Investment Council discusses Incentives for Investment Promotion: Albania compared to Western Balkan countries

Investment Council discussed on Wednesday, “Incentives for Investment Promotion: Albania compared to Western Balkan countries.” In consultation with AIDA and the business community, the Secretariat drafted a technical note on the nature of investment incentives that Albania offers compared to the other regional countries, interests and problems in the attraction of investors and improvement of business climate.

The Chair of the Council, Minister Milva Ekonomi stated that: “Albania offers many opportunities in the attraction of foreign investments compared to the neighbouring countries because of the geographical location, competitive social cost, as well as natural resources. Meanwhile, AIDA has a new clear role due to the Strategic Investment Law which makes our country more competitive in the region.”

During her presentation, Head of Secretariat, Ms. Diana Leka stated that “Albania performs good in the region in relation to FDI value, but the content and number of greenfield projects as well as technology and innovation-oriented products is relatively low and debatable compared to regional countries while the investment climate is conditioned by the reform in the judicial, sustainability of public administration, especially tax administration, and fight against corruption and informality.”

One of the findings resulting from the analysis is that Albania is more competitive regarding non-fiscal incentives – due to Strategic Investments Law and labour cost. Meanwhile, almost all the countries offer incentives in the import of machinery, income tax or possibility for the loss carry forward, creation of national and local economic zones. While regarding sectors, each country has different favouring sectors, e.g. Macedonia and Montenegro have incentives dedicated to tourism.

In relation to total tax burden for the business, Albania is seen less attractive compared to the regional countries, listed behind Serbia for the highest level of income tax and tax on the source, while on the other hand Albania is more advantageous regarding low labour cost, especially average salary compared to the other countries.

Key messages deriving from the analysis were that in Albania there is a clear political and legislative objective for the attraction of foreign investors. Many laws are in place, such as Law on Strategic Investments, TEDA, Law on Tourism, Concessions and PPP. But the non-sustainability of the fiscal legislation and bureaucracy in implementation creates insecurity in the success of the incentives and sustainable investments, as well as change of the tax in infrastructure. The business demands urgent preparation of promoting products for investment in priority sectors, for the implementation of incentive policies in the automotive and tourism industries.

In the report prepared by the Secretariat, the business has demanded engagement from the institutions especially regarding professional administration, as a precondition for the effectiveness of incentives.

Furthermore, the Council discussed the preparation of feasibility studies and products from AIDA for potential investors and meanwhile stressed the need to increase AIDA’s budget and capacities.

More information is available on the Technical Note.