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Afghanistan

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Toward Foreign Direct Investment

Under the Private Investment Law of 2005 (PIL), qualified domestic or foreign entities may invest in all sectors of the economy.  Article 16 of the PIL states that approved domestic and foreign companies with similar objectives are subject to the same rights under Afghan law and the same protections against discriminatory governmental actions.

The Ministry of Commerce and Industries (MOCI) has taken on the role of promoting business growth, investment, and trade.  The High Commission on Investment (HCI) is responsible for investment policy making. The HCI includes the Ministers of Agriculture, Finance, Foreign Affairs, Mines and Petroleum, and the Governor of the Central Bank (Da Afghanistan Bank). The Minister of Commerce and Industries chairs the HCI.  The High Economic Council (HEC), which is chaired by the President and includes both the HCI members and representatives from academia and the private sector, also plays a role in investment policy development.

The HEC, HCI, MOCI, and the Afghan Chamber of Commerce and Industries are tasked with maintaining a dialogue and resolving business disputes with the government.

On July 29, 2016, Afghanistan was formally admitted to the WTO, which could bring about a number of benefits for Afghanistan after full implementation, including improving prospects for foreign direct investment.

Limits on Foreign Control and Right to Private Ownership and Establishment

Under the PIL, foreign and domestic private entities have equal standing and may establish and own business enterprises, engage in all forms of remunerative activity, and freely acquire and dispose of interests in business enterprises.

While there is no requirement for foreigners to secure Afghan partners, the Afghan Constitution and the PIL prohibit foreign ownership of land.  In practice most foreign firms find it necessary to work with an Afghan partner. Foreign land ownership is not permitted, however, foreigners may lease land for up to 50 years.

Although the HCI has authority to limit the share of foreign investment in some industries, specific economic sectors, and specific companies, that authority has never been exercised.  In practice, investments may be 100 percent foreign owned.

Article 5 of the PIL prohibits investment in nuclear energy and gambling establishments.

Investment in certain sectors, such as production and sales of weapons and explosives, non-banking financial activities, insurance, natural resources, and infrastructure (defined as power, water, sewage, waste-treatment, airports, telecommunications, and health and education facilities) is subject to special consideration by the HCI, in consultation with relevant government ministries.  The HCI may choose to apply specific requirements for investments in restricted sectors. Direct investment exceeding USD 3,000,000 requires HCI approval of the investment application.

Other Investment Policy Reviews

There have been no third-party investment policy reviews by the OECD, WTO, or UNCTAD in the past six years.

Afghanistan’s last major investment policy review was the Afghanistan National Development Strategy (ANDS), which was developed with the assistance of the United Nations Development Program (UNDP) and covered the period 2008-2013.  That strategy attempted to guide development investments in the focus areas of (1) agriculture and rural rehabilitation, (2) human capacity development, and (3) economic development and infrastructure, through high-priority programs chosen for contributions to job creation, broad geographic impact, and likelihood of attracting additional investment.

Business Facilitation

The Ministry of Commerce and Industry (MoCI) is responsible for business facilitation.  The HCI and HEC are responsible for investment and economic policy making.

Foreign or domestic companies investing in Afghanistan must obtain a corporate registration from the Afghanistan Central Business Registry (ACBR) and a Tax Identification Number issued by the Department of Revenue.

The websites for registration are:

Companies operating in the security, telecommunications, agriculture, and health sectors require additional licenses from relevant ministries.  Companies seeking licenses to provide consultancy, legal, or audit services must meet requirements for education or related experience for top officers.

To begin the process for initial issuance of licenses, renewals, and material changes to the license, foreign firms must submit a letter of interest to the Afghan Center of Business Registers.  From there, the Ministry of Commerce and Industry (MoCI) will process the request, and notify the foreign firm how to proceed in obtaining the license.

While registering a business can take as little as two days, it often takes longer and may require a local attorney’s help.

Ease of doing business reforms in 2016 led MOCI to begin issuing licenses for three years, as opposed to one year, to attract investment.  Obtaining a business license is relatively simple, however, applications for renewal are contingent upon certification from the Ministry of Finance (MOF) that all tax obligations have been met.  Some companies have seen MOCI license renewals delayed while the MOF audits their tax status, despite MOF assurances that an ongoing tax audit should not impede license renewal.

Outward Investment

The government does not promote or incentivize outward investment.  Due to the security situation capital flight is a concern.

Private investors have the right to transfer capital and profits out of Afghanistan, including for off-shore loan debt service.  There are no restrictions on converting, remitting, or transferring funds associated with investment, such as dividends, return on capital, interest and principal on private foreign debt, lease payments, or royalties and management fees, into a freely usable currency at a legal market-clearing rate.

