Doing business in Albania

39 Pages·2014·2.38 MB·English

Doing business
in Albania
2014
Doing business in Albania 2014 1
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Dear Reader, 19
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In the preparation of this guide, every effort has been made to provide current, correct and clearly expressed 24
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information. However, the information in the text is intended to offer general guidelines only. This guide is
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distributed with the understanding that EY is not responsible for the result of any action taken on the basis
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of information in this publication, nor for any errors or omissions contained herein. EY is not attempting
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to render legal, accounting or tax advice through this publication. Readers are encouraged to consult with
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competent professionals for advice concerning specific matters before making any decision. This book reflects
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information current as of February 2014. Further information about EY and its approach to a variety of
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business issues can be found at www.ey.com. 35
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This guide is one in a series of country profiles prepared for use by clients and professional staff. 39
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Dr. Alexandros Karakitis 48
Country and Tax Managing Partner 52
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EY Albania
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General overview Geography Climate
Albania lies in the Southwestern part of Albania has a mild climate, conditioned
the Balkan Peninsula, covering an area by the country’s geographical position
of 28,748 square kilometers. Albania in the transit zone between the typical
occupies a strategic geographical location Mediterranean climate with dry hot
in South-Eastern Europe along the Strait summers and cool rainy winters in the
of Otranto which links the Adriatic Sea west and the moderate continental in
with the Ionian Sea and separates Albania the east. The country has an average of
from Italy. around 300 sunny days per year. Annual
precipitation ranges from about 100 cm
Albania shares a border with Greece to
(40 inches) on the coast to more than
the south/southeast (282 km), Former
250 cm (100 inches) in the mountains.
Yugoslav Republic of Macedonia to the
east (151 km), Kosovo to the northeast
(112 km), and Montenegro to the
northwest (172 km). The capital city Population,
of Albania is Tirana. Other major cities
include Durrës, Vlorë, Fier, Shkodër. Language
The Country is in the Central European
time zone, one hour ahead of the According to the latest official data,
Greenwich Mean Time (GMT). published by the World Bank, Albania’s
population is 3.162 million (2012
Much of Albania’s surface is mountainous
estimation), with an average density of
– the average height above sea level is
approximately 110 people per square km.
708 m, (2,336 feet) and its highest
The main minority groups are Greeks and
peak, Mount of Korabi, is 2,753 m
Vlachs, Romany and Bulgarians.
(9,085 feet). The country is rich in water
resources with the main rivers being
The official language of the country is
extensively managed to generate hydro-
Albanian with an adult literacy of 99
electricity.
per cent. Italian, English and Greek are
The Country covers an area of 28,748 the foreign languages most spoken in
square km (approximately 11,100 square Albania.
miles) and has nearly 450 km (280
miles) of seacoast along the Adriatic
and Ioanian Seas. Over a third of the
territory of Albania is forested and the
country is very rich in flora. Other natural
resources include petroleum, natural gas,
coal, bauxite, chromites, copper, iron ore,
nickel, salt, timber, and hydropower.
4 Doing business in Albania 2014 Doing business in Albania 2014 5
General overview
Travel and work in Official Bank Political system and domestic policies. It directs and Economy connecting the Adriatic with the Black
controls the activities of the ministries Sea through Italy, Albania, FYROM and
Albania Holidays Schedule and other state organs. Bulgaria, and linking Greece with Turkey.
Albania is a parliamentary republic. According to the World Bank1:
Integration into the European Union
Current political leaders Albania has joined the Memorandum of
Albania is relatively easy to access. In Albania, banks are closed on Saturdays and NATO has been the ultimate goal “Albania is a middle-income country that
Understanding on the Development of
Citizens of EU and Schengen area, and Sundays and on official public of all the post-communist governments has made enormous strides in
the South Eastern Europe Core Regional
President: Bujar Nishani
Armenia, Azerbaijan, Turkey, Ukraine, holidays. The following is a list bank in Albania. The major priorities of the establishing a credible multi-party
Transport Network. Together with the
(since July 2012) - Democratic Party
Kazakhstan, Kosovo, citizens of holidays as provided by the Bank of current government are thorough reform democracy and market economy
European Commission, Bosnia and
Prime Minister: Edi Rama
countries exempted from Schengen visa Albania for 2014: of the legal system, fast and stable over the last two decades. Following
Herzegovina, Croatia, FYROM, Serbia,
(since September 2013)
requirement due to liberalization of the growth of the economy, development of graduation from the International
Montenegro and Kosovo, Albania is
- Socialist Party
visa regime, holders of a valid multi- Holiday Date the education, health, sports and culture Development Association (IDA) to the committed to cooperate for enhancing
entry USA, UK or Schengen visa, holders to reach the EU standards, ensuring International Bank for Reconstruction and
the development of regional transport
Next election dates
of a valid residence permit in UK, USA, New Year’s Day January 1 and 2 national prosperity and EU membership. Development (IBRD) in 2008, Albania network in South Eastern Europe (SEE).
