Albania is an upper middle-income country with a gross domestic product (GDP) per capita of USD 5,288 (2018) and a population of approximately 2.9 million people, around 45 percent of whom live in rural areas. According to IMF estimates, real GDP increased by 4.2 percent in 2018, and growth is expected to decline during 2019 but remain close to 4 percent in the medium term. Albania received European Union (EU) candidate status in June 2014 and has since been seeking to open accession negotiations. The EU has encouraged Albania to continue progress in reforms related to five key priorities: public administration reform, justice reform, the fight against corruption, the fight against organized crime, and protection of human rights, including the rights of persons belonging to minorities and property rights.
Foreign investors cite corruption, particularly in the judiciary, a lack of transparency in public procurement, and poor enforcement of contracts as continuing problems in Albania. In 2016, the Government of Albania (GOA) passed sweeping constitutional amendments to reform the country’s judicial system and improve the rule of law. The implementation of judicial reform is underway, including the vetting of judges and prosecutors for unexplained wealth. While numerous judges and prosecutors have been dismissed by a vetting commission for unexplained wealth or organized crime ties, foreign investors perceive the investment climate as problematic and say Albania remains 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; business owners and business associations frequently note they did not receive enough notice, time, or opportunity for engagement on regulatory and legislative changes. 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. The increasing use of public private partnership (3P) contracts has narrowed the opportunities for competition, including by foreign investors, in infrastructure and other sectors. Poor cost-benefit analyses and a lack of technical expertise in drafting and monitoring 3P contracts are ongoing concerns. The government had signed more than 200 3P contracts by the end of 2018.
Property rights remain another challenge in Albania, as clear title is difficult to obtain. There have been instances of individuals manipulating the court system to obtain illegal land titles. Compensation for land confiscated by the former communist regime is difficult to obtain and inadequate. The agency charged with removing illegally constructed buildings often acts without full consultation and fails to follow procedures.
To attract FDI and promote domestic investment, the host government approved a Law on Strategic Investments in 2015. The 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), like free trade zones. The development of the first TEDA, in Spitalle, Durres, was granted to a consortium of local companies in August 2017, but only after the tender had failed three times. Development of the TEDA has yet to begin, as one of the bidders has challenged the decision in the court.
Transparency International’s 2018 Corruption Perceptions Index ranked Albania 99th of 180 countries, a drop of eight places from 2017. Consequently, Albania is now perceived as the most corrupt country in the Western Balkans. While it improved by two spots, to 63rd, in the World Bank’s 2019 “Doing Business” survey, Albania continued to score poorly in the areas of enforcing contracts, registering property, granting construction permits, and obtaining electricity.
The Albanian legal system ostensibly does not discriminate against foreign investors. The U.S.—Albanian Bilateral Investment Treaty, which entered into force in 1998, 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 in all but a few sectors.
Energy and power, tourism, 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: Key Metrics and Rankings
|TI Corruption Perceptions Index||2018||99 of 180||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report||2019||63 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2018||83 of 126||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, stock positions)||2017||$56||http://www.bea.gov/international/factsheet/|
|World Bank GNI per capita||2017||4$,320||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The GOA understands that private sector development and increased levels of foreign investment are critical to support sustainable economic development. Albania maintains a liberal foreign investment regime designed to attract FDI. The Law on Foreign Investment outlines specific protections for foreign investors and allows 100 percent foreign ownership of companies, except in the areas of domestic and international air passenger transport and television broadcasting. 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 to investors for investments of more than 10 million euros. Amendments in 2017 and 2018 extended state protection for strategic investments as defined under the 2015 Law on Strategic Investments.
The Albanian Investment Development Agency (AIDA) oversees promoting foreign investments in Albania. Potential U.S. investors in Albania should contact AIDA to learn more about services AIDA offers to foreign investors ( ).
The Law on Strategic Investments stipulates that AIDA, as the Secretariat of the Strategic Investment Council, serve as a one-stop shop for foreign investors, from filing of the application form to granting the status of strategic investment/investor.
