Regional Offi ce for Europe and Central AsiaFOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS

EASTERN EUROPE AND CENTRAL ASIA AGRO-INDUSTRY DEVELOPMENT COUNTRY BRIEF

ALBANIA

Contents

Key indicators ................................................................................................................................................................................................ 2

Agro-industry national policy framework ........................................................................................................................................... 2

Economic and social development and trends ................................................................................................................................. 3

Agro-industry outlook and performance ............................................................................................................................................ 5

Trade Liberalization, WTO accession and trade performance ...................................................................................................... 7

Foreign direct investments .....................................................................................................................................................................10

Research & Development and innovations ......................................................................................................................................11

Food safety, certifi cation and quality control ..................................................................................................................................12

Business environment and competitiveness ...................................................................................................................................13

Ranking Albania ..........................................................................................................................................................................................15

2

Key indicators

Key Economic Indicators1 2006 2009 2011Food & Beverages

indicators2006 2009 2011

GDP (PPP), US$ billion 21.49 27.56 28.76 Output, % of manufacturing 19.97 20.0 n/a

Manufacturing VA, % of GDP n/a 19.36 19.38 Value Added, % of manufactur.

16.35 16.4 n/a

Agriculture VA, % of GDP 22.0 20.40 20.04 Enterprises, % of manufactur.

32.9 33.6 n/a

Employment in Agric., % of total

58.0 44.1 41.0 Employment, % of manufactur.

13.1 14.4 n/a

Gross Fixed Capital F., % of GDP

25.05 28.79 24.94 Investments, % of manufactur.

28.8 12.1 n/a

FDI net infl ows, % of GDP 3.56 7.96 n/a FDI infl ows, % of total infl ow n/a n/a n/a

R&D, % of GDP n/a 0.15 n/a R&D, % of Output n/a n/a n/a

Merchandise Trade, % of GDP

42.22 46.54 56.60 Net Trade, US$ billion -0.22 -0.34 -0.40

Merchandise Exports, US$ billion

0.79 1.09 1.96 Exports, %of merchandise Exp

3.82 2.97 2.15

Merchandise Imports, US$ billion

3.06 4.55 5.38 Imports, % of merchandise Imp

8.13 8.12 8.18

Exports annual growth, % 20.4 -19.7 25.7 Exports annual growth, % 18.4 1.8 20.4

Import annual growth, % 17.0 -13.4 17.2 Import annual growth, % 16.7 -10.9 12.4

GNI per capita, 1’000 US$ 2.97 3.97 3.98 Output per capita, US$ 71.1 96.4 n/a

Trade per capita, US$ 2009-2011

3,299 Exports per capita, US$ 9.6 10.1 13.0

Doing Business Indicators Rank

117 85 Agribusiness Indicators Value

3.1

Global Merchandise Exports Imports Rank

137122

FDI Inward Attraction Index Global Competitiveness Index

4089

Agro-industry national policy framework

National development programmes: The key documents1 that are setting out the Government policies for overall economic development as well as for agriculture, rural and agro-industry development include: (i) the National Strategy for Development and Integration 2007-2013 that was prepared in the framework of the Integrated Planning System as a coherent refl ection of 38 sectors and crosscutting strategies. A new NSDI 2013-2020 is under preparation process that is projected to be in place in March 2013; (ii) the Inter-sectoral Rural Development Strategy 2007-2013; (iii) the Strategic Programme for Development of Innovation and Technology of SMEs 2011-2016; (iv) the Strategy on Consumer Protection and Market Surveillance 2007-2013 that was prepared by the Ministry of Agriculture, Food and Consumer Protection; the Ministry of Economy, the Ministry of Trade and Technology, and the Ministry of Health; (v) the National Strategy for Science, Technology and Innovation 2009-2015, in which agriculture and agro-industry are of the priorities sectors; (vii) the Business and