or in one of the Schengen states, can has generally been able to maintain
The Core Network includes 4,300 km
enter into Albania without an entry visa Summer Day March 14 Executive branch Presidential election: 2017; positive growth rates and financial of railways across the Western Balkans,
by presenting only a valid identification Nevruz Day March 22 Parliamentary election: 2017 stability, despite the ongoing economic 6,000 km of roads, major ports and
document at the border crossing point. crisis. The country is facing a challenge of
The head of state in Albania is the airports. The total cost of developing the
Catholic Easter and
They are allowed to stay within the April 20 President of the Republic. The President Legislative branch maintaining growth in a difficult external Core Network is estimated at over EUR
Orthodox Easter
Albanian territory up to 90 days within a environment while rebuilding fiscal
is elected to a 5-year term by the 16 billion and 17 priority projects are
180 days period. Otherwise, they need International May 1 Albanian Assembly by secret ballot, The Albanian Assembly (Kuvendi i buffers.” identified.
to apply for a residence permit. The Worker’s Day requiring more than 60% of the votes Shqipërisë) is the lawmaking body in
duration of a residence permit may be End of Ramadan July 28 of all deputies. The President has the Albania. It is composed of 140 deputies, Infrastructure The infrastructure of the country
three months, six months, one year, five
power to guarantee observation of who are elected through a proportional needs considerable investments in
years or permanent. Feast of Sacrifice October 4 the constitution and all laws, act as system. Parliamentary elections are held The national road network in Albania new construction and modernization.
Mother Teresa commander in chief of the armed forces, at least every four years. is about 18,000 km long including For this reason, in 2008, the Ministry
Foreigners who come in Albania for work Beatification Day October 19 exercise the duties of the Assembly of the 3,636 km of national roads, 10,500 of Public Works and Transport and
purposes need to obtain a work permit Republic of Albania when the Assembly The Assembly has the power to km of interurban roads, and the rest Telecommunications adopted a sectorial
Flag and
or certificate with the Albanian Labor November 28 is not in session, and appoint the prime decide the direction of domestic and of 4,000 km is under the jurisdiction transport strategy (2008-2013). It
Independence Day
Inspectorate from the first moment they minister. foreign policy; approve or amend the of autonomous units, enterprises or includes a detailed investment plan for
start working in Albania, unless they Liberation Day November 29 constitution; declare war on another companies. The primary road network the road network, railway infrastructure,
come in the country on business trips, Executive power rests with the Council state; ratify or annul international is about 1,138 km with nine main the ports and airports of Albania. The
National Youth Day December 8
i.e. the duration of stay is not more than of Ministers (the Government). The treaties; elect the President of the connections which made up the basis of development of the national transport
one month in a year. Citizens of the EU Christmas Day December 25 prime minister is appointed by the Republic, Attorney General and his or her the network. The secondary network is infrastructure as an integral part of the
and Schengen area are exempt from the President; ministers are nominated by deputies, provide consent to the election 1,998 km long. South-East European☻ Core Network and
obligation to apply for a work permit or a the President on the basis of the prime of members of the Supreme Court by the The only Pan-European Transport the future trans-European Transport
work registration certificate. Note: The End of Ramadan and Feast of Sacrifice holidays minister’s proposal. The Assembly must President; and control the activity of state Corridor crossing Albania is Corridor VIII, Networks is the core of the Government’s
may be subject to change according to the lunar calendar.
give final approval of the composition radio and television, state news agency which is an energy and infrastructure axis investment policy.
of the government. The government is and other official information media.
responsible for carrying out both foreign 1World Bank: Country Overview 2013
6 Doing business in Albania 2014 Doing business in Albania 2014 7
GGeenneerraall oovveerrvviieeww
Skilled work force economic growth, whereas consumption External sector direct investment (FDI) declined by 4% Financial sector Fiscal developments
and private investments remained low. and private transfers (deposits placed
availability
During the first quarter of 2013, in from abroad) dropped 50% (year-on- The stable developments in the financial According to cash-based government
Aggregate demand and economic activity annual terms, current account deficit year). system, stabilized macroeconomic finance data, total revenue in the first
According to the Institute of Statistic
slowed down in the second quarter shrank by approximately 26% year on situation and prudential and regulatory half of 2013 fell by 2.9%, year-on-year.
(INSTAT) data for the 2011-2012,
in 2013. Provisional data show that year, as the trade deficit continued to The overall balance of payments saw measures taken by the Bank of Albania, In this period, revenue from indirect
Albania’s working age population is
real GDP grew by 1.1% year-on-year, decline, according to INSTAT. an increase in foreign reserve assets by led to the stabilization and higher capital taxes declined significantly, reflecting still
2,229,652. The labor force consists of
down from 1.6% in 2012 and 1.8% in about EUR 86.4 million in the second ratios, liquidity contributed to increased fragile domestic demand, lower imports
1,106,407 men (49.6%) and 1,123,245
the first quarter of 2013. The slower In the first quarter of 2013, trade deficit quarter of 2013. The current account volumes of banking operations. However, and the effect of the VAT exemptions.
women (50.4%). The adult literacy rate
pace of economic activity was due to narrowed from a year earlier due to posted a deficit of EUR 294.7 million, credit risk remained high due to the Taking into account the share of tax
in Albania is 96.8%. A high percentage of
uncertainties and limited funding sources the increase in exports and decrease in up 17.1% in annual terms. The current increasing level of non-performing loans revenues in total revenues, their decrease
the workforce has completed some form
which resulted to the decreases of imports. account deficit was estimated at about during the first half of 2013. The top had an impact on the fall of total
of secondary, technical or vocational
consumption and private investments. 11.5% of nominal GDP, or about 1.4 risks for the financial sector arise from revenues, despite the good performance
education. Many Albanians have strong
After reaching 15% of GDP in 2009, the percentage points higher than in the the slow pace of the economy, generating of non-tax revenues.
