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.
TI Corruption Perceptions Index
91 of 180
World Bank’s Doing Business Report “Ease of Doing Business”
65 of 190
Global Innovation Index
93 of 128
U.S. FDI in partner country (M USD, stock positions)
World Bank GNI per capita
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 ).
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.
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.
3. Legal Regime
Transparency of the Regulatory System
Albania’s regulatory system has improved in recent years, but challenges remain. Uneven enforcement of legislation, cumbersome bureaucracy, and a lack of transparency are all hindrances to the business community.
Albanian legislation includes rules on disclosure requirements, formation, maintenance, and alteration of capital, mergers and divisions, takeover bids, shareholders’ rights, as well as corporate governance principles. The Law on Accounting and Financial Statements includes reporting provisions related to international financial reporting standards for large companies, and national financial reporting standards for small and medium enterprises.
Other independent agencies and bodies, including the Energy Regulator (ERE), Telecom Regulator (AKEP), Natural Resources Bureau (AKBN), and other major institutions operate to ensure transparency in specific sectors.
State-owned oil company Albpetrol retains some regulatory authority over legacy oilfields and is a consistent source of reports of corruption, malign interpretation of regulations, and inefficiency in the hydrocarbons sector. Major foreign investors in this sector report difficulties in complying with often overlapping regulatory requirements, and inconsistent and often conflicting interpretations of Albanian legislation and regulations governing oil exploration and extraction.
International Regulatory Considerations
Albania acceded to the World Trade Organization in 2000, and the country notifies the WTO Committee on Technical Barriers to Trade of all draft technical regulations.
Legal System and Judicial Independence
The Albania legal system is based on the continental judicial system. The Albanian constitution provides for the separation of legislative, executive, and judicial branches, thereby supporting the independence of the judiciary. The Civil Procedure Code, enacted in 1996, governs civil procedure in Albania. The civil court system consists of district courts, appellate courts, and the Supreme Court. The district courts are organized in specialized sections according to the subject of the claim, including civil, family, and commercial disputes.
The administrative courts of first instance, the Administrative Court of Appeal, and the Administrative College of the High Court, now adjudicate administrative disputes. Administrative courts aim to adjudicate administrative cases quickly. The Constitutional Court reviews whether laws or subsidiary legislation comply with the Constitution, and in limited cases protects and enforces the constitutional rights of citizens and legal entities.
Parties may appeal the judgment of the first instance courts within 15 days, while appellate court judgments must be appealed to the Supreme Court within 30 days. A lawsuit against an administrative action is submitted to the administrative court within 45 days from notification and the law stipulates short procedural timeframes enabling faster adjudication of administrative disputes.
Albania does not have a specific commercial code, but defines commercial legislation through a series of relevant commercial laws including, the Foreign Investment Law, Commercial Companies Law, Bankruptcy Law, Environmental Law, Law on Corporate and Municipal Bonds, Transport Law, Maritime Code, Secured Transactions Law, Employment Law, Taxation Procedures Law, 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, and Sports Law.
Corruption is endemic in the Albanian judicial system and U.S. investors are advised to include binding international arbitration clauses in agreements with Albanian counterparts. While the government has historically respected decisions by international arbitration courts, the GoA ignored a 2016 injunction from such a court in a high-profile investment dispute (a decision that was later reversed). Albania is a signatory to the New York Convention and foreign arbitration awards may be enforced in local courts.
Laws and Regulations on Foreign Direct Investment
The Law on Foreign Investments seeks to create a hospitable legal climate for foreign investors and stipulates the following:
- No prior government authorization is needed for an initial investment;
- Foreign investment may not be expropriated or nationalized directly or indirectly, except for designated special cases, in the interest of public use and as defined by law;
- Foreign investors enjoy the right to expatriate all funds and contributions in kind from their investments;
- Foreign investors receive most favored nation treatment according to international agreements and Albanian law.
There are limited exceptions to this liberal investment regime, most of which apply to the purchase of real estate. Agricultural land cannot be purchased by foreigners and foreign entities, but may be rented for up to 99 years. Investors can buy agricultural land if registered as a commercial entity in Albania. 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.
In an effort to boost investments in strategic sectors, the government approved a new law on strategic investments in May 2015. Under the new law, a “strategic investment” as deemed by the government benefits from either “assisted procedure” or “special procedure” assistance by the government to help navigate the permitting and regulatory process. To date, no major foreign investors have taken advantage of the law. Several projects proposed by domestic companies or consortiums of local and foreign partners have been designated as strategic investments, mostly in the tourism sector.
Major Laws Governing Foreign Investments:
- Law 55/2015, “On Strategic Investments”: Defines procedures and rules to be observed by government authorities when reviewing, approving and supporting strategic domestic and foreign investments in Albania;
- Law 9901/2008 “On Entrepreneurs and Commercial Companies”: Outlines general rules and regulations on the merger of commercial companies;
- Law 110/2012 “On Cross-Border Mergers”: Determines rules on mergers when one of the companies involved in the process is a foreign company;
- Law 9121/2003 “On Protection of Competition”: Stipulates provisions for the protection of competition, and the concentration of commercial companies;
- Law 10198/2009 “On Collective Investment Undertakings”: Regulates conditions and criteria for the establishment, constitution, and operation of collective investment undertakings and of management companies;
- Law 7764/1993 “On the Foreign Investments” amended by the Law 10316/2010.
Authorities responsible for mergers, change of control, and transfer of shares include, the Albanian Competition Authority (ACA; http://www.caa.gov.al/laws/list/category/1/page/1 ) which monitors the implementation of the competition law and approves mergers and acquisitions when required by the law; and, the Albanian Financial Supervisory Authority (FSA; http://www.amf.gov.al/ligje.asp ) which regulates and supervises the securities market and approves the transfer of shares and change of control of companies operating in this sector.