Despite hospitable legislation, U.S. investors are challenged by corruption and the perpetuation of informal business practices. Several U.S. investors have left the country in recent years after contentious commercial disputes, including some that were brought before international arbitration.
Limits on Foreign Control and Right to Private Ownership and Establishment
Foreign and domestic investors have equal rights of ownership of local companies, based on the principle of “national treatment.” According to the indicator, just three of 33 sectors have restrictions against full foreign ownership, or in the case of the agriculture sector, against foreign land ownership.
- Domestic and international air passenger transport: foreign interest in airline companies is limited to 49 percent ownership by investors outside the Common European Aviation Zone, for both domestic and international air transportation;
- Television broadcasting: no entity, foreign or domestic, may own more than 40 percent of a television company.
- Agriculture: No foreign individual or foreign incorporated company may purchase agricultural land, though land may be leased for up to 99 years
Albania lacks an investment review mechanism for inbound foreign direct investment. 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. 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 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
The National Business Center (NBC) serves as a one-stop shop for business registration. All required procedures and documents are published on-line (http://www.qkb.gov.al/information-on-procedure/business-registration/). Registration may be done in person or online via the . 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 the Albanian language.
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 (https://www.state.gov/e/eb/ifd/bit/117402.htm) 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 April 2018, Albania had concluded bilateral investment treaties with 45 countries.
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 legal, regulatory, and accounting systems have improved in recent years, but challenges remain. Uneven enforcement of legislation, cumbersome bureaucracy, and a lack of transparency all hinder 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. Albania meets minimum standards on fiscal transparency, and debt obligations are published by the Ministry of Finance and Economy. Albania’s budgets are publicly available, substantially complete, and reliable.
The law on notification and public consultation requires that the GOA publish draft laws and regulations for public consultation or notification. Such draft laws and regulations are published at the following page: http://www.konsultimipublik.gov.al/. However, the business community frequently complains that final versions of laws and regulations fail to incorporate their comments and concerns.
Other independent agencies and bodies, including, but not limited to, the Energy Regulator (ERE), Telecom Regulator (AKEP), Natural Resources Bureau (AKBN), and Extractive Industries Transparency Initiative (EITI), oversee 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, malign 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 interpretations of Albanian legislation and regulations governing oil exploration and extraction.
International Regulatory Considerations
Albania acceded to the World Trade Organization in 2000, and the country notifies the WTO Committee on Technical Barriers to Trade of all draft technical regulations.
Albania signed a Stabilization and Association Agreement (SAA) with the EU in 2006, and currently seeks to open accession talks with the EU. The country has embarked on a gradual process of legislation approximation with the EU.
Legal System and Judicial Independence
The Albanian 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, family, 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, 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, Sports Law, etc.
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, the GOA ignored a 2016 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:
- No prior government authorization is needed for an initial investment;
- 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;
- Foreign investors enjoy the right to expatriate all funds and contributions in kind from their investments;
- 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 leased 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.
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 foreign investors have taken advantage of the law. Several projects proposed by domestic companies or consortiums of local and foreign partners have been designated as strategic investments, mostly in the tourism sector.
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 7764/1993 “On the Foreign Investments” amended by the Law 10316/2010.
- 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;
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; ) 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, which may represent as much as 40 percent of the formal economy, 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 only if the number of foreign employees did not exceed 10 percent of the total number of employees on the payroll over the preceding 12 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 EU’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. The GOA is in the process of approving changes to the law that would restrict third party unsolicited proposals in certain sectors.
Competition and Anti-Trust Laws
The Albanian Competition Authority ( ) is the agency that reviews transactions for competition- related concerns. 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, the Financial Supervisory Authority ( ) and/or the Bank of Albania ( ) may require additional regulatory approvals. Transactions between parties outside Albania, including 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 (ECHR) in Strasbourg, France. As of December 2018, the Court had issued around 31 decisions in favor of Albanian citizens in civil cases involving protection of property, with financial bill in the millions of euros for the GOA. A significant number of applications are pending for consideration before the ECHR. Even after settlement in Strasbourg, enforcement remains slow.
