DASH on doing business in Albania: It has great potential, but is affected by corruption and dirty money

An annual US Department of State Investment Climate Report provides information on the environment for doing business in more than 160 economies around the world.

In the report DASH outlines the challenges and advantages of doing business in Albania.

The United States estimates that Albania continues to maintain its macroeconomic stability, despite three consecutive shocks such as the 2019 earthquake, the COVID-19 pandemic and the economic impacts of Russian aggression in Ukraine. After a contraction of 3.5 percent in 2020, Albania's economy recovered, growing by 8.9 percent in 2021, 4.9 percent in 2022, with estimates putting 2023 growth at 3.4 percent.

In the annual report on the investment climate, the US Department of State points out that, however, Albania's economic development remains vulnerable to widespread corruption, unfair competition, the informal sector and a persistent labor shortage.

"Albania has great economic potential, a sound legal framework and has made progress in limiting corruption to a low level, digitizing public services for both citizens and businesses. However, foreign investors perceive Albania as a difficult place to do business. They cite persistent corruption, including in the public sector, the judiciary, public procurement, unfair and distorted competition, the large informal economy, money laundering, frequent changes in fiscal legislation and poor contract enforcement as ongoing challenges for investment. and business in Albania", says the report, in which it is emphasized that the emigration of young and qualified workforce has created a lack of workforce that affects investment prospects.

The report recalls that Albania continues to remain poorly in the Transparency International organization's Corruption Perception indicators. In 2023, Albania was ranked 98th out of 180 countries, a slight improvement from 2022, but still behind its best ranking of 2016, when it ranked 83rd.

Albania suffers from a large informal sector and money laundering activities. The Financial Action Task Force (FATF), an intergovernmental organization established at the initiative of the G7, included Albania in its gray list in 2020. From 2020-2022, the country underwent four follow-up reports and improved its work leading to delisting in October 2023.

The business community reports that the large wave of illegal income from drug trafficking, smuggling, tax evasion and corruption harms competition in the market. Allegations of corruption are common and investors report that they may be the target of extortion by public administration, the media and criminal groups, the report said.

"Reports of corruption in government procurement are common. Investors often report cases of government corruption that delays and prevents investments in Albania", says the DASH report, which emphasizes that "the continued use of public private partnership (PPP) contracts has reduced opportunities for competition, including by investors foreign, in infrastructure and other sectors".

Weak cost-benefit analyzes and lack of technical expertise in designing and monitoring PPP contracts are persistent concerns.

“American investors face challenges due to corruption and the persistence of informal business practices. "Some US investors have faced contentious commercial disputes with public and private entities, including some that have gone to international arbitration," the report said.

DASH emphasizes that property rights continue to present a challenge in Albania, because it is difficult to obtain an uncontested certificate of ownership.

"There have been cases of individuals who allegedly manipulated the court system to illegally obtain a land title. Overlapping property titles is a serious and common issue. The compensation process for lands confiscated by the former communist regime continues to be difficult, inefficient and insufficient. The government has shown the will to address this problem, but without progress," the report states.

DASH mentions the fact that Albania undertook judicial reform to fight systemic corruption, stressing that the country "has functional and independent anti-corruption bodies, including the Office of the Special Prosecutor and the National Bureau of Investigation, part of the Special Structure Against Corruption and Organized Crime (SPAK). The judicial reform is strongly supported by the United States and the European Union and implementation is ongoing, with the expectation that its success will eventually improve the investment climate in the country."