Albania remains ‘moderately free’ as it climbs 13 steps in economic freedom

Tirana Times
By Tirana Times January 28, 2019 15:29

Albania remains ‘moderately free’ as it climbs 13 steps in economic freedom

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  • The state-run sector produces only a fifth of the GDP and employs one out of five in Albania, but experts say a weak rule of law has led to unfair competition and operations under monopoly position including the state-run electricity distribution and services operated by private sector operators under monopoly concessions or public private partnerships.

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TIRANA, Jan. 28 – Albania climbed 13 steps to rank one of the Western Balkans’ best performing countries in economic freedom, but remained ‘moderately free,’ according to the 2019 index of economic freedom published by the Heritage Foundation, one of the top US-based think tanks.

This year’s report ranked Albania 52nd out of 180 global economies, a sharp improvement compared to last year’s 65th, in progress which the Heritage Foundation attributes to "dramatic improvement for the second consecutive year in fiscal health and higher scores for judicial effectiveness, labor freedom, and government spending.”

The report ranks Albania only one step below neighboring Kosovo, Europe’s youngest country that will be celebrating its 11th independence anniversary next February, and much better compared to Serbia, the region’s largest economy that ranked 69th this year. Ethnically-divided Bosnia and Herzegovina and tiny Montenegro ranked 83rd and 92nd respectively.

Macedonia, which recently overcame its decades-long name dispute with Greece, by being renamed the Republic of North Macedonia, was the region’s best performer ranking 33rd as the sole Western Balkan economy that is rated 'mostly free.'

Despite progress during the past quarter of a century of transition to democracy and a market economy, the report describes Albania as one of Europe’s poorest countries, “with sluggish economic growth hindered by a large informal economy and weak energy and transportation infrastructure and where high unemployment and a lack of opportunity spur substantial emigration.”

The long-standing issue of property rights, a weak judiciary that is undergoing reform, one of the region's weakest tax collection rates at only around 25 percent of the GDP despite having the highest tax burden among Western Balkan countries are some of Albania’s drawbacks identified by the Heritage Foundation report. In addition, a number of non-tariff barriers and bureaucracy is estimated to hamper both trade and investment opportunities.

Due to poor connectivity and the small size of regional economies as well as tariff and non-tariff barriers in place defying a regional free trade agreement, Albania conducts only a tenth of its trade with regional CEFTA countries. Similarly, Albania also manages to attract only a tenth of the FDI flowing into Western Balkans. FDI in Albania, which during the past decade has been at an average of €1 billion annually, mainly focuses on low value-added energy-related projects such as hydropower, oil and mining and most recently natural gas through the major Trans Adriatic Pipeline set to bring Caspian gas to Europe by 2020.

The state-run sector produces only a fifth of the GDP and employs one out of five in Albania, but experts say a weak rule of law has led to unfair competition and operations under monopoly position including the state-run electricity distribution and services operated by private sector operators under monopoly concessions or public private partnerships.

The latest World Bank Doing Business report showed Albania climbed only two steps to rank 63rd out of 190 global economies for the ease of doing business, continuing to lag behind most of its regional competitors ranking in the top 50.

Paying taxes ranks Albania the world's 122nd worst performer with medium-sized companies spending an average of 252 hours a year and having to pay about 37.3 percent of their profit in taxes and contributions, in the region's worst rating.

Tirana Times
By Tirana Times January 28, 2019 15:29