Foreign Investors Regard Albania as a Difficult Place to do Business Due to Corruption – says the US State Department

Washington DC | July 31 (Tirana Echo) – Foreign investors regard Albania as a difficult place to do business because of corruption and lack of transparency in public procurement, says a report by the US State Department. The country is now perceived as the second most corrupt country in the Western Balkans and continuing to score poorly in the areas of enforcing contracts, registering property, and obtaining electricity.

According to the Investment Climate Statements 2018 Report published yesterday by the State Department, despite government efforts to reform the country’s judicial system and improve the rule of law, foreign investors perceive the investment climate as problematic and say Albania remains a difficult place to do business.

Foreign investors cite corruption, particularly in the judiciary, a lack of transparency in public procurement, and poor enforcement of contracts as continuing problems in the small Balkan country.

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.” – says the report.

The Bureau of Economic and Business Affairs at the State Department which drafts these annual findings, also highlights the fact that “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.

Albania suffers from endemic corruption across government departments with lack of transparency in their procurement procedures, with public contracts often ‘spoken for’ well before public tenders can take place.

The State Department says that the increasing use of public private partnership (PPP) contracts, which have been the norm in recent years, 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 PPP contracts by the end of 2017.

Furthermore, the report notes that 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.” – underlines the report.

The Albanian government led by socialist prime minister Edi Rama approved a new Law on Strategic Investments in 2015 in order to attract FDI. 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.

Rama who blames corruption as an inheritance from former democratic party rule, has vowed to press ahead with a crucial ‘Vetting’ process which is currently scanning Albania’s judges and prosecutors. The government hopes that the US and EU backed justice reform already under implementation will start to bear its first fruits by next year, when the country goes to local elections.

However, after his first mandate in power, Transparency International’s 2017 Corruption Perceptions Index ranked Albania 91st of 180 countries, a drop of eight places from 2016. As such, Albania is now perceived as the second most corrupt country in the Western Balkans.

Despite heavy criticism, the report notes that 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.

Albania is an upper middle-income country with a GNI per capita of USD 4,180 (2016) 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 3.8 percent in 2017, and growth is expected to reach 3.9 percent annually from 2018 to 2020.

Albania received EU candidate status in June 2014. In November 2016, the European Commission recommended the opening of EU accession negotiations with Albania, conditioned primarily upon implementation of a judicial reform package passed earlier the same year.

In April 2018, the EU Commission recommended the opening of accession negotiations, and the Council of the European Union decided last June to conditionally start formal membership talks with Albania and Macedonia by next year.


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