TIRANA, July 30 – Members of the foreign business community expect for the future that the Albanian government further improves the business climate by simplifying administrative procedures, improving licensing and implementing the rule of law, according to findings of a survey conducted by AIDA, Albania’s Investment Development Agency. They wish further improvements in tax administration and infrastructure. In particular, they identify as a hindrance to their businesses the relatively high level of the informality, the uneven enforcement of the tax laws to all businesses and difficulties to get proper invoices especially from micro and small enterprises.
Progress of accession to the European Union, functionality of the judiciary, corruption, land ownership rights, ability to source locally, provision of planning and construction permits, lack of functional industrial or economic zones are some other concerns for foreign investment enterprises.
Another set of questions asked companies about the main obstacles they face. The answers reveal that the majority of the foreign investors can rely on adequate financing and find enough workforce for their activities. They are quite divided as to the availability of skilled labour which can be translated into a demand for better education and vocational training. Another problem area is clarity and fairness of laws and regulations as well as the functionality of judiciary and of the commercial legal system.
Conditions of market access were found satisfactory but the interaction with authorities less so. Cumbersome communication with authorities was stressed also in the written comments.
In their opinion, mostly, the smaller domestic companies do not register all workers and turnover and get in this way an unfair competitive advantage by avoiding taxation. They find that enforcement and transparency in tender procedures would help overcome corruption. Further policy recommendations include the abolition of VAT for imported machinery and a simplification and functional improvement of the land registry.
As regards the role of AIDA and government support, it is strongly recommended by the foreign investment enterprises (FIEs) surveyed that AIDA be an active player and a collaborator with foreign companies, helping them to expand their activity in Albania. Also, AIDA should transmit all the issues raised by investors to public institutions and provide feedback. AIDA should continue to promote investment opportunities and to support existing and potential investors through active interaction.
Finally, FIEs reconfirmed that selecting Albania as a business location basically depends on stability of economic policy, governance integrity (lower corruption), reasonable taxation, clear land ownership and availability of skilled labour.
Just like in the 2010 survey, three quarters of the respondents were quite positive about the initiatives undertaken by the Albanian Government in the areas of start-up and licensing, provision of working permits and employment regulation.
Companies are positive about the cost of labour, interaction with authorities, and linguistic as well as ICT related skills available in Albania. Some 40 per cent of the FIEs are by and large satisfied with the tax system and the employment regulations.
Around 85 per cent of the companies have positive expectations to increase their activities in Albania.
Most of the companies were growing in recent years, 56.6 per cent have more employees in 2010 than in 2008, 68.1 per cent have higher turnover and 66 per cent increased their market shares. In 2012, 57 per cent of the companies would increase employment while 35 per cent will keep it constant. The survey also asked about the activities FIEs undertake in Albania. As to innovation, FIEs rely mostly on imported technology and do not undertake R&D in Albania. Only 25 per cent of the companies have invested in R&D, while more than 72 per cent have not allocated resources to technology innovation or get at least occasionally involved in R&D projects.
Income of the foreign investors in Albania amounted to 81 million in 2011, down from 288 million in 2010. This considerable contraction may reflect some worsening in the business environment, like contraction of demand.
As to employment, the share of FIEs is 18 per cent for the economy as a whole, but much more (39 per cent) in manufacturing. Their share in employment is relatively small compared with the share in turnover which is a sign of the higher labour productivity of the foreign sector.
Albania above-potential economy on FDI
A United Nations report has ranked Albania as one of the few above-potential economies managing to attract more foreign direct investment than expected in 2011. Albania’s FDI preserved the 1 billion dollar value even in 2011, remaining one of the most attractive countries in the South-East Europe region, says a recent report by the United Nations Conference on Trade and Development (UNCTD).
At USD 1.03 billion in 2011, Albania’s FDI was only 2 percent or USD 20 million lower than in 2010 when Albania became the second top performer in the region after Serbia. Renewable energy, agribusiness, textile industry, services to businesses, transportation vehicles and electronic equipment are some of the areas the Albanian Investment Development Agency (AIDA) has identified as priority fields to attract FDI.