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. Albania is a signatory to the New York Arbitration Convention and foreign arbitration awards are typically recognized by Albania, although the government refused to recognize an injunction from a foreign arbitration court in one high profile case, in 2016, calling into question the government’s commitment to arbitration (this refusal was later reversed). The Albanian Civil Procedure Code outlines provisions regarding domestic and international commercial arbitration. Many foreign investors complain that endemic judicial corruption and inefficient court procedures undermine judicial protection in Albania and seek international arbitration to resolve disputes.
Albania’s tax system does not distinguish between foreign and domestic investors. Informality in the economy (as high as 50 percent) presents challenges for tax administration.
Visa requirements to obtain residence or work permits are straightforward and do not pose an undue burden on potential investors. The only potential complication to obtaining a work permit is the requirement that a foreign employer maintain a certain number of local employees. The Law on Foreigners states that a foreign employer will be granted a work permit when the number of foreign employees does not exceed 10 percent of the total number of employees on the payroll over the 12 proceeding months.
The Law on Entrepreneurs and Commercial Companies sets guidelines on the activities of companies and the legal structure under which they may operate. The government adopted the law in 2008 to conform Albanian legislation to the European Union’s Acquis Communitaire. The most common type of organization for foreign investors is a limited liability company.
The Law on Concessions establishes the framework for promoting and facilitating the implementation of privately financed concessionary projects. Concessions may be identified by central or local governments or through third party unsolicited proposals. In the case of unsolicited proposals, the proposing company is entitled to receive a bonus of up to 10 percent of total points based on the technical and financial proposal.
Competition and Anti-Trust Laws
The Albanian Competition Authority (http://www.caa.gov.al/?lng=en ) is the agency that reviews transactions for competition- related concerns. The Law on Protection of Competition governs incoming foreign investment whether through mergers, acquisitions, takeovers, or green field investments, irrespective of industry or sector. In the case of particular share transfers in insurance and banking industries, the Financial Supervisory Authority (http://amf.gov.al/ ) and/or the Bank of Albania (https://www.bankofalbania.org/ ) may require additional regulatory approvals. Transactions between parties outside Albania, including foreign-to-foreign transactions, are covered by the competition law, which explicitly states that the transactions apply to all activities, domestic or foreign, that directly or indirectly affect the Albanian market.
Expropriation and Compensation
The Albanian Constitution guarantees the right of private property. According to Article 41, expropriation or limitation in the exercise of a property right can occur only if it serves the public interest and with fair compensation. During the post-communist period, expropriation has been limited to land for public interest, mainly infrastructure projects such as roads, energy infrastructure, water works, airports, and other facilities. Compensation has generally been below market value and owners have complained that the compensation process is slow and unfair. Civil courts are responsible for resolving such complaints.
Change of government can also be of concern to foreign investors. Following the 2013 elections and peaceful transition of power, the new government revoked or attempted to renegotiate numerous concession agreements, licenses, and contracts signed by the previous government with both domestic and international investors. This practice has occurred in years past, as well.
There are many ongoing disputes regarding properties confiscated during the communist regime. Identifying ownership is a longstanding problem in Albania that makes restitution for expropriated properties difficult. The restitution and compensation process started in 1993, but has been slow and marred by corruption. Many U.S. citizens of Albanian origin have suffered from long-running restitution disputes. Court cases drag on for years without a final decision, forcing many to refer their case to the European Court of Human Rights in Strasbourg, France. To date, the Court has issued around 29 decisions in favor of Albanian citizens in civil cases involving protection of property with an assessed financial cost of approximately USD 50 million. Approximately 400 applications are pending for consideration. Even after settlement in Strasbourg, enforcement of decisions is slow.
The GoA has recently approved new property compensation legislation that aims to provide a solution to the pending claims for restitution and compensation. The legislation presents three methods of compensation for confiscation claims: restitution; compensation of property with similarly valued land in a different location; and cash settlement/financial compensation. The legislation sets a 10-year timeframe for the completion of the entire process.
The Albanian government has generally not engaged in expropriation actions against U.S. investments, companies, or representatives. There have been limited cases in which the government has revoked licenses, especially in the mining and energy sectors, based on contract violation claims.
ICSID Convention and New York Convention
Under the Albanian Constitution, ratified international agreements prevail over domestic legislation. Albania is a member state to the International Centre for the Settlement of Investment Disputes (ICSID Convention). It also is a signatory to the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). Albania has ratified the 1927 Convention and the European Convention on Arbitration (Geneva Convention).
Investor-State Dispute Settlement
For an arbitration award to be locally recognized, the claimant must enforce the award before the Court of Appeals. The procedure to recognize a foreign arbitral award typically lasts around one month and either party may appeal the Court’s decision to the Supreme Court. The appeal must be filed within 30 days from the date of decision or notification of the other party (if absent).
The possibility of bringing an action before the local court to avoid arbitration proceedings is remote. According to explicit provisions in the Albanian Code of Civil Procedure, if a party brings actions before local courts despite the parties’ agreement to arbitrate, the court would, upon motion of the other party, dismiss the case without entertaining the merits of the case. The decision of the court to dismiss the case can be appealed to the Supreme Court, which has 30 days to consider the appeal.
An alternative to dispute settlement via the courts is private arbitration or mediation. Parties can engage in arbitration when they have agreed to such a provision in the original agreement, when there is a separate arbitration agreement, or by mutual agreement at any time when a dispute arises. 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. Mediation is also applicable in resolving all civil, commercial, and family disputes and is regulated by the law “On Dispute Resolution through Mediation.” Arbitral awards are final and enforceable and can be appealed only in cases foreseen in the Code of Civil Procedure. Mediation is final and enforceable in the same way.
There are no consolidated institutions for dispute resolution through arbitration and arbiters are appointed ad hoc in compliance with the provisions of the Code of Civil Procedure. The law provides for the National Chamber of Mediators and Chambers of Mediators as institutions to perform mediation. Mediators are licensed and registered at the Mediators Register at the Ministry of Justice, which maintains a list of mediators from which the parties can choose.
