Doing Business In Albania Guide 2017 - PwC

1Albania – a profile1.1 IntroductionHistoryThe history of Albania begins to takeshape around 3000BC. The Illyrianswere the first to populate Albania at thebeginning of the Bronze Age, an IndoEuropean people who settled in theBalkan Peninsula. The name Albania(in Albanian: “Shqipëri”), derives fromone of the Illyrian tribes called “Albano”meaning the “Land of Eagles”.In 1190 the first Albanian medievalstate, the Principality of Arbër, wasfounded, with Kruja city as the capital.In the middle ages, the name Arbëri wasincreasingly used to refer to the regionnow comprising the nation of Albania.In the late 14th century, with theexpansion of the Ottoman Empiretowards the Balkans, Albania becamea battlefield. For about 25 years,the national hero Gjergj KastriotiSkanderbeg united the Albanianprovinces, leading them in theirresistance against the Ottoman army.Following his death in 1468, theOttomans occupied the country forabout five centuries.Albania proclaimed its independencein 1912 and the present day nationalborders were sanctioned by theConference of Ambassadors heldin London in 1913. A short-livedmonarchy (1914-1925) was succeededby an even shorter-lived first AlbanianRepublic (1925-1928). This wasreplaced by another monarchy (19281939), which was headed by PrinceZog I. During World War II, Albania’sNational Liberation Army foughtalongside the allies first againstItaly and then against Germany. Asa result, Albania finally achieved fullindependence on 29 November 1944.8Doing Business and Investing in AlbaniaAdult education is also possible for thoseadults who either did not complete theirbasic education or those who wish tocontinue with their learning.Not long after independence Albaniabecame a communist state, led anddominated by Enver Hoxha (d. 1985).The Republic of Albania was foundedin 1991 and the former communistparty was removed from power inthe elections of March 1992, amideconomic collapse and social unrest.Further crises followed during the1990s, peaking in the 1997 financialpyramid schemes scandal, and led toa mass emigration of Albanians fromthe country; mostly to Italy, Greece,Switzerland, Germany and the U.S.A.and 1,500mm annually, with the higherlevels of rain falling in the north. Nearly95% of the rain falls in the winter.Albania became a full member of NATOin 2009 and in June 2014 was grantedcandidate status to the European Union.Albania has a population of just underthree million people, of which nearly athird live in Tirana, the capital city.Geography and climateLanguageAlbania is located in South East Europein the Western Balkan Peninsulaand shares common borders withMacedonia to the east, Greece to thesouth and Kosovo and Montenegro tothe north. It has access to the Adriaticand Ionian Seas in the west andsouthwest, with Italy less than 72 kmaway across the Adriatic Sea.The official language in the Republic ofAlbania is Albanian (locally referred as“Shqip”). Albanian is an Indo-Europeanlanguage, spoken by approximately 7.6million people, not only in Albania andKosovo, but also in other countries inthe Balkans region where there is anAlbanian presence, including westernMacedonia, southern Montenegro,southern Serbia and north-westernGreece.The country terrain is mostly mountains(almost 70% coverage), combined witha beautiful coastline and numerousrivers and lakes, and covers an area of28,748 km².The highest point in Albania is KorabiMountain (2,751 m). Three large lakesof the Balkan Peninsula - Ohrid, Prespaand Shkodra - are partly located inAlbania. The capital and the largest cityin Albania is Tirana, with other citieslocated around the country, including:Durrës, Korça, Elbasan, Shkodra,Gjirokastra, Vlora and Fier.Albania has a Mediterranean climatewith an average temperature of 7 C inthe winter and 24 C in the summer.Rainfall averages between 1,000mmAlbania falls within the CentralEuropean Time Zone (GMT 1) andbetween April and October switches todaylight savings time, i.e. GMT 2.There are about 2000 schoolsthroughout the country (approximately1500 schools for Basic Education, and500 Secondary Education schools),and 38 universities, (15 public and23 private ones) with approximately146,000 students registered for theacademic year 2015/2016.Living standards1.2 PeoplePopulationReligionThe Constitution of Albania provides forfreedom of religion and the Governmentrespects this right in practice. Therehave been no reports of societal abuseor discrimination of any kind based onreligious beliefs or practice.EducationIn Albania, attendance at school,whether public or private, is mandatoryfor Primary and Secondary education.Higher education, although notcompulsory, is also available invarious forms; colleges, universities,academies etc.In 2016, Albania’s GDP per capita wasEUR 3,781 p.a. The data