backgrounds in engineering, medicine
Labor market current account deficit (CAD) dropped to same period a year earlier. Net foreign in turn higher credit risk and a possible According to the Bank of Albania,
and economics, but there is still a relative
10% of GDP in 2012. This was mainly the currency flows to capital and financial decline in banking sector’s profitability. expenditures maintained an increasing
shortage of professionals with strong
management skills. The skilled workforce The rate of unemployment remains result of a public investment slowdown account increased by approx. 76.7% in The bank’s lending standards applied trend and totaled ALL 205.1 billion, up
and the relatively low cost of labor practically unchanged at 12.8% in the and weakening domestic demand, which annual terms. to households eased during the second to 12.2% year on year. Expenditures were
(the average monthly salary in 2012 second quarter of 2013. Year-on-year led to lower imports. In the first quarter quarter of 2013, whereas those applied impacted by the concurrent increase in
is ALL 50,092 according to INSTAT) employment growth amounted to 1.5% of 2013, imports shrunk by 11% (year- Monetary developments to businesses continued to be restrictive. capital and current expenditures, which
are considerable incentives for foreign in the first quarter. According to INSTAT, on-year, in lek) driven by lower electricity Business lending standards tightened registered high growth rates during the
companies, especially those that are a rise in employment in the private non- imports, weak domestic demand reflected In December 2013, the average annual on small and medium-sized enterprises first half of 2013. Budget deficit reflected
labor intensive, to invest in Albania. agricultural sector at a 7.6% determined in declining food imports (-10%), and consumer price index (CPI) was 1.9%. A but remained unchanged on large the higher fiscal stimulus, particularly in
the rise in employment in the economy lower investments reflected in declining conservative consumer demand and more enterprises. second quarter, and reached ALL 48.2
over the second quarter of 2013. This machineries imports (-11.7%). On the moderate import prices have eased the The current and expected macroeconomic billion at end of the first half of 2013,
Economic development
was due to the comparative base effect, other hand, exports have seen a positive inflation pressure on the CPI. situation in Albania and the use of or 3.55% of GDP. Around 79.1% of the
and the positive impact of the decision on growth of 17%, helped by positive alternative financial resources were the deficit was financed through domestic
The Albanian economy is increasingly
personal income tax exemption for wages electricity generation. Shoes and raw In view of an accommodative monetary main factors contributing negatively to resources, a considerable portion of
facing the economic growth challenge.
up to ALL 30,000. Employment in the materials (oil, cement) also appear to policy, at the beginning of 2013, the demand for business loans during the which were deriving from previous
While the Albanian economy enjoys
public and agricultural sectors fell 0.9% be experiencing positive growth rates. As Bank of Albania lowered the key repo rate second quarter of 2013. The need to privatization project receipts. The rest of
consolidated macroeconomic stability and
and 0.5% respectively, while the sector’s a result, the trade deficit has narrowed by 0.25% points to 3.75% maintaining finance house purchase and consumption, the deficit, 20.9%, was financed through
sound financial foundations, aggregate
average wage remained almost flat. considerably by 27%. Remittances it unchanged for the next five months. developments in the real estate market foreign debt. Public debt stock amounted
demand has been weak during recent
dropped 30% (year-on-year) in the first Albania saw stable macroeconomic and bank lending standards had a positive to ALL 871.5 billion at end of the first
years. According to the Bank of Albania,
quarter of 2013, reflecting ongoing framework being characterised by impact on households’ demand for loans. six months of 2013. Average maturity of
the Albanian economy grew by 1.7%
weaknesses in Italy and Greece, where low exchange rate volatility and weak debt continued to increase at fast rates to
annual rate over the first six months
most of Albanian immigrants work. The inflationary pressures, despite the 457 days. Domestic debt stock accounted
of 2013. Fiscal stimulus and external
capital account also weakened, as foreign monetary policy relaxation. for 57.4% of total public debt.
demand were major contributors to
8 Doing business in Albania 2014 Doing business in Albania 2014 9
General overview
Eurobond country to the EU by providing rights and worker’s authorized stay. Albania grants of the EU. Albania is gradually aligning Commission released its annual reports 1.6 percentage points from the previous
obligations and creating mechanisms similar treatment to EU nationals legally its laws with the acquis, notably in key on prospective member states which year. Excluding privatization receipts, the
Following previous unsuccessful attempts, for working closer together in areas of employed in Albania and their family areas of Internal Market legislation, concluded that the Albanian election inflows of foreign direct investments in
Albania issued its first-ever Eurobond for mutual interest. members residing with them. and has agreed binding deadlines was held in an “orderly manner” on June 2010 increased by 66.4% compared to
a total of EUR 300 million on 28 October for harmonization in areas such as 2013 and that progress had been made 2009. This change was due to a higher
2010. The bond has a maturity of 5 years Ensuring free movement of goods is Under the SAA, EU companies have the competition, intellectual, industrial and in meeting other conditions and as such level of privatization receipts and the
and carries an interest rate of 7.5%. one of the main objectives of the SAA. right of establishment in Albania. EU commercial property, public procurement, recommended granting Albania candidate important role they played in FDI growth
Three-quarters of the proceeds from the In this framework, Albania is gradually companies are granted either national standards and certification, financial status. In 5 December 2013 in an MEP in 2009.