The PIL states that an investor may freely transfer investment dividends or proceeds from the sale of an approved enterprise abroad.  The MOF has in some instances frozen the domestic bank accounts of companies over tax disputes, which has effectively served to prohibit transfers of capital.

6. Financial Sector

Capital Markets and Portfolio Investment

Afghanistan is in principle welcoming toward foreign portfolio investment, but financial institutions and markets are at an early stage of development.  Afghanistan does not have a stock market. There are no limitations of foreign investors obtaining credit. The banking sector generally only provides short term loans.

Afghanistan joined the IMF on July 14, 1955.  As confirmed in the May 2018 IMF Country Report, Afghanistan maintains an exchange system that is free of multiple currency practices and restrictions on the making of payments and transfers for current international transactions.

Money and Banking System

The penetration of banking services is described in the below tables based on Q3 2018 data from the Afghan Central Bank (Da Afghanistan Bank, DAB):

Provided Banking Facilities  No.
Full Service Branches 414
Limited Service Branches 212
Automated Teller Machines 332
Others   92
Point of Sale    182
  Total 1,232

 

Debit and Credit Cards No.
Debit Card                                                                                                              455,376
Credit Card 2,016
  Total 457,392

Most Afghans remain outside the formal banking sector.  Afghans continue to rely on an informal trust-based process referred to as Hawala to access finance and transfer money, due in part to religious acceptance, unfamiliarity with a formal banking system, and limited access to banks in rural areas.  Three of the four major mobile network operators – Etisalat, AWCC, and Roshan – offer mobile money services. The Afghan government will launch a mobile money salary payment system for 5,000 employees in the Ministry of Labor in mid-2019.

Finance is Afghanistan’s second-largest service industry behind telecommunications and is potentially an important driver of private investment and economic growth.  There are 14 commercial banks operating in Afghanistan.

There are three state banks: Bank-e Millie Afghan (Afghan National Bank), Pashtany Bank, and New Kabul Bank (formerly the privately owned Kabul Bank).  There are also branch offices of foreign banks, including Alfalah Bank (Pakistan), Habib Bank of Pakistan, and National Bank of Pakistan.

As of September 2018, the total assets of the banking sector was USD 4.16 billion.  Banking remains highly centralized, with a considerable majority of total loans made in Kabul.  Bank lending is undermined by the legal and regulatory infrastructure that impedes the enforcement of property rights and development of collateral.

As of December 2018, the banking sector gross Non-Performing Loans (NPL) ratio was 11.3 percent, while the net ratio stands at 5.9 percent.

Formal credit to the private sector stands at less than 10 percent of GDP, significantly lower than other countries in the region.  Afghanistan ranks 105 out of 190 economies for ease of obtaining credit in the World Bank’s Doing Business 2019. Afghan entrepreneurs complain interest rates for commercial loans from local banks are high, averaging around 15.5 percent.  In response to this situation, investment funds, leasing, micro-financing, and SME-financing companies have entered the market. USAID is working with the Afghan banking sector to promote improved access to finance and the expansion of financial inclusion.

Afghanistan has lost many correspondent banking relationships in the past few years due to risk aversion and lack of profitability.  The full extent of impact has yet to be quantified, but the unmeasured effects have been a loss in the ease of basic international transactions.

The Afghan Central Bank (Da Afghanistan Bank, DAB) has made improvements in monitoring and supervising the banking sector, following the 2010 Kabul Bank crisis.  President Ghani also took steps to hold those responsible accountable. The Afghan Government has a plan to recover assets from perpetrators of the large-scale bank fraud, though progress on its implementation remains slow.

Foreigners can open bank accounts with Afghanistan banks if they have valid visas, work permits, and in the case of a legal entity, a valid business license.  Afghan banks do not open bank accounts for non-resident customers.

Foreign Exchange and Remittances

Foreign Exchange Policies

Private investors have the right to transfer capital and profits out of Afghanistan, including for off-shore loan debt service.  There are no restrictions on converting, remitting, or transferring funds associated with investment, such as dividends, return on capital, interest and principal on private foreign debt, lease payments, or royalties and management fees, into a freely usable currency at a legal market clearing rate.  The PIL states that an investor may freely transfer investment dividends or proceeds from the sale of an approved enterprise abroad.