The provisions for arbitration procedures and the recognition and enforcement of foreign awards are stipulated in the Albanian Code of Civil Procedure. Albania does not have a separate law on arbitration. Although the arbitration chapter of the Code of Civil procedure stipulates only the rules for domestic arbitration, the country is signatory to the 1958 New York Convention, and as such, recognizes the validity of written arbitration agreements and arbitral awards in a contracting state.
The Albanian Code of Civil Procedure requires the courts to reach a judgment within a reasonable amount of time, but does not provide for a specific deadline to decide on commercial disputes. Reaching a final judgment in a commercial litigation may take several years to exhaust all stages of the process.
The procedure for the recognition of a foreign arbitral award should take on average approximately one month; however, in certain cases this decision may be appealable. An appeal against a court decision that recognizes a foreign arbitral award does not automatically suspend the effects of the enforcement.
International Commercial Arbitration and Foreign Courts
Over the past ten years, there have been six investment disputes between the Albanian government and U.S. companies, four of which resulted in international arbitration. Despite a stated desire to attract and support foreign investors, U.S. investors in disputes with the Albanian government report a lack of productive dialogue with government officials, who frequently display a reluctance to settle the disputes before they are escalated to the level of international arbitration, or before the international community exerts pressure on the government to resolve the issue. U.S. investors in Albania are encouraged to include strong binding arbitration clauses in any agreements with Albanian counterparts.
Albania maintains adequate bankruptcy legislation, though actual bankruptcies are rare in practice. Corrupt and inefficient bankruptcy court proceedings make it difficult for companies to reorganize or discharge debts through bankruptcy. The new law on bankruptcy, approved in May 2017, aims to address loopholes in the insolvency regime, decrease unnecessary market exit procedures, reduce fraud, and ease collateral recovery procedures. The Bankruptcy Law governs 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 law establishes statutory time limits for insolvency procedures, professional qualifications for insolvency administrators, and an Agency of Insolvency Supervision to regulate the profession of insolvency administrators.
Debtors, creditors, or tax authorities can initiate a bankruptcy procedure. Debtors and creditors can file for either liquidation or reorganization. Tax authorities can request a bankruptcy procedure when the subject reports losses three years consecutively. Bankruptcy proceedings may also be invoked when the debtor is unable to pay the obligations at maturity date or will be unable to pay in the near future.
According to the provisions of the Bankruptcy Law, the initiation of bankruptcy proceedings would suspend the enforcement of claims by all creditors against the debtor subject to bankruptcy. Creditors of all categories should submit their claims to the bankruptcy administrator in order to be treated under the bankruptcy proceeding. The Bankruptcy Law provides specific treatment for different categories, including, secured creditors, unsecured creditors, and unsecured creditors of lower ranking (i.e. those whose claims would be paid after all the secured and unsecured creditors were satisfied). The claims of the secured creditors will be satisfied by the assets of the debtor, which secure such claims under security agreements. The claims of the unsecured creditors will be paid out of bankruptcy estate excluding the assets used for payment of the secured creditors, following the priority ranking described under the Albanian Civil Code.
Pursuant to the provisions of the Bankruptcy Law, the creditors have the right to establish a creditors committee and the creditors’ assembly. The creditors’ committee is appointed by the Commercial Section Courts, before the first meeting of the creditors’ assembly. The creditors’ committee represents the secured creditors, the unsecured creditors with larger claims, and creditors with small claims. The committee has the right: (a) to support and supervise the activities of the insolvency administrator; (b) to request and receive information about the insolvency proceedings; c) to inspect the books and records; and, d) to order an examination of the revenues and cash balances.
In the event that the creditors and administrator agree that reorganization is the company’s best option, the bankruptcy administrator prepares a reorganization plan and submits it to the court for authorizing implementation.
According to the insolvency procedures, only creditors whose rights are affected by the proposed reorganization plan enjoy the right of vote and the dissenting creditors in reorganization receive at least as much as what they would obtain in a liquidation. Creditors are divided into classes for the purposes of voting on the reorganization plan and each class votes separately and creditors of the same class are treated equally.
The insolvency framework allows for the continuation of contracts supplying essential goods and services to the debtor, the rejection by the debtor of overly burdensome contracts, the avoidance of preferential or undervalued transactions, and the possibility of the debtor obtaining credit after commencement of insolvency proceedings. No priority is assigned to post-commencement creditors.
The creditor has the right to object to decisions accepting or rejecting creditors’ claims, and should approve the sale of substantial assets of the debtor. The creditor does not have the right to request information from the insolvency representative and the law does not require approval by the creditor for the selection of appointment of insolvency representative.
According to the law on bankruptcy, foreign creditors have the same rights as domestic creditors with respect to the commencement of, and participation in, a bankruptcy proceeding. The claim is valued as of the date the insolvency proceeding is opened. Claims expressed in foreign currency are converted into Albanian currency according to the official exchange rate applicable to the place of payment at the time of the opening of the proceeding.
The Albanian Criminal Code provides for several criminal offences in bankruptcy such as: (i) the bankruptcy was provoked intentionally; (ii) concealment of bankruptcy status; (iii) concealment of assets after bankruptcy; and, (iv) failure to comply with the obligations arising under bankruptcy proceeding.
According to the World Bank’s 2018 Doing Business Report, Albania ranked 41 out of 190 countries in the insolvency index. A reference analysis of ‘resolving insolvency’ can be found here: http://www.doingbusiness.org/data/exploreeconomies/albania#resolving-insolvency .
The number of bankruptcy requests in Albania is growing; as of November 2016, 132 companies had navigated through bankruptcy based on the register of the Taxation Department.
4. Industrial Policies
The Albanian Investment Development Agency (AIDA; www.aida.gov.al ) is the best source to find incentives offered across a variety of sectors. Aside from the incentives listed below, individual parties may negotiate additional incentives directly with AIDA, the Ministry of Finance and Economy, or other ministries, depending on the sector.
In an effort to boost investments in strategic sectors, the GoA approved a new law on strategic investments in May 2015 that outlines the criteria, rules, and procedures that state authorities employ when approving a strategic investment. Interested parties can apply through December 31, 2018 to receive the status of a strategic investment. A strategic investment is an investment of public interest, based on several criteria, including, size of the investment, implementation time, productivity and value added, creation of new jobs, sectoral economic priorities, and regional and local economic development. The law does not discriminate between foreign and domestic investors.
