Albania is an upper middle-income country with a GNI per capita of USD 4,300 (2015) and a population of approximately 2.8 million people, more than half of who live in rural areas. Real GDP grew by 3.3 percent through the third quarter of 2016, and growth is projected to reach 3.8 percent in 2017 on public spending increases. Albania received EU candidate status in June 2014 and is working to implement reforms necessary to open EU accession negotiations. In November 2016, Albania received a European Commission recommendation to open EU accession negotiations conditioned primarily upon implementation of a judicial reform package passed earlier the same year.
Despite the government’s stated desire to attract foreign direct investment, corruption in Albania is endemic, particularly in the judiciary, and sanctity of contract and respect for private property remain low. The implementation of the reform of the judicial system has recently begun, but the investment climate remains problematic and Albania is perceived as a difficult place to do business.
Investors report ongoing concerns that regulators use difficult-to-interpret or inconsistent legislation and regulations as tools to dissuade foreign investors and favor politically connected companies. Regulations and laws governing business activity change frequently and without meaningful consultation with the business community. Major foreign investors report pressure to hire specific, politically connected subcontractors and express concern about compliance with the Foreign Corrupt Practices Act while operating in Albania. Reports of corruption in government procurement are commonplace. Several U.S. companies complained last year that they were disqualified from public tenders despite offering the lowest qualified bid, only to see the government award the contract to a local company.
Property rights remain another challenge in Albania, as clear title is difficult to obtain. Some factors include unscrupulous actors who manipulate the corrupt court system to obtain title to land not their own. Compensation for land confiscated by the former communist regime is difficult to obtain and inadequate. Meanwhile, the agency charged with removing illegally constructed buildings often acts without full consultation and fails to follow procedures.
To attract FDI, the GOA approved a new Law on Strategic Investments in 2015. The new law outlines investment incentives and offers fast-track administrative procedures to strategic foreign and domestic investors, depending on the size of the investment and number of jobs created. The government also passed legislation creating Technical Economic Development Areas (TEDAs), similar to free trade zones, but the tender to develop the first TEDA failed and the process stalled. The tender has since reopened for the third time.
Albania climbed 36 notches in the World Bank’s 2017 Doing Business report, ranking 58th out of 190 countries, up from 90th in 2016. The lifting of a moratorium on building permits, which the government froze in 2013 to combat illegal construction, explained much of the improvement. While Albania fared well in the “Dealing with Construction Permits" category, jumping 80 places from 2016, the country lost points or improved only marginally in every other variable measured by the index. Albania continued to score poorly for enforcing contracts and registering property, ranking 116th and 106th, in the overall global rankings.
The Albanian legal system ostensibly does not discriminate against foreign investors. The U.S.-Albanian bilateral investment treaty entered into force in 1998 and ensures that U.S. investors receive most-favored-nation treatment. The Law on Foreign Investment outlines specific protections for foreign investors and allows 100 percent foreign ownership of companies except in the areas of international air passenger transport, electric power transmission, and television broadcasting.
Energy and power, water supply and sewerage, road and rail, mining, and information communication technology represent the best prospects for foreign direct investment in Albania over the next several years.
Table 1
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The government of Albania (GoA) understands that private sector development and increased levels of foreign investment are critical to increase opportunity and lower unemployment. Albania maintains a liberal foreign investment regime designed to help attract FDI. The Law on Foreign Investment outlines specific protections for foreign investors and allows 100 percent foreign ownership of companies in all but a few sectors. Albanian legislation does not distinguish between domestic and foreign investments.
The 2010 amendments to the Law on Foreign Investment introduced criteria specifying when the state would grant special protection to foreign investors involved in property disputes, providing additional guarantees for investors for investments of more than 10 million euros through December 2014. The 2017 amendments extended state protection for strategic investments, as defined under the 2015 Law on Strategic Investments, through December 2018.
The U.S.-Albania bilateral investment treaty entered into force in 1998 and obligates the GOA to provide U.S. investors with most-favored-nation treatment.
The Albanian Investment Development Agency (AIDA) is in charge of promoting foreign investments in Albania. Investors intending to invest in Albania should contact AIDA to learn more about the services AIDA offers for foreign investors http://aida.gov.al/
The Law on Strategic Investments stipulates that AIDA, as the Secretariat of the Strategic Investment Council, serves as a one-stop window for foreign investors, from filing of the application form to granting the status of strategic investment/investor.
The deadline for application to receive the status of strategic investment/investor is December 2018. The legal framework regulating the strategic investments can be found at the Albanian Investment Development Agency page at http://aida.gov.al/pages/strategic-investments.
Despite hospitable legislation, U.S. investors are challenged by rampant corruption and the perpetuation of informal business practices. Several major U.S. investors have left the country in recent years after contentious commercial disputes, including several that were brought before international arbitration.
Limits on Foreign Control and Right to Private Ownership and Establishment
There are no restrictions on foreign ownership or control of domestic corporations. According to Albanian legislation, 100 percent foreign ownership of companies is allowed in nearly all sectors with a few exceptions, including:
* International air passenger transport (foreign interest in airline companies is limited to 49 percent ownership for investors outside the Common European Aviation Zone);
* Electric power transmission (must be 100 percent state owned);
* Television broadcasting (no entity may own more than 40 percent of a television company).
Albanian law permits private ownership and establishment of enterprises and property. Foreign investors do not require additional permission or authorization beyond that required of domestic investors. The government applies restrictions only on the purchase of real estate: agricultural land cannot be purchased by foreign individuals or foreign companies, but may be rented for up to 99 years. Commercial property may be purchased, but only if the proposed investment is worth three times the price of the land. There are no restrictions on the purchase of private residential property. Foreigners can acquire concession rights on natural resources and on resources of the common interest, as defined by the Law on Concessions and Public Private Partnerships.
Foreign and domestic investors have numerous options available for organizing business operations in Albania. The 2008 ‘Law on Entrepreneurs and Commercial Companies,’ and ‘Law Establishing the National Registration Center’ (NRC) allow for the following legal types of business entities to be established through the NRC: Sole Entrepreneur; Unlimited Partnership; Limited Partnership; Limited Liability Company; Joint Stock Company; Branches and Representative Offices; and Joint Ventures.
Other Investment Policy Reviews
World Trade Organization (WTO) conducted a Trade Policy Review of Albania in March 2016: https://www.wto.org/english/tratop_e/tpr_e/s337_e.pdf.
Business Facilitation
According to the 2017 World Bank Doing Business Report, it takes an average of five procedures over five days to start a company in Albania. The National Registration Center (NRC) serves as a one-stop shop for business registration. All required procedures and documents are published on-line at http://www.qkb.gov.al/information-on-procedure/business-registration/ The registration may be done in person, or online via the e-Albania portal at https://www.e-albania.al/sherbimi.aspx?kodi=3428. Many companies choose to complete the registration process in person, as the online portal requires an authentication process and electronic signature and is only available in Albanian. Business licenses can be acquired through the Business Licensing Center at http://www.qkl.gov.al
Outward Investment
Albania neither promotes nor incentivizes outward investment or restricts domestic investors from investing abroad.
