HomeReportsInvestment Climate Statements...Custom Report - 360c054e9e hide Investment Climate Statements Custom Report Excerpts: Albania Bureau of Economic and Business Affairs Sort by Country Sort by Section In this section / Albania Executive Summary 1. Openness To, and Restrictions Upon, Foreign Investment 2. Bilateral Investment Agreements and Taxation Treaties 8. Responsible Business Conduct Albania Executive Summary Albania is an upper middle-income country with a GNI per capita of USD 4,180 (2016) and a population of approximately 2.9 million people, around 45 percent of whom live in rural areas. According to IMF estimates, real GDP increased by 3.8 percent in 2017, and growth is expected to reach 3.9 percent annually from 2018 to 2020. Albania received EU candidate status in June 2014. In November 2016, the European Commission recommended the opening of EU accession negotiations with Albania, conditioned primarily upon implementation of a judicial reform package passed earlier the same year. In April 2018, the EU Commission recommended the opening of accession negotiations, and the Council of the European Union will review this recommendation in June 2018. Foreign investors cite corruption, particularly in the judiciary, a lack of transparency in public procurement, and poor enforcement of contracts as continuing problems in Albania. In 2016, the government of Albania passed sweeping constitutional amendments to reform the country’s judicial system and improve the rule of law. The implementation of judicial reform is underway, including the vetting of judges and prosecutors for unexplained wealth, but foreign investors perceive the investment climate as problematic and say Albania remains a difficult place to do business. Investors report ongoing concerns that regulators use difficult-to-interpret or inconsistent legislation and regulations as tools to dissuade foreign investors and favor politically connected companies. Regulations and laws governing business activity change frequently and without meaningful consultation with the business community. Major foreign investors report pressure to hire specific, politically connected subcontractors and express concern about compliance with the Foreign Corrupt Practices Act while operating in Albania. Reports of corruption in government procurement are commonplace. The increasing use of public private partnership (3P) contracts has narrowed the opportunities for competition, including by foreign investors, in infrastructure and other sectors. Poor cost-benefit analyses and a lack of technical expertise in drafting and monitoring 3P contracts are ongoing concerns. The government had signed more than 200 3P contracts by the end of 2017. Property rights remain another challenge in Albania, as clear title is difficult to obtain. Some factors include unscrupulous actors who manipulate the corrupt court system to obtain title to land not their own. Compensation for land confiscated by the former communist regime is difficult to obtain and inadequate. Meanwhile, the agency charged with removing illegally constructed buildings often acts without full consultation and fails to follow procedures. To attract FDI, the host government approved a new Law on Strategic Investments in 2015. The new law outlines investment incentives and offers fast-track administrative procedures to strategic foreign and domestic investors, depending on the size of the investment and number of jobs created. The government also passed legislation creating Technical Economic Development Areas (TEDAs), similar to free trade zones. The development of the first TEDA, in Spitalle, Durres, was granted to a consortium of local companies in August 2017, but only after the tender had failed three times. Development of the TEDA has yet to begin, as one of the bidders has challenged the decision in the court. Transparency International’s 2017 Corruption Perceptions Index ranked Albania 91st of 180 countries, a drop of eight places from 2016. As such, Albania is now perceived as the second most corrupt country in the Western Balkans. Albania continued to score poorly in the areas of enforcing contracts, registering property, and obtaining electricity. The Albanian legal system ostensibly does not discriminate against foreign investors. The U.S.—Albanian Bilateral Investment Treaty, which entered into force in 1998, ensures that U.S. investors receive most-favored-nation treatment. The Law on Foreign Investment outlines specific protections for foreign investors and allows 100 percent foreign ownership of companies except in the areas of domestic and international air passenger transport and television broadcasting. Energy and power, tourism, water supply and sewerage, road and rail, mining, and information communication technology represent the best prospects for foreign direct investment in Albania over the next several years. Table 1 Measure Year Index/Rank Website Address TI Corruption Perceptions Index 2017 91 of 180 http://www.transparency.org/ World Bank’s Doing Business Report “Ease of Doing Business” 2018 65 of 190 https://itaisinternationaltrade- my.sharepoint.com/personal/ elena_zhilinskaya_trade_gov/ Documents/doingbusiness.org/ rankings Global Innovation Index 2017 93 of 128 https://www.globalinnovationindex.org/ U.S. FDI in partner country (M USD, stock positions) 2016 20 http://www.bea.gov/ international/factsheet/ World Bank GNI per capita 2016 4,180 http://data.worldbank.org/ 1. Openness To, and Restrictions Upon, Foreign Investment Policies Towards Foreign Direct Investment The government of Albania (GoA) understands that private sector development and increased levels of foreign investment are critical to increase opportunity and lower unemployment. Albania maintains a liberal foreign investment regime designed to help attract FDI. The Law on Foreign Investment outlines specific protections for foreign investors and allows 100 percent foreign ownership of companies in all but a few sectors. Albanian legislation does not distinguish between domestic and foreign investments. The 2010 amendments to the Law on Foreign Investment introduced criteria specifying when the state would grant special protection to foreign investors involved in property disputes, providing additional guarantees to investors for investments of more than 10 million euros. The 2017 amendments extended state protection for strategic investments, as defined under the 2015 Law on Strategic Investments, through December 2018. The Albanian Investment Development Agency (AIDA) is in charge of promoting foreign investments in Albania. Potential U.S. investors in Albania should contact AIDA to learn more about the services AIDA offers to foreign investors (http://aida.gov.al/home ). The Law on Strategic Investments stipulates that AIDA, as the Secretariat of the Strategic Investment Council, serves as a one-stop shop for foreign investors, from filing of the application