To address the situation, the GOA approved new property compensation legislation in 2018 that aims to provide a solution to the pending claims for restitution and compensation. The 2018 law reduces the burden on the state budget by changing the cash compensation formula. The legislation presents three methods of compensation for confiscation claims: restitution; compensation of property with similarly valued land in a different location; or financial compensation. It also set a 10-year timeframe for the completion of the entire process.
The GOA 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.
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).
Investor-State Dispute Settlement
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 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 GOA 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 GOA 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.
Albania maintains adequate bankruptcy legislation, though corrupt and inefficient bankruptcy court proceedings make it difficult for companies to reorganize or discharge debts through bankruptcy. A law on bankruptcy that entered into force in May 2017 aimed to address loopholes in the insolvency regime, decrease unnecessary market exit procedures, reduce fraud, and ease collateral recovery procedures. 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.
Debtors, creditors, or tax authorities can initiate a bankruptcy procedure. 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 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.
If 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 offenses 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 2019 “Doing Business” Report, Albania ranked 39th out of 190 countries in the insolvency index. A reference analysis of ‘resolving insolvency’ can be found at the following link:
4. Industrial Policies
The Albanian Investment Development Agency (AIDA; www.aida.gov.al) is the best source to find incentives offered across a variety of sectors. Aside from the incentives listed below, individual parties may negotiate additional incentives directly with AIDA, the Ministry of Finance and Economy, or other ministries, depending on the sector.
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 employ when approving a strategic investment. The GOA has extended by one year, to December 2019, the deadline to apply to qualify as a strategic investment. A strategic investment is defined as an investment of public interest, based on several criteria, including the size of the investment, implementation time, productivity and value added, creation of 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 EUR 1 million to EUR 100 million, 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. Under 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 January 1, 2016, established the Strategic Investments Committee (SIC), a commission headed by the prime minister whose members include ministers covering the respective strategic sectors, the state advocate, and relevant ministers whose portfolios are impacted by the strategic investment. The Albanian Investment Development Agency (AIDA) serves as the Secretariat of SIC and oversees 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 investments of 50 million euros or more enjoy special procedure status.
Tourism and Economic Areas: Investments of 5 million euros or more enjoy the status of assisted procedure, while investments greater than 50 million euros enjoy the status of special procedure. In 2018, the GOA introduced new incentives to promote the tourism sector. International hotel brands that invest at least USD 8 million for a four-star hotel and USD 15 million for a five-star hotel are exempt from property taxes for 10 years, pay no profit taxes, and pay a value-added tax (VAT) of just 6 percent for any service on their hotels or resorts. For all other hotels and resorts, the GOA reduced the VAT on accommodation from 20 percent to 6 percent. In the information technology sector, the government has recently reduced the profit tax for software development companies from 15 percent to 5 percent.
Agriculture (large agricultural farms) and Fishing: Investments greater than 3 million euros that create at least 50 new jobs enjoy the status of assisted procedure, while investments greater than 50 million euros enjoy the status of special procedure.
In addition, the GOA offers a wide range of incentives and subsidies for investments in the agriculture and agro-tourism sectors. The funds are a direct contribution from the state budget and the EU Instrument of Pre-Accession for Rural Development Fund (IPARD.) IPARD funds allocated for the period 2018-2020 total 71 million euros. The program is managed by the Agricultural and Rural Development Agency ( ). Profit taxes for agrotourism ventures are now 5 percent, down from 15 percent previously, while the value-added tax (VAT) is now six percent, down from 20 percent previously. Agricultural inputs, agricultural machinery, and veterinary services are exempt from VAT. The government offers other subsidies to agricultural farms and wholesale trade companies that export agricultural products.
