TIRANA, April 12 – Albania continues remaining one of least attractive destinations for German investors among 16 Central and South East European countries, according to an annual survey conducted by the German Association of Industry and Trade in Albania (DIHA).
The fight against corruption and crime, the transparency of public procurement, legal security, the predictability of economic policies, the public administration, the tax authorities, the tax system and tax burden are some of the key barriers German businesses and their Albanian partners face in the country.
Among 20 European destinations, Albania ranked 19th as an investment destination for 2016 leaving behind only neighbouring Kosovo. The experience of current German investors operating in Albania seems to have played a key role. The survey showed only two-thirds of current German investors in Albania (67 percent) would invest again in Albania if they were given the opportunity, ranking Albania the worst among 16 CSEE countries.
A majority 56 percent of German businesses described the current economic situation in Albania as bad, a 10 percent increase compared to 2015, according to the survey conducted with 40 DIHA members in early 2016. Some 38 percent described the situation in 2016 as satisfactory compared to only 5 percent good.
However, 2016 expectations about the economic situation in the sectors where the companies operate are slightly more optimistic with 41 percent expecting the situation to improve, but the same percentage expecting it to remain unchanged.
Own business situation, revenues and investments are also expected to slightly improve in 2016.
German businesses in Albania are most satisfied with cheap labour costs, the productivity and motivation of employees and quality and availability of local suppliers.
German companies are already present in Albania operating in several key sectors with total investment of Euro 128 million at the end of 2014, according to the country’s central bank.
The biggest German investments in Albania can be found in the Tirana International Airport, the Durres Port, the Tirana Business Park.
German-owned ProCredit bank also plays an important role, offering loans to SMEs and most recently to renewable energy projects.
German companies in Albania are also actively engaged in other important sectors such as construction, production, retail sales and logistics. Tirana Business Park, a Euro 100 million investment led by Germany’s Lindner Group, has partially opened outside Tirana.
The German development cooperation with Albania was launched in 1988, just before the collapse of the communist regime. Since then, the German federal government has made available around 1 billion euros in financial cooperation projects throughout the country. The focus is on improving municipal infrastructure and energy supply and strengthening the financial sector.
Tax concern
Other Albanian and foreign business associations have also expressed concern over the measures needed to improve the country’s business environment after Albania lost 35 places to rank 97th out of 189 countries in the latest Doing Business report published by the World Bank.
The appeal comes at a time when a sharp decline in international oil and metal prices has severely affected the country’s domestic industry by reducing investment, exports and government revenue.
The American Chamber of Commerce in Albania has appealed for a review downward of taxes on profit, dividend and personal income as an incentive giving the business community more room to develop and increase registration numbers.
Since 2014, 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 Albania one of the region’s highest.
Albania registered the greatest increase in the total tax rate among 189 countries in 2014 when the rate of the corporate income tax increased by 5 percent to 15 percent and the property tax doubled, according to the 2016 Paying Taxes report published by the World Bank and the PwC audit firm. The report shows Albania lost 11 places to rank 142nd with a total tax rate as a percentage of commercial profit of 36.5 percent, up from 30.7 percent in the 2015 report.