1 World Bank Indicators Database and ITC accessed in October 2012. Author’s calculations

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Investment Development Strategy 2007-2013; (vi) the Agriculture and Food Sector Strategy 2007-2013 (AFSS) with Sectoral, Sub-Sectoral and Crosscutting Strategies, which details medium and long-term policy objectives, the main interventions, the monitoring tools and the costs of implementation of policies and interventions and the expenditure programmes prepared in the framework of the Medium-Term Budget Programme (which ensure the coherence of policies and the long–term orientation of the development of the agriculture and food sector in order to clarify the reform and development process taking place in the public and private sectors and outline the needs for technical and fi nancial support to agriculture). The AFSS is based on the Government Programme on the economic development of the country, the implementation of the Stabilisation Association Agreement with the EU (2009), the NATO membership plan and the public investment and external assistance programmes. The Common European Policy on agriculture is included in the framework of rural development. In 2009 Albania applied for EU membership and was offi cially recognized as a potential candidate country. An agricultural census was carried out in 2012.

Legal framework: Albania proceeded with a wide ranging reform of the economy, liberalizing prices and trade mechanisms, redistributing agricultural land and other state and collective farms assets to individuals, and privatizing most of the state marketing and agro-processing enterprises. Since then, the agricultural policy environment has been relatively free of distortions without price controls, limited subsidies and liberal trade policy. Albania adopted the law on Agriculture and Rural Development (2007), the Law on Food (2008), the Law on Business licensing (2009) and established a National Licensing Centre.

Supporting institutions: In 2008 the Government approved a Fund “On the Support to Agricultural Production” foreseen in the budget of the Ministry of Agriculture, Food and Consumer’s Protection and in 2009, it established the Agriculture and Rural Development Agency (ARDA), as a paying agency. Private sector and civil society inputs to policy making were institutionalized under the Business Advisory Council established in 2006. The National Food Authority (NFA) was set up as a public institution under the jurisdiction of the Ministry of Agriculture, Food and Consumer Protection. The NFA’s main targets are controls and inspections, as well as risk assessment and communication for the whole area of food safety, animal health and plant protection in Albania. Applied agricultural research is conducted by the Agricultural Technology Transfer Centres (ATTC) 2

Economic and social development and trends

Economic and social development: In 2012, Albania was reclassifi ed from an upper-middle income country to a lower middle income country3. Albania has a small economy, which had GNI per capita of US$ 3,980 in 2011. The total population is 3.21 million, of which the rural population comprises 46.6 percent. Annual population growth is 0.36 percent.

According to EBRD report Albania remains one of the few transition economies that have weathered the global crisis reasonably well until now, partly because the economy is less integrated with global markets than others. GDP growth averaged around six percent between 2004 and 2008, but declined to about 3.3 percent in 2009 and to three percent in 2011. Manufacturing accounted for 19 percent of GDP and remained stable in 2011.

The agricultural sector remains very important and it is dominated by small farms and highly fragmented land. Agriculture contributed 19.4 percent of value added to GDP and employed 41 percent of the total labour force in 2011. However, the economy remains highly import-dependent in terms of food and raw materials for agro-processing due to low agricultural productivity. Therefore, the country is vulnerable to any increase in food commodity prices. The public contribution to agriculture and agro-industry has continuously been quite limited,

2 Ministry of Agriculture, Food and Consumer Protection (2011) Albanian Agriculture. Fact Sheet 3 WB countries classifi cation list

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at about 1-1.5 percent of the budget and even less in GDP terms. In general, investments in agriculture have been fi nanced through foreign loans and grants.

According to the UNIDO Industrial Development Report, Albania is considered to have very low manufacturing importance and an average level of agriculture importance.

Chart 1. Evolution of value added to GDP in Albania (percent)

Source: WBDI, accessed in October 2012; UNIDO database; National Statistics; Author’s calculations

Growing demand and trends: Albania has a structural defi cit on all of its major agricultural commodities; namely, cereals, fruits, oilseeds, poultry meat and sugar. These sectors are typically organized through traditional family farming systems, and in some cases the products require extensive processing. Total consumer expenditure on food and beverages accounts for more than half of total family expenditure but it is still low in terms of average annual per capita consumption. Agricultural production and incomes have followed a noticeably increasing trend in recent years. Livestock production accounts for about 46 percent of total production in the sector, followed by 44 percent of plant crops production and 11 percent of fruit production.4 Fruit and livestock production have had the highest growth rates and the production of citrus fruits and other fruits and vegetables is growing. In 2010, the top fi ve products in terms of value were cow’s milk (ranked by commodity in the world 67), grapes (ranked 40), beef, tomatoes (ranked 59) and olives (ranked 20).5