Development Priority Areas: Investments greater than one million euros that create 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: Certain machinery and equipment imported for the construction of hydropower plants are VAT exempt. The government supports the construction of small wind and photovoltaic parks with an installed capacity of less than three megawatts and two megawatts, respectively, by offering feed-in-premium tariffs for 15 years. The Energy Regulatory Authority (ERE; ) conducts an annual review of the feed-in-premium tariffs for wind and photovoltaic parks. The ERE also conducts an annual review of the feed–in-tariffs for small hydroelectric plants with an installed capacity of fewer than 15 megawatts. Imports of machinery and equipment for investments of greater than 400,000 euros for mall wind and solar parks with an installed capacity of fewer than three megawatts and two megawatts, respectively, enjoy a VAT exemption. Imports of hot water solar panels for household and industrial use are also 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).
In 2019, the GOA reduced the dividend tax from 15 percent to 8 percent.
Corporate income tax exemption: Film studios and cinematographic productions, licensed and funded by the National Cinematographic Center, are exempt from 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 GOA can lease public property of more than 500 square meters 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 for activities that address certain social and economic issues, as well as activities related to sports, culture, tourism, and cultural heritage. Criteria and terms are decided on an individual basis 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 can 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 fiscal and administrative incentives for companies that invest in this sector, and for firms that establish a presence in these areas. A full list of incentives can be found at: .
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 TEDAs created the legal framework to establish TEDAs (a.k.a. free trade zones), defining the incentives for developers investing in the development of these zones and companies operating within the zones. The Ministry of Finance and Economy has announced two investment opportunities that seek private sector developers to obtain, develop, and operate fully serviced areas located in Koplik (61 hectares) and Spitalle (100 hectares). Interested investors and developers can find more information for the development of TEDAs at the following link: .
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 constitute less than 10 percent of the investor’s total workforce before a work permit is granted. There is no minimum requirement for domestic content in goods or technology.
According to current legislation in force, companies with sensitive data (primarily in telecommunications, banking, and energy) are not authorized to transfer data abroad. 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 the Albanian Telecommunication Union (ATU).
5. Protection of Property Rights
Protection and enforcement of property rights remain significant challenges for individuals and investors in Albania. Despite recent improvements, procedures are cumbersome, and registrants have complained of corruption during the process. The GOA has drafted and passed property legislation in a piecemeal and uncoordinated way. Reform of the sector has yet to incorporate consolidation of property rights or the elimination of legal uncertainties. According to the EU’s 2018 Progress Report, significant progress has yet to be made toward improving the legal framework for registration, expropriation, and compensation of property. As well, the legalization process for illegal construction throughout the country remains far from complete.
Through international donor assistance, the property registration system has improved, but reform is incomplete. Approximately 15 percent of properties nationwide are unregistered, mostly in urban and high-value coastal areas. Albania counts around 4.4 million properties, of which 3.8 million have been registered. Albania has an estimated 440,000 illegal structures, and illicit construction remains a major impediment to securing property titles. A process that aims to legalize or eliminate such structures was begun in 2008, but remains incomplete. The situation has led to clashes between squatters and owners of allegedly illegal buildings and the Albanian State Police during the demolition of such structures.
According to the 2019 World Bank’s “Business Report,” Albania performed poorly in the property registration category, ranking 98th out of 190 countries. It took an average of 19 days and six procedures to register property, and the associated costs could reach 9.2 percent of the total property value. The civil court system manages property rights disputes, though verdicts can take years and authorities often fail to enforce court decisions.
To streamline the property management process, the GOA in April 2019 established the State Cadaster Agency, which integrated several major agencies responsible for property registration, compensation, and legalization, including the Immovable Property Registration Office (IPRO) and the Office for the Legalization of Illegal Structures (ALUIZNI).
Intellectual Property Rights
Albania is not listed on the United States Trade Representative (USTR) Special 301 Report or Notorious Markets List. However, intellectual property rights (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 to 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 experienced IPR attorney and avoid potential risks by establishing solid commercial relationships and drafting strong contracts.