2. Bilateral Investment Agreements and Taxation Treaties
The United States and Albania signed a bilateral investment treaty in 1995, which entered into force in January 1998. The treaty ensures that U.S. investors receive national or most-favored-nation treatment and provides for dispute settlement. There is no free trade agreement or bilateral taxation treaty between the two countries.
As of May 2017, Albania had concluded bilateral investment treaties with 44 countries. See a full list at the following page: http://investmentpolicyhub.unctad.org/IIA/CountryBits/2. Out of 44 agreements, eight are not yet in force. The BIT with the United States has been in force since 1998.
As of February 2017, Albania had signed treaties for the avoidance of double taxation with 41 countries. See a full list at the following page: https://www.tatime.gov.al/c/6/125/marreveshje-nderkombetare
Albania has also signed free trade agreements with the EU, CEFTA countries (Macedonia, Montenegro, Serbia, Bosnia and Herzegovina, Kosovo, and Moldova), EFTA countries (Switzerland, Liechtenstein, Norway, and Iceland), and Turkey. In addition, in 1992, Albania ratified the Agreement on Promotion, Protection and Guarantee of Investments among member states of the Organization of the Islamic Conference.
3. Legal Regime
Transparency of the Regulatory System
Albania’s regulatory system has improved in recent years, but faces challenges. Uneven enforcement of legislation, cumbersome bureaucracy, and a lack of transparency are all hindrances to the business community.
Albanian legislation includes rules on disclosure requirements, formation, maintenance, and alteration of capital, mergers and divisions, takeover bids, shareholders’ rights, as well as corporate governance principles. The Law on Accounting and Financial Statements includes reporting provisions related to international financial reporting standards for large companies, and national financial reporting standards for small and medium enterprises.
Other independent agencies and bodies, including the Energy Regulator (ERE), Telecom Regulator (AKEP), Natural Resources Bureau (AKBN), and other major institutions operate to ensure transparency in specific sectors.
State-owned oil company AlbPetrol retains some regulatory authority over legacy oilfields and is a consistent source of reports of corruption, predatory interpretation of regulations, and inefficiency in the hydrocarbons sector. Major foreign investors in this sector report difficulties in complying with often overlapping regulatory requirements and inconsistent and often conflicting interpretation of Albanian legislation and regulations governing oil exploration and extraction.
International Regulatory Considerations
Albania acceded to the WTO in 2000, and the country notifies the WTO Committee on Technical Barriers to Trade of all draft technical regulations.
The Albania legal system is based on the continental judicial system. The Albanian Constitution provides for the separation of legislative, executive, and judicial branches, thereby supporting the independence of the judiciary. The Civil Procedure Code enacted in 1996 governs civil procedure in Albania. The civil court system consists of district courts, appellate courts, and the Supreme Court. The district courts are organized in specialized sections according to the subject of the claim, including civil disputes, family disputes, and commercial disputes.
The administrative courts of first instance, the Administrative Court of Appeal, and the Administrative College of the High Court, now adjudicate administrative disputes. Administrative courts aim to adjudicate administrative cases quickly. The Constitutional Court reviews whether laws or subsidiary legislation comply with the Constitution, and in limited cases protects and enforces the constitutional rights of citizens and legal entities.
Parties may appeal the judgment of the first instance courts within 15 days; while appellate court judgments must be appealed to the Supreme Court within 30 days. A lawsuit against an administrative action is submitted to the administrative court within 45 days from notification and the law stipulates short procedural timeframes enabling faster adjudication of administrative disputes.
Albania does not have a specific commercial code, but defines commercial legislation through a series of relevant commercial laws including, the Foreign Investment Law, Commercial Companies Law, Bankruptcy Law, Environmental Law, Law on Corporate and Municipal Bonds, Transport Law, Maritime Code, Secured Transactions Law, Employment Law, Taxation Procedures Law, Banking Law, Insurance and Reinsurance Law, Concessions Law, Mining Law, Energy Law, Water Resources Law, Waste Management Law, Excise Law, Oil and Gas Law, Gambling Law, Telecommunications Law, Value Added Law, and Sports Law.
Corruption is endemic in the Albanian judicial system and U.S. investors are advised to include binding international arbitration clauses in agreements with Albanian counterparts. While the government has historically respected decisions by international arbitration courts, as noted above, the GoA recently ignored an injunction from such a court in a high-profile investment dispute (a decision that was later reversed). Albania is a signatory to the New York Convention and foreign arbitration awards may be enforced in local courts.
Laws and Regulations on Foreign Direct Investment
The Law on Foreign Investments seeks to create a hospitable legal climate for foreign investors and stipulates the following:
1. No prior government authorization is needed for an initial investment;
2. Foreign investment may not be expropriated or nationalized directly or indirectly, except for designated special cases, in the interest of public use and as defined by law;
3. Foreign investors enjoy the right to expatriate all funds and contributions in kind from their investments;
4. Foreign investors receive most favored nation treatment according to international agreements and Albanian law.
There are limited exceptions to this liberal investment regime, most of which apply to the purchase of real estate. Agricultural land cannot be purchased by foreigners and foreign entities, but may be rented for up to 99 years. Investors can buy agricultural land if registered as a commercial entity in Albania. Commercial property may be purchased, but only if the proposed investment is worth three times the price of the land. There are no restrictions on the purchase of private residential property.
In an effort to boost investments in strategic sectors, the government approved a new law on strategic investments in May 2015. Under the new law, a “strategic investment" as deemed by the government benefits from either “assisted procedure" or “special procedure" assistance by the government to help navigate the permitting and regulatory process. To date, no major investors have taken advantage of the law.
Major Laws Governing Foreign Investments:
* Law 55/2015, “On Strategic Investments": Defines procedures and rules to be observed by government authorities when reviewing, approving and supporting strategic domestic and foreign investments in Albania;
* Law 9901/2008 “On Entrepreneurs and Commercial Companies": Outlines general rules and regulations on the merger of commercial companies;
* Law 110/2012 “On Cross-Border Mergers": Determines rules on mergers when one of the companies involved in the process is a foreign company;
* Law 9121/2003 “On Protection of Competition": Stipulates provisions for the protection of competition, and the concentration of commercial companies;
* Law 10198/2009 “On Collective Investment Undertakings": Regulates conditions and criteria for the establishment, constitution, and operation of collective investment undertakings and of management companies;
* Law 7764/1993 “On the Foreign Investments" amended by the Law 10316/2010.
Authorities responsible for mergers, change of control, and transfer of shares include, the Albanian Competition Authority (ACA) http://www.caa.gov.al/laws/list/category/1/page/1 which monitors the implementation of the competition law and approves mergers and acquisitions when required by the law; and, the Albanian Financial Supervisory Authority (FSA) http://www.amf.gov.al/ligje.asp which regulates and supervises the securities market and approves the transfer of shares and change of control of companies operating in this sector.
