies in conducting their due diligence as part of the company’s overarching compliance program when choosing business partners or agents overseas. The U.S. Foreign and Commercial Service can be reached directly through its offices in every major U.S. and foreign city, or through its Website at www.trade.gov/cs.
The Departments of Commerce and State provide worldwide support for qualified U.S. companies bidding on foreign government contracts through the Commerce Department’s Advocacy Center and State’s Office of Commercial and Business Affairs. Problems, including alleged corruption by foreign governments or competitors, encountered by U.S. companies in seeking such foreign business opportunities can be brought to the attention of appropriate U.S. government officials, including local embassy personnel and through the Department of Commerce Trade Compliance Center "Report A Trade Barrier" Website at tcc.export.gov/Report_a_Barrier/index.asp.
Guidance on the U.S. FCPA: The Department of Justice’s (DOJ) FCPA Opinion Procedure enables U.S. firms and individuals to request a statement of the Justice Department’s present enforcement intentions under the antibribery provisions of the FCPA regarding any proposed business conduct. The details of the opinion procedure are available on DOJ’s Fraud Section Website at www.justice.gov/criminal/fraud/fcpa. Although the Department of Commerce has no enforcement role with respect to the FCPA, it supplies general guidance to U.S. exporters who have questions about the FCPA and about international developments concerning the FCPA. For further information, see the Office of the Chief Counsel for International Counsel, U.S. Department of Commerce, Website, at http://www.ogc.doc.gov/trans_anti_bribery.html. More general information on the FCPA is available at the Websites listed below.
Exporters and investors should be aware that generally all countries prohibit the bribery of their public officials, and prohibit their officials from soliciting bribes under domestic laws. Most countries are required to criminalize such bribery and other acts of corruption by virtue of being parties to various international conventions discussed above.
Some useful resources for individuals and companies regarding combating corruption in global markets include the following:
Information about the U.S. Foreign Corrupt Practices Act (FCPA), including a "Lay-Person’s Guide to the FCPA" is available at the U.S. Department of Justice’s Website at: http://www.justice.gov/criminal/fraud/fcpa.
Information about the OECD Antibribery Convention including links to national implementing legislation and country monitoring reports is available at: http://www.oecd.org/department/0,3355,en_2649_34859_1_1_1_1_1,00.html. See also new Antibribery Recommendation and Good Practice Guidance Annex for companies: http://www.oecd.org/dataoecd/11/40/44176910.pdf
General information about anticorruption initiatives, such as the OECD Convention and the FCPA, including translations of the statute into several languages, is available at the Department of Commerce Office of the Chief Counsel for International Commerce Website: http://www.ogc.doc.gov/trans_anti_bribery.html.
Transparency International (TI) publishes an annual Corruption Perceptions Index (CPI). The CPI measures the perceived level of public-sector corruption in 180 countries and territories around the world. The CPI is available at: http://www.transparency.org/policy_research/surveys_indices/cpi/2009. TI also publishes an annual Global Corruption Report which provides a systematic evaluation of the state of corruption around the world. It includes an in-depth analysis of a focal theme, a series of country reports that document major corruption related events and developments from all continents and an overview of the latest research findings on anti-corruption diagnostics and tools. See http://www.transparency.org/publications/gcr.
The World Bank Institute publishes Worldwide Governance Indicators (WGI). These indicators assess six dimensions of governance in 212 countries, including Voice and Accountability, Political Stability and Absence of Violence, Government Effectiveness, Regulatory Quality, Rule of Law and Control of Corruption. See http://info.worldbank.org/governance/wgi/sc_country.asp. The World Bank Business Environment and Enterprise Performance Surveys may also be of interest and are available at: http://go.worldbank.org/RQQXYJ6210.
The World Economic Forum publishes the Global Enabling Trade Report, which presents the rankings of the Enabling Trade Index, and includes an assessment of the transparency of border administration (focused on bribe payments and corruption) and a separate segment on corruption and the regulatory environment. See http://www.weforum.org/en/initiatives/gcp/GlobalEnablingTradeReport/index.htm.
Additional country information related to corruption can be found in the U.S. State Department’s annual Human Rights Report available at http://www.state.gov/j/drl/rls/hrrpt/.
Global Integrity, a nonprofit organization, publishes its annual Global Integrity Report, which provides indicators for 92 countries with respect to governance and anti-corruption. The report highlights the strengths and weaknesses of national level anti-corruption systems. The report is available at: http://report.globalintegrity.org/.
