TIRANA, April 9 – Electricity supply, competition from the shadow economy and corrupt practices are the top three business environment obstacles in Albania, according to a regional survey conducted by London-based European Bank for Reconstruction and Development and the World Bank.
Competitors’ practices in the informal sector were the main obstacle for SMEs, while corruption was more problematic for large firms. Tax administration and access to land were among the chief constraints for young firms in Albania, says the report which surveyed top managers from over 15,500 companies in a total of 29 EBRD countries.
Other minor obstacles identified in the survey included access to finance and land, political instability, workforce skills, transport, crime, courts, business licensing, labour regulations, and customs and trade.
Albania’s number of power outages in a typical month decreased from 32.8 in 2007 to 7.8 in the latest Business Environment and Enterprise Performance (BEEPS) round, partly owing to increased precipitation, remaining slightly above the SEE average of 5.4. The percentage of annual revenue lost due to power outages decreased from 15 percent in 2007 to 7.7 percent in the latest survey.
Some 40.2 percent of the firms surveyed reported competing against firms in the informal sector, which is slightly below the SEE average of 48.6 percent. This competition is highest among SMEs with 41 percent of them reporting competing against unregistered firms, compared with 27.8 percent of large firms.
The informal sector is estimated an important contributor to employment and production in Albania. According to the International Labour Organization, 30 percent of the total workforce in the construction sector is employed informally. Discrepancies in Albania’s national accounts suggest that the informal sector accounted on average for 36.2 percent of GDP over the period 1996-2012. This leads to tax revenue losses, a lack of labour protection and unfair competition among firms, notes the report.
The survey found corruption has replaced political instability as the third most important obstacle in Albania. Although relatively few firms applied for construction-related permits, almost one-third of the firms that did said that an informal gift or payment was expected or requested during the application process, well above the SEE average of 18.8 percent. Likewise, although informal payments typically made by firms to secure a government contract dropped from 6.5 percent (of contract value) in 2009 to 1.5 percent in 2014, it was above the SEE average of 1 percent. Similarly, the percentage of firms that never had to make informal payments to “get things done” increased to 52.7 percent, but was still slightly below the average of 56.2 percent for transition countries.
Across the whole transition region, the single largest complaint from managers was about unfair competition from the informal economy, where companies are not always registered or they seek to avoid taxes by under-reporting revenues, employee numbers or the wages they pay.
The EBRD and World Bank conducted the fifth round of their Business Environment and Enterprise Performance (BEEPS) in 2013/2014.