issue, rated at B1 by Moody’s and B+ by establishing a free trade area with the treatment or most-favored-nation (MFN) services, land transport, company law, meeting it was recommended that “...the
Standard &Poor’s, will be used to repay a EU, in conformity with the GATT and treatment, whichever is more favorable. accounting, consumer protection, data Council should acknowledge the progress In 2011, although FDI inflows increased
2009 syndicated loan, while the rest will other relevant WTO provisions. Albania Notwithstanding the provisions governing protection, health and safety at work and made by Albania by granting it candidate year-on-year, a significant amount of
be used to replace short-term domestic has abolished all quantitative restrictions on the free movement of workers under equal opportunities. status without undue delay.” However, foreign capital was repatriated resulting
T-bills. or measures having an equivalent effect the SAA, special establishment provisions On 28 April 2009, Albania submitted several EU states remained opposed to in a sharp drop in net FDI. Net foreign
and has progressively dismantled its could be introduced for ‘key personnel’. its application for EU membership. On granting Albania candidate status, and at direct investment (FDI) inflows remained
In December 2013, the credit rating tariffs in trade with the EU. Albania is 8 November 2010, the Council of the a December 2013 meeting the Council of at the same level in 2012 as in 2011 and
agency Standard & Poor’s has lowered also using the Combined Nomenclature In addition, the SAA provides for the EU decided to lift visa requirements for the European Union put off the decision financed some 70% of the current account
its long-term foreign and local currency for the classification of goods in trade progressive and reciprocal liberalization Albanian citizens on short-term travel to until June 2014. deficit, up from 60% in 2011. Total
sovereign credit ratings on Albania to and to determine the basic duties to of trade in services, consistent with the the Schengen Area. The visa liberalization capital account inflows fell by 11.3% on
B from B+ while affirming the country’s which the successive reductions of duties relevant WTO rules, in particular Article entered into force on 15 December 2010 Foreign direct investments an annual basis in 2012, but the overall
short term ratings at B, indicating that would be applied. In addition, Albania is V of GATS. EU companies not established and in 10 October 2012 the European balance of payments was positive and the
the ratings on Albania are constrained prohibited, in principle, from introducing in Albania would gradually acquire the Commission recommended that Albania During 2005-2008, foreign direct stock of international reserves increased
by the country’s low per capita GDP new duties, restrictions or measures with right to provide services in the country, in be granted EU candidate status, subject investments (FDIs) in the Albanian by 4.2%, covering about 4.5 months of
level, high government debt being equivalent effect in trade between the accordance with the GATS provisions and to the completion of key measures in economy had rapid growth rates. In imports. In the first half of 2013, FDI
widened significantly in 2013 and EU and Albania. Albania is also required taking account, in particular, of progress certain areas. general, foreign direct investments had inflows increased by 12.3% in annual
significant structural difficulties related to abolish any domestic tax measure or in approximation of laws in the various In October 2012 the European a significant impact on the increase in terms. Overall, the current account deficit
to weak institutions and governance practice which discriminates directly or fields. Commission evaluated the progress employment, exports, introduction of has been narrowing but remains a source
(in particular, weak rule of law and indirectly against EU products. Moreover, of Albania to comply with 12 key technologies and modern production of vulnerability, especially in view of the
high levels of corruption). According to trade arrangements of Albania with third In the framework of the SAA, Albania conditions to achieve official candidate methods, and on services quality and potential adverse impact of the volatile
Standard & Poor’s, the ratings for Albania parties are established in such a way has committed itself to progressive status and start accession negotiations. variety. external environment on inflows of FDI
in 2014 could lower due to the high that they do not result in discrimination liberalization of both inward and outward The report concluded that if Albania and migrant workers’ remittances.
rollover risk on its increased debt stock. against the EU. movement of capital, in particular managed to hold a fair and democratic Foreign direct investments inflows in
The SAA requires Albania to ensure for direct investments. Protection of parliamentary election in June 2013, and FDIs made an important contribution
2010 yielded EUR. 827.4 million, up
non-discrimination as regards working investors as regards liquidation and also implemented the remaining changes to the financial sector, particularly in
Albania and the EU by about 17.1% year-on-year. Foreign
conditions, remuneration and dismissal repatriation of investments and profits is to comply with the eight key priorities banking. Out of 16 commercial banks
direct investments in 2010 were
against EU workers who are legally also covered. still not fully met, then the Council of operating at present in Albania, 14 are
On 12 June 2006, Albania entered into a oriented mainly to the hydropower and
established in its territory. The resident the European Union would recommend foreign-owned. Following the entry of
Stabilization and Association Agreement hydrocarbon sectors. The ratio of net
spouse and children of an EU worker Finally, the SAA includes provisions on granting Albania the official candidate foreign banking groups into the market,
(SAA) with the EU and its member foreign direct investments (inflows -
legally employed in Albania has access to the gradual approximation of the existing status. the performance and competitiveness
states. This agreement is drawing the outflows) to nominal GDP for 2010 is
the labor market during the period of the and future legislation of Albania to that On 16 October 2013 the European of the financial services industry has
estimated at about 9.4% or about up
10 Doing business in Albania 2014 Doing business in Albania 2014 11
General overview