There was estimated about 12.4 percent of population leaving below national poverty line and 4.25% of population living under 2 dollar (PPP) a day of the international poverty line in 2008.6

4 Ministry of Agriculture, Food and Consumer Protection of Republic of Albania (2007) The Agriculture and Food Sector Strategy 2007-2013 of Albania

5 FAOSTAT, accessed in October 20126 http://en.wikipedia.org/wiki/List_of_countries_by_percentage_of_population_living_in_poverty

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Agro-industry outlook and performance

Agro-industry background and challenges: The Albanian agro-industry is a complex sector that is made up of small private businesses that were created as a result of the privatisation of the former agro–processing state enterprises and new investment from private initiatives. The privatisation of these state agro-processing enterprises started in 1992 with the bread, fl our, milk, alcoholic and non–alcoholic beverage industries.

The current orientation of the agri-business and agro-industry sector in Albania is highly driven by the need to comply with the conditions of EU accession and the WTO regulations in order to access more diversifi ed markets.

The challenges that the agribusiness sector in Albania is facing today are:

+ Insuffi cient investment in research and development;

+ Strong competition from imported products;

+ The diffi culty of ensuring safety and product quality;

+ A lack of appropriate facilities (i.e. stores, renovation technology, processing capability, packaging, logistics and delivery speed),;

+ Inconsistent fl ow of goods and information exchange between actors in the food supply chain (FSC) and information exchange among the participants in the chain;

Outside events related to the fi nancial crisis.7 Organic products have become more popular and are expensive commodities in developed countries. However, exports are not the only driver for the production of organic products, as there is also interest among domestic consumers. Premiums on organic products are typically 10-20 percent above conventional price level, but sometimes up to three to four times more.8 The land share under organic products in Albania has dropped from 0.11 percent in 2005 to 0.02 percent in 2010. However, the number of producers has increased from 93 to 110, concentrating mainly on the production of medicinal and aromatic plants and olives.9

Food and beverage industry performance: The food industry in Albania has achieved marked and sustainable development in recent years and it is now an important branch of the economy, although it still does not form an essential part.

In 2009 the food and beverage industry generated US$ 310 million, which represents about 20 percent of manufacturing output or 1.1 percent of GDP. It has been a fast growing sector, at an average of about 24.8 percent a year, starting in 2000. Despite a signifi cant increase of turnover in 6.6 times in 2009 compared to 2000, it has experienced a decline by 10 percent compared to 2008. In 2009, the food and beverage industry was made up of 2,547 enterprises (33.6 percent of all manufacturing enterprises), 78 percent of which operate in the bread and fl our industry; 11 percent in the dairy sector, six percent in beverages and fi ve percent in meat, fi sh, fruit and vegetable processing. Most of these enterprises are privately owned, small or medium sized and located in the Tirana prefecture. In 2009, the food and beverage industry employed 6,832 people (or 14.4 percent of the manufacturing labour force) and labour productivity is growing over time. Employment rates and the number of enterprises increased by 1.7 and 2.1 times respectively between 2000 and 2009. The development of diff erent

7 A.Gabeta. M.Bello & E.Dhimitri (2012) Challenges of Albanian Agribusiness Sector for the Increase of Competitiveness. Working Paper for the Ninth AIMS International Conference on Management. University “Fan S. Noli”, Korca

8 H.Willer&L.Kilcher (2012) The World of Organic Agriculture - Statistics and Emerging Trends 2012. Research Institute of Organic Agriculture (FiBL), Frick, and International Federation of Organic Agriculture Movements (IFOAM), Bonn

9 Database of the Research Institute of Organic Agriculture FiBL and International Federation of Organic Agriculture Movements IFOAM, 2012, http://www.organic-world.net

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sectors varies and investments in fi xed capital are unstable from year-to-year. Dairy and meat processing especially have made large investments to assure compliance with standards.

According to the Ministry of Agriculture, Food and Consumer Protection of Albania10, the agro-processing industry accounts for 24.4 percent of total estimated production (prices of 2006) from agriculture and agro-industry. The biggest increases were in enterprises producing tinned fruits and vegetables, refi ned oils, dairy products, bread, sweets, biscuits and wine. Only a small volume of agricultural raw materials are sold to agro-processors, many of whom prefer to use higher quality imported raw materials with reliable supply chains and a suffi cient volume of products. This includes vegetable oil for bottling, grapes for wine production and meat and vegetables for tinning.

Chart 2. Evolution of share of the food and beverage industry in the economy of Albania over time (percent

of Manufacturing)

Source: Author’s calculations are based on UNIDO data and national statistics

Chart 3. Distribution of output, employment, enterprises and investments in the food and beverage sub-

sectors of Albania in 2009

Source: Author’s calculations are based on UNIDO data and national statistics

10 Ministry of Agriculture, Food and Consumer Protection of Republic of Albania (2011) Albanian Agriculture.

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Trade Liberalization, WTO accession and trade performance

Trade regulation and trade unions: Albania applies a liberal trade regime following guidelines set by the EU and it is fully in line with international trade rules. As a result of the on-going process of harmonizing its customs rules with the EU system under the SAA, imports and exports of agricultural and food products are not generally subject to special authorization requirements. Exceptions apply to quotas or control requirements imposed through various bilateral or multilateral agreements. The tariff system for agricultural commodities has been simplifi ed, and is now composed of fi ve tariff levels of most favoured nations and no “tariff quotas” as well as diff erentiated seasonal tariff s, which are applied to fruits and vegetables. Excise duty is applied on a group of agricultural and food products. Exports are open, without any other restrictive measures, quotas, prohibitions or other tariff and non-tariff restrictions, and no export duties are applied. Albania signed free trade bilateral agreements with CEFTA members in 2007, with Turkey in 2008 and with EFTA, which is expected to be ratifi ed soon. Albania is a member of the Central European Initiative Wholesale Markets Foundation that was formed with the assistance of EBRD, CEI, FAO and UNECE.

WTO accession: Albania has been a member of WTO since September 2000 and is an observer of the Agreement of Government Procurement (GPA) accession with a 0.028 percent contribution to the WTO budget in 2012. The average import duty that was applied for agricultural goods in 2011 was 7.9 percent. The fi rst Trade Policy review by the WTO was conducted in Apr 2010.

Trade performance: Between 2007 and 2011, Albania’s exports increased on average by 16 percent each year and amounted to US$ 1.9 billion, refl ecting an increase of 25.7 percent in 2011. Imports also increased by 17.2 percent and amounted to US$ 5.4 billion. This resulted in a trade defi cit of US$ 3.4 billion for 2011, compared to US$3.1 billion for the previous year.11

Albania is a net importer of food (except meat products). The import of food and beverage products totalled over US$ 441 million in 2011, representing 8.18 percent of total merchandise imports, increasing by 12.4 percent in 2010 in comparison with a negative annual growth of 10.9 percent in 2009; in the same year the value of exports was just about US$42 million, or 2.15 percent of the total with annual growth of 20.4 percent in 2010 compared to modest 1.8 percent in 2009. Beverages account for the highest share of imported products (22 percent, ranking in world imports 78), vegetables oils (15 percent, ranked 110), cereals and fl our (14 percent, ranked 110), and starch, sugar and confectionery (9 percent, ranked 113). Meat accounts for 66 percent of all exports (ranking 76 globally). However, the value is very low at US$ 27.5 million in 2011. Processed vegetables and fruits account for nine percent of total food and beverage exports (ranked 110), and dairy products account for seven percent (ranked 105).12

Compared to imports, food and beverage exports were concentrated among a few partners: Four major partners accounted for 94 percent of exports in 2011 compared to 14 major partners for imports.

Top destinations for food and beverage products: Italy (62 percent), Serbia (18 percent), Greece (11 percent), Spain (three percent) in 2011

Top origins for food and beverage products: Italy (19 percent), Greece (12 percent), Turkey (nine percent), Austria (six percent) and Serbia (six percent) in 2011.

