Progress in Investment Reform for Albania INVESTMENT REFORM INDEX

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Preliminary Results
Progress in Investment Reform for Albania
INVESTMENT REFORM INDEX
26 April 2006 Investment Compact Country Mission
to Albania
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Agenda

• Context and Objectives
• Approach, Process, Organisation and
  Differentiating Factors
• Results of Measurement for Albania
• Dimension specific results
• Next steps and Key Events

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Context and Objectives
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Context
The Investment Reform Index and the Investment
Compact
Focus of Investment Compact Program
A. Enterprise and SME Development
B. Policy and Promotion Specific to FDI
Investment Reform Index Enterprise Policy
Performance Assessment (EPPA) Peer Review
1. Monitoring and Evaluation
Country Investment Policy Analysis and
Implementation
Investor Forum Sector Specific Regional
Investment Promotion
Enterprise Forum
2. Implemen-tation Support
4 Areas
Structured Public/Private Debate
Regional Foreign Investors Council, White Book
and Reality Checks
Enterprise Policy Performance Assessment
3. Private Sector Support
Annual Ministerial for SEE Region Programme for
Parliamentary Support
4. Political Support
5
Objectives
The IRI is guided by four key objectives
Regional Collab-oration and Peer Review
Targeted Support in Imple-mentation
Public and Private Sector Involvement
Structured Evaluation
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Approach, Organisation and Process
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Approach
The IRI measures implementation of reform in 10
key dimensions
Main focus of evaluation in 2006
Part of a separate process conducted in
cooperation with the EC in the framework of the
European Charter for Small Enterprises
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Approach
Each dimension is broken down into main
sub-dimensions Example Tax Policy
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Approach
Each sub-dimension is broken down into core
indicators Example Tax Policy ? Tax
Administration
10
Approach
Each indicator is broken down into levels of
reform Example Tax Policy ? Tax Administration
Note This table has been simplified for
presentation purposes each level of reform is
fully detailed in the actual IRI.
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Process
Gathering information for scores will follow a
specific process Example Anti-Corruption
CET
Investment Compact
Private Sector
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Organisation
The Investment Reform Index is organised to
involve all levels in the evaluation and input
process

• IC Core Team collects data and interviews OECD
  Experts to establish a preliminary level of
  progress for each country in each policy
  dimension
• Local consultants build from the first
  measurement by collecting primary data in the
  countries and conducting interviews with local
  experts. The results analysed by the IC Core Team
  and incorporated into the level of progress
• The Private Sector and the Country Economic Team
  evaluate the latest measure. This provides an
  opportunity to step back and analyse the
  measurements in a broader context. After
  consultation mechanisms are complete, all parties
  confirm a final measurement, which is published

Local Consultants Country Economic Team
IC Core Team
Private Sector
OECD Experts Local Experts
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Differentiating Factors
How the IRI is different from other indices
The OECD Investment Compact IRI relative to other
indices from international organisations

• Main Differentiating factors of the IRI
• Focus on a very specific region where history,
  culture and geography allow for more relevant
  benchmarking between countries.
• Tripartite participatory approach to evaluation
  and measurement including government, private
  sector, and the OECD.
• Comprehensive evaluation of the investment
  environment structured along ten key dimensions
  in line with OECD standards.
• Does not only measure but also provides guidance
  on how to improve through good practices.
• Meta Index which incorporates existing work
  already conducted by other organisations (e.g.,
  World Banks Doing Business report).

Process
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Preliminary IRI Results for Albania
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Preliminary IRI Results for Albania
Preliminary IRI results for Albania

• Dimensions where policy reform is more advanced
  are
• Trade policy
• Investment Policy
• Competition Policy
• Dimensions where reforms have been slower are
• Regulatory Reform
• Anti-corruption Policy
• Human Capital
• Tax Policy

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Preliminary Findings
Dimension Specific Results
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1. Investment Policy and Investment Promotion
Dimension specific results
Preliminary Findings

• Investment policy
• National Treatment of foreign investment is
  guaranteed by law and internationally accepted
  mechanisms for state-investor dispute settlement
  are generally in place.
• Guarantees against unfair expropriation of
  property are also set in the Constitution and the
  foreign investments law.
• Transfer of funds (current and capital account)
  by foreign investors is guaranteed.
• Intellectual property rights legislation is
  generally in line with international standards,
  but enforcement of IPR legislation needs to be
  consolidated.
• Land ownership is limited for foreign individuals
  but there are no limitations for foreign-owned
  companies that are registered in Albania.
• Investment promotion
• The current Investment Promotion Agency ANIH
  is operational since 2002, with main
  responsibilities in image building, investment
  generation and servicing potential and existing
  investors.
• Albania plans to set up a National Business
  Agency to deal with foreign investment and export
  promotion and SME development.
• However, a new national investment promotion
  strategy should be adopted and reflect government
  and private sector consensus on the countrys
  investment promotion priorities.