The following sectors are defined as strategic sectors: mining and energy, transport, electronic communication infrastructure, urban waste industry, tourism, agriculture (large farms) and fishing, economic zones, and development priority areas. The law foresees that investments in strategic sectors may benefit the status of assisted procedure and special procedure, based on the level of investment, which varies from one to 100 million euros, depending on the sector and other criteria stipulated in the law.
In the Assisted Procedure, the public administration coordinates, assists, and supervises the entire administrative process for the investment approval and makes available to the investor state-owned property needed for the investment. Under the special procedure, the investor also enjoys state support for the expropriation of private property and the ratification of the contract by parliament.
The law and bylaws that entered into force on January 1, 2016, foresee the establishment of the Strategic Investments Committee (SIC), a collegial body headed by the prime minister, whose members include ministers covering the respective strategic sectors, state advocate, and on a case-by-case basis ministers whose portfolios are impacted by the strategic investment. The Albanian Investment Development Agency (AIDA) serves as the Secretariat of SIC and is in charge of providing administrative support to investors. The SIC grants the status of Assisted Procedure and Special Procedure, for strategic investments/investors based on the size of investments and other criteria defined in the law.
Energy and Mining, Transport, Electronic Communication Infrastructure, and Urban Waste Industry: Investments greater than 30 million euros enjoy the status of assisted procedure, while 50 million euros or more enjoys special procedure status.
Tourism and Economic Areas: Investments of 5 million euros or more enjoy the status of assisted procedure; and greater than 50 million euros enjoy the status of special procedure. The GoA has introduced new incentives to promote the tourism sector. International hotel brands that invest at least USD 8 million for a four-star hotel and USD 15 million for a five-star hotel will be exempt from property taxes for 10 years, pay no profit taxes, and pay a Value-added tax (VAT) of just 6 percent for any service on their hotels or resorts. For all other hotels and resorts, the GoA reduced the VAT on accommodation from 20 percent to 6 percent. In the information technology sector, the government has recently reduced the profit tax for software development companies from 15 percent to 5 percent.
Agriculture (large agricultural farms) and Fishing: Investments greater than 3 million euros that create at least 50 new jobs enjoy the status of assisted procedure, while investments greater than 50 million euros enjoy the status of special procedure. In addition, the GoA offers a wide range of incentives and subsidies for investments in the agriculture sector. The funds are a direct contribution from the state budget and from the European Union Instrument of Pre-Accession for Rural Development Fund (IPARD.) IPARD funds allocated for the period 2018-2020 total 71 million euros. The program is managed by the Agricultural and Rural Development Agency (http://azhbr.gov.al/ ).
Development Priority Areas: Investments greater than one million euros that create at least 150 new jobs enjoy the status of assisted procedure. Investments greater than 10 million euros that create at least 600 new jobs enjoy the status of special procedure.
Energy sector: Certain machinery and equipment imported for the construction of hydropower plants are VAT exempt. The government supports the construction of small wind and photovoltaic parks with an installed capacity of less than 3 megawatts and 2 megawatts, respectively, by offering feed-in-premium tariffs. The Energy Regulatory Authority (ERE; http://www.ere.gov.al/ ) conducts an annual review of the feed-in-premium tariffs for wind and photovoltaic parks. The ERE conducts an annual review of the feed –in-tariffs for small hydroelectric plants with an installed capacity of less than 15 megawatts.
Foreign tax credit: Albania applies foreign tax credit rights even in cases where no double taxation treaty exists with the country in which the tax is paid. If a double taxation treaty is in force, double taxation is avoided either through an exemption or by granting tax credits up to the amount of the applicable Albanian corporate income tax rate (currently 15 percent).
Corporate income tax exemption: Film studios and cinematographic productions, licensed and funded by the National Cinematographic Center, are exempt from paying corporate income tax.
Loss carry forward for corporate income tax purposes: Fiscal losses can be carried forward for three consecutive years (the first losses are used first). However, the losses may not be carried forward if more than 50 percent of direct or indirect ownership of the share capital or voting rights of the taxpayer is transferred (changed) during the tax year.
Incentives for manufacturing sector
Lease of public property: The government of Albania can lease public property of more than 500 square meters, or grant a concession for the symbolic price of one euro if the properties will be used for manufacturing activities with an investment exceeding 10 million euros, or for inward processing activities. The GoA can also lease public property or grant a concession for the symbolic price of one euro for investments of more than two million euros on activities that address social and economic issues in a certain area, as well as activities related to sports, culture, tourism, and cultural heritage. Criteria and terms are decided on an individual bases by the Council of Ministers.
Manufacturing activities are exempt from VAT on machinery and equipment.
The employer is exempt from the social security tax payment for one year for all new employees.
The state pays the salaries for four months for the new employees and offers various financing incentives for job training.
VAT credit for fuel: Taxpayers whose main business activity is production of bricks and tiles and the transport of goods with technological means are allowed to credit VAT on the purchase of fuel used wholly and exclusively for their business activities, up to the limit of a certain percentage of the taxpayer’s total annual turnover.
Manufacturing sector obtains VAT refunds immediately in the case of zero risk exporters, within 30 days if the taxpayer is an exporter, and within 60 days in the case of other taxpayers.
Apparel and footwear producers are exempt from 20 percent VAT on raw materials so long as the finished product is exported. In 2011, the GoA also removed customs tariffs for imported apparel and raw materials in the textile and shoe industries (e.g. leather used for clothes, cotton, viscose, velvet, sewing accessories, and similar items).
Technological and Development Areas (TEDA): The Law on the Economic Development Areas provides fiscal and administrative incentives for companies that invest in this sector, and for firms that establish a presence in these areas. A full list of incentives can be found here: http://www.teda.gov.al/?page_id=687 .
