Albania, a small market, but with remarkable opportunities for investors

The stability of fiscal policies and legislation, increased trust in the services offered by the administration to the business and the reinstatement of trust in the courts are some of the main elements to work with in order to boost investments, both foreign and domestic. Diana Leka, Head of the Secretariat of the Investment Council, thinks that efforts must be made to improve the business climate in the country, by protecting current investors who respect obligations towards our state and our society. “If we protect investors and create opportunities for them to reinvest their profits in Albania, then we have offered the best sponsorship to the country in terms of investments”, says the head of the institution that was established one year ago by the Albanian authorities with the support of EBRD, as a platform to enhance the dialogue between the government and the private sector, to improve the business climate and to promote good governance.

What are the main barriers for a company that wants to invest in Albania?

Our analysis, based on the assessments of international reports during the last 2-3 years, as well as on our surveys and face-to-face meetings with the businesses, found that the main problems are related with: tax inspection practices, informality level of the economy, which affects unfair competition, complex procedures and “abusive” decisions on administrative appeals, as part of the “dispute resolution”, or specific problems concerning the bankruptcy of companies. The barriers emerge in the form of lack of trust in the public institutions and especially in fiscal administration institutions, lack of inter-institutional coordination, mostly experienced during the anti-informality action with the large number of inspections, failure to provide a timely answer to businesses, evasive interpretations of the legislation and low professionalism of the administration. Businesses remain concerned about the resolution of disputes arising with the public administration regarding administrative appeals and there is scepticism about the decisions of administrative courts and their quality. A recent analysis carried out by the Secretariat found that the appeals of businesses are accepted by the administration only in few cases, whereas administrative courts are inclined to issue decisions in favour of the administration.

So, for instance, institutional data processed by the Secretariat indicate that the General Customs Directorate (GCD) and the Tax Appeal Directorate (TAD) accept very few appeals submitted by businesses; respectively GCD accepted 2% of appeals in 2015 and TAD accepted 6% for the first half of 2015.

Also, the data for 2015 from the Administrative Court in Tirana point to a low percentage (26% of decisions) in favour of the businesses.

The in-depth analysis on the above pointed at the indispensability of fiscal policies’ and relevant applicable legislation stability (unification of stances, simplification of procedures and transparency of the administration’s activity); communication, staff retention and building trust in the services that the administration offers to the businesses, as well as reinstatement of trust in the courts.

These factors constitute a triangle where the work and cooperation between the government and businesses must focus on in the coming months.

Is there a need for interventions to improve the business climate for the investors and where should these interventions take place?

Globalisation is a phenomenon where you get lost even if you sit still, because others progress, investors seize opportunities in the countries of the region. Efforts must be made to improve the business climate in the country by protecting current investors who respect obligations towards our state and our society. If we protect investors and create opportunities for them to reinvest their profits in Albania, then we have offered the best sponsorship to the country in terms of investments. The capital reinvestment level is a significant indicator of the improvement of the business climate and of better chances to attract new investors. The government has recently undertaken a number of measures, especially in relation with the collection of overdue liabilities, recent laws, such as the one on tourism and strategic investments, or starting to issue construction permits which should be accompanied as soon as possible with the drafting of legal provisions that enable their proper implementation, such as for instance the issuance of construction permits, etc. However, the wish and will to establish a good business climate can be shown through some small changes, at no cost on the budget, but with an impact on the business. I refer here to a considerable number of practical recommendations offered by the Secretariat of the Investment Council, particularly with regards to the tax legislation and tax inspections.

According to you, which are the sectors that would potentially attract foreign investors? 

Among the most potential sectors is the infrastructure sector, because the country still needs a lot of investment and improvement in this area, the energy sector is also very attractive due to the natural resources of Albania, such as water and underground resources.  In the meantime, both these sectors need enormous investment capitals and, at a difficult time for international conjunctures, I think that it would be of interest to attract foreign investments that may require a lower capital, but are more numerous.

Information technology is undoubtedly another area of interest. Albania has now turned into an attraction for ‘call-centre’ businesses, the number of which has grown rapidly in the last years, mainly due to the cheap labour costs. These businesses can very well serve as a bridge to further develop the establishment of IT- based businesses in the country. The infrastructure and network has been already built and opportunities of training young persons, who will be the workforce in this area, are very good. I think that Albania has a chance in this direction, which guarantees an increase of both, foreign investments and income of those employed in this sector. The government may further promote this area by providing various incentives in fiscal relief, or support in new hires and staff training. In the meantime, a linkage with the education system must be established to prepare qualified professionals in the IT sector and to enable a relationship with businesses for traineeship purposes.

How competitive do you consider Albania versus the Region?

We are currently working on this issue and on April 28 we will present to the Investment Council some of the recommendations. Albania is a small market but, on the other hand, it presents fantastic opportunities due to its geographical position, EU integration process, active workforce, new unexploited prospects (tourism, agriculture, BoP services, light industry) or perhaps a relative stable currency. Albania must be seen as an integrated part of the Balkan regional network and it can offer very good opportunities for foreign investors in this context. The Western Balkan countries, such as Macedonia and Serbia have been aggressive in attracting companies, mainly in the automotive industry, which is also the result of a tradition they have in this sector. Albania is part of this region and must be seen as integrated within the larger regional market, as a complementary actor, as well as a competitor in advantageous sectors for it.

The BoP sector, even though lightweight regarding contributions to the GDP (it is estimated from 3-5%) is a growing sector, it has drawn a lot of interest from foreign investors and has shown a trend of service diversification, not only in respect to customer and marketing services, but with regards to financial, legal, accounting, programming services, etc. as well. Therefore, Albania must aim to further develop this sector the foundations of which lie in a young well-educated workforce and which provides for further qualification opportunities if oriented towards productivity.

Published on Monitor Magazine, 18 April 2016.

Republished by Independent Balkan News Agency, 4 May 2016.