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Investment Climate/DASH: Albania has problems with corruption, Kosovo is making progress

2024-07-18 19:48:00, Aktualitet CNA

Investment Climate/DASH: Albania has problems with corruption, Kosovo is making

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 and Kosovo

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 Special Prosecutor's Office (SPO) and the National Bureau of Investigation (NBI). ), 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." .

Chuang

In the section on Kosovo, the DASH report points out that the ongoing tensions with Serbia continue to be an obstacle to the attraction of foreign investments.

Kosovo's economy, the report says, has demonstrated considerable resilience in the wake of global and regional shocks, including the COVID 19 pandemic, Russian aggression in Ukraine and rapidly rising commodity prices.

According to the report, the International Monetary Fund and the World Bank predicted economic growth of approximately 4.0 percent in 2024. Foreign investments remain limited, while remittances from the diaspora continue to represent a significant part of Kosovo's Domestic Product.

The report notes that Kosovo has taken measures to improve the investment climate with government actions to simplify business registration and reduce bureaucratic obstacles. However, economic growth and productivity continue to be constrained by structural issues, including a large informal economy, dependence on diaspora remittances for consumption, and high rates of unemployment among women and youth.

"A small domestic market, although growing, limited regional integration and ongoing tensions with Serbia, continue to be the most important obstacles for attracting Foreign Direct Investments", says the report, in which it is emphasized that the policies the sometimes "self-indulgent" economic behavior of the Kosovo government, political interference in the economy and limited public-private dialogue also present challenges for investors.

Investment Climate/DASH: Albania has problems with corruption, Kosovo is making
Aries

The report states that in June 2023, the Kosovo government, citing security concerns, banned the entry of finished goods of Serbian origin into Kosovo.

"The ban caused great uncertainty among importers and negatively affected companies owned by foreign entities in Kosovo due to disruptions in the supply chain. Despite repeated requests, the Kosovo government has not provided any explanation as to how this ban has mitigated security threats," the report states.

DASH also emphasizes the issue of administrative regulation of business registration that threatened the closure of some businesses and mediums during 2023, as well as the decision of the Central Bank of Kosovo to use the euro as the only currency for cash payments "only with a month's warning, severely limiting access to financial support from Serbia of the Serbian community".

The report states that Kosovo's laws and regulations are in line with international standards for investment support and protection, but implementation remains weak. It mentions that with the help of the American government, Kosovo established a Commercial Court in August 2022, which aims to handle business disputes in a fair, efficient and predictable manner. The court is expected to improve the business environment by reducing opportunities for corruption and building investor and private sector confidence in the judicial system.

"Investors are attracted by Kosovo's young population, low labor costs, proximity to the EU market and natural resources. The global supply disruptions caused by the COVID-19 pandemic have sparked a greater interest from some businesses to use Kosovo as a base for production aimed at the EU market," the DASH report states./ VOA





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