Albania’s Challenges on Investments
Speaks Ms Diana Leka, Head of Secretariat of Investment Council in Albania
In the second half of the year, it is expected a revitalisation of private investments, influenced also by the expected political stability following the parliamentary elections.
But, important challenges lay ahead. In a interview for FIAA’s June Newsletter, Ms Diana Leka, Head of Secretariat of Investment Council in Albania, stated that one of the main pillars where we need to be focused has to be in which area we expect growth of investments in the future, as well as which could be the pertinent policies, considering also the regional context.
What role has the Investment Council played in the improvement of the business climate and how do you evaluate the current investment climate in Albania?
The Investment Council has been working specifically on the improvement of tax administration, customs facilitation procedures, dispute resolution, as well as informality. There is some progress concerning the simplification of services and documents related to the payment of taxes, facilitation of constructions permit, communications and transparency with taxpayers, steps on closing a business, e-signature, efforts undertaken regarding VAT refund for exporters or RPAs, improved transparency towards taxpayers, increased access online of land and property registration records, etc. Some important international reports, including Doing Business, have already recorded positive scores on the above issues too.
While, at the macro policy level – initiated structural reforms on energy, pension, NPLs, land property, fiscal rule and transparency of public management money, territorial reform should be further accelerated to reach the enormous potential that Albania can offer to compete regionally and globally.
What about the environment during the second half of 2017?
Stability of laws and institutions will make the second half of 2017 really promising for the “pending” private investment decisions Predictability is crucial for the business and investment activities. As a small economy, although quite strategically located, stability remains crucial in all aspects, but more specifically as relates to laws and institutions.
What are some of the challenges that lie ahead for investment in Albania?
One of the main pillars where we need to focus is where the growth or investment will mainly come in the next period ahead and what could be the relevant policies, keeping in consideration the regional context.
Productivity levels, especially labour productivity, remain low, probably related to the quality of investment climate and the current state of “unfair competition”. Challenges ahead, a part of legal reform, are related to proactive policies on:
- Informality and lack of finance which directly impact competitiveness. We worked on these issues last year, and believe that a well-defined and consolidated plan of action in short and medium term is necessary to tackle the issue. There is still a gap of disaggregated data that hinder the quantification of findings to come with options of policies for example in agriculture, trade, service which seems to be main sectors that contribute to the growth/employment.
- Invest in improving the Human capital and quality of education by focusing more on skills that would allow easy access to the current labour market and new knowledge economy – for example, Investment Council worked in February and recommended to focus education on problem-solving, foreign languages, Microsoft skills and communication. Investment in R&D is at a very low level, while inclusive innovation and research& development, are a precondition for upgrading new skills and adapting existing ones.
- Ease the access of new business such as startups, in the barriers they face as a new entry in the market. As any other business model, startups face administrative burden like a usual business. Targeted and tailored policies would help to support them specifically in accessing finance and entering markets. Albania and Eastern countries are already mentioned in the main international media as “unveiling its tech ambitions”, but regional competition is becoming quite aggressive and proactive and flexible policies should be on the top agenda.
- Improving Infrastructures such as in energy, logistics and trade cost, and ICT infrastructure, by considering public investment to be focused more on “connectivity “ and creating conditions for private investment, while private investment could be more in agriculture, tourism, automotive, etc.
Obviously, the speed and maturity of the justice reform followed by professionalism and image of the public administration are pre – conditions that will facilitate or hinder any reform for the country.
What will the Council discuss in the second half of the year?
It will be discussed simplification of inspections to reduce the administrative burden for the business. Government Inspections are essential components of the regulatory system and critical to the benefits of society, businesses and citizens. However, inspections may bear redundant costs and administrative burdens for businesses by discouraging entrepreneurship. The high number and often overlap of various inspections as well as their efficiency in practice still remain a concern for the private sector, also reported to the Secretariat. Thus, the analysis of inspection procedures and interaction between businesses and relevant authorities will be part of the IC agenda for the second half of 2017.
The second subject is related to construction permits and e-permit portal in the frame of recent territorial reform.
The Government has implemented an online portal on construction permits aiming to facilitate the procedures for the business and individuals for getting such permits. The Secretariat of IC has gathered some preliminary opinions and feedback from businesses on construction permits applications and procedures, particularly related to agricultural and industrial sites. On the above basis, our aim is that in cooperation with the local governmental units and the respective stakeholders, to look into the impact of such reforms on investment and local economic development.
What more do you think can be done to improve business conditions?
Rule of law. Albania has a set of good laws in compliance with EU standards but it struggles with their implementation. In any proactive new national investment policy, it should be considered what is really important for the private sector to invest in, the size of the country, its uniqueness, and alignment with “connectivity agenda” under Berlin process. Last year, Investment Council worked on incentives for investments in Albania vis-à-vis other Balkan countries and we found that the “incentive map” was quite different to other Balkan countries. Development of relevant and agreed instruments could help in the regional convergence through harmonisation of policies and alignment with EC standards. It will also address different technical regulations that hinder the trade within the region.
From the operational aspect, it is important to improve the efficiency in the implementation of initiated projects within the limits of the domestic debt, which is directly linked with infrastructure projects.
Prepare projects that could be considered as “quality” projects that really bring impact to the country, and above all prior consultation with the private sector of any new law or policy would help to find a better common solution and better communication. Investment Council and its Secretariat would be a very useful instrument in this aspect.
Published in Monitor Magazine, 27 June 2017.