Investors in Albania are entitled to judicial protection of legal rights related to their investments. Foreign investors have the right to submit disputes to an Albanian court. In addition, parties to a dispute may agree to arbitration. Albania is a signatory to the New York Arbitration Convention and foreign arbitration awards are typically recognized by Albania, although the government refused to recognize an injunction from a foreign arbitration court in one high profile case, in 2016, calling into question the government’s commitment to arbitration (this refusal was later reversed). The Albanian Civil Procedure Code outlines provisions regarding domestic and international commercial arbitration. Many foreign investors complain that endemic judicial corruption and inefficient court procedures undermine judicial protection in Albania and seek international arbitration to resolve disputes.
Albania’s tax system does not distinguish between foreign and domestic investors. Informality in the economy (as high as 50 percent) presents challenges for tax administration.
Visa requirements to obtain residence or work permits are straightforward and do not pose an undue burden on potential investors. The only potential complication to obtaining a work permit is the requirement that a foreign employer maintain a certain number of local employees. The Law on Foreigners states that a foreign employer will be granted a work permit when the number of foreign employees does not exceed 10 percent of the total number of employees on the payroll over the 12 proceeding months.
The Law on Entrepreneurs and Commercial Companies sets guidelines on the activities of companies and the legal structure under which they may operate. The government adopted the law in 2008 to conform Albanian legislation to the European Union’s Acquis Communitaire. The most common type of organization for foreign investors is a limited liability company.
The Law on Concessions establishes the framework for promoting and facilitating the implementation of privately financed concessionary projects. Concessions may be identified by central or local governments or through third party unsolicited proposals. In the case of unsolicited proposals, the proposing company is entitled to receive a bonus of up to 10 percent of total points based on the technical and financial proposal.
Competition and Anti-Trust Laws
The Law on Protection of Competition governs incoming foreign investment whether through mergers, acquisitions, takeovers, or green field investments, irrespective of industry or sector. In the case of particular share transfers in insurance and banking industries, additional regulatory approvals may also be necessary. Transactions between parties outside Albania-foreign-to-foreign transactions-are covered by the competition law, which explicitly states that the transactions apply to all activities, domestic or foreign, that directly or indirectly affect the Albanian market.
Expropriation and Compensation
The Albanian Constitution guarantees the right of private property. According to Article 41, expropriation or limitation in the exercise of a property right can occur only if it serves the public interest and with fair compensation. During the post-communist period, expropriation has been limited to land for public interest, mainly infrastructure projects such as roads, energy infrastructure, water works, airports, and other facilities. Compensation has generally been below market value and owners have complained that the compensation process is slow and unfair. Civil courts are responsible for resolving such complaints.
Change of government can also be of concern to foreign investors. Following the 2013 elections and peaceful transition of power, the new government revoked or attempted to renegotiate numerous concession agreements, licenses, and contracts signed by the previous government with both domestic and international investors. This practice has occurred in years past, as well.
There are many ongoing disputes regarding properties confiscated during the communist regime. Identifying ownership is a longstanding problem in Albania that makes restitution for expropriated properties difficult. The restitution and compensation process started in 1993, but has been slow and marred by corruption. Many U.S. citizens of Albanian origin have suffered from long-running restitution disputes. Court cases drag on for years without a final decision, forcing many to refer their case to the European Court of Human Rights in Strasbourg, France. To date, the Court has issued approximately 29 decisions in favor of Albanian citizens in civil cases involving protection of property with an assessed financial cost of approximately $50 million. Reportedly, there are approximately 400 applications pending for consideration. Even after settlement in Strasbourg, enforcement of the decision is often slow or nonexistent.
The GOA has recently approved new property compensation legislation that aims to provide a solution to the pending claims for restitution and compensation. The legislation presents three methods of compensation for confiscation claims: restitution; compensation of property with similarly valued land in a different location; and cash settlement/financial compensation. The legislation sets a 10-year timeframe for the completion of the entire process.
The Albanian government has generally not engaged in expropriation actions against U.S. investments, companies, or representatives. There have been limited cases in which the government has revoked licenses, especially in the mining and energy sectors, based on contract violation claims.
Dispute Settlement
ICSID Convention and New York Convention
Under the Albanian Constitution, ratified international agreements prevail over domestic legislation. Albania is a member state to the International Centre for the Settlement of Investment Disputes (ICSID Convention). It also is a signatory to the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). Albania has ratified the 1927 Convention and the European Convention on Arbitration (Geneva Convention).
For an arbitration award to be locally recognized, the claimant must enforce the award before the Court of Appeals. The procedure to recognize a foreign arbitral award typically lasts around one month and either party may appeal the Court’s decision to the Supreme Court. The appeal must be filed within 30 days from the date of decision or notification of the other party (if absent).
The possibility of bringing an action before the local court to avoid arbitration proceedings is remote. According to explicit provisions in the Albanian Code of Civil Procedure, if a party brings actions before local courts despite the parties’ agreement to arbitrate, the court would, upon motion of the other party, dismiss the case without entertaining the merits of the case. The decision of the court to dismiss the case can be appealed to the Supreme Court, which has 30 days to consider the appeal.
An alternative to dispute settlement via the courts is private arbitration or mediation. Parties can engage in arbitration when they have agreed to such a provision in the original agreement, when there is a separate arbitration agreement, or by mutual agreement at any time when a dispute arises. Legislation distinguishes arbitration of international disputes from arbitration of domestic disputes in that the parties involved in an international dispute may agree to settle through either a domestic or foreign arbitration tribunal. Mediation is also applicable in resolving all civil, commercial, and family disputes and is regulated by the law “On Dispute Resolution through Mediation." Arbitral awards are final and enforceable and can be appealed only in cases foreseen in the Code of Civil Procedure. Mediation is final and enforceable in the same way.
There are no consolidated institutions for dispute resolution through arbitration and arbiters are appointed ad hoc in compliance with the provisions of the Code of Civil Procedure. The law provides for the National Chamber of Mediators and Chambers of Mediators as institutions to perform mediation. Mediators are licensed and registered at the Mediators Register at the Ministry of Justice, which maintains a list of mediators from which the parties can choose.
The provisions for arbitration procedures and the recognition and enforcement of foreign awards are stipulated in the Albanian Code of Civil Procedure. Albania does not have a separate law on arbitration. Although the arbitration chapter of the Code of Civil procedure stipulates only the rules for domestic arbitration, the country is signatory to the 1958 New York Convention, and as such, recognizes the validity of written arbitration agreements and arbitral awards in a contracting state.
The Albanian Code of Civil Procedure requires the courts to reach a judgment within a reasonable amount of time, but does not provide for a specific deadline to decide on commercial disputes. Reaching a final judgment in a commercial litigation may take several years to exhaust all stages of the process.
The procedure for the recognition of a foreign arbitral award should take on average approximately one month; however, in certain cases this decision may be appealable. An appeal against a court decision that recognizes a foreign arbitral award does not automatically suspend the effects of the enforcement.