been enhanced, thus contributing to the Concession contracts for the construction Manufacturing sector is known for FDIs inflows by sectors of the economy Source: Bank of Albania
improvement of the quality of banking of hydro-power plants signed by the attracting foreign investors since
services. Albanian Government with foreign early 1990s, especially in the sectors
Sectors (in million Euros) 2007 2008 2009 2010 2011 2012
companies over the last two years provide of textiles, clothing and footwear
The telecommunications sector has for about EUR.1.3 billion investments, manufacturing, where their role is Manufacturing 227 439 408 416 952 892
also undergone a rapid development, to be carried out in the next three years. significant in the share of this sector Mining and hydrocarbons 10 29 147 311 612 810
thanks to foreign investments. Three Foreign investments in this sector in the to exports and employment. Clothing Financial and insurance 588 548 614 700 715 749
foreign capital companies are currently course of the coming three years are and textiles account for about 45 % of
Transport and telecommunication 590 383 357 400 389 402
operating in the field of mobile telephony. projected to be about EUR 1.3 billion. total exports in Albania. Approximately
The number of mobile phone users 235 foreign businesses or about 11% of Wholesale and retail trade 99 271 253 240 217 189
has amounted to 3 million users, at an Companies with foreign capital foreign capital or joint-stock businesses Energy and water supply 10 18 95 118 247 102
increasing level of about 92%. Due to have also contributed substantially are currently operating in these sectors. Real estate 57 25 42 63 83 90
competition in this sector, the quality and to improving and modernizing the
Construction 132 196 189 - 1 11 80
quantity of services has increased and transport infrastructures, construction of
Hotels and restaurants 94 94 79 76 70 69
service costs have significantly declined. important road-works, seaports and the
After the privatization of the state-owned International “Mother Teresa” Airport, Others 23 58 77 113 104 120
fixed telephony company, even in this thus playing an important role in cross- TOTAL FDI 1,830 2,061 2,261 2,436 3,400 3,503
area there is an increasing number of border economic relations as well as
subscribers, significantly contributing to among different regions in Albania. Stock of foreign direct investments in Albania by countries of origin (in % to total FDI stock, as at period-end)
the spreading of internet services in the
Country 2008 2009 2010 2011 2012
country.
Austria 9.02% 9.77% 14.53% 13.06% 14.22%
Important investments have been carried Canada 0.39% 4.51% 11.08% 15.56% 20.15%
out in the energy sector. Investments in Foreign direct investments (inflows, stock, as a share of GDP and per capita) Switzerland 6.65% 4.78% 2.79% 16.00% 14.47%
search and production of oil and gas have
Cyprus 2.62% 2.21% 2.46% 3.79% 3.83%
increased due to petroleum agreements FDI in
with foreign investors and companies Albania 2005 2006 2007 2008 2009 2010 2011 2012 Germany 3.20% 3.27% 3.45% 2.47% 2.40%
operating in this sector, thus contributing France 1.16% 1.15% 1.64% 1.50% 2.17%
Inflows
to an increase of oil production in the Greece 27.46% 24.77% 24.67% 14.91% 12.87%
country. In million
Italy 15.57% 15.39% 15.89% 12.56% 12.39%
Euros 212.60 258.60 481.10 665.10 696.40 831.50 711.51 727.20
Kuwait 4.08% 3.14% 2.91% 0.26% 0.14%
Important international companies have As a share of
approached the electric power sector as GDP 3.20 3.60 6.10 7.50 8.00 9.30 10.56 7.40 Lebanon 1.94% 1.59% 1.15% 0.85% 1.17%
partners in public/private cooperation, Per capita, in Netherland 9.12% 9.16% 9.15% 7.44% 6.94%
with a view to bring about by way of euro 66.80 81.30 151.20 209.00 218.90 261.30 225.60 229.97 Turkey 9.22% 10.39% 7.68% 5.53% 7.51%
concession large electricity works.
United States of America 3.64% 1.06% -4.02% -1.38% 0.51%
Concession projects in this sector aim at
Source: FDI – Bank of Albania and World Bank
almost doubling the current electricity Other 5.92% 8.80% 6.61% 7.44% 1.23%
production and diversifying the energy Total FDI 100.00% 100.00% 100.00% 100.00% 100.00%
resources by using renewable power. .
Source: Bank of Albania
12 Doing business in Albania 2014 Doing business in Albania 2014 13
General overview
Leading industries investor protection index rose from 2.7 of oil, cereals and vegetables. The work market share in the international trade Mining sector
in 2008 to 7.3 in 2012). Yet, protecting on creating a functioning electronic and meet the EU standard requirements
property rights, enforcing contracts, and agricultural information system (farm for this industry. Albania is a rich country in minerals. The
getting a construction permit seem to be register, animal register, etc.) must most frequent ones are groundwater
Breakdown of Economic Activity By Sector Agriculture Industry Services areas where Albania is performing poorly, intensify. Construction industry resources, carbonate minerals, industrial
GDP composition by sector (2012 est.) 20% 18.7% 61.3% not only in the region but in a worldwide minerals, mineral rocks, sedimentary
Labor force by occupation 47.8% 23% 29.2% comparison. Within the sector, the food processing In the third quarter of 2013, House industrial minerals, chromite, etc. Albania
industry is a better than average Price Index recorded an annual negative is well known for chromium, copper,
Agriculture performer. In some niche market change for the fifth consecutive quarter. nickel and copper reserves. Both the
Albanian legislation not only permits privatized telecommunication firm. products, such as frog meat, the sector The 1.2% real-term fall may be considered quantity and quality of chromium are
but encourages foreign investment in There has been some progress as regards Twenty percent of Albania is fertile arable is an important player at the European low compared to the double-digit decline high. Before 1990 Albania was the 3rd
most sectors of the economy. Foreign attracting greenfield investment in the land. Utilized Agricultural Area (UAA) is level. Double digit growth has been seen recorded since the third quarter of 2012. country in Europe for chromium reserves
investors are allowed to participate in energy sector with 11 new agreements 1.12m ha, which is 39% of the total land in the sub-sectors of herbs and spices, In the meantime, Rental Price Index rose and now it ranks as the country with the
the economic activity, being treated signed in 2012 to construct and operate of the country. About half of the UAA is vegetable oils and fish products. Again, 10.4% in the third quarter, representing highest level of reserves in Europe.