generated fromthe Ministry of Finance shows a 3.4%growth in economy.The minimum wage in Albania isapproximately EUR 185 (ALL 24,000)per month while the average monthlysalary in the public sector is aroundEUR 410 (54,500 ALL) and around EUR320 in the private sector (ALL 42,500).1.3 GoverningstructuresThe politics of the Republic ofAlbania takes place in the frameworkof a Parliamentary RepresentativeDemocratic Republic. The Constitutionis the highest law in the land and wasadopted by popular referendum on 28November 1998.The system of government is basedon the separation and balancingof the legislative, executive andjudicial powers. All three branchesof government are separate andindependent to each other.The Parliament represents thelegislative branch. The executive branchis represented by the President as theChief of State, the Prime Minister as thehead of Government and the Councilof Ministers. The judicial branch iscomposed of the Constitutional Court,the Supreme Court, First InstanceCourts and Courts of Appeal.Court decisions are issued from FirstInstance Courts, Courts of Appeal, andthe Supreme Court.As of September 2017, the Governmentconsists of 11 ministries. Whereas, theunicameral Parliament consists of 140seats based on a closed list proportionalrepresentation system, where allParliament members serve a four-yearterm.The Constitutional Court, which is notpart of the ordinary judicial system,has a specific role and has jurisdictionover the review of constitutionalityof law and other normative acts.The Constitutional Court guaranteesand upholds compliance with theConstitution and has the ultimatepower to interpret its content.Individuals or legal entities can alsoaddress the Constitutional Court ifthey claim that the right for a fair legalprocess has been violated.1.4 Legal systemThe Albanian legal system has acivil law system. All legal acts mustbe in compliance with the AlbanianConstitution which is the highest law inthe legislative hierarchy. Internationaltreaties and conventions ratified bythe Parliament prevail over the locallegislation, apart from the Constitution,in the event of an inconsistency with thelocal legislation.Laws and other legal acts are issued andapproved by a number of bodies, andenacted as follows: Laws are proposed by the Council ofMinisters, any member of Parliamentor 20 thousand voters (people),approved by Parliament and enactedby the President of the Republic.After approval by Parliament, a lawenters into force 15 days after itspublication in the Official Gazette orat another date as specified by thelaw. Parliamentary decisions are issuedby Parliament. Decrees are issued by the Presidentof the Republic. Normative acts, decisions,instructions, regulations andorders are issued by the Council ofMinisters. Instructions, regulations and ordersare issued by each Ministry.Judicial systemThe judicial system consists of the FirstInstance Courts, the Appeal Courtsand the Supreme Court. The FirstInstance Courts and the Appeal Courtsjudge cases under three jurisdictions:criminal, civil and administrative. Casesin the First Instance Courts are heardby one judge or a panel of three judges,whereas cases in the Appeal Courts areheard by a panel of three judges. TheSupreme Court deals with matters thatare organised into three main panels:Civil, Criminal and Administrative.For the unification of judicial practice,the Supreme Court can deal withspecific cases in Joint Panels, with theparticipation of all its members.The decisions are proclaimed by thejudge/s in the name of the Republic.There is no “trial by jury” system inAlbania.In August 2016, Albania’s parliamentadopted a law on introducing vettingfor judges and prosecutors, passing thelaw on Reassessment of Judges andProsecutors, known as the “vetting”law. It is part of a wider judicial reformdemanded by the EU and designed tocleanse the justice system of corruptionand political influence.Doing Business and Investing in Albania9

11.5 EconomyTourismA recent law on tourism encourages foreign and domesticinvestors to consider Albania as a business destinationby providing very competitive investment terms aimed attransforming the tourism sector in Albania into one of themost important sectors of the economy in the coming years.Official data shows that year on year, tourism is a growingindustry. In 2016, over 4.5 million tourists entered Albania(mainly by road), showing an increase of over 12% comparedto 2015.In addition, in December 2016 the government approved theNational Plan “Albania 2030” with the main goal to supportthe urban development in Albania especially focusing onintegrated planning for coast development in Albania byidentifying the potential areas for tourism development.The Adriatic and Ionian seas that run along the coastline ofAlbania, offer a large number of varied