A revised 2016 IPR law aimed 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 State Inspectorate for Market Surveillance (SIMS), the Albanian Copyright Office (ACO), the Audiovisual Media Authority (AMA), the General Directorate of Patents and Trademarks (GDPT), the General Directorate for Customs, the Tax Inspectorate, the Prosecutor’s Office, law enforcement, and the courts. The 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. The Criminal Code was also amended in 2017 to better address copyright infringements.
The SIMS, established in 2016, is responsible to inspect, control, and enforce copyright and other related rights. The Directorate has noted some progress on IPR protection. Yet, despite minor improvements, law enforcement on copyrights remains problematic and copyright violations are rampant. The number of copyright violation cases brought to court remains low.
While official figures are not available, Customs does report the quantity of counterfeit goods destroyed annually. In cases of seizures, 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.
The 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 in 2014 to reflect EU legislation on the matter.
Albania became a contracting party to the World Intellectual Property Organization (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. In 2018, Parliament approved the 34/2018 law, which ensures Albania’s adherence to the Vienna Agreement for the International Classification of the Figurative Elements of Marks.
Resources for Rights Holders
Contact at mission on IP issues:
Jeffrey D. Bowan
Economic and Commercial Officer
Phone: + 355 (0) 4229 3115
American Chamber of Commerce
Address: Rr. Deshmoret e shkurtit, Sky Tower, kati 11 Ap 3 Tirana, Albania
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 (NPL) remains a concern. The Bank of Albania’s legal measures to address the problem have generated mostly positive results. The banking sector is fully private. It has undergone significant consolidation over the last year, shrinking the number of banks to 12, down from 16 at the beginning of 2018. As of December 2018, the Turkish National Commercial Bank had further consolidated its position as the largest bank, with 28.4 percent of the market, followed by Austria’s Raiffeisen Bank, with 15 percent, and Albania’s Credins Bank, with 12.9 percent. The share of Greek banks has significantly decreased in recent years due to the departure from Albania of the National Bank of Greece and Greece-based Piraeus Group’s Tirana Bank.
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 enough liquidity to support sizeable positions. Furthermore, portfolio investments remain limited mostly to company shares, government bonds, and real estate.
Nevertheless, the high rate of non-performing loans and the economic slowdown forced commercial banks to tighten lending standards. After a slight increase in 2017, the stock of loans decreased by 3.3 percent year-on-year in 2018, due also to the 9 percent appreciation of the domestic currency against the euro. The credit market is competitive, but interest rates in domestic currency can be high, ranging from 6 percent to 8 percent. Most mortgage and commercial loans are denominated in euros, as rate differentials between local and foreign currency average 2.5 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.
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. The sector has contracted in recent years. In December 2018, Albania had 474 bank branches, down from 552 in 2016. Capital adequacy, at 18.2 percent, remains above Basel requirements and indicates sufficient assets, which in 2018 totaled USD 13.54 billion. At the end of 2018, the return on assets was 1.2 percent. Non-performing loans continued to fall, reaching 11.1 percent at the end of the 2018, down from 13.2 percent compared with 2017, and a significant improvement over 2014, when NPLs stood at 25 percent.
The Bank of Albania has the flexibility to intervene in the currency market to protect exchange rates and official reserves, but not for longer than 12 months. As part of its strategy to stimulate business activity, the Bank of Albania has persistently lowered interest rates, which in June 2018 reached a historic low of 1 percent, down from a rate of 1.25 percent in place since May 2016.
Most banks operating in Albania are subsidiaries of foreign banks, and just two have Albanian shareholders. However, Albanian ownership is expected to increase because of the sector’s ongoing consolidation. 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 must complete a form allowing for the disclosure of their banking data to the IRS as required under the U.S. Foreign Account Tax Compliance Act.
Foreign Exchange and Remittances
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 Bank of Albania maintains a free float exchange rate regime for its domestic currency, the lek. Albanian authorities do not engage in currency arbitrage, nor do they view it as an efficient instrument to achieve competitive advantage. The Bank of Albania does not intervene to manipulate the exchange rate unless required to control domestic inflation, in accordance with the Bank’s official mandate. 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. A 2018 campaign launched by the BOA with a goal to reduce the domestic use of the euro and other foreign currencies has yet to produce tangible results. The campaign is part of a larger reform that aims to improve the effectiveness of domestic economic policies.