equally with Albanian nationals, except hydropower plants (HPPs). the food processing sector is diverse, but
arable land, 38% is permanent grassland a turning point from its continuous drop
for some limitations on the rights of land and 11% is land under permanent crops. dominated by small-scale, often artisan since the third quarter of 2012. This Mining industry in Albania is currently
ownership. The output of privately-owned small HPPs producers, most of them producing for performance reduced the price-to-rent being privatized and the government is
surged by 76% year-on-year in 2012, Agriculture is one of the most the local market. ratio closer to the historical average. This also offering concession for construction
Foreign investors may bring disputes raising their share of total electricity
determinative sectors of the Albanian ratio was 10% lower year on year and 47% and operation in this sector. In 2000 the
before the Albanian courts. Provisions generation to 5.6% in 2012, from 3.4% national economy. Its contribution has Small-sized investment opportunities above the historical average. government signed a 30-year concession
regarding domestic and international a year earlier. Overall, state involvement been decreasing over years and it is have been identified in many sub-sectors. with the Italian company DARFO to
commercial arbitration are incorporated in the economy remains limited and is estimated at 17% of the GDP, while The best can be found in segments where According to the Bank of Albania, the exploit 50% of chromium reserves and
into the Albanian Code of Civil Procedure. mainly concentrated in water supply, about 60% of the labor force works in exports already exist, namely medicinal contribution of construction to annual 100% of ferro-chromium.
As a practical matter, however, corruption transport and energy. As measured by plants and herbs, early and late season
agriculture and related fields. GDP growth was estimated at around 1.4
remains a problem in the judicial World Bank: Doing Business indicators, vegetables, preserved products such as percentage points. The expanded activity The number of mining permits is
system, and some foreign investors have Albania moved from the 77th ranking in The government allocated about €6.8 olives, olive oil, canned tomatoes, fresh in the construction sector is believed increasing year after year and more
experienced delays and losses as a result. 2012 to 85th in 2013. million in 2013 for direct support and processed fish, and cheese. to be temporary, driven by the higher than 738 small, medium and very few
and national investment schemes public investment, reflected mainly in large private companies exercise their
Private sector One area of concrete progress is the in agriculture and agro-processing. The 2009-2013 plan of the Ministry the increase in engineering works. By activity in Albania. Out of the 738 mining
developments legal and regulatory framework for Agricultural production in 2012 increased of Agriculture is to increase the contrast, residential construction was low, permits, most of them are for chrome
business, which has been substantially slightly, mostly due to improved financial support for farms, agricultural due to the weak domestic demand and and limestone. In industrial aspect the
According to the European Commission overhauled and modernized. Among the production in fruit trees and olives. Part businesses, improve the marketing tighter funding conditions. The number of production is going on in 300 deposits of
report, the private sector remains achievements are a significant reduction of the growth is linked to the government strategy of agricultural products and an approved construction permits does not 25 different kinds of industrial minerals
dominant and continues to account for in the time (from 36 to five days between direct support schemes that have increase in the level and quality of the suggest any improvements in the trend and rocks. Albanian geologic reserves of
about 80% of GDP. The privatization 2008 and 2012) and cost of registering encouraged the planting of new trees. technology and information available of residential construction in the first half copper deposits are about 53 million tons
process suffered setbacks with the a business and trading across borders, The work on setting up a functional land to farmers and businesses. The main of 2013. with 1.3-2.5% Cu; extractable reserves
unsuccessful sale of Albpetrol, a state- and improvements in the regulations cadaster continues to progress very objective of this plan is the increase in are about 27 million tons with 1, 52% Cu.