11 Source: UN Comtrade briefs12 ITC (UNCDAT/WTO)

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Chart 4. Food and beverages and agricultural trade performance over time

Source: ITC (UNCTAD/WTO): Trade Map online, accessed in October 2012

Chart 5. Share of product groups in total exports and imports of food and beverages in 2011

Source: ITC (UNCTAD/WTO): Trade Map online, accessed in October 2012

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Chart 6. Evolution of the Top 5 Destinations of Exported F&B Products by Albania over time

Source: ITC (UNCTAD/WTO). Data is based on the selected products’ groups. Trade Map online, accessed in October 2012

Chart 7. Growth of National Supply and International Demand for Exports of F&B products by Albania in

2011

Source: ITC (UNCTAD/WTO). Data is based on the selected products’ groups. Trade Map online, accessed in October 2012

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Foreign direct investments

Strategies, regulations and ranking: The investment climate in Albania is liberal and welcomes foreign investors to the market. The Government encourages foreign investment through comprehensive structural reforms to both improve the relevant legislation in a variety of sectors and lower fi scal burdens for companies through an ongoing eff ort to privatize public enterprises, to simplify the tax structure and reduce taxes. Despite progress with these reforms, major challenges remain with investors citing widespread corruption, weak law enforcement, insuffi ciently defi ned property rights, government bureaucracy, a lack of developed infrastructure, and frequent changes to the legal framework.13 The initiatives aimed at improving the investment climate are in line with the Business and Investment Development Strategy 2007-2013 that is a part of NSDI. The Strategy is supported by a number of laws; namely, the Foreign Investment Law; the Entrepreneurs and Commercial Companies Law (2008); the Industrial Property Law (2008), the Civil Code, the Real Estate Registration Law, the Sale and Purchase of the Land Plot Law; the Law on Land (2003); the Protection of Competition Law; and the Commercial Law.

According to IAB 201214 Albania was ranked 40 (among 181 economies) by the FDI Inward Attraction Index in 2011. This is a signifi cant improvement on the 129th place ranking in 2000 (among 178 economies). Of the 33 sectors covered by the Investing Across Sectors indicators, 30 are fully open to foreign equity ownership. The only exceptions are the domestic and international air transportation and the television broadcasting sectors. Albania off ers the fastest establishment processes for foreign companies (seven procedures and seven days) in both the EECA regional average for and the IAB global average. Foreign companies are not required to seek investment approval, although, if they wish to engage in international trade, they must register with the customs system in order to import goods. Registration with the National Registration Centre (NRC) takes only a day and the required documents are available online. Entrepreneurs can complete company, tax, social insurance, health insurance, and labour directorate registrations using a single application procedure with the NRC. Any company in Albania may freely open and maintain bank accounts in foreign currencies. The minimum capital requirement for domestic and foreign LLCs has been signifi cantly reduced to ALL 100 (US$ 1). It is possible to lease or own both privately and publicly held land for up to 99 years for agricultural land and for 30 years for other land. However, the process of leasing public land is diffi cult in practice due to a lease through a competitive bid and requirements of several administrative procedures.

According to the WIR 2009 Albania was considered as having medium levels of importance in agriculture and low importance in manufacturing. Albania has 37 bilateral investment agreements in force on reciprocal protection and promotion of investments. However, some impediments to foreign investment include corruption, inadequate energy supplies and weak law enforcement.

Foreign direct investments fl ows: According to WIR 2012, Albania managed to attract more FDI than was expected in 2011. In 2010, FDI infl ows continued to be strong at US$ 1.11 billion or 9.4 percent of GDP. This has increased by 4.2 times compared to 2005. As a small economy, it can improve its investment climate with single large investments such as the privatization of large State-owned companies in 2009, which increased the FDI infl ow by 45 percent compared to 2008. The vast majority of FDI is directed to the service sector (e.g. fi nancial and communication). FDI in the agro-processing industry is still modest at about 8 percent of the total FDI into the agro-industry as a whole in 2005 (which was a 374 percent increase on 2000).

It has been assessed15 that serious large-scale investments in agriculture and the agro-processing sector have not been considered by investors, whether local or international, mostly due to a general lack of infrastructure.