The Banking Law does not impose restrictions on the purchase, sale, holding, or transfer of monetary foreign exchange. However, local law authorizes the BOA 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 BOA 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 1,000,000 lek (USD 9,000) in hard currency and/or precious items. Failure to declare such assets is considered a criminal act, punishable by confiscation of the assets and possible imprisonment.
Although the Foreign Exchange (FX) 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, a certificate of registration from the National Registration Center, 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 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 2019 INCSR maintains Albania in the “Major Money Laundering Jurisdictions” category following its inclusion for the first time in 2017. The category implies that financial institutions of the country engage in currency transactions involving significant amounts of proceeds from international narcotics trafficking.
Sovereign Wealth Funds
Albania does not have a sovereign wealth fund. A draft law to establish the Albanian Investment Corporation is currently under discussion. The GOA plans to transfer state owned assets, including state-owned land, and provide initial capital to launch the corporation. The corporation would develop, manage, and administer state-owned property and assets as public investments.
7. State-Owned Enterprises
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. SOEs operate mostly in the generation, distribution, and transmission of electricity, oil and gas, railways, postal services, ports, and water supply. There is no published list of SOEs.
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 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, the Law on State Owned Enterprises, and the Law on the Transformation of State-Owned Enterprises into Commercial Companies. The Ministry of Economy and Finance and other relevant ministries covering the sector in which the company operates represent the state as the owner of the SOEs. There are no legal binding requirements for the SOEs to adhere to Organization for Economic Cooperation and Development (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 Economy and Finance, and one-third by the line ministry, local government unit, or institution to which the company reports. The Supervisory Board is the highest decision making authority and appoints and dismisses the administrator for the SOE through a two-thirds vote.
The privatization process in Albania is nearing conclusion, with just a few major privatizations remaining. Such opportunities include OSHEE, the state-run electricity distributor; 16 percent of Albtelekom, the fixed- line telephone company; and state-owned oil company Albpetrol.
The bidding process for privatizations is public and relevant information is published by the Public Procurement Agency at . Foreign investors may participate in the privatization program. No public timelines exist for future privatizations.
The privatization process in Albania is nearing conclusion, with just a few major privatizations remaining. Such opportunities include OSHEE, the state-run electricity distributor; 16 percent of Albtelekom, the fixed- line telephone company; and state-owned oil company Albpetrol.
The bidding process for privatizations is public and relevant information is published by the Public Procurement Agency at . Foreign investors may participate in the privatization program. No public timelines exist for future privatizations.
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 in Albania also formed a 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.
Corruption is a continuing problem in Albania, undermining the rule of law and jeopardizing economic development. Albania ranked 99th out of 180 countries in Transparency International’s 2018 Corruption Perceptions Index (CPI). Despite some improvement in the index from 2013 and 2014, progress in tackling corruption has been slow and unsteady. 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 fully implemented, is expected to position the country as a more attractive destination for international investors.
Judicial reform has been described as the most significant developments in Albania since the end of communism, and nearly one-third of the constitution was rewritten as part of the effort. The reform also entails the passage of laws to ensure implementation of the constitutional amendments. Judicial reform’s vetting process will ensure that prosecutors and judges with unexplained wealth, insufficient training, or those who have issued questionable past decisions are removed from the system. The reform is also establishing an independent prosecutor and a specialized investigation unit to investigate and prosecute corruption and organized crime. Once 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 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 several 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
In an effort to curb corruption, the government announced a new platform in 2017, which invites citizens to submit complaints and allegations of corruption and misuse of office by government officials. The platform has a dedicated link for businesses. The Integrated Services Delivery Agency (ADISA), a government entity, provides a second to report corruption.