International Commercial Arbitration and Foreign Courts
Over the past ten years, there have been six investment disputes between the Albanian government and U.S. companies, four of which resulted in international arbitration. Despite a stated desire to attract and support foreign investors, U.S. investors in disputes with the Albanian government report a lack of productive dialogue with government officials, who frequently display a reluctance to settle the disputes before they are escalated to the level of international arbitration, or before the international community exerts pressure on the government to resolve the issue. U.S. investors in Albania are encouraged to include strong binding arbitration clauses in any agreements with Albanian counterparts.
Bankruptcy Regulations
Albania maintains adequate bankruptcy legislation, though actual bankruptcies are rare in practice. Corrupt and inefficient bankruptcy courts make it difficult for companies to reorganize or discharge debts through bankruptcy.
The Bankruptcy Law governs the reorganization or liquidation of insolvent businesses. It sets out non-discriminatory and mandatory rules for the repayment of the obligations by a debtor in a bankruptcy procedure. The law establishes statutory time limits for insolvency procedures, professional qualifications for insolvency administrators, and an Agency of Insolvency Supervision to regulate the profession of insolvency administrators.
A bankruptcy procedure can be initiated by debtors, creditors, or tax authorities. Debtors and creditors can file for either liquidation or reorganization. Tax authorities can request a bankruptcy procedure when the subject reports losses three years consecutively. Bankruptcy proceedings may also be invoked when the debtor is unable to pay the obligations at maturity date or will be unable to pay in the near future.
According to the provisions of the Bankruptcy Law, the initiation of bankruptcy proceedings would suspend the enforcement of claims by all creditors against the debtor subject to bankruptcy. Creditors of all categories should submit their claims to the bankruptcy administrator in order to be treated under the bankruptcy proceeding. The Bankruptcy Law provides specific treatment for different categories, including, secured creditors, unsecured creditors, and unsecured creditors of lower ranking (i.e. those whose claims would be paid after all the secured and unsecured creditors were satisfied). The claims of the secured creditors will be satisfied by the assets of the debtor, which secure such claims under security agreements. The claims of the unsecured creditors will be paid out of bankruptcy estate excluding the assets used for payment of the secured creditors, following the priority ranking described under the Albanian Civil Code.
Pursuant to the provisions of the Bankruptcy Law, the creditors have the right to establish a creditors committee and the creditors’ assembly. The creditors’ committee is appointed by the Commercial Section Courts, before the first meeting of the creditors’ assembly. The creditors’ committee represents the secured creditors, the unsecured creditors with larger claims, and creditors with small claims. The committee has the right: (a) to support and supervise the activities of the insolvency administrator; (b) to request and receive information about the insolvency proceedings; c) to inspect the books and records; and, d) to order an examination of the revenues and cash balances.
In the event that the creditors and administrator agree that reorganization is the company’s best option, the bankruptcy administrator prepares a reorganization plan and submits it to the court for authorizing implementation.
According to the insolvency procedures, only creditors whose rights are affected by the proposed reorganization plan enjoy the right of vote and the dissenting creditors in reorganization receive at least as much as what they would obtain in a liquidation. Creditors are divided into classes for the purposes of voting on the reorganization plan and each class votes separately and creditors of the same class are treated equally.
The insolvency framework allows for the continuation of contracts supplying essential goods and services to the debtor, the rejection by the debtor of overly burdensome contracts, the avoidance of preferential or undervalued transactions, and the possibility of the debtor obtaining credit after commencement of insolvency proceedings. No priority is assigned to post-commencement creditors.
The creditor has the right to object to decisions accepting or rejecting creditors’ claims, and should approve the sale of substantial assets of the debtor. The creditor does not have the right to request information from the insolvency representative and the law does not require approval by the creditor for the selection of appointment of insolvency representative.
According to the law on bankruptcy, foreign creditors have the same rights as domestic creditors with respect to the commencement of, and participation in, a bankruptcy proceeding. The claim is valued as of the date the insolvency proceeding is opened. Claims expressed in foreign currency are converted into Albanian currency according to the official exchange rate applicable to the place of payment at the time of the opening of the proceeding.
The Albanian Criminal Code provides for several criminal offences in bankruptcy such as: (i) the bankruptcy was provoked intentionally; (ii) concealment of bankruptcy status; (iii) concealment of assets after bankruptcy; and, (iv) failure to comply with the obligations arising under bankruptcy proceeding.
According to the World Bank’s 2017 Doing Business Report, Albania ranked 43 out of 190 countries in the insolvency index. A reference analysis of ‘resolving insolvency’ can be found at: http://www.doingbusiness.org/data/exploreeconomies/albania#resolving-insolvency.
The number of bankruptcy requests in Albania is growing; as of November 2016, 132 companies had navigated through bankruptcy based on the register of the Taxation Department.
4. Industrial Policies
Investment Incentives
The Albanian Investment Development Agency (www.aida.gov.al) is the best source to find incentives offered across a variety of sectors. Distinct from the incentives listed below, individual parties may negotiate additional incentives directly through AIDA or with the Ministry of Economy, Trade, Tourism and Entrepreneurship.
In an effort to boost investments in strategic sectors, the GoA approved a new law on strategic investments in May 2015 that outlines the criteria, rules, and procedures that state authorities use when approving a strategic investment. A strategic investment is an investment of public interest, based on several criteria, including, size of the investment, implementation time, productivity and value added, creation of new jobs, sectoral economic priorities, and regional and local economic development. The law does not discriminate between foreign and domestic investors.
The following sectors are defined as strategic sectors: Mining and Energy, Transport, Electronic Communication Infrastructure, Urban Waste Industry, Tourism, Agriculture (large farms) and Fishing, Economic Zones, and Development Priority Areas. The law foresees that investments in strategic sectors may benefit the status of Assisted Procedure and Special Procedure, based on the level of investment, which varies from one to 100 million euros, depending on the sector and other criteria stipulated in the law.
In the Assisted Procedure, the public administration coordinates, assists, and supervises the entire administrative process for the investment approval and makes available to the investor state-owned property needed for the investment. In the Special Procedure, the investor also enjoys state support for the expropriation of private property and the ratification of the contract by Parliament.
The law and bylaws that entered into force on Jan. 1, 2016, foresee the establishment of the Strategic Investments Committee (SIC), a collegial body headed by the prime minister, whose members include ministers covering the respective strategic sectors, state advocate, and on a case-by-case basis ministers whose portfolios are impacted by the strategic investment. The Albanian Investment Development Agency (AIDA) serves as the Secretariat of SIC and is in charge of providing administrative support to investors. The SIC grants the status of Assisted Procedure and Special Procedure, for strategic investments/investors based on the size of investments and other criteria defined in the law.
Energy and Mining, Transport, Electronic Communication Infrastructure, and Urban Waste Industry: Investments greater than 30 million euros enjoy the status of assisted procedure, while 50 million euros or more enjoys special procedure status.