Foreign Trade Zones/Free Ports/Trade Facilitation
Albania has no functional duty free import zones, although legislation exists for the creation of such. The May 2015 amendments to the Law on the Establishment and Operation of Technical and Economic Development Areas (TEDA) established the legal framework for the establishment of TEDAs (a.k.a. free trade zones), defining the incentives for developers investing in the development of these zones as well as companies operating within the zones. The Ministry of Economic Development has announced three investment opportunities that seek private sector developers to obtain, develop, and operate fully serviced areas located in Koplik (61 hectares) and Spitalle (100 hectares). Interested investors and developers can find more information for the development of Technical and Economic Development Areas (TEDA) here: http://aida.gov.al/faqe/zonat-me-zhvillim-teknik-dhe-ekonomik .
Performance and Data Localization Requirements
Although visa, residence, and work permit requirements are straightforward and do not pose an undue burden on potential investors, the Law on Foreigners requires foreign investors to prove that foreign employees constitute less than 10 percent of the investor’s total workforce before a work permit is granted. There is no minimum requirement for domestic content in goods or technology.
According to current legislation in force, companies with sensitive data (primarily in telecommunications, banking, energy, and other sector) are not authorized to transfer data abroad. To do so, they must receive approval and fulfill certain security criteria. As such, many companies operating in Albania are returning their data to Albania. The two largest private datacenters in Albania belong to telecom operator Albtelekom and the Albanian Telecommunication Union (ATU).
5. Protection of Property Rights
Real Estate is registered at the Immovable Property Registration Office (IPRO). The procedures are cumbersome and registrants have complained of corruption during the process. Recent changes to legislation allow a notary public to have access to real estate registers and confirm the legal ownership of property. The process of registering property remains cumbersome and difficult to navigate. For large transactions, it is advisable to hire an attorney to check documents and procedures for property registration.
The government has drafted and passed property legislation in a piecemeal and uncoordinated way. Reform of the sector has yet to incorporate consolidation of property rights or the elimination of legal uncertainties. Immovable property rights enforcement is inefficient and cited as a common source of corruption. Through international donor assistance, the registration system has improved. The initial property registration process has seen progress, but the finalization of the process has stalled in recent years. Approximately 15 percent of properties nationwide are unregistered, mostly in urban and high value coastal areas.
Illegal construction is a major impediment to securing property titles. The legalization process to address large-scale illegal construction started in 2006, and is still underway. There are an estimated 440,000 illegal buildings in Albania. In an attempt to legalize property and punish illegal construction, the government’s National Urban Construction Inspectorate (INUK) began a building demolition campaign in late 2013. There were credible reports that the government demolished some homes without due legal process as part of a wider campaign to demolish illegally constructed buildings. Citizens also submitted complaints that INUK ignored citizens’ requests to demolish some illegal buildings while choosing to demolish other buildings about which citizens had not complained.
The civil court system manages property rights disputes. Decisions from civil courts often take many years and authorities often do not enforce court decisions. In 2010, there were amendments to the law on foreign investments, which granted special protection to foreign investors on property disputes. However, the new law on strategic investments aims to fill the gap and provide foreign investors with assistance on a variety of issues including property title. Foreigners and/or foreign entities can purchase commercial land only if the investment is more than three times the value of the land. Farmland can be leased, not owned, for up to 99 years.
According to the 2018 World Bank’s Doing Business Report, Albania performed poorly in the registering property category, ranking 103 out of 190 economies. It takes 19 days and six procedures to register property and the associated costs can reach 9.6 percent of the total property value.
Intellectual Property Rights
Albania is not listed on the USTR’s Special 301 or Notorious Markets report. However, IPR infringement and theft are common due to weak legal structures and poor enforcement. Counterfeit goods, while decreasing, are present in some local markets ranging from software to garments and machines. Albanian law protects copyrights, patents, trademarks, stamps, marks of origin, and industrial designs, but significant gaps remain between the law’s intent and its enforcement. Regulators are ineffective at collecting fines and prosecutors rarely press charges for IP theft. U.S. companies should consult an attorney experienced in IPR issues and avoid potential risk by establishing solid commercial relationships and drafting strong contracts.
A revised IPR law approved by the Parliament on March 31, 2016, entered into effect in November 2016. The law seeks to harmonize domestic legislation with EU law to strengthen IPR enforcement and address shortcomings in existing legislation. The main institutions responsible for IPR enforcement include the State Inspectorate for Market Surveillance, Albanian Copyright Office (ACO), Audiovisual Media Authority (AMA), the General Directorate of Patents and Trademarks (GDPT), the General Directorate for Customs, the Tax Inspectorate, the Prosecutor’s Office, police, and courts. The law also stipulated the establishment of three new IPR bodies: the National Council of Copyrights, which is responsible to monitor the implementation of the law; the Agency for the Collective Administration, in charge of IPR administration; and the Copyrights Department within the Ministry of Culture.
The State Inspectorate for Market Surveillance, established in 2016, is responsible to inspect, control, and enforce copyright and other related rights. The Directorate has noted some progress in IPR protection. Yet, despite minor improvements, law enforcement on copyrights remains problematic and copyright violations are rampant. The number of copyright violation cases brought to court remains low.
While official figures are not available, Customs does report the quantity of counterfeit goods destroyed annually. In the case of seizure, the rights holder has the burden of proof and must first inspect the goods before any further action takes place. The rights holder is also responsible for the storage and destruction of the counterfeit goods.
Patents and Trademarks
The General Directorate for Patents and Trademarks (GDPT) is responsible to register and administer patents, commercial trademarks and service marks, industrial designs, and geographical indications. The 2008 law on Industrial Property was amended initially in 2014 to reflect EU legislation on this matter. Further amendments were introduced in February 2017 that aim to transform GDPT from a public institution into an autonomous agency to strengthen its human and financial capacities and improve performance. Despite adequate legislation, the GDPT requires further capacity building and additional human resources to be effective. Specifically, examination procedures are lengthy due to a limited number of patent and trademark examiners.