10. Political and Security Environment
While political violence is rare, political protests in 2019 have included instances of civil disobedience, low-level violence, and the use of tear gas by police. Albania’s June 2017 elections and transition to a new government were peaceful. On January 21, 2011, security forces shot and killed four protesters during a violent political demonstration. In its external relations, Albania remains 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 around 1.2 million people, according to official data. After peaking at 18.2 percent in the first quarter of 2014, the official estimated unemployment rate has decreased in recent years, falling to 12.3 percent in December 2018. However, unemployment among persons aged 15-29 remains high, at 23 percent. Around 40 percent of the population is self-employed in the agriculture sector. Informality remains widespread in the Albanian labor market. A 2016 International Labor Organization (ILO) report on the informal economy showed that informal employment constituted 32 percent of the labor market in Albania excluding the agriculture sector.
The institutions that oversee the labor market include the Ministry of Finance, Economy, and Labor; the Ministry of Health and Social Protection; the National Employment Service; the State Labor Inspectorate; and private actors such as employment agencies and vocational training centers. Albania has adopted a wide variety of regulations to monitor labor abuses, but enforcement remains weak due to persistent informality in the work force.
Outward labor migration remains an ongoing problem affecting the Albanian labor market. For example, recent media reports say a significant number of doctors and nurses have emigrated to Europe, mostly to Germany. In December 2018, the average public administration salary was approximately 63,276 Albanian lek (approximately USD 575) per month. The GOA increased the national minimum wage in January 2019 to 26,000 lek per month (approximately USD 225), but it remains the lowest in the region.
While some in the labor force are highly skilled, many work in low-skill industries or have outdated skills. The government provides fiscal incentives for labor force training for the inward processing industry, which in Albania includes the footwear and textile sectors. The National Employment Service provided training and internship opportunities to 8,500 registered job seekers in 2018. It also promotes self-employment through the establishment of new businesses. In March 2019, Parliament approved a new law on employment promotion, which defined public policies on employment and support programs. Albania has a tradition of a strong secondary educational system, while vocational schools are viewed as less prestigious and attract fewer students. However, the government has more recently focused attention on vocational education. In 2018, 20.5 percent of high school pupils were enrolled in vocational schools, compared with 15.7 percent in 2013.
Law 108/2013 of 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. However, employment can be regulated through special laws in the case of specific projects, or to attract foreign investment, and wages and training costs may be tax deductible. The law on Free Trade Zones also provides fiscal incentives for labor taxes in case of investments in the zone.
The Labor Code includes rules regarding contract termination procedures that distinguish layoffs from terminations. 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 contract. Unemployment compensation makes up around 50 percent of the minimum wage.
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. While there are no official data recording the number of collective bargaining agreements used throughout the economy, they are widely used in the public sector, including by state-owned enterprises. Albania has a labor dispute resolution mechanism as specified in the Labor Code, but the mechanism is considered weak.
Albania has been a member of the International Labor Organization since 1991 and has ratified 54 out of 189 ILO conventions, including the entire set of fundamental and governance conventions. The implementation of labor relations and standards remains a challenge according to the ILO. Furthermore, labor dialogue has suffered from the 2017 division of the Ministry of Labor and Social Protection into two different institutions.
U.S. Department of State Human Rights Report: https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/
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.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Table 3: Sources and Destination of FDI
|Direct Investment from/in Counterpart Economy Data|
|From Top Five Sources/To Top Five Destinations (US Dollars, Millions)|
|Inward Direct Investment||Outward Direct Investment|
|Total Inward||$6,739||100%||Total Outward||$471||100%|
|“0” reflects amounts rounded to +/- USD 500,000.|
Table 4: Sources of Portfolio Investment
|Portfolio Investment Assets|
|Top Five Partners (Millions, US Dollars)|
|Total||Equity Securities||Total Debt Securities|
|All Countries||$814||100%||All Countries||$38||100%||All Countries||$776||100%|
|Czech Rep.||$101||12%||Netherlands||$8||22%||Czech rep.||$101||14.76%|