Bilateral Investment Agreements
A bilateral investment treaty between the United States and Albania was signed in 1995 and entered into force on January 3, 1998. This treaty, inter alia, ensures that U.S. investors receive national or most-favored-nation treatment and provides for dispute settlement. As of June 1, 2009, Albania has concluded bilateral investment protection agreements with the following countries:
Agreements in force:
Greece, Germany, Italy, France, Austria, Netherlands, United Kingdom, Denmark, Sweden, Portugal, Belgium and Luxembourg, Spain, Finland, Hungary, Slovenia, Switzerland, USA, Turkey, Romania, Bulgaria, Macedonia, Russia, Israel, , China, Malaysia, Republic of Korea, Serbia, Montenegro, Moldavia, Kosovo (UNMIK) and OPEC Fund for International Development.
Ukraine, Tunisia, Syrian Arab Republic, Poland, Lithuania, Bosnia &Herzegovina, Islamic Republic of Iran, Kuwait, Libyan Arab Jamahiriya, Egypt, Czech Republic and Croatia.
Albania has also signed agreements for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital with many countries, which have priority over Albanian domestic laws.
Tax treaties are in force with the following countries:
Poland, Hungary, Czech Republic, Italy, Sweden, Greece, Malta, Belgium, Netherlands, France, Norway, Switzerland, Rumania, Bulgaria, Macedonia (FYROM), Croatia, Moldova, Federal Republic of Yugoslavia, Kosovo (UNMIK), Turkey, Russian Federation, Malaysia, China, Egypt, Serbia, Montenegro, South Korea, Austria and Latvia. Agreements are signed with Luxembourg, Spain, Singapore and Ireland and are awaiting ratification by parliaments.
OPIC and Other Investment Insurance Programs
The Overseas Private Investment Corporation (OPIC), a USG sponsored entity, can make insurance and project finance resources available to U.S. investors in Albania. OPIC's three main activities are risk insurance, project finance and investment funds. Albania has also signed the MIGA Convention, which established the Multilateral Investment Guarantees Agency (MIGA). MIGA provides investment guarantees against certain non-commercial risks (i.e., political risk insurance) to eligible foreign investors for qualified investments in developing member countries. MIGA's coverage is against the following risks: currency transfer restriction, expropriation, breach of contract, and war and civil disturbance. It provides insurance against risks similar to that offered by OPIC; MIGA and OPIC can work together on projects. MIGA offers long-term (up to 20 years) political risk insurance coverage to eligible investors for qualified investments.
In 1998, OPIC-supported the $200 million Southeast Europe Equity Investment Fund, which invested heavily in Southeastern Europe. OPIC supported its successor, SEEF II managed by Bedminster Capital. SEEF II has invested in the Albanian health sector by purchasing a private hospital now known as the American Hospital as well one of the largest Internet Providers in Albania, ABCOM. For more information on OPIC please visit http://www.opic.gov
Overseas Private Investment Corporation
1100 New York Ave., NW Washington, DC 20527
Email for general business inquiries to: email@example.com
Labor relations between employee and employer are regulated by individual employment contracts pursuant to Law 8549, dated January 11, 1999 ("On The Status Of The Civil Employee And The Labor Code") updated in 2003. The GOA has established the National Council of Labor, composed of government officials, trade unions and employers associations. Its major goal is to improve social dialogue between the government, management and employees. The institutions that deal with the labor market are: Ministry of Labor and Social Affairs, National Employment Service, State Labor Inspectorate and other private actors like Private Employment Agencies, and Private Vocational Training Centers.
Employers and employees have the right to form trade unions (Labor Code, article 176). Trade unions are organized at the national level (according to industrial sector) and at the company level. The right to strike is sanctioned by Law no. 7458 (January 12, 1991) and by the Labor Code. Trade unions have the right to negotiate wages, working conditions, etc., and the employment contracts are applicable both to union and to non-union workers. Two main national-level trade unions, both affiliated with the ITUC (International Trade Union Confederation) are the Confederation of Trade Unions (KSSH) and The Union of the Independent Trade Unions of Albania (BSPSH). Employment contracts can be for a limited or an unlimited period, but as a general rule employment contracts are signed for an unlimited period if the duration is not specified properly in the contract.
The labor force in Albania is about two million people, of which almost 1.2 million workers live abroad, mostly in Greece and Italy. During the third quarter of 2009, the unemployment rate reached 12.76%. A high proportion of Albanians under-40 speaks two languages. Albanian youth generally speak Italian and Greek and English are common among the younger generation. While some members of the labor force are highly skilled, many work in low-skill industries or have out-of-date technological skills. However, Albanians are rapidly learning modern market practices and often display impressive entrepreneurship.
Albania has a tradition of strong secondary education that prepares students to enter the labor market. Elementary education is compulsory and a large percentage of those who finish elementary school continue to high school. 62 percent of high school graduates go on to college. The GOA has opened new public universities in Albania which along with the new private universities represent impressive growth in this sector. In addition, the number of students who receive graduate degrees abroad has increased significantly, establishing a generation of skilled professionals which the government is trying to lure back to Albania through the Brain Gain Project (a UNDP program offering financial incentives to Albanians educated abroad to return to Albania to work). In 2007, the GOA established the Excellency Fund which aims to promote and financially reward youngsters and students during their studies.