Albania became a contracting party to the WIPO Patent Law Treaty and a full member of the European Patent Organization in 2010. The government became party to the London Agreement on the implementation of Article 65 of the European Convention for Patents in 2013.
For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at: http://www.wipo.int/directory/en/ .
Resources for Rights Holders
Contact at mission on IP issues:
Jeffrey D. Bowan
Economic and Commercial Officer
Phone: + 355 (0) 4229 3115
American Chamber of Commerce
Address: Rr. Deshmoret e shkurtit, Sky Tower, kati 11 Ap 3 Tirana, Albania
Phone: +355 (0) 4225 9779
Fax: +355 (0) 4223 5350
List of local lawyers: https://al.usembassy.gov
6. Financial Sector
Capital Markets and Portfolio Investment
In the absence of a stock market, the country’s banking sector remains the main channel for business financing. The sector is sound, profitable, and well capitalized, although the high rate of non-performing loans remains a concern. The Bank of Albania’s legal measures to address the problem have generated positive results. During 2017, non-performing loans continued to decrease, reaching 13.2 percent at the end of the year, an improvement over 2014, when the rate stood at 25 percent. Capital adequacy, at 16.6 percent, remains above Basel requirements and indicates sufficient assets, which totaled USD 13.25 billion in 2017, 2.7 percent higher than the previous year. The banking sector is fully private and includes 16 banks, most of which are subsidiaries of foreign banks. As of December 2017, the Turkish National Commercial Bank has further consolidated its position as the largest bank, with 27.8 percent of the market, followed by Austrian Raiffeisen Bank, which has a 17 percent market share. The share of Greek banks has fallen in recent years and stands at around 10 percent, due chiefly to the recent sale of the Albanian subsidiary of the National Bank of Greece to the American Bank of Investments (ABI), a domestic bank.
The government has adopted policies promoting the free flow of financial resources to promote foreign investment in Albania. The government and Central Bank refrain from restrictions on payments and transfers for international transactions. Despite Albania’s shallow FX market, banks enjoy sufficient liquidity to support sizeable positions. Furthermore, portfolio investments remain limited mostly to company shares, government bonds, and real estate.
The high rate of non-performing loans and the economic slowdown has forced commercial banks to tighten lending standards. After falling in 2015, the stock of loans increased by 2.5 percent year-on-year in 2016, but has remained flat since then. The credit market is competitive, but interest rates in domestic currency can be high, ranging from 5.8 percent to 8.3 percent. Most mortgage and commercial loans are denominated in euros, as rate differentials between local and foreign currency average 3.3 percent. Commercial banks have improved the quality and quantity of services they offer and the private sector has benefited from the expansion of these instruments.
The major state owned enterprises are Electric Distribution Operator (OSHEE), Transmission System Operator (OST), Electricity Generation Company (KESH), Oil and Gas Operator, Albpetrol, Albanian Post Office, and the Albanian Railway System. There is no published list of SOEs and no clear data on their assets, net income, or total number of employees.
Money and Banking System
Albania’s banking sector weathered the financial crisis better than many of its neighbors, due largely to a lack of exposure to international capital markets and lack of a domestic housing bubble. Market concentration remains high, as the five largest banks dominate the market with about 74 percent of total assets. The Bank of Albania has the flexibility to intervene in the currency market to protect exchange rates and official reserves, but not for more than 12 months. As part of its strategy to stimulate business activity, the Bank of Albania maintained a stable central bank interest rate at the historic low of 1.25 percent in 2017.
Foreigners are not required to prove residency status to establish a bank account aside from the normal know-your-client procedures. However, U.S. citizens are required to fill out a form allowing for the disclosure of their banking data to the IRS under the framework of the U.S. Foreign Account Tax Compliance Act.
Foreign Exchange and Remittances
Foreign Exchange Policies
The Central Bank of Albania (BOA) formulates, adopts, and implements foreign exchange policies and maintains a supervisory role in foreign exchange activities in accordance with the Law on the Bank of Albania No. 8269 and the Banking Law No. 9662. Foreign exchange is regulated by the 2009 Regulation on Foreign Exchange Activities no. 70 (FX Regulation).
The BOA maintains a free float exchange rate regime for its domestic currency, the lek (ALL). Foreign exchange is readily available at banks and exchange bureaus. However, when exchanging several million dollars or more, preliminary notification may be necessary, as the exchange market in Albania remains small. The domestic currency has generally been stable in recent years, experiencing just minor fluctuations. Nevertheless, it has appreciated by around 4.5 percent against the euro since the beginning of 2018. Albanian authorities do not engage in currency arbitrage, and do not view such as an efficient instrument to achieve competitive advantage. In early 2018, the Bank of Albania, in cooperation with the Ministry of Finance, launched a campaign that aims to reduce the domestic use of the euro and other foreign currencies for savings, loans, and high-value investments and expenditures. The campaign is part of a larger reform that aims to improve the effectiveness of domestic economic policies.
The Banking Law does not impose restrictions on the purchase, sale, holding, or transfer of monetary foreign exchange. However, the Law on the Bank of Albania authorizes the Bank to temporarily restrict the purchase, sale, holding, or transfer of foreign exchange to preserve the foreign exchange rate or official reserves. In practice, the Bank of Albania rarely employs such measures. The last episode was in 2009, when the Bank temporarily tightened supervision rules over liquidity transfers by domestic correspondent banks to foreign banks due to insufficient liquidity in international financial markets. It also asked banks to halt distribution of dividends and use dividends to increase shareholders’ capital, instead. The Bank lifted these restrictions in 2010.
The Law on Foreign Investment guarantees the right to transfer and repatriate funds associated with an investment in Albania into a freely usable currency at a market-clearing rate. Only licensed entities (banks) may conduct foreign exchange transfers and waiting periods depend on office procedures adopted by the banks. Both Albanian and foreign citizens entering or leaving the country must declare assets in excess of ALL 1,000,000 (USD 9,000) in hard currency and/or precious items. Failure to declare such assets is considered a criminal act, which is punishable by confiscation of the assets and imprisonment. Legal parallel markets are not in place in Albania, as the financial sector does not make use of convertible or negotiable instruments.