Major transactions in Afghanistan, such as the sale of autos or property, are frequently conducted in dollars or in the currency of neighboring countries.  Afghanistan does not maintain a dual-exchange-rate policy, currency controls, capital controls, or any other restrictions on the free flow of funds abroad. Afghanistan uses a managed floating exchange rate regime under which the rate is determined by market forces.  It is illegal to transport more than USD 20,000 or its equivalent in other currencies out of Afghanistan via land or air. Amounts over USD 10,000 but less than USD 20,000 must be declared. Enforcement is reported to be inconsistent.

Remittance Policies

Access to foreign exchange for investment is not restricted by any law or regulation.  There are large, yet informal, foreign exchange markets in major cities and provinces where U.S. dollars, British pounds, and euros are readily available.  Entities wishing to buy and sell foreign exchange in Afghanistan must register with the Afghan Central Bank (Da Afghanistan Bank, DAB), and thousands of licensed, as well as unlicensed, Hawalas continue to practice their trade.  Non-official money service providers often cite the lack of enforcement in the currency exchange sector, and the resulting competitive disadvantage to licensed exchangers, as a disincentive to becoming licensed.

Over the past several years, Afghanistan has made significant progress in improving Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) controls and is no longer subject to Financial Action Task Force (FATF) monitoring.  The FATF report can be found at http://www.fatf-gafi.org/countries/a-c/afghanistan/documents/fatf-compliance-june-2017.html  .

Sovereign Wealth Funds

Afghanistan does not have a sovereign wealth fund.

7. State-Owned Enterprises

The Government of Afghanistan operates over 30 active state-owned enterprises (SOEs), almost all of which are wholly-owned.  About 11,000 people are employed in sectors including public security, construction, transport, telecommunications, agriculture, and extractives.  Net income for all the SOEs is around USD 13 million; few are profitable. All SOEs are overseen and regulated by the Ministry of Finance and directly operated by specific ministries depending on the nature of the operations.  The Law on State Owned Enterprises includes specific targets for research and development investment, social development measures, and employee profit sharing, but compliance is negligible.

The Afghan government is also a stakeholder in 13 state-owned corporations (SOCs), entities that have independent boards and are not operated or directly supervised by the government.  SOEs and SOCs make up a small share of overall economic activity, although a few SOCs have significant market share in their sectors, including Afghan Telecom (Aftel), Ariana Afghan Airlines, and the electrical utility DABS (Da Afghanistan Breshna Sherkat).

Afghanistan does not have a centralized ownership entity for SOEs; the Ministry of Finance is responsible for all SOE oversight.

9. Corruption

Afghan and foreign firms routinely cite corruption as an obstacle to doing business, whether in permitting and licensing, government procurement, meeting regulatory requirements, or taxation.  Various corruption watchdog reports regularly indicate corruption is endemic throughout society. For example, systemic corruption at border crossings hampers development of the licit market economy.  Afghan officials collect bribes in exchange for undervaluing, under-weighing, or not scanning shipments, which facilitates smuggling of illegal goods and the illicit trade of legal goods, while also weakening Afghan revenue collection and regulatory institutions.

The practice of criminalizing commercial complaints is commonly used to settle business disputes or to extort money from wealthy international investors.  The government does not implement criminal penalties for official corruption effectively, and officials are reported to frequently engage in corrupt practices with impunity.  There are reports of low-profile corruption cases successfully tried and of lower-level officials removed for corruption.

President Ghani has made anti-corruption efforts a high priority, and the government has seen some success in reform of procurements and customs.  In 2016, the government opened the Anti-Corruption Justice Center (ACJC) to investigate and try corruption cases. The ACJC has successfully convicted some government officials for corruption.  These high-level initiatives are positive steps though corruption remains a major issue. Disputes over land and land grabbing have risen over the last decade. Press reports indicate that government officials take land without compensation in exchange for contracts or political favors.  Occasionally, provincial governments confiscate land without due process or compensation to build public facilities.

UN Anticorruption Convention, OECD Convention on Combating Bribery

Afghanistan has signed and ratified the UN Anticorruption Convention. Afghanistan is not party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

The Afghan Government body responsible for combating corruption is the High Office of Oversight & Anti-Corruption. Prosecutorial authority resides with the Attorney General’s Office.