The average salary in public administration during the third quarter of 2009 amounted to 42,000 leke (about $450) monthly. In May 2009, the GOA increased the minimum monthly wage applicable for both the public administration and the private sector to 18,000 leke (about $200), which is still among the lowest in the region. However, since 2008, to counter informality in the labor sector due to under reporting of revenue by businesses, the government is using minimum reference salaries (MRS) for the private sector. The MRS establishes a standard wage depending on job code for all employees and is used to calculate both the personal income tax and the rate of contributions for social and health insurance. It is not necessarily the actual salary an employee receives.
Corporate Social Responsibility
In general, there is little awareness of corporate social responsibility among producers and consumers with the exceptions of large companies, mostly foreign companies, which try to employee social corporate responsibility principles. The laws and legislation related to CSR exist in Albania and if implemented fully could constitute a strong base for further development of CSR practices in Albania. Even academic instruction on CSR in Albania is in a very early stage of development. Corporate Governance course, Environmental Engineering and Business Ethics curricula have only been introduced in the past several years at some universities.
Competition from State-Owned Enterprises
In general, there is little discrimination between public and private companies operating in the same sector but there have been allegations by businesses that believe state-owned companies were granted preferential treatment in government contracts.
Privatization process of SOEs in Albania is nearing completion and SOEs are active only in few sectors like extraction and sale of oil and gas (Albpetrol), energy generation (KESH), insurance (INSIG) and ports.
Foreign-Trade Zones/Free Ports
The GOA approved Law 9789, dated July 19. 2007 “On the Establishment and Functioning of Economic Zones,” abolishing Law 8636, dated July 6, 2000, "On Free Zones." The current legislation regulates the establishment of economic zones and related matters and makes the establishment and the functioning of such zones more efficient. It anticipates the establishment of free trade zones and industrial parks near ports, airports or at the crossroads of international transport. Economic zones are proposed by the Ministry of Economy and approved by the Council of Ministers on a case-by-case basis. The latter has the power to define the status of the zone (either a free zone or an industrial park), areas and boundaries, the economic activities to be performed within the zones, the period of the zone functioning, the method of granting the permission (lease, concession, etc.) and the procedures for the selection of the “developer.” The selection of the "developer" of the economic zones is based on the criteria defined in the law 9663, dated December 18, 2006 “On Concessions.”
During 2007-2009, the GOA approved the construction of several industrial parks: Shengjin, Koplik, Vlore, Elbasan, Lezhe, and Shkoder and one industrial and energy park in Spitalle, Durres (the largest, with 850 hectares). Four of these parks are located near the main ports of Albania - Durres, Vlore, Shengjin. The developers for the Shengjin, Vlora and Koplik/Shkoder have been selected while selection of other developers is still in process as of January 2009.
Industrial zones may be used for production, manufacturing, agro-processing, trade, export-import and supporting activities. Albinvest will serve as a “one- stop-shop” for the licensing of tenants. The development of economic zones will promote economic growth and increase employment and the competitiveness of the Albanian economy.
In 2009, Albanian government approved the first free zone adjacent to the approved container port in Vlore. The Ministry of Economy and Energy, initiated a process of open international tender for the execution and completion of a Concession Agreement (with a duration of 35 years), for a 478 hectares area. The tender deadline was December 18 and the Ministry is expected to announce the winner.
Foreign Direct Investment Statistics
The FDI has increased although it still remains among the lowest in the region. The cumulative FDI is also the lowest in the region. The Bank of Albania reported the following figures for foreign direct investment in Albania. Regardless of numerous contracts, only a few projects materialized in 2009.
|FDI in million Euro||279||212||259||481||653||580|
Source: Bank of Albania
*BoA estimate for the first three quarters of 2009
FDI during the first nine months of 2009 is estimated to have reached 580 million euro despite optimistic GOA projections for 2009 fueled mainly by strong investor interest witnessed during 2007-2008. A large part of FDI is due to privatizations. The Albanian government collected 103 million Euro from the privatization of 76 percent of the shares of the distribution arm of Albanian Power Corporation; 48 million Euro from the privatization of 12.6 percent of AMC state controlled shares; 5 million euro from the privatization of 40% of GOA controlled shares of the United Bank of Albania. INSIG (insurance company) privatization failed during the negotiation process with the winer and it might take place during 2010.
Leading investor nations in Albania include: Italy, Greece, Turkey, Austria, Germany, Canada, Spain and the U.S.. Foreign investment focuses on financial sector, oil and gas production, telecommunications, mining, metallurgy, energy, manufacturing and cement production.