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Investment Policy
Dimension specific results
Preliminary Findings
Preliminary IRI evaluation
No law or institution
Solid law or institution passed but little or
no evidence of effective implementation
Law or institution in line with good practices
and significant evidence of implementation
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Investment Promotion
Dimension specific results
Preliminary Findings
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2. Tax Policy
Dimension specific results
Preliminary Findings

• Albania has a competitive corporate tax rate.
  According to the World Bank, however, total tax
  payable is over 50.
• Tax legislation is generally well drafted,
  although much legislation is still pending
  approval.
• Albania has made significant progress in aligning
  the corporate tax regime with international
  standards. However, transfer pricing rules are
  not well enforced and IAS/IFRS will not be fully
  implemented and enforced until January 2008.
• Total number of tax payments and time to comply
  are both higher than the SEE average of 50 and
  236 respectively, according to World Bank
  estimates. Online tax filing is not yet
  available.
• VAT reimbursements are not monitored and often
  delayed, and corruption, especially by tax
  inspectors, is still considered a problem by the
  private sector.
• Consultations between the public and private
  sectors occur regularly during the annual budget
  approval process.

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Tax Policy
Dimension specific results
Preliminary Findings
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Tax Policy
Dimension specific results
Preliminary Findings
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3. Anti-Corruption Policy
Dimension-specific results
Preliminary Findings

• Like most SEE countries, Albania has signed and
  ratified key international conventions related to
  corruption and has adopted laws which criminalise
  corrupt acts such as active and passive bribery,
  money laundering, and trading in influence.
• The government is currently developing a new
  anti-corruption strategy.
• Concerning the Promotion of Good Governance and
  Reliable Public Administration, steps are being
  taken to improve
• conflict of interest policy
• the professionalism of the civil service
• public procurement
• customs
• training programmes for law enforcement and tax
  officials.
• Oversight bodies, such as the Supreme Audit
  Institution, are functioning, however, other
  areas of policy transparency are rather
  underdeveloped.

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Anti-Corruption Policy
Dimension-specific results
Preliminary Findings
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4. Competition Policy
Dimension specific results
Preliminary Findings

• Albania has made progress in the competition
  area, the competition law and the existing bylaws
  for implementation following the international
  competition standards. However, further
  development of the legislative framework is
  needed.
• While the drafting of a competition policy is
  part of the 2005 National Plan for the
  approximation of legislation and SAA
  implementation, a comprehensive competition
  policy strategy remains to be adopted.
• In addition, the Competition Authority needs to
  strengthen its administrative capacity through
  adequate staffing, budget reinforcement and
  training of personnel.
• Further consolidation of enforcement record is
  also needed, especially with regard to
  investigations of cartel agreements, abuses of
  dominance and merger control.
• In parallel, state aid control should be
  consolidated through robust implementation of
  state aid law and the strengthening of
  administrative capacity of both the State Aid
  Commission and the State Aid Department within
  the Ministry of Economy.
• Finally, the competition advocacy actions of the
  Competition Authority and the coordination with
  the sectoral regulators and the court system
  should be increased.

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Competition Policy
Dimension specific results
Preliminary Findings
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Competition Policy
Dimension specific results
Preliminary Findings
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5. Trade Policy
Dimension specific results
Preliminary Findings

• Albania has signed FTAs with all SEE countries.
  The negotiations on the Stabilisation and
  Association Agreement were recently concluded and
  the Agreement was signed on 18 of February 2006.
• Albanias trade openness is generally good, but
  is hindered by important non-tariff barriers
• 54 of European standards have been adopted so
  far.
• Sanitary and phytosanitary standards are slowly
  being brought into line with EU standards
• Certification is voluntary and foreign
  certificates are accepted.
• Finally, customs procedures are currently being
  upgraded, but corruption with customs officials
  continues to be an issue according to feedback
  from the private sector.

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Trade Policy
Dimension specific results
Preliminary Findings
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6. Regulatory Reform
Preliminary Findings
Dimension-specific results

• Albania has made good progress in drafting and
  implementing action plans for removal of the
  administrative barriers, improvements of the
  licensing system, and the reduction of the cash
  economy.
• A Task Force on Regulatory Reform, led by the
  Prime Minister, has been established. It has
  drafted an action plan with short-term measures
  and long-term objectives for the removal of
  administrative barriers.
• An Oversight Body is functional and an action
  plan has been developed.
• No regulatory impact analysis programme has been
  set up so far.
• Regarding transparency, ad hoc public/private
  consultations exists and is further developed no
  formal forward planning mechanism is in place,
  however ministers present to the Centre of
  Government a programme of the draft acts that
  they plan to propose for the coming year the
  official gazette and websites inform parties of
  regulatory requirements.
• According to the World Bank Governance Indicators
  and the FIAS report, regulatory quality is
  generally poor.

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Regulatory Reform
Preliminary Findings
Dimension-specific results
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Regulatory Reform
Preliminary Findings
Dimension-specific results
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7. Human Capital
Dimension specific results
Preliminary Findings

• Education spending and enrolment rates have
  deteriorated in recent years.
• Educational quality needs to be improved.
• Albania has developed a pre-university education
  strategy, and implementation has begun.
• Strategies for pre-school and higher education
  are now being developed with support from the
  World Bank.
• The Ministry of Education and Science has
  finalised in 2006 a strategy on Vocational
  Educational Training.
• A Training Institute of Public Administration was
  established to provide training for civil
  servants.
• Finally, the labour market is considered
  flexible compared to other SEE countries.
  However, unfair competition by businesses
  operating in the grey economy remains a problem.

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Human Capital
Dimension specific results
Preliminary Findings
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Next Steps and Key Events
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2005-2006 Key Events for the Investment Reform
Index
Key Events
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Preliminary Results

• All of the results are preliminary.
• Albania results will be finalised in June/July
  2006.
• For any comments or questions please contact
  Jennifer Brett at jennifer.brett_at_oecd.org or
  Jakob Fexer at jakob.fexer_at_oecd.org.