Afghan Government Point of Contact:

Dr. Yama Torabi
Head of Secretariat of High Council on Rule of Law and Anti-Corruption: (HCRoLAC)
+93 799 271 624)
Email: yama.torabi@gmail.com

Watchdog Organization Contact:

Sayed Ikram Afzali, Executive Director
Integrity Watch Afghanistan
Emal: ikram.afzali@iwaweb.org

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 1: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2017 $20.82 B 2017 $19,540 https://data.worldbank.org/country/afghanistan   
Foreign Direct Investment Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2017 N/A 2017 $19 https://ustr.gov/countries-regions/south-central-asia/afghanistan   
Host country’s FDI in the United States ($M USD, stock positions) 2017 $0 2017 $2 https://ustr.gov/countries-regions/south-central-asia/afghanistan    
Total inbound stock of FDI as % host GDP N/A N/A 2017 7.0% unctad.org/sections/dite_dir/docs/wir2018/wir18_fs_af_en.pdf  


Table 3: Sources and Destination of FDI

Data not available.


Table 4: Sources of Portfolio Investment

Data not available.

Albania

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The GOA understands that private sector development and increased levels of foreign investment are critical to support sustainable economic development.  Albania maintains a liberal foreign investment regime designed to attract FDI. 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.  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.  Amendments in 2017 and 2018 extended state protection for strategic investments as defined under the 2015 Law on Strategic Investments.

The Albanian Investment Development Agency (AIDA) oversees promoting foreign investments in Albania.  Potential U.S. investors in Albania should contact AIDA to learn more about services AIDA offers to foreign investors (http://aida.gov.al/  ).

The Law on Strategic Investments stipulates that AIDA, as the Secretariat of the Strategic Investment Council, serve as a one-stop shop for foreign investors, from filing of the application form to granting the status of strategic investment/investor.

Despite hospitable legislation, U.S. investors are challenged by corruption and the perpetuation of informal business practices.  Several U.S. investors have left the country in recent years after contentious commercial disputes, including some 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 of 33 sectors have restrictions against full foreign ownership, or in the case of the agriculture sector, against foreign land ownership.

  • 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.
  • Agriculture: No foreign individual or foreign incorporated company may purchase agricultural land, though land may be leased for up to 99 years

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.  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

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/).  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.  

Outward Investment

Albania neither promotes nor incentivizes outward investment or restricts domestic investors from investing abroad.

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 (NPL) remains a concern.  The Bank of Albania’s legal measures to address the problem have generated mostly positive results. The banking sector is fully private.  It has undergone significant consolidation over the last year, shrinking the number of banks to 12, down from 16 at the beginning of 2018. As of December 2018, the Turkish National Commercial Bank had further consolidated its position as the largest bank, with 28.4 percent of the market, followed by Austria’s Raiffeisen Bank, with 15 percent, and Albania’s Credins Bank, with 12.9 percent.  The share of Greek banks has significantly decreased in recent years due to the departure from Albania of the National Bank of Greece and Greece-based Piraeus Group’s Tirana 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 enough liquidity to support sizeable positions.  Furthermore, portfolio investments remain limited mostly to company shares, government bonds, and real estate.

Nevertheless, the high rate of non-performing loans and the economic slowdown forced commercial banks to tighten lending standards.  After a slight increase in 2017, the stock of loans decreased by 3.3 percent year-on-year in 2018, due also to the 9 percent appreciation of the domestic currency against the euro.  The credit market is competitive, but interest rates in domestic currency can be high, ranging from 6 percent to 8 percent. Most mortgage and commercial loans are denominated in euros, as rate differentials between local and foreign currency average 2.5 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.

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.  The sector has contracted in recent years. In December 2018, Albania had 474 bank branches, down from 552 in 2016. Capital adequacy, at 18.2 percent, remains above Basel requirements and indicates sufficient assets, which in 2018 totaled USD 13.54 billion.  At the end of 2018, the return on assets was 1.2 percent. Non-performing loans continued to fall, reaching 11.1 percent at the end of the 2018, down from 13.2 percent compared with 2017, and a significant improvement over 2014, when NPLs stood at 25 percent.

The Bank of Albania has the flexibility to intervene in the currency market to protect exchange rates and official reserves, but not for longer than 12 months.  As part of its strategy to stimulate business activity, the Bank of Albania has persistently lowered interest rates, which in June 2018 reached a historic low of 1 percent, down from a rate of 1.25 percent in place since May 2016.

Most banks operating in Albania are subsidiaries of foreign banks, and just two have Albanian shareholders.  However, Albanian ownership is expected to increase because of the sector’s ongoing consolidation. 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 must complete a form allowing for the disclosure of their banking data to the IRS as required under the U.S. Foreign Account Tax Compliance Act.