Tourism and Economic Areas: Investments equal or higher than 5 million euros enjoy the status of assisted procedure; and greater than 50 million euros enjoy the status of special procedure.
Agriculture (large agricultural farms) and Fishing: Investments greater than 3 million euros and which create at least 50 new jobs enjoy the status of assisted procedure; and greater than 50 million euros enjoy the status of special procedure.
Development Priority Areas: Investments greater than one million euros that creates at least 150 new jobs enjoy the status of assisted procedure. Investments greater than 10 million euros that create at least 600 new jobs enjoy the status of special procedure.
Energy sector: Some machinery and equipment imported for the construction of hydropower plants is VAT exempt.
Foreign tax credit: Albania applies foreign tax credit rights even in cases where no double taxation treaty exists with the country in which the tax is paid. If a double taxation treaty is in force, double taxation is avoided either through an exemption or by granting tax credits up to the amount of the applicable Albanian corporate income tax rate (currently 15 percent).
Corporate income tax exemption: Film studios and cinematographic productions, licensed and funded by the National Cinematographic Center, are exempt from paying corporate income tax.
Loss carry forward for corporate income tax purposes: Fiscal losses can be carried forward for three consecutive years (the first losses are used first). However, the losses may not be carried forward if more than 50 percent of direct or indirect ownership of the share capital or voting rights of the taxpayer is transferred (changed) during the tax year.
Incentives for manufacturing sector
Lease of public property: The government of Albania can lease public property of more than 500 m2, or grant a concession for the symbolic price of one euro if the properties will be used for manufacturing activities with an investment exceeding 10 million euros, or for inward processing activities. The GOA can also lease public property or grant a concession for the symbolic price of one euro for investments of more than two million euros on activities that address social and economic issues in a certain area, as well as activities related to sports, culture, tourism and cultural heritage. Criteria and terms are decided on an individual bases by the Council of Ministers.
Manufacturing activities are exempt from VAT on machinery and equipment.
The employer is exempt from the social security tax payment for one year for all new employees.
The state pays the salaries for four months for the new employees and offers various financing incentives for job training.
VAT credit for fuel: Taxpayers whose main business activity is production of bricks and tiles and the transport of goods with technological means are allowed to credit VAT on the purchase of fuel used wholly and exclusively for their business activities, up to the limit of a certain percentage of the taxpayer’s total annual turnover.
Manufacturing sector obtains VAT refunds immediately in the case of zero risk exporters, within 30 days if the taxpayer is an exporter, and within 60 days in the case of other taxpayers.
Apparel and footwear producers are exempt from 20 percent VAT on raw materials so long as the finished product is exported. In 2011, the GOA also removed customs tariffs for imported apparel and raw materials in the textile and shoe industries (e.g. leather used for clothes, cotton, viscose, velvet, sewing accessories, and similar items).
Technological and Development Areas (TEDA): The law on the economic development areas provides both fiscal and administrative incentives for companies investing in these areas. A full list of incentives can be found at the following page: http://www.teda.gov.al/?page_id=687.
Research and Development
The Agency for Research, Technology and Innovation (ARTI), is a public, legal institution whose mission is to evaluate, finance, monitor and manage programs and projects in the fields of science, technology and innovation in Albania. ARTI ) aims to fund projects in the field of small and medium enterprises, as well as transfer, modernization and renewal of their technologies. The Agency is funded by the state budget, donations by both domestic and foreign individuals and private sector, EU programs and projects, from specific countries and partner organizations. There are no restrictions to apply for research and development projects for foreign firms operating in Albania.
Foreign Trade Zones/Free Ports/Trade Facilitation
Albania has no functional duty free import zones, although legislation exists for the creation of such. The May 2015 amendments to the Law on the Establishment and Operation of Technical and Economic Development Areas (TEDA) established the legal framework for the establishment of TEDAs (a.k.a. free trade zones), defining the incentives for developers investing in the development of these zones as well as companies operating within the zones. The Ministry of Economic Development has announced three investment opportunities seeking private sector developers to obtain, develop, and operate three fully serviced areas, located in Koplik (61 ha) and Spitalla (100 ha). Interested investors and developers may find more information for the development of Technical and Economic Development Areas (TEDA) at the following site: http://aida.gov.al/faqe/zonat-me-zhvillim-teknik-dhe-ekonomik
Performance and Data Localization Requirements
Although visa, residence, and work permit requirements are straightforward and do not pose an undue burden on potential investors, the Law on Foreigners requires foreign investors to prove that foreign employees are less than 10 percent of the total workforce before granting a work permit.
According to current legislation in force, companies that have sensitive data (mostly in telecommunications, banking, energy, and other sector) are not authorized to transfer data abroad. In order to do so, they must receive approval and fulfill certain security criteria. As such, many companies operating in Albania are returning their data to Albania. The two largest private datacenters in Albania belong to telecom operator Albtelekom and Albanian Telecommunication Union (ATU).
5. Protection of Property Rights
Real Property
Real Estate is registered at the Immovable Property Registration Office (IPRO). The procedures are cumbersome and registrants have complained of corruption in the process. Recent changes to legislation allow a notary public to have access to real estate registers and confirm the legal ownership of property. The process of registering property remains cumbersome and difficult to navigate. For large transactions, it is advisable to hire an attorney to check documents and procedures for property registration.
Property legislation has developed in a piecemeal and uncoordinated way. The reform in the sector has not achieved the consolidation of property rights and the elimination of legal uncertainties. Immovable property rights enforcement is not efficient and is a common source of corruption allegations and lengthy legal procedures. Through international donor assistance, the registration system has improved. The initial property registration process has seen progress, but the finalization of the process has stalled in recent years. Approximately 15 percent of properties nationwide are not yet registered, mostly in urban and high value coastal areas.
Illegal construction is a major impediment to securing property titles. The legalization process to address large-scale illegal construction started in 2006, and is still ongoing. There are an estimated 440,000 illegal buildings in Albania, many have applied or are cases in process for legalization. In an attempt to legalize property and punish illegal construction, the government’s National Urban Construction Inspectorate (INUK) began a campaign of building demolition in late 2013. There were credible reports that the government demolished some homes without due legal process as part of a wider campaign to demolish illegally constructed buildings. Citizens also submitted complaints that INUK ignored citizens’ requests to demolish some illegal buildings while choosing to demolish other buildings about which citizens had not complained.
The civil court system manages property rights disputes. Decisions from civil courts often take many years and authorities often do not enforce court decisions. In 2010, there were amendments to the law on foreign investments, which granted special protection to foreign investors on property disputes. However, the new law on strategic investments aims to fill the gap and provide foreign investors with assistance on a variety of issues including property title. Foreigners and/or foreign entities can purchase commercial land only if the investment is more than three times the value of the land. In the case of farm land, it can only be leased, for 99 years.
According to the 2017 World Bank’s Doing Business Report, Albania performed poorly in the registering property category, ranking 106 out of 190 economies. It takes 19 days and six procedures to register property and the associated costs can reach 10 percent of the total property value.