beaches, with sandyand rocky shores. During the long and sunny summer, thesebeaches are a major attraction for Albanians and foreigntourists alike, so it is little wonder that this is where thebusiness venture investments are concentrated.Tourism in the mountains is also important. National parksand mountains like Valbona, Theth, Razma, Voskopoja,Dardha and Llogora offer amazing scenery and well-runresorts that offer opportunities for walking, hiking, adventuresports or just relaxation.There are also some UNESCO protected areas in Albania,such as, Butrint, Berat and Gjirokastër, all known for theirunique cultural values.In almost all cities of Albania, you can find culturalmonuments, museums, archaeological parks, castles andbuildings that conjures up the history of ancient civilizationsand provides a compelling attraction for tourists.Some of the most notable international tourist magazines andnewspapers have finally discovered Albania and recognise thecountry as one of the most attractive spots in the region and amust-visit destination.TransportRegional and European cooperationin the transport sector is seen as animportant topic for the AlbanianGovernment. It is because of this that inJune 2004 Albania was a co-signatoryof the Memorandum of Understandingthat created the regional transportorganisation in South East EuropeTransport Observatory (SEETO) withthe aim of promoting cooperationin the development of multimodaltransport infrastructure. Albania is alsoa member of BSEC (Black Sea EconomicCooperation), a fully-fledged regionaleconomic organization which acquiredinternational legal identity by charter inMay 1999.The objective of Albania’s membershipand participation in these organisationsis to facilitate its integration withinSoutheast Europe and with theintention of utilising segments of PanEuropean Corridors IV, V, VII,X and, inparticular, Corridor VIII (Durrës-Varnathrough Tirana, which include the portsof Durrës and Vlora, as well as Rinasinternational airport in Tirana).Road transportAlbania has 3,719 km of road network,comprised of primary roads (32% ofnetwork length), secondary roads(56% of network length) and plannednew roads (the remaining 12% ofnetwork length). The most importantroad segments (highways) are theones connecting the city of Tirana withDurrës, Shkodra and Montenegro,Tirana with Elbasan, Durrës withLushnja, Durrës with Kukës and Kosovo.Recently, the construction of the FierLevan-Tepelenë highway has beencompleted, greatly assisting with roadtraveling the south of Albania and oninto Greece.The most important road projects for2016-2020 include investment plans in: the Blue Corridor Road, part ofthe seaside corridor, which willeventually link Montenegro withGreece. Starting in Shëngjin andgoing through to Butrint, this road10Doing Business and Investing in Albaniais a must for the development oftourism, giving tourists access tovast seaside areas. The entire roadproject is expected to have a lengthof about 350 km. the Arbri Road, a dual carriage road,72 km long, that will facilitate roadtraffic travelling between Tirana andMacedonia.Railway TransportThe Albanian railway network consistsof 441 km of single non-electrified trackthat connects a number of towns andcities in the country. The connectionthrough to Montenegro via Hani Hotit(rebuilt to its previous condition in2003) gives access to the Europeanrailway network.However, it has to be recognised thatmuch of the railway network is obsoleteand poorly connected. For this purpose,considerable investment has beenring-fenced for the development of thefollowing specific segments: Tirana – Rinas (Airport)– Durrës Vorë – Shkodër – Hani Hotit (borderwith Montenegro) Durrës – Elbasan – Pogradec – Lin(border with Macedonia)Maritime transportThe most important Albanian maritimeports are Durrës, Vlorë, Shëngjin andSarandë, which deal with the majorityoutgoing and incoming freight andpassengers; with the port of Durrësaccounting for the highest volumes oftraffic. In addition, Albania has twovery important petroleum terminals(managed and operated by the privatesector under the supervision of theMinistry), both serving the petroleumindustry and importing refinedproducts. These are: Porto Romano (near Durrës) Petrofilera (north of Vlora)With its Adriatic and Ionian coastlineand its close proximity to North Africaand the Middle East, Albania is ideallypositioned to serve as a regional hubfor maritime trade. However, thestrengthening of the ports’ capabilitiesis still a high priority and very muchneeded in order to accommodateand support the development of themultimodal transport ambitions for thecountry and for the region.One of the major developmentsforeseen is in the new port of Shëngjin,in the north of Albania. The port isexpected to become one of the largestin the region, substituting the