A positive investment climate, competitive incentives and an investment promotion center

Selami Xhepa
Chair, Albanian Center for Foreign Investment Promotion

Albania's investment policy and regulatory framework is based on the firm belief that a free enterprise, market driven economy will:

  • enhance the country's international competitiveness as a preferred investment location;
  • hasten its integration into the global economy;
  • stimulate trade and investment flows;
  • provide employment and development of its people.

Preferential treatment is not accorded to local investors. Equal treatment for all investors and free competition between and among them is considered to be a pre-requisite in the development of a positive investment environment.

For example, foreign investors do not require any preliminary authorisations. An investor simply organises and registers his company and begins work. The company is then automatically eligible for all the benefits and incentives mandated for investors under the law.

Albania's positive investment climate offers investors important and compelling reasons to consider Albania to be a preferred investment location.

  • democratic institutions supporting private sector development;
  • strong and united commitment, by all government levels, to a free market economy and private sector driven economic growth;
  • rapidly increasing access by land, air and sea, both within the country and to major Central European, EEC and Mediterranean rim markets;
  • broad-based, rapid privatisation, impacting on all segments of the population, accompanied by the fast growing private ownership of micro and small businesses, land and housing;
  • rapid increase in Gross Domestic Product (GDP) - 11 per cent in 1993, 7.4 per cent in 1994 and 13.5 per cent in 1995. Per capita, GDP moved from a low of US$213 in 1992 to an estimated $766 in 1995;
  • availability of well-educated, skilled, low-cost labour, and professional staff supported by an established system of primary, secondary and university level institutions. Knowledge of a second, or even third language, is not uncommon;
  • competitive investment incentives and guarantees for repatriation of capital and profits under established laws;
  • major and continuing improvements in infrastructure - roads, airports, harbours, telecommunications, energy and water - under programmes agreed and funded by Albania and its international group of multilateral and bilateral partners;
  • protection of industrial and intellectual properties, patents and copyrights established by laws equivalent to European standards;
  • foreign ownership of construction land for productive purposes.

Albania has liberal and competitive investment laws which place literally no restrictions on foreign investors; nor do they require investors to seek authorisations or licenses prior to the initiation of their enterprises. The laws have created a level playing field for both local and foreign investors. The key features of the investment law are:

  • a foreign investor faces few, if any regulatory hurdles in starting their business. Once the investor has established a legal identity for their business, a simple business registration process completes the formalities;
  • there are no specific restrictions placed on the transfer of funds into or out of Albania;
  • disputes are mainly resolved through the Albanian courts. Issues relating to expropriations, compensation, discrimination, or the transfer of funds, are resolved by binding arbitration under the terms of the International Centre for Settlement of Investment Disputes Convention, to which Albania is a signatory.
  • trade and investment treaties and double taxation agreements have been signed, or are under negotiation with a number of countries, providing further investment protection;
  • there is a four year tax holiday automatically offered to all foreign investors in the manufacturing sector who guarantee to operate in Albania for at least ten years;
  • the tax holiday begins immediately. However, the investor is liable for re-imbursement of taxes should the business cease operations before the agreed ten year period;
  • a reduction of up to 60 per cent of taxes due may be taken in any tax year in which the investing company re-invests profits in productive sector enterprises;
  • investors in a tourism related 'promoted activity' may be granted a full five year tax holiday;
  • all materials subsequently re-exported are exempt from all export duties. In this regard, plans are well-advanced for the creation of export processing and/or industrial zones, which will offer attractive possibilities for export oriented investments. Private investments are also sought in such zones;
  • a company law framework, drawing on European models, is also effective. There are few departures from standard western practices;
  • new accounting and audit standards have been installed, and a law covering certification of public accountants and auditors has been approved;
  • commercial and civil codes have been established, governing contracts, securities, mortgages, and leasing among many other issues covered by the legislation.

The Albanian Center for Foreign Investment Promotion (ACFIP) was established as a semi-independent government body, reporting directly to the Prime Minister. The Center is responsible for the promotion and facilitation of new local and foreign investments. It has a broad brief for a range of services, including negotiation with state authorities and financial institutions on the investor's behalf.

The Center's services to investors range from providing economic and business information on Albania, to arranging sectoral, feasibility surveys.

  • assess and report regularly on Albania's economic and business environment;
  • review and make appropriate recommendations on legal and financial regulations, the tax system, and conditions governing the establishment and operations of investment and business activities;
  • evaluate and target priority investment sectors and projects;
  • carry out a broad programme of investment promotion, to meet local and foreign investment targets in priority investment sectors;
  • assist in identifying and choosing local partners for foreign investors;
  • advise on business agreements;
  • arrange for preliminary feasibility studies and estimates.

The Center:

  • organises investment conferences;
  • plans and participates in inward and outbound investment promotion missions;
  • provides assistance to individuals and groups exploring investment opportunities in Albania;
  • conducts direct mail promotional campaigns.

The Center has a permanent staff of senior specialists, ready to assist the investor.

The services of the Center are provided at no cost to the investor.

Exploring investment opportunities: selected case studies

Foreign investment opportunities include labour intensive activities in such fields as:

  • light industry, including garments and leather products;
  • food processing;
  • wood processing;
  • construction materials;
  • tourism;
  • property and construction.

Other more specialised opportunities exist in the following sectors:

  • mining;
  • oil and gas;
  • banking and financial services;
  • utilities and public service concessions; public sector investment projects.

The ACFIP is a primary source of information, essential to investors when preparing feasibility studies. While the Center avoids preparation of detailed enterprise level feasibility studies - with the hope of attracting would-be investors, it does work closely with prospective investors in preparing their own studies. Furthermore, it will commission outside consultants to prepare sector studies, which are made available to investors.

Three such sectoral surveys financed by UNCTAD/UNDP have been completed by outside consultants during the fourth quarter of 1996:

  • wood processing;
  • agro and agro-processing;
  • textiles and garments.

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