Intellectual Property Rights
Albania is not and has never been listed on the USTR Special 301 Watch List or Priority Watch List, or Notorious Markets report. However, IPR infringement and theft are common due to weak legal structures and poor enforcement. Counterfeit goods, while decreasing, are present in some local markets ranging from software to garments and machines. Albanian law protects copyrights, patents, trademarks, stamps, marks of origin, and industrial designs, but significant gaps remain between the law’s intent and its enforcement. Regulators are ineffective at collecting fines and prosecutors rarely press charges for IP theft. U.S. companies should consult an attorney experienced in IPR issues and avoid potential risk by establishing solid commercial relationships and drafting strong contracts.
A new IPR law approved by the Parliament on March 31, 2016 entered into effect in November 2016. The law seeks to harmonize domestic legislation with EU law to strengthen IPR enforcement and address shortcomings in existing legislation. The main institutions responsible for IPR enforcement include the Albanian Copyright Office (ACO), Audiovisual Media Authority (AMA), the General Directorate of Patents and Trademarks (GDPT), the General Directorate for Customs, the Tax Inspectorate, the Prosecutor’s Office, police, and courts. The new law also stipulated the establishment of three new IPR bodies: the National Council of Copyrights, which is responsible to monitor the implementation of the law; the Agency for the Collective Administration, in charge of IPR administration; and the Copyrights Department within the Ministry of Culture.
While official figures are not available, Customs does report the quantity of counterfeit goods destroyed annually. In the case of seizure, the rights holder has the burden of proof and must first inspect the goods before any further action takes place. The rights holder is also responsible for the storage and destruction of the counterfeit goods.
Law enforcement on copyrights remains virtually nonexistent and copyright violations are rampant. Most IP-related fines are never collected and the few cases referred to prosecutors by regulatory agencies are rarely enforced. The number of copyright violation cases brought to court remains low. ACO sanctions are not effective and the low fines it levies are rarely collected and do not serve as an adequate deterrent.
Patents and Trademarks
The General Directorate for Patents and Trademarks (GDPT) is responsible to register and administer patents, commercial trademarks and service marks, industrial designs, and geographical indications. The 2008 law on Industrial Property was amended initially in 2014 to reflect EU legislation on this matter. Further amendments were introduced in February 2017 that aim to transform GDPT from a public institution into an autonomous agency to strengthen its human and financial capacities and improve performance. Despite adequate legislation, the GDPT requires further capacity building and additional human resources to be effective. Specifically, examination procedures are lengthy due to a limited number of patent and trademark examiners.
Albania became a contracting party to the WIPO Patent Law Treaty and a full member of the European Patent Organization in 2010. The government became party to the London Agreement on the implementation of Article 65 of the European Convention for Patents in 2013.
For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at: http://www.wipo.int/directory/en/.
Resources for Rights Holders
Contact at mission on IP issues:
Jeffrey D. Bowan
Economic and Commercial Officer
Phone: + 355 (0) 4229 3115
E-mail: BowanJD@state.gov
Country resources:
American Chamber of Commerce: www.amcham.com.al
Address: Rr. Deshmoret e 4 shkurtit, Sky Tower, kati 11 Ap 3 Tirana, Albania
Email: info@amcham.com.al
Phone: +355 (0) 4225 9779
Fax: +355 (0) 4223 5350
List of local lawyers: http://tirana.usembassy.gov/list_of_attorneys.html
6. Financial Sector
Capital Markets and Portfolio Investment
In the absence of a stock market, the country’s banking sector remains the main channel for business financing. The sector is sound, profitable, and well capitalized, although the high rate of non-performing loans remains a concern. The Bank of Albania’s legal measures to address the problem have generated positive results. At the end of 2016, non-performing loans dropped to 18.2 percent of all private loans, marking a significant reduction from 2014, when the non-performing loans reached 25 percent. Capital adequacy, at 15.7 percent, remains far above Basel requirements and indicates sufficient assets, which totaled $11.4 billion in 2016. The banking sector is fully private and consists of 16 banks, most of which are subsidiaries of foreign banks. As of September 2016, the Turkish National Commercial Bank remains the largest bank, with 27.3 percent of the market, followed by Austrian Raiffeisen Bank with 18.8 percent market share. The market share of Greek banks has fallen significantly in recent years and stands at around 14 percent.
The government has adopted policies promoting the free flow of financial resources to promote foreign investment in Albania. The government and Central Bank refrain from restrictions on payments and transfers for international transactions. Despite Albania’s shallow FX market, banks enjoy sufficient liquidity to support sizeable positions. Furthermore, portfolio investments remain limited mostly to company shares, government bonds, and real estate.
The high rate of non-performing loans and the economic slowdown has forced commercial banks to tighten lending standards. After falling in 2015, the stock of loans increased by 2.5 percent year-on-year in 2016. The credit market is competitive, but interest rates in domestic currency can be high, currently between 5.6 and 12 percent. Most mortgage and commercial loans are denominated in euros as rate differentials between local and foreign currency average 2-6 percent. Commercial banks have improved the quality and quantity of services they offer and the private sector has benefited from the expansion of these instruments.
The major state owned enterprises are Electric Distribution Operator (OSHEE), Transmission System Operator (OST), Electricity Generation Company (KESH), Oil and Gas Operator, Albpetrol, Albanian Post Office, and the Albanian Railway System. There is no published list of SOEs and no clear data on their assets, net income, or total number of employees.
Money and Banking System
Albania’s banking sector weathered the financial crisis better than many of its neighbors, due largely to a lack of exposure to international capital markets and lack of a domestic housing bubble. There is sufficient liquidity in the market to enter and exit sizeable positions. The sector remained profitable even during the peak of the 2008 financial crisis, when it suffered a reduction of deposits of about 15 percent. Market concentration remains high, as the five largest banks dominate the market with about 73 percent of total assets. The Bank of Albania has the flexibility to intervene in the currency market to protect exchange rates and official reserves, but not for more than 12 months. In an attempt to stimulate business activity, the Bank of Albania further loosened monetary policy in 2016, with official central bank interest rates reaching a historic low of 1.25 percent.
Foreigners are not required to prove residency status to establish a bank account aside from the normal know-your-client procedures. However, U.S. citizens are required to fill out a form allowing for the disclosure of their banking data to the IRS under the framework of the U.S. Foreign Account Tax Compliance Act.
Foreign Exchange and Remittances
Foreign Exchange
The Central Bank of Albania (BOA) formulates, adopts, and implements foreign exchange policies and maintains a supervisory role in foreign exchange activities in accordance with the Law on the Bank of Albania No. 8269 and the Banking Law No. 9662. Foreign exchange is regulated by the 2009 Regulation on Foreign Exchange Activities no. 70 (FX Regulation).