Port ofDurrës as the main industrial port ofAlbania. With a sixty million tons ofcargo operational capacity per year,the port aims to cover the needs of theregion (Kosovo, Serbia, Macedonia).Air TransportCivil aviation has undergone a majortransformation since 2005. A PublicPrivate Partnership agreement wasawarded to a concessionaire tooperate Tirana’s “Mother Teresa”International Airport for a period of20 years (extended for a further twoyears in 2016, on the condition thataccess is given to more internationalflights). Concessionaire was ownedfrom a consortium of companies(Albanian-American Enterprise Fund“AAEF, DEG-Deutsche investitions-undEntwicklungsgesellschaft GmbH andAviAlliance GmbH) until November2016 when it was sold to Real FortressLimited Company.Infrastructure has been modernisedand capacity expanded resulting in athroughput of more than two millionpassenger in 2016. Following anamendment to the agreement withthe concessionaire, the Governmentnow intends to develop air transportinfrastructure even further withthe construction of more airports inSaranda in the south and Kukës in thenorth of Albania.TelecommunicationsAlbania’s country code is 355.Landline and mobile telephony, as wellas postal services, are well regulatedand monitored from the Authority ofDoing Business and Investing in Albania11

1Electronic and Postal Communications (AKEP). In the fixed linesector, Albtelecom is the biggest player in the market with 71%market share (out of 248,000 total subscribers in 2016).conditions for interested parties. As an example, taxes havebeen reduced or exempted in order to facilitate economicactivity in specific sectors. The current approved areas are:The mobile telephony sector is shared between fourcompanies in Albania. The market is oriented towards prepaidservices counting on 92% of total subscribers, with VodafoneAlbania having the highest market share. Koplik, Shkodër (61 ha), a major city in the north ofAlbania, bordering Montenegro,A number of private and foreign courier operators providepostal, parcels and packages services in Albania. PostaShqiptare, a state-owned entity, is the biggest player in themarket with about 94% market share. Vlorë (289 ha), situated six kilometres from the city ofVlora, on the coast to the south of Albania.Another important development has been in the call centreindustry which, as a subsector of the business processoutsourcing industry, has grown significantly in the last fewyears to become a major employer, especially for the youngergeneration. There are around 300 call centres in Albania withover 25,000 employees. The biggest operators are Italiancompanies which aim is to provide services to not only Italybut also to other EU country markets.CurrencyThe Albanian official currency is Albanian Lek (ALL). Theexchange rate regime is determined by the Bank of Albaniaand permits the use of foreign currencies for payment ofgoods and services. The value of the ALL against foreigncurrencies is freely determined by the market and has provedto be relatively stable against both the Euro and the US Dollarin recent years. End of year 2016 exchange rates for US Dollarand Euro have been respectively; 1 USD: 128.17 ALL and 1Euro: 135.23 ALL).Economic zonesAlbania has given high priority to the improvement ofeconomic development areas and the respective regulatoryframework. The government has approved a new legislationrelated specifically to these areas in order to provide adequate Spitallë – Durrës (209 ha), between the main port ofDurrës and the international airport at Rinas.All three areas represent significant potential areasdevelopment across many business sectors such as agriculture,goods and services, the automotive industry and other lightindustry.1.6 TradeIn June 2014, the European Council granted Albaniacandidate status to future EU membership. The Stabilizationand Association Agreement (SAA) has been in force sinceApril 2009 and Albania has continued to implement itsobligations. Regular political and economic dialogue betweenthe EU and Albania has been maintained through the relevantstructures under the SAA.The government is seriously involved in reforms related toEU integration and continues to make progress in meetingthe objectives set out in the five key priorities for the openingof accession negotiations. The integration process in the EUserves as a significant motivator for the whole country to goforward and carry on reforms in order to improve businessclimate and align legislation with EU requirements.The liberalization of the foreign trade regime in Albania hasbeen a major objective since 1990. This has been implementedin compliance with the rules and guidelines set by the EU andthe World Trade Organization (a WTO member since 2000).In May 2016, Albania has become the latest WTO member toratify the new