Although the Foreign Exchange Regulation provides that residents and non-residents may transfer capital within and into Albania without restriction, capital transfers out of Albania are subject to certain documentation requirements. 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 will be transferred. Such persons must also submit a declaration on the source of the funds to be transferred. In January 2015, The FX Regulation was amended and the requirement to present the documentation showing the preliminary payment of taxes related to the transaction was removed.
Albania is not a major trading partner with the United States, but, in general, does not engage in currency manipulation tactics. Albania is a member of the Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a Financial Action Task Force-style regional body. The INCRS 2017 report for the first time ever categorizes Albania as a country of jurisdiction of primary concern with regard to money laundering.
Sovereign Wealth Funds
Albania does not have a sovereign wealth fund.
7. State-Owned Enterprises
SOEs are defined as legal entities, which are entirely state-owned or state-controlled and operate as commercial companies in compliance with the Law on Entrepreneurs and Commercial Companies. No discrimination exists between public and private companies operating in the same sector. The government requires SOEs to submit annual reports and undergo independent audits. SOEs are subject to the same tax levels and procedures, and same domestic accounting and international financial reporting standards, as all other commercial companies. The High State Audit is the institution that audits SOE activities. SOEs are also subject to public procurement law.
Albania is yet to become party to the Government Procurement Agreement (GPA) of the World Trade Organization (WTO), but has obtained observer status and is negotiating full accession. However, private companies can compete openly and under the same terms and conditions with respect to market share, products and services, and incentives.
The SOE operation in Albania is regulated by the Law on Entrepreneurs and Commercial Companies, the Law on State Owned Enterprises, and the Law on the Transformation of State Owned Enterprises into Commercial Companies. The Ministry of Economy and Finance and other relevant ministries covering the sector in which the company operates represent the state as the owner of the SOEs. There are no legal binding requirements for the SOEs to adhere to OECD guidelines. However, basic principles of corporate governance are stipulated in the above-mentioned laws and generally accord with OECD guidelines. The corporate governance structure of SOEs includes the supervisory board and the general director (administrator) in the case of joint stock companies. The supervisory board is comprised of 3-9 members, who are not employed by the SOE, two-thirds of whom are appointed by the representative of the Ministry of Economy and Finance, and one-third by the line ministry, local government unit, or institution to which the company reports. The Supervisory Board is the highest decision making authority, and appoints and dismisses the administrator for the SOE through a two-thirds vote. In the case of SOEs operating in the electricity sector, the representative of the owner and the appointment of supervisory board members is regulated by the Law on the Electrical Energy Sector, and in the natural gas sector by the Law on the Sector of Natural Gas.
The privatization process in Albania is nearing conclusion, with just a few major privatizations remaining. These opportunities include the electricity distribution company, 16 percent of Albtelekom, the fixed- line telephone company, and state-owned oil company Albpetrol. SOEs operate in energy generation, electricity transmission and distribution, gas transmission, water supply, ports, railway, postal services, and hydrocarbons sectors.
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.
Corruption is a continuing problem in Albania, undermining the rule of law and jeopardizing economic development. Albania ranked 91 out of 180 countries in Transparency International’s 2017 Corruption Perception Index (CPI). Despite some improvement in the index from 2013 and 2014, progress in tackling corruption has been slow and unsteady. Albania remains one of the most corrupt countries in Europe, according to the CPI. The passage by Parliament of constitutional amendments in July 2016 to reform the judicial system was a major step forward, and reform, once fully implemented, is expected to position the country as a more attractive destination for international investors.
Judicial reform has been described as the most significant developments in Albania since the end of communism, and nearly one-third of the constitution was rewritten as part of the effort. The reform also entails the passage of laws to ensure implementation of the constitutional amendments. Judicial reform’s new vetting process will ensure that prosecutors and judges with unexplained wealth, insufficient training, or who have issued questionable past decisions are removed from the system. The reform will also establish an independent prosecutor and a specialized investigation unit to investigate and prosecute corruption and organized crime. If fully implemented, judicial reform will discourage corruption, promote foreign and domestic investment, and allow Albania to compete more successfully in the global economy.
UN Anticorruption Convention, OECD Convention on Combatting Bribery
The government has ratified several corruption-related international treaties and conventions and is a member of major international organizations and programs dealing with corruption and/or organized crime. 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), and 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 the 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 is a member of the Stability Pact Anti-Corruption Network (SPAI). Albania is not a member of the OECD Convention on Combating Bribery of Foreign Public Officials in international Business Transactions.
Resources to Report Corruption
In an effort to curb corruption, the government announced a new platform in 2017 called, “Shqiperia qe Duam – Albania We Want,” through which citizens can submit complaints and/or cases of corruption and misuse of office by government officials. The platform has a dedicated link for businesses. The Integrated Services Delivery Agency (ADISA), a government entity, provides a second online portal to report corruption.
10. Political and Security Environment
Political violence is rare. Albania’s June 2017 elections and transition to a new government were peaceful. However, security forces shot and killed four protesters on January 21, 2011, during a violent political demonstration. Albania is a source of stability in the region and maintains generally friendly relations with neighboring countries.
11. Labor Policies and Practices
Albania’s labor force numbers around 1.16 million people, according to official data. The official estimated unemployment rate in December 2017 was 13.4 percent; though unemployment among persons aged 15-29 is estimated at 24.6 percent. Approximately 40 percent of the population is self-employed in the agriculture sector. Informality is widespread in the Albanian labor market. A recent International Labor Organization (ILO) report on the informal economy showed that informal employment constituted 61 percent of the labor market in Albania. The share in Albania for women, at 63.5 percent, is higher than among men, at 59 percent. Informal employment rates drop to 33 percent when the figure excludes the agricultural sector, but still ranks among the highest in the region. While some in the labor force are highly skilled, many work in low-skill industries or have outdated skills. The education level of the workforce is relatively low, limiting economic prospects and access to quality jobs. According to the Institute of Statistics, in 2015, around 43 percent of working age persons in Albania had a primary education or less, while only 19 percent had a tertiary education. The government provides fiscal incentives for labor force training for the inward processing industry, which in Albania includes the shoe and textile sectors. A majority of young Albanians speak English, Italian, or Greek as a second language. Other foreign languages are common, as well.