The BOA maintains a free float exchange rate regime for its domestic currency, the Lek (ALL). Foreign exchange is readily available at banks and exchange bureaus. However, when exchanging several million dollars or more, preliminary notification may be necessary as the exchange market in Albania remains small. The domestic currency has remained stable over the last year, depreciating by around 1.5 percent against the U.S. dollar. Albanian authorities do not engage in currency arbitrage and do not view such as an efficient instrument to achieve competitive advantage.
Remittance Policies
The Banking Law does not impose restrictions on the purchase, sale, holding, or transfer of monetary foreign exchange. However, the Law on the Bank of Albania authorizes the Bank to temporarily restrict the purchase, sale, holding, or transfer of foreign exchange to preserve the foreign exchange rate or official reserves. In practice, the Bank of Albania rarely employs such measures. The last episode was in 2009, when the Bank temporarily tightened supervision rules over liquidity transfers by domestic correspondent banks to foreign banks due to insufficient liquidity in international financial markets. It also asked banks to halt distribution of dividends and use dividends to increase shareholders’ capital, instead. The Bank lifted these restrictions in 2010.
The Law on Foreign Investment guarantees the right to transfer and repatriate funds associated with an investment in Albania into a freely usable currency at a market-clearing rate. Only licensed entities (banks) may conduct foreign exchange transfers and waiting periods depend on office procedures adopted by the banks. Both Albanian and foreign citizens entering or leaving the country must declare assets in excess of ALL 1,000,000 (USD 8,000) in hard currency and/or precious items. Failure to declare such assets is considered a criminal act, which is punishable by confiscation of the assets and imprisonment. Legal parallel markets are not in place in Albania, as the financial sector does not make use of convertible or negotiable instruments.
Although the Foreign Exchange Regulation provides that residents and non-residents may transfer capital within and into Albania without restriction, capital transfers out of Albania are subject to certain documentation requirements. Persons must submit a request indicating the reasons for the capital transfer, the amount of capital transferred outside the territory of Albania, and the address to which the capital will be transferred. Such persons must also submit a declaration on the source of the funds to be transferred. In January 2015, The FX Regulation was amended and the requirement to present the documentation showing the preliminary payment of taxes related to the transaction was removed.
Albania is not a major trading partner with the United States, but, in general, does not engage in policy currency manipulation tactics. Albania is a member of the Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a Financial Action Task Force-style regional body. The INCRS 2016 report categorizes Albania as a country of jurisdiction of concern with regard to money laundering.
Sovereign Wealth Funds
Albania does not have a sovereign wealth fund.
7. State-Owned Enterprises
SOEs are defined as legal entities, which are entirely state-owned or state-controlled and operate as commercial companies in compliance with the Law on Entrepreneurs and Commercial Companies. No discrimination exists between public and private companies operating in the same sector. The government requires SOEs to submit annual reports and undergo independent audits. SOEs are subject to the same tax levels and procedures, and same domestic accounting and international financial reporting standards, as all other commercial companies. The High State Audit is the institution that audits SOE activities. SOEs are also subject to public procurement law.
Albania is yet to become party to the Government Procurement Agreement (GPA) of the World Trade Organization (WTO), but has obtained observer status and is negotiating full accession. However, private companies can compete openly and under the same terms and conditions with respect to market share, products and services, and incentives.
The SOE operation in Albania is regulated by the Law on Entrepreneurs and Commercial Companies, Law on State Owned Enterprises, and the Law on the Transformation of State Owned Enterprises into Commercial Companies. The Ministry of Economic Development, Tourism, Trade and Entrepreneurship represents the state as the owner of the SOEs. There are no legal binding requirements for the SOEs to adhere to OECD guidelines. However, basic principles of corporate governance are stipulated in the above-mentioned laws and generally accord with OECD guidelines. The corporate governance structure of SOEs includes the supervisory board and the general director (administrator) in the case of joint stock companies. The supervisory board is comprised of 3-9 members, who are not employed by the SOE, two-thirds of whom are appointed by the representative of the Ministry of Economic Development, and one-third are appointed by the line ministry, local government unit, or institution to which the company reports. The supervisory B=board is the highest decision making authority, and appoints and dismisses the administrator for the SOE through a two-thirds vote. In the case of SOEs operating in the electricity sector, the representative of the owner and the appointment of supervisory board members is regulated by the Law on the Electrical Energy Sector, and in the natural gas sector by the Law on the Sector of Natural Gas.
Privatization Program
The privatization process in Albania is nearing a conclusion, with only a few major privatizations remaining. These few opportunities include the electricity distribution company, 16 percent of the fixed line telephone company, Albtelekom, and state-owned oil company Albpetrol. SOEs operate in energy generation, electricity transmission and distribution, water supply, ports, railway, insurance, postal services, and hydrocarbons sectors.
8. Responsible Business Conduct
Public awareness of corporate social responsibility (CSR) in Albania is low and CSR remains a relatively new concept for much of the business community. The small level of CSR engagement in Albania comes primarily from the energy, telecommunications, heavy industry, and banking sectors and tends to focus on philanthropy and environmental issues. International organizations have recently improved efforts to promote CSR awareness. Thanks to efforts by the international community and large international companies, the first Albanian CSR Network was founded in March 2013 as a business-led, non-profit organization. The American Chamber of Commerce also formed a CSR subcommittee in 2015 to promote CSR among its members. The government maintains relatively robust CSR, labor and employment rights, consumer protection, and environmental protection legislation, but enforcement and implementation is inconsistent.
Albania has been a member of the Extractive Industries Transparency Initiative (EITI) since 2013.
The Law on Commercial Companies and Entrepreneurs outlines generic corporate governance and accounting standards. According to the above-mentioned law and the law on the national business registration center, companies are required to disclose publicly when they change administrators and shareholders and to disclose financial statements.
The Corporate Governance Code for unlisted joint stock companies incorporates the OECD definitions and principles on corporate governance, but is not legally binding. The code provides guidance for Albanian companies, and aims to provide a best-practice framework above the minimum legal requirements, while assisting Albanian companies to develop a governance framework.
9. Corruption
Corruption is a continuing problem in Albania, undermining the rule of law and jeopardizing economic development. Albania ranked 83 out of 176 countries in Transparency International’s 2016 Corruption Perception Index (CPI). Albania’s score improved from 2013 and 2014, when it ranked 116 and 110. Nevertheless, Albania remains one of the most corrupt countries in Europe, according to the CPI. The passage by Parliament of constitutional amendments in July 2016 to reform the judicial system was a major step forward, and reform, once implemented, should make the country more attractive to international investors.
Judicial reform has been described as the most significant development in Albania since the end of communism, and nearly one-third of the constitution was rewritten, as a result. The reform also entails the passage of laws to ensure implementation of the constitutional amendments. Judicial reform’s new vetting process will ensure that prosecutors and judges with unexplained wealth, insufficient training, or who have issued questionable past decisions are removed from the system. The reform will also establish an independent prosecutor and specialized investigation unit to investigate and prosecute corruption and organized crime. If fully implemented, judicial reform will discourage corruption, promote foreign and domestic investment, and allow Albania to compete more successfully in the global economy.