Foreign Exchange and Remittances

Foreign Exchange

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 Bank of Albania maintains a free float exchange rate regime for its domestic currency, the lek.  Albanian authorities do not engage in currency arbitrage, nor do they view it as an efficient instrument to achieve competitive advantage.  The Bank of Albania does not intervene to manipulate the exchange rate unless required to control domestic inflation, in accordance with the Bank’s official mandate.  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.  A 2018 campaign launched by the BOA with a goal to reduce the domestic use of the euro and other foreign currencies has yet to produce tangible results. The campaign is part of a larger reform that aims to improve the effectiveness of domestic economic policies.

Remittance Policies

The Banking Law does not impose restrictions on the purchase, sale, holding, or transfer of monetary foreign exchange.  However, local law authorizes the BOA 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 BOA 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 1,000,000 lek (USD 9,000) in hard currency and/or precious items.  Failure to declare such assets is considered a criminal act, punishable by confiscation of the assets and possible imprisonment.

Although the Foreign Exchange (FX) 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, a certificate of registration from the National Registration Center, 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 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 2019 INCSR maintains Albania in the “Major Money Laundering Jurisdictions” category following its inclusion for the first time in 2017. The category implies that financial institutions of the country engage in currency transactions involving significant amounts of proceeds from international narcotics trafficking.

Sovereign Wealth Funds

Albania does not have a sovereign wealth fund.  A draft law to establish the Albanian Investment Corporation is currently under discussion.  The GOA plans to transfer state owned assets, including state-owned land, and provide initial capital to launch the corporation.  The corporation would develop, manage, and administer state-owned property and assets as public investments.

7. State-Owned Enterprises

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.  SOEs operate mostly in the generation, distribution, and transmission of electricity, oil and gas, railways, postal services, ports, and water supply. There is no published list of SOEs.

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 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 Organization for Economic Cooperation and Development (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.

Privatization Program

The privatization process in Albania is nearing conclusion, with just a few major privatizations remaining.  Such opportunities include OSHEE, the state-run electricity distributor; 16 percent of Albtelekom, the fixed- line telephone company; and state-owned oil company Albpetrol.

The bidding process for privatizations is public and relevant information is published by the Public Procurement Agency at www.app.gov.al  .  Foreign investors may participate in the privatization program.  No public timelines exist for future privatizations.

The privatization process in Albania is nearing conclusion, with just a few major privatizations remaining.  Such opportunities include OSHEE, the state-run electricity distributor; 16 percent of Albtelekom, the fixed- line telephone company; and state-owned oil company Albpetrol.

The bidding process for privatizations is public and relevant information is published by the Public Procurement Agency at www.app.gov.al  .  Foreign investors may participate in the privatization program.  No public timelines exist for future privatizations.

9. Corruption

Corruption is a continuing problem in Albania, undermining the rule of law and jeopardizing economic development.  Albania ranked 99th out of 180 countries in Transparency International’s 2018 Corruption Perceptions 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 vetting process will ensure that prosecutors and judges with unexplained wealth, insufficient training, or those who have issued questionable past decisions are removed from the system.  The reform is also establishing an independent prosecutor and a specialized investigation unit to investigate and prosecute corruption and organized crime. Once 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 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 several 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, “Shqiperia qe Duam” – “The Albania We Want,”    which invites citizens to submit complaints and allegations 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.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2017 $13,039 2017 $13,039 www.worldbank.org/en/country  
Foreign Direct Investment Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2017 $89 2017 $56 BEA
Host country’s FDI in the United States ($M USD, stock positions) 2017 N/A 2017 $0 BEA
Total inbound stock of FDI as % host GDP 2017 55.4% 2017 55.4% UNCTAD

* Source for Host Country Data: 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/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward $6,739 100% Total Outward $471 100%
Greece $1,279 19% Kosovo $314 66.6%
Switzerland $1,066 15.8% Italy $137 29%
Canada $1,051 15.5% U.S.A. $9 1.9%
Netherlands $944 14% Netherlands $2 0.4%
Turkey $508 7.5% Germany $2 0.4%
“0” reflects amounts rounded to +/- USD 500,000.

 

Table 4: Sources of Portfolio Investment

Portfolio Investment Assets
Top Five Partners (Millions, US Dollars)
Total Equity Securities Total Debt Securities
All Countries $814 100% All Countries $38 100% All Countries $776 100%
Turkey $258 32% Turkey $17 46% Turkey $241 44.4%
Czech Rep. $101 12% Netherlands $8 22% Czech rep. $101 14.76%
Italy $89 11% Canada $8 22% Italy $89 12.53%
Germany $67 8% Bahamas $2 5% Germany $67 9%
Poland $37 5% U.S.A. $2 5% Poland $37 2.78%
Investment Climate Statements
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