Trade Facilitation Agreement (TFA). Importsand exports of goods with the EU are not generally subjectedto special authorization requirements. Exceptions are made tothose quotas or control requirements imposed through differentbilateral or multilateral agreements signed by Albania.Albania has signed several Free Trade Agreements (FTAs)with key markets (European Union, Turkey, CEFTA and EFTAcountries) allowing Albanian-based manufacturers to use thecountry as a gateway to markets in southern Europe and fortranshipping to the EU. By using the SAA, Albania can exportall industrial goods produced in the country and import allneeded products into the country from EU countries withoutany customs tariffs. Albania has signed 43 bilateral treatieswhich aim to protect and promote investments, as well as 41double tax treaties.12Doing Business and Investing in Albania1.7 Energy and miningElectricityMain players in the electricity market are KESH (Albanian Power Corporation), OST(the transmission system operator) and OSHEE (the distribution system 0perator).Between them, they are responsible, respectively, for the production, transmission anddistribution of electricity. In addition to KESH, there are several private companies(operating mainly on a concession basis) involved in the production sector.The total network capacity, a combination of state owned hydro power plants andprivate concessionaires, in 2015 amounted to 1,895 MW. Total energy produced relieson hydro resources with 25% of it produced from private companies.In 901Source: INSTAT dataWith the new 400 kV interconnection power line with Kosovo finalized in June 2016,Albania took a further step towards its integration into the regional electricity market.Given the natural water resources in Albania and the large areas of hydrographicterritory, the Government is giving high priority to renewable energy sourcesand promoting ‘Green Energy’ by offering a number of incentives and support toinvestments.In January 2016 the government fully adopted the National Renewable Energy ActionPlan which together with the 2013 Law on Renewable Energy aim to make Albaniacomplaint with the acquis on renewable energy.Oil & gasAlbania is one the largest exporter of crude oil in the region (first among EnergyCommunity countries). Exports of oil increased by 9.37% in 2015 compared to 2014,however production fell by 7%. The production of refined oil products also fell in2015, a decrease of 10% compared to 2014.Albpetrol sh.a. (state-owned company) is active in the development, production andtrade of crude oil. A planned privatization plan of the company in 2016 has been puton hold from the Albanian government.Although the gas sector is not very developed yet, Albania has continued to focus onthe development of the Gas Master Plan of Albania in order to have a well regulatedmarket in the future. In addition, in September 2015, the Albanian Parliamentadopted a new law on natural gas sector, which transposes the Third Energy Packageand establishes a general legal framework for further developing the gas market incompliance with the EU acquis communautaire.The development of the high profile Trans Adriatic Pipeline (TAP) project is boundto have an effect on the local market. TAP is the largest foreign investment project inAlbania and will enable the countryto become part of the internationalnatural gas network. This will providedevelopmental solutions to the areasand zones where the pipeline passesthrough by revitalizing economiclife and increasing employment. TheTAP was certified as an independenttransmission operator (ITO) fornatural gas on 31 March 2016 and isseen the future transmission systemoperator that will Albania with theEuropean gas market.Alternative sources in the energysectorGiven its coastal position and aMediterranean climate that provides2,400 hours of sunshine per year,Albania has the ideal geographicalconditions for the development andsustainable production of solar andwind energy. The National Agency ofNatural Resources (AKBN) and donorshave carried out a number of studiesfor installing solar panels in bothresidential and service sectors. Thereare also plans to develop wind energyfarms in Albania during the next fewyears with ideal locations all across thecountry, particularly in the mountainsand coastal lowlands.Mining industryAlbania has a long history of miningwith significant mineral depositsof chromium, nickel, copper andbitumen, as well as non-metallicminerals such as limestone anddecorative stones.Currently, a number of small tomedium size mining and quarrycompanies that operate in Albania,with only a few that could describedas large-scale. By the end of 2015,the AKBN reported 600 mininglicenses, out of which 112 licenseeswere extracting chromium ore

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