for getting credit and protecting the production and processing of the
owned oil company, and of the remaining slowly. Under the Law on agricultural
shareholders (the disclosure index rose agricultural goods and in the quality and
public stake in Albtelecom, a partly cooperative entities, new cooperatives
from 0 in 2008 to 8 in 2012, and the security of the foods to achieve a larger
have been registered for the production
14 Doing business in Albania 2014 Doing business in Albania 2014 15
General overview
Power and utilities industry Transport sector Hydrocarbons industry The Albanian Parliament, on 25.03.2013, Natural Resources, this discovery paved Telecommunication industry
ratified by Law No. 104/2013 the way for further explorations in this
The successful privatization of the The Road Maintenance Project Albania has petroleum resources both on “Agreement between the Republic of structural range (Molishti-1 further on Albania’s telecom industry has been
electricity distribution company in 2009, contributed to reducing the roughness and offshore, and shares geologic trends Albania, the Hellenic Republic and the South), or even in other tectonic liberalized and legislation has been
supported by transaction advice by index from 10 for national roads and 19 with the neighboring Balkan states of Republic of Italy, on the Trans Adriatic belts with similar geological models. recently introduced, adopting the
the International Finance Corporation for rural roads to 5 and 8, respectively. Croatia, Serbia, Montenegro, Macedonia, Pipeline (“TAP”). Through this principles established in the EU regulatory
(IFC), and with a World Bank Partial Risk About 110km of secondary and local and Greece. agreement, the Trans Adriatic Pipeline Insurance companies framework for communications. The
Guarantee, was a critical reform that is roads are in the process of reconstruction (TAP) will transport natural gas from market’s growth potential has attracted
increasing the reliability of electricity and rehabilitation. Around USD 400m is Albania possesses important oil reserves the Turkish-Greek border through South The insurance market in Albania started international investment into both the
supplies and ease fiscal pressures in the committed from external donators for and produces about 350,000 tons of Eastern Europe to its tie-in point near to operate in the beginning of the 90s incumbent and alternative operators.
future. rehabilitating and improving an additional oil annually: 23% diesel, 23% solar and Lecce in Italy. In doing so, the project will with the liberalization of the Albanian Future network development is expected
1,000-1,500 km of the secondary and 28% oil bitumen. Major oil companies enhance the security of Europe’s energy economy and was strengthened with the in order to support the growing popularity
The World Bank, together with the local roads network. have been operating in the country for sector by increasing the diversity of improvement of the legal environment of broadband services.
European Bank for Reconstruction and a number of years and the government supply. According to Oxford Economics’ and the investment of foreign insurance Albania’s Internet market offers much
Development (EBRD) and European Infrastructure in areas with has a clear policy to attract foreign report on TAP AG, the construction of the companies in the market. growth potential due to currently low
Investment Bank (EIB) has supported investment in its natural resource sector. pipeline is expected to take place between penetration levels. Internet access is
tourism potential
the construction of the Vlora Thermal the timeframe 2015-2018. Operation The insurance industry in Albania is available through a variety of means
Power Plant, which represents the first The oil and gas sector are split into 3 of the pipeline is set to commence in regulated by a single regulatory body including dial-up, leased line, microwave
significant investment in domestic power Under the Municipal Water and companies: Albpetrol (responsible for 2019. The direct impact of the project – the Financial Supervision Authority radio, ADSL, WiFi and fibre. Broadband
generation in over 25 years in Albania. Wastewater Project, the Integrated Water exploration and production), ARMO is projected to peak in 2017, at which (FSA). There are currently ten licensed uptake is rising in response to increased
and Ecosystem Management Project and (responsible for refineries and retail point activity is expected to generate non-life and life insurance companies as availability and drastic tariff reductions.
Furthermore under the Dam Safety the Integrated Coastal Zone Management activities) and Servcom (supporting €57 million for Albanian GDP and create well as four licensed insurance and non- Recognizing the potential of applying
Project, the Bank will contribute to and Clean-Up Project (ICZMP), the World Albpetrol in the field of development and 4,200 jobs (part-time and full-time). insurance brokerage firms operating in information and communication
further increases by increasing the Bank supported significant improvements drilling affairs). In the last 15 years, the In total, the construction phase of the Albania. The latest developments in the technology (ICT) to improve both social
efficiency of the cascade of dams on the in water supply and investments in country has licensed drilling to American, project is forecast to generate €157 legislative framework were designed with and economic development, Albania has
Drini River, which provide for the largest sewerage and wastewater treatment. Austrian, Canadian, Croatian, Greek, and million in GDP and support 2,900 jobs the purpose of the alignment with EU taken steps to develop a knowledge-based
share of domestic generation. These included several access roads Swedish companies. (part-time and full-time) per year. directives in this field. society, principally by improving ICT
to the beach or historical monuments
literacy.
(castle and monastery), repairing or The EBRD is providing $64.5 million to In November 2013, the Canadian based
extension of water supply systems and modernize the Patos Marinza oil field company Petromanas Energy Inc. and Albania’s mobile market has undergone
sewage water collection, as well as in southern Albania, one of the largest the joint venture partner the Royal Dutch rapid growth due to competition, initially
parking places and rehabilitation of costal onshore oil deposits in continental Shell Plc announced positive test results with the entrance of Albanian Mobile
roads. Europe. During 2008, ARMO was from the $75 million exploration in Telecommunication, Vodafone and later
privatized by Refinery Associates of Shpirag-2 well in Block 2-3, which covers through the entrance of Eagle Mobile
Texas, Anica Enterprises and Mercuria an area of 3,450 square kilometers and Plus network. The majority of mobile
Energy group for 128m Euro. onshore south-central Albania. The test users utilize prepaid services. With the
showed that the well flowed at rates of mobile voice market maturing, mobile
1,500 to 2,200 barrels per day of oil network operators are turning their
equivalent to 800 to 1,300 barrels per attention to increase average revenue per
day. According to the National Agency of user levels.
