TIRANA, July 7 – The U.S. State Department has once again lambasted Albania’s business climate as unfavorable, with corruption, unclear property rights and discrimination against foreign investors as the top concerns.
In a report on Albania’s 2017 investment climate, the State Department’s Bureau of Economic and Business Affairs, rates endemic corruption as the top concern holding back U.S. investors to Albania.
“Despite the government’s stated desire to attract foreign direct investment, corruption in Albania is endemic, particularly in the judiciary, and sanctity of contract and respect for private property remain low. The implementation of the reform of the judicial system has recently begun, but the investment climate remains problematic and Albania is perceived as a difficult place to do business,” says State Department.
The report also expresses concern over the discrimination against foreign investor in favour of local companies with political connections.
“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,” says the U.S. State Department.
“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. Several U.S. companies complained last year that they were disqualified from public tenders despite offering the lowest qualified bid, only to see the government award the contract to a local company,” it adds.
Last year, the same report condemned the Albanian government’s ‘antagonistic treatment of foreign investors’ after two major North American oil companies, Canada-based Bankers Petroleum and U.S.-based TransAtlantic Petroleum left the country following disputes rather than expanding their Albania presence.
The 2017 report is optimistic a pickup in commodity prices and Albania’s huge water resources represent good investment opportunities in the country.
“Energy and power, 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,” says the report.
U.S. officials are also optimistic the implementation of a long-awaited reform in the highly perceived corrupt judiciary will give a boost to the country’s business climate and improve investor confidence.
“The passage by Parliament of constitutional amendments in July 2016 to reform the judicial system was a major step forward, and reform, once implemented, should make the country more attractive to international investors,” says the report.
“If fully implemented, judicial reform will discourage corruption, promote foreign and domestic investment, and allow Albania to compete more successfully in the global economy,” it adds.
Earlier this year, some of the country’s biggest local and foreign companies represented by the American Chamber of Commerce in Albania perceived the business climate to have considerably improved, but high taxes, unfair competition and government bureaucracy remained the top three concerns for the second year in a row.
Once again the high level of taxes tops the list of concerns as Albania’s tax burden has climbed to one of the region’s highest in the past few years, with the economy losing its competitiveness to neighbouring countries applying flat tax regimes of about 10 percent.
Since 2014, when Albania abandoned its 10 percent flat tax regime, the corporate income tax and the withholding tax on dividends, rents and capital gains have increased by 5 percent to 15 percent, making the tax burden in the country one of the region’s highest.
Albania climbed 32 steps to rank 58th among 190 global economies in the latest Doing Business report to record its best ever ranking, but yet lagged behind some of its key regional competitors offering lower taxes and easier procedures. At 36.5 percent of profit, Albania’s total tax rate is slightly lower only compared to Serbia’s 39.7 percent, the largest economy among the six EU aspirant Western Balkans countries.
Investment, trade links
U.S. investment in Albania has remained almost unchanged in the past two and a half years. Bank of Albania data shows the stock of U.S. investment in Albania dropped to €88 million in the first quarter of 2017, down from a peak level of about €100 million at the end of the third quarter of 2016, but exactly the same compared to the €88 million at the end of 2014, ranking the leading global economy the tenth largest foreign investor in Albania.
U.S. investment in Albania is mainly focused in the financial and oil and gas industry.
Due to the huge geographical distance and the small size of the Albanian economy, trade exchanges between the two countries remain quite modest.
Albania’s state statistical institute, INSTAT, reports trade exchanged between the two countries, slightly rose to 12.5 billion lek (€93 mln, $106 mln) in 2016, accounting for only 1.5 percent of Albania’s trade volume.
The trade exchanges are overwhelming dominated by Albanian imports topped by machinery and equipment while medicinal plants lead the country’s exports to the U.S.
Despite the small level of trade and investment, the U.S. has been a strategic partner in Albania’s Euro-Atlantic integration and a key donor in the country’s transition to democracy and market economy.
Albania’s affection to the U.S. started after World War I when former President Woodrow Wilson stood up to support Albania’s independence to prevent any further partition of Albanian territories.
The two countries re-established diplomatic relations on March 15, 1991, after a break of 52 years following World War II and Albania’s isolation under communism.
President George W. Bush was the first sitting American President to visit Albania on 10 June 2007.
Some 200,000 Americans of Albanian descent live in the U.S. while the number of Albanian-Americans who permanently live in Albania is estimated at 20,000.