form to granting the status of strategic investment/investor. The deadline for application to receive the status of strategic investment/investor is December 2018. The legal framework regulating the strategic investments can be found at the Albanian Investment Development Agency page (http://aida.gov.al/pages/strategic-investments ). Despite hospitable legislation, U.S. investors are challenged by rampant corruption and the perpetuation of informal business practices. Several major U.S. investors have left the country in recent years after contentious commercial disputes, including several that were brought before international arbitration. Limits on Foreign Control and Right to Private Ownership and Establishment Foreign and domestic investors have equal rights of ownership of local companies, based on the principle of “national treatment.” According to the World Bank’s “Investing Across Borders” indicator, just three out of 33 sectors may not be foreign owned. Domestic and International air passenger transport: foreign interest in airline companies is limited to 49 percent ownership by investors outside the Common European Aviation Zone, for both domestic and international air transportation; Television broadcasting: no entity, foreign or domestic, may own more than 40 percent of a television company. Albania lacks an investment review mechanism for inbound foreign direct investment. Albanian law permits private ownership and establishment of enterprises and property. Foreign investors do not require additional permission or authorization beyond that required of domestic investors. Foreign individuals and companies may not purchase agricultural land, though land may be leased 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. Foreigners can acquire concession rights on natural resources and resources of the common interest, as defined by the Law on Concessions and Public Private Partnerships. Foreign and domestic investors have numerous options available for organizing business operations in Albania. The 2008 ‘Law on Entrepreneurs and Commercial Companies,’ and ‘Law Establishing the National Registration Center’ (NRC) allow for the following legal types of business entities to be established through the NRC: Sole Entrepreneur; Unlimited Partnership; Limited Partnership; Limited Liability Company; Joint Stock Company; Branches and Representative Offices; and Joint Ventures. Other Investment Policy Reviews World Trade Organization (WTO) completed a Trade Policy Review of Albania in May 2016 (https://www.wto.org/english/tratop_e/tpr_e/tp437_e.htm ). In November 2017, UNCTAD completed the first Investment Policy Review (IPR) of South-East European (SEE) countries, including Albania (http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=1884 ). Business Facilitation According to the 2018 World Bank Doing Business Report, it takes an average of five procedures over five days to start a company in Albania. The National Business Center (NBC) serves as a one-stop shop for business registration. All required procedures and documents are published on-line (http://www.qkb.gov.al/information-on-procedure/business-registration/ ). The registration may be done in person, or online via the e-Albania portal . Many companies choose to complete the registration process in person, as the online portal requires an authentication process and electronic signature and is only available in the Albanian language. In 2016, the Business Licenses Center merged with the National Registration Center, to create the National Business Center (http://www.qkr.gov.al/home/ ), which now serves as a one-stop-shop for business registration and all licenses. Outward Investment Albania neither promotes nor incentivizes outward investment or restricts domestic investors from investing abroad. 2. Bilateral Investment Agreements and Taxation Treaties Bilateral Investment Treaties The United States and Albania signed a Bilateral Investment Treaty (https://www.state.gov/e/eb/ifd/bit/117402.htm) in 1995, which entered into force in January 1998. The treaty ensures that U.S. investors receive national or most-favored-nation treatment and provides for dispute settlement. There is no free trade agreement or bilateral taxation treaty between the two countries. As of April 2018, Albania had concluded bilateral investment treaties with 44 countries. See a full list here: http://investmentpolicyhub.unctad.org/IIA/CountryBits/2 . Out of 44 agreements, eight are not yet in force. The BIT with the United States has been in force since 1998. Bilateral Taxation Treaties As of April 2018, Albania had signed treaties for the avoidance of double taxation with 41 countries. See a full list here: https://www.tatime.gov.al/c/6/125/marreveshje-nderkombetare . Albania has also signed free trade agreements with the EU, CEFTA countries (Macedonia, Montenegro, Serbia, Bosnia and Herzegovina, Kosovo, and Moldova), EFTA countries (Switzerland, Liechtenstein, Norway, and Iceland), and Turkey. In addition, in 1992, Albania ratified the Agreement on Promotion, Protection and Guarantee of Investments among member states of the Organization of the Islamic Conference. 8. Responsible Business Conduct Public awareness of corporate social responsibility (CSR) in Albania is low and CSR remains a relatively new concept for much of the business community. The small level of CSR engagement in Albania comes primarily from the energy, telecommunications, heavy industry, and banking sectors, and tends to focus on philanthropy and environmental issues. International organizations have recently improved efforts to promote CSR awareness. Thanks to efforts by the international community and large international companies, the first Albanian CSR Network was founded in March 2013 as a business-led, non-profit organization. The American Chamber of Commerce also formed a CSR subcommittee in 2015 to promote CSR among its members. The government maintains relatively robust CSR, labor, and employment rights, consumer protection, and environmental protection legislation, but enforcement and implementation is inconsistent. Albania has been a member of the Extractive Industries Transparency Initiative (EITI) since 2013. The Law on Commercial Companies and Entrepreneurs outlines generic corporate governance and accounting standards. According to the above-mentioned law and the law on the national business registration center, companies are required to disclose publicly when they change administrators and shareholders and to disclose financial statements. The Corporate Governance Code for unlisted joint stock companies incorporates the OECD definitions and principles on corporate governance, but is not legally binding. The code provides guidance for Albanian companies, and aims to provide a best-practice framework above the minimum legal requirements, while assisting Albanian companies to develop a governance framework. Edit Your Custom Report