16 Doing business in Albania 2014 Doing business in Albania 2014 17
General overview
Financial system office as well as security of tenure. liquidity levels. However, due to the exchange transactions in Albania. As Currency
international economic crisis showing of today there are no companies listed
16 banks are operating in Albania. Their effects in Albania, profitability suffered on the TSE; consequently there are no
ALL’s exchange rate versus major foreign currencies
Albanian central bank and assets account for approximately 92.9% as non-performing loans increased, recorded transactions.
of the total financial system assets and and banks started to tighten criteria for
commercial banking sector
ALL per unit of foreign currencies
about 88.7% of GDP. As of the end of awarding credit thus dampening credit Insurance market must abide to certain
June 2013, banking sector assets rose growth. limitations with respect to investments in Average of period
The Bank of Albania (BoA) is the central Main
to ALL 1,204 billion, recording modest real estate and securities. Private pension
bank of Albania. It was established in growth by ALL 16 billion or 1.4% from Finally, the banking system performance funds occupy an insignificant position in foreign US European British pound Swiss Japanese yen
1992 from the transformation of the end-2012. Their annual growth was during 2012 showed high growth trends the institutional investor arena. These currencies dollar currency (EUR) sterling (GBP) franc (per 100)
State Bank of Albania, which performed (USD) (CHF) (JPY)
estimated at 3.4%, from 10.9% a year when compared to the previous year. The entities also invest in treasury bills and
both central banking and commercial 2009 94.98 132.06 148.29 87.50 101.60
earlier. As of the end of June 2013, net results of the banking system in 2012 bank deposits.
banking functions. Its main task is to
total banking sector assets accounted amounted to €26.71 million, reflecting 2010 103.9 137.8 160.53 99.87 118.66
maintain Albanian Lek (ALL) purchasing
for about 88.7% of Albania’s GDP. More a significant increase compared with the Currently there are no investment 2011 100.89 140.33 161.71 113.98 126.68
power and thus price stability in Albania.
than 90% of the Albanian bank assets previous year. funds. Yet, a new Law No 10198, dated
Other tasks include: the conduct of 2012 108.18 139.20 171.75 115.62 135.55
are owned by large foreign banks, 10.12.2009 “On Collective Investment
foreign exchange operations; the
already well-established in Central and The Bank of Albania decided at the end of Undertakings”, aims at developing such
management of the official foreign Source: Bank of Albania
Eastern Europe. Some of the main July 2013 to lower by 0.25% the interest institutions.
reserves; the promotion of the smooth
problems facing the banking system rate to 3.5% reflecting a lower inflation,
operation of payment systems; financial The currency of Albania is the Albanian purchased amounts are minimal and do
include slow corporate loan granting and conservative fiscal policy in the economy, The corporate bond market remains
stability and banking supervision; Lek (ALL). The exchange rate regime is not increase the volatility of the exchange
underdeveloped e-banking. keeping macroeconomic stimulus undeveloped. The passage of a new law
the issuance of banknotes; and the determined by the Bank of Albania. The rate.
position. In the long-term the final “On Corporate and Local Government
production of statistics. value of ALL against foreign currencies is
The banking sector is the main actor in objective of this movement remains to Bonds” aims at fostering the development
freely determined by the market. Monetary policy does not target
financial intermediation in Albania. The keep the inflation at 3% +/- 1 percentage of the market. Government bonds with
Ever since its establishment, the BoA an exchange rate, but takes into
assets structure of the banking system point, which is the target of the Bank of a maturity of over 1 year are sold in
has been politically and functionally Bank of Albania interventions in the consideration the potential impact of
is mainly financed by deposits from Albania. the primary market through auctions
independent. Such independence, foreign exchange market are carried the exchange rate on inflation when
the public and is concentrated towards organized by the Bank of Albania.
which is laid down in its organic law, is out in accordance with its own rules deciding on the interest rate. Albania
financing the private sector. The banking Capital market The Government has issued bonds of
conducive to maintaining price stability. and procedures. Such interventions are applies no official intervention currency,
sector is dominated by foreign capital and respectively 2, 3, 5 and 7 year maturities,
It means that neither the BoA nor any aimed at fending off harmful short term but interventions are mainly carried out
remains highly concentrated, with the with variable and fixed interest rates.
member of its decision-making bodies The Financial Supervisory Authority fluctuations in the market and increasing against the EUR.
five largest banks holding about 68% of After their issuance, such bonds are
(i.e. the Governor and the Supervisory (FSA) is the exclusive regulator of the level of foreign exchange reserves. In
the total credit portfolio and 74% of total traded on the retail market by licensed
Council), are allowed to seek or take the capital market in Albania. The only the last 10 years, however, interventions The Bank of Albania has no intention
deposits. Total credit to the economy entities.
instructions from the government or any organized securities market in Albania by the Bank of Albania have been rare of changing neither the exchange rate
amounted to around 41% of GDP.
other public or private authority. The is the Tirana Stock Exchange (TSE) and have aimed to dampen strong one- regime, nor its policies and regulations
latter must respect this principle and not founded in 1996. In 2002, the TSE was sided moves at times of abnormal market governing interventions in the foreign
The banking sector is completely
seek to influence neither the BoA nor its restructured as a joint stock company behavior. More rarely interventions have exchange market. There is a general
private-owned. It provides the full range
staff. Under the law, the Governor and with the Ministry of Finance as its been carried out in order to increase the official consensus on the advantages
of business loans. Overall, the banking
the members of the Supervisory Council exclusive owner, and in 2007 it was level of foreign reserves according to of the current regime in Albania’s
sector is well-capitalized and has good
are granted long-renewable terms of licensed by the FSA to conduct stock a pre-approved plan, provided that the conditions. The exchange rate regime is
18 Doing business in Albania 2014 Doing business in Albania 2014 19