Albania has a tradition of a strong secondary educational system, while vocational schools are less prevalent. However, the government has shifted attention to the promotion of vocational education. In 2017, almost 20 percent of high school pupils were enrolled in vocational schools compared with 15 percent in 2013.
In December 2017, the average salary in public administration was approximately 61,000 ALL (USD 550) per month. Since April 2017, minimum wage is 24,000 ALL/month (approximately USD 215), which remains among the lowest in the region.
Pursuant to the Labor Code and the recently amended “Law on the Status of the Civil Employee,” both individual and collective employment contracts regulate labor relations between employees and management. Albania has been a member of the International Labor Organization (ILO; http://www.ilo.org/dyn/normlex/en/f?p=1000:11200:0::NO:11200:P11200_COUNTRY_ID:102532 ) since 1991 and has ratified 54 ILO conventions from of 189, including the entire set of fundamental, governance conventions, and two protocols.
The Albanian government has established the National Council of Labor, composed of government officials, trade unions, management, and employers’ associations, to improve social dialogue among stakeholders. The institutions governing the labor market include the Ministry of Finance and Economy, the Ministry of Health and Social Protection, the National Employment Service, the State Labor Inspectorate, and private actors such as employment agencies and vocational training centers. Albania has adopted a large variety of regulations to monitor labor abuses, but their enforcement remains weak due to persistent informality in the work force.
Law 108/2013, dated March 28, 2013, “On Foreigners,” and various decisions of the Council of Ministers, regulate the employment regime in Albania. The law limits to 10 percent the number of foreigners hired by employers in Albania. In 2015, the labor code was amended to include the temporary employment of foreigners in Albania. However, for specific projects or to attract foreign investment, employment can be regulated thorough special laws, and wages and training costs may be tax deductible.
Both employees and managers have the right to form trade unions. Trade unions are organized at both the national level (according to industrial sector) and company level. The Labor Code guarantees the right to strike as part of the right to negotiate wages and working conditions. However, strikes from economic grievances are rare in Albania. Employment contracts apply to both union and non-union workers. The two main national-level trade unions, both affiliated with the International Trade Union Confederation (ITUC), are the Confederation of Trade Unions (KSSH) and the Union of the Independent Trade Unions of Albania (BSPSH). Employment contracts can be limited or unlimited in duration, but typically cover an unlimited period if not specified in the contract. Employees can collect up to 12 months of salary in the event of an unexpected interruption of the working contract.
The State Labor Inspectorate is the main authority responsible for the monitoring of labor conditions and the enforcement of the labor code and occupational health and safety standards. The Inspectorate’s performance is considered inadequate due to a lack of human resources and limited financial capabilities. Furthermore, the Inspectorate has no investigative or prosecutorial responsibilities, as it submits all allegations of infringements to other law enforcement agencies.
The Labor Inspectorate is responsible for enforcing occupational health and safety standards and regulations. Workplace conditions in the manufacturing, construction, and mining sectors are often poor and, in some cases, dangerous due to a lack of inspections and enforcement by the Inspectorate.
U.S. Department of State Human Rights Report: http://www.state.gov/j/drl/rls/hrrpt.
Department of Labor Child Labor Report: http://www.dol.gov/ilab/reports/child-labor .
12. OPIC and Other Investment Insurance Programs
The Overseas Private Investment Corporation (OPIC) signed an agreement with Albania in 1991. Albania has also ratified the World Bank’s Multilateral Investment Guarantees Agency (MIGA) Convention. Both instruments provide 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 covers the following risks: currency transfer restriction, expropriation, breach of contract, war, terrorism, civil disturbance, and failure to honor sovereign financial obligations. MIGA and OPIC often cooperate on projects.
For more information on OPIC please see the website : http://www.opic.gov/ .
For more information on MIGA, please see the website : http://www.miga.org/ .
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
|USG or International Statistical Source||USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
|Host Country Gross Domestic Product (GDP) (M USD)||2016||11,864||2015||11,864||World Bank|
|Foreign Direct Investment||Host Country Statistical Source*||USG or International Statistical Source||USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
|U.S. FDI in partner country (M USD, stock positions)||2016||81||2016||20||BEA|
|Host country’s FDI in the United States (M USD, stock positions)||2016||N/A||2016||0||BEA|
|Total inbound stock of FDI as percent host GDP||2016||0||2016||0||N/A|
*Domestic Sources: Bank of Albania (http://www.bankofalbania.org/ ), Albanian Institute of Statistics (http://www.instat.gov.al/ ), Albanian Ministry of Finances (http://www.financa.gov.al/ ).
Table 3: Sources and Destination of FDI
|Direct Investment from Albania in Counterpart Economy Data|
|From Top Five Sources/To Top Five Destinations (US Dollars, Millions) – December 2016|
|Inward Direct Investment||Outward Direct Investment|
|Total Inward||4.985||100%||Total Outward||407||100%|
|“0” reflects amounts rounded to +/- USD 500,000.|
Source: IMF Coordinated Direct Investment Survey (CDIS).
Table 4: Sources of Portfolio Investment
|Portfolio Investment Assets|
|Top Five Partners (Millions, US Dollars) – December 2016|
|All Countries||749||100%||All Countries||31||100%||All Countries||718||100%|
|Turkey||195||31%||Not specified (including confidential)||31||100||Not specified (including confidential)||319||44.4%|
|Czech Rep.||106||9%||Czech Rep.||106||14.76%|
|Russian Federation||65||7%||Russian Federation||65||9%|
Source: IMF’s Coordinated Portfolio Investment Survey (CPIS).
14. Contact for More Information
Jeffrey D. Bowan
Economic and Commercial Officer
U.S. Embassy Tirana, Albania
Rruga Elbasanit, Nr. 103
+355 4 224 7285