13 http://www.state.gov/e/eb/rls/othr/ics/2012/191094.htm14 IFC/MIGA/WB (2010) Investing Across Borders: Indicators of foreign direct investment regulation in 87 economies. The World Bank

Group. Wachington15 KPMG (2011) Invest in Albania. Albania Sh.p.k.

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However, with the energy and road infrastructure rapidly improving or scheduled to improve in the mid-term, the sector looks more attractive. One of the sector’s selling points is that most of its agricultural products are generally free from artifi cial additives and pesticides, placing the country in a promising position of becoming an important producer and exporter of quality organic foods. Some agriculture sub-sectors with a high potential for export and with great investment opportunities include: Medicinal plants and herbs, vegetables, canned products such as olives and olive oil, fresh and processed fi sh.

Chart 8. Foreign direct investments in Albania over time

Source: WBDI; ITC (UNCTAD/WTO); accessed in October 2012

Research & Development and innovations

The Ministry of Agriculture has implemented a consolidated extension programme in cooperation with fi ve Agricultural Technology Transfer Centres (ATTC) and other research bodies in line with the National Strategy for Development and Integration (NSDI) and the National Strategy of Science, Technology and Innovation (2009-2015), where agriculture and the agro-industry are identifi ed as of the priorities sectors. In 2010, the Agency for Research, Technology and Innovation (ARTI) started its activity as a public, legal institution under the competences of the Council of Ministers. ARTI aims at building a modern system of science and strengthening the role of S&T in Albania.16

The Government’s strategic goals for the 2010–2015 period are to increase public spending on research to 0.6 percent of GDP by 2015; to increase the share of gross expenditure on R&D from international donors to cover 40 percent of all research spending; to create 4-5 ATTCs including dedicated laboratory equipment or workspaces that could be used for new technology based fi rms (pre-incubation, testing, certifi cation, etc.); to double the number of researchers, through “brain gain” incentives and the training of new researchers (establishment of graduate schools; train 500 PhDs) and to increase innovation activity in 100 companies. In terms of investment, it is estimated that the budget for higher education and research in the 2009-2012 period was ALL 22.6 billion. The Government increased the budget for science to around EUR 15 million in 2009 (0.2 percent of GDP), which is 2.2 times higher than in 2005. It also launched programmes that foster human resource development in science (Excellence Fund and Brain Gain Programme).17

In Albania, on-farm-research, which is systematically planned and implemented, provides close cooperation

16 http://wbc-inco.net/object/news/368117 Councils of Ministries of Republic of Albania (2009) National Strategy of Sciences, Technology and Innovation 2009-2015.

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between the stations for applied research (ATTC). A systematic feedback and monitoring system in the Albanian research and extension system helps to defi ne typical farmers’ problems on certain product issues. Albania has a less systematic approach to advisor training through its agricultural technology transfer centres.18

Food safety, certification and quality control

Food safety background and Albania’s membership: Albania has been a member of the Codex Alimentarius Commission since 1992 and is a correspondent member of the International Organisation of Standardization (ISO). In 2009, the Council of Ministers of the Republic of Albania adopted the National Plan for the Implementation of the SAA for 2009-2014 that lays down short, medium and long term priorities for Albania in the European integration process, including the need to update the legal framework and related physical infrastructure for the offi cial inspection of food in line with EU standards. There has been progress in adopting legislation in various areas, including quality policy that refers to the introduction and promotion of geographical indications. However, there is still a need to adopt a new veterinary framework law. Further eff orts are needed in order to harmonize Albanian legislation with the New and Old Approach directives, as well as to build up an adequate market surveillance infrastructure. The new Law on Food (2008) determines the conditions for production, processing, conservation, distribution, control and marketing of food products used for consumers.

In 2009 the National Food Authority (NFA) was established in order to bring production standards up to EU levels. The NFA still needs to be clarifi ed and a clear chain of command needs to be established. It has not yet developed its risk-assessment capacity and the Scientifi c Committee and Panels have not yet been established. The General Directorate of Standardisation (GDS) of Albania, which was established in 2008 and replaced the Bureau of Standards, has continued its preparations to apply for full membership of the European Committee for Standardization (CEN) in 2012. The law on standardisation was amended in February 2011. In total there are 16 conformity assessment bodies (CABs) accredited by the General Directorate of Accreditