Two important surveys that measure the business climate in Albania for foreign investors have been released this week by American and German business associations based in Tirana.
The American Chamber of Commerce in Albania and the German Association of Industry and Trade surveys show that overall businesses and investors continue to be anxious about economic informality, lack of transparency in dealing with authorities and corruption. They are also particularly unhappy about government bureaucracy and the frequent shifting of government policies that make the cost of doing business in Albania unpredictable.
The business climate has slightly improved in 2014 as compared to the year before, both indexes show. That’s positive. However, 2013 had set the bar very low. The economy could essentially only go up in 2014, reflecting trends in the wider region. In fact, it is clearly not going up fast enough for Albania to get the solid economic growth it needs.
There are major problems, and the numbers presented by the German survey in particular continue to be very worrying. Only 66 percent of German companies already here say they would still invest in Albania if they were given the opportunity once again compared to 86 percent a year earlier. That’s the worst performance of any country in the entire central and eastern European region that the index measures. We usually try to pass the Germans’ persistent negative views about Albania as lack of knowledge, but we can’t this year, because these are companies that do know Albania, the index tells us. In addition, only 22 percent of these businesses expect to increase their investments for 2014 and only around 28 percent say they will hire more staff.
In both surveys and in other media interviews, the first is that over and over, business owners say they are treated with lack of respect by state authorities. They face a massive bureaucracy and arbitrary interpretations of quickly shifting policies and regulations and are left at the mercy of arrogant and arbitrary tax and customs officials. Frustrate people enough – and it is those that do things by the book and follow all the rules that get frustrated most – and they will take their business elsewhere, no matter what other incentives the government might offer on paper.
Over and over, member businesses of the American Chamber of Commerce in Albania have a simple comment: Treat us like taxpayers, the ones supporting the state financially and creating jobs. In other words, respect and serve and the taxpayers first.
To be certain, these problems in the relations between the government and businesses have been going on for years, but the change in government 18 months ago appears to have done little to improve things. Maybe more time is needed. After all, the economy and attitudes take time to shift direction.
But we note that some of the highly advertised reforms have also come aground. Despite promises and foreign advisers, other major economic data released this week also showed that customs revenue is down.
Government officials have gone on TV to put forward the best interpretation of why the revenue is down. More oil and gas are being produced locally, for example, a crackdown on smoking means less cigarettes are being imported and government facilitation schemes have removed some taxes from imports like machinery for production businesses.
Yet, economic experts say, that might not be enough to explain the decline in revenue. It could have something to do with the fact that overall Albanians continue to be cautious about the future, keeping consumption and economic growth down as well as with some government activities – like the increases of taxes and energy prices for businesses, which have not helped matters.