UN Anticorruption Convention, OECD Convention on Combatting Bribery
The government has ratified several corruption-related international treaties and conventions and is a member of major international organizations and programs dealing with corruption and/or organized crime. Albania has ratified the Civil Law Convention on Corruption (Council of Europe), the Criminal Law Convention on Corruption (Council of Europe), the Additional Protocol to Criminal Law Convention on Corruption (Council of Europe), and the United Nations Convention against Corruption (UNCAC). Albania has also ratified a number of key conventions in the broader field of economic crime, including the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime (2001); and the Convention on Cybercrime (2002). Albania has been a member of the Group of States against Corruption (GRECO) since the ratification of the Criminal Law Convention on Corruption, in 2001, and is a member of the Stability Pact Anti-Corruption Network (SPAI). Albania is not a member of the OECD Convention on Combating Bribery of Foreign Public Officials in international Business Transactions.
Resources to Report Corruption
Government online portal to report corruption: http://www.stopkorrupsionit.al
10. Political and Security Environment
Political violence is rare. Albania’s June 2013 elections and transition to a new government were peaceful. However, security forces shot and killed four protesters on Jan. 21, 2011, during a violent political demonstration. Albania is a source of stability in the region and maintains generally friendly relations with neighboring countries.
11. Labor Policies and Practices
Albania’s labor force numbers about 1.1 million people, according to official data. The official estimated unemployment rate in October 2016 was 15 percent; though unemployment for people aged 15-29 was estimated at 27 percent. Approximately 46 percent of the population is self-employed in the agriculture sector. Informality is widespread in the Albanian labor market. A 2013 International Labor Organization survey on Labor force suggests that 43 percent of non-farm jobs correspond to informal employment. The situation is even more serious in the farm sector, where 88 percent of employment is informal or undocumented.
While some in the labor force are highly skilled, many work in low-skill industries or have outdated skills. The education level of the workforce is relatively low, limiting economic prospects and access to quality jobs. According to the Institute of Statistics, in 2015 about 43 percent of working age persons in Albania had a primary education or less, while only 19 percent had a tertiary education. The government provides fiscal incentives for labor force training for the inward processing industry, which in Albania includes the shoe and textile sectors. A majority of young Albanians speak English, Italian, or Greek as a second language. Other foreign language skills are common, as well.
Albania has a tradition of a strong secondary educational system, while vocational schools are less prevalent. In 2014, just 8 percent of high school pupils were enrolled in vocational schools. However, the current government has shifted attention to the promotion of vocational education.
In October 2016, the average salary in public administration was approximately 54,000 ALL ($436) per month. Minimum wage is 22,000 ALL/month (approximately $176), which is among the lowest in the region.
Pursuant to the Labor Code and the recently amended “Law on the Status of the Civil Employee," both individual and collective employment contracts regulate labor relations between employees and management. Albania has been a member of the International Labor Organization (ILO) since 1991 and has ratified 54 ILO conventions, the entire set of fundamental and governance conventions as well as two protocols: http://www.ilo.org/dyn/normlex/en/f?p=1000:11200:0::NO:11200:P11200_COUNTRY_ID:102532.
The Albanian government has established the National Council of Labor, composed of government officials, trade unions, management, and employers’ associations, to improve social dialogue between stakeholders. The institutions governing the labor market include the Ministry of Welfare and Youth, Ministry of Innovation and Public Administration, the National Employment Service, the State Labor Inspectorate, and private actors such as employment agencies and vocational training centers. Albania has adopted a large variety of regulations to monitor labor abuses, but their enforcement remains weak due to persistent informality in the work force.
Law 108/2013 dated March 28, 2013 “On Foreigners" and various decisions of the Council of Ministers regulate the employment regime in Albania. The law limits to 10 percent the number of foreigners hired by employers in Albania. In 2015, the labor code was amended to include the temporary employment of foreigners in Albania. However, for specific projects or to attract foreign investment, employment can be regulated thorough special laws, and wages and training costs may be tax deductible.
Both employees and managers have the right to form trade unions. Trade unions are organized at both the national level (according to industrial sector) and company level. The Labor Code guarantees the right to strike as part of the right to negotiate wages and working conditions. However, strikes from economic grievances are rare in Albania. Employment contracts apply to both union and non-union workers. The two main national-level trade unions, both affiliated with the International Trade Union Confederation (ITUC), are the Confederation of Trade Unions (KSSH) and the Union of the Independent Trade Unions of Albania (BSPSH). Employment contracts can be limited or unlimited in duration, but typically cover an unlimited period if not specified in the contract. Employees can collect up to 12 months of salary in the event of an unexpected interruption of the working contract.
The state labor inspectorate is the main authority responsible for the monitoring of labor conditions and the enforcement of labor code and occupational health and safety standards. Its performance is considered inadequate due to a lack of human resources and limited financial capabilities. Furthermore, the inspectorate has no investigative and prosecution responsibilities as it submits all allegations of infringements to other law enforcement agencies.
The State Labor Inspectorate is responsible for enforcing occupational health and safety standards and regulations. Workplace conditions in the manufacturing, construction, and mining sectors are often poor and, in some cases, dangerous due to a lack of inspections and enforcement by the Labor Inspectorate.
U.S. Department of State Human Rights Report: http://www.state.gov/j/drl/rls/hrrpt
Department of Labor Child Labor Report: http://www.dol.gov/ilab/reports/child-labor
12. OPIC and Other Investment Insurance Programs
The Overseas Private Investment Corporation (OPIC) signed an agreement with Albania in 1991. Albania has also ratified the World Bank’s Multilateral Investment Guarantees Agency (MIGA) Convention. Both instruments provide investment guarantees against certain non-commercial risks (i.e., political risk insurance) to eligible foreign investors for qualified investments in developing member countries. MIGA’s coverage covers the following risks: currency transfer restriction, expropriation, breach of contract, war, terrorism, civil disturbance, and failure to honor sovereign financial obligations. MIGA and OPIC often cooperate on projects.
For more information on OPIC please see www.opic.gov.
For more information on MIGA, please see www.miga.org.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
*Domestic Sources: Bank of Albania http://www.bankofalbania.org/
Albanian Institute of Statistics http://www.instat.gov.al/
Albanian Ministry of Finances: http://www.financa.gov.al/
Table 3: Sources and Destination of FDI
Source: IMF Coordinated Direct Investment Survey (CDIS)
Table 4: Sources of Portfolio Investment
Source: IMF’s Coordinated Portfolio Investment Survey (CPIS) (cpis.imf.org )
14. Contact for More Information
Jeffrey D Bowan
Economic and Commercial Officer
U.S. Embassy Tirana, Albania
Rruga Elbasanit, Nr. 103
Tirana, Albania
+355 4 224 7285
BowanJD@state.gov
Tags
Albania Bureau of Economic and Business Affairs Bureau of European and Eurasian Affairs
Source: U.S Department of State, Bureau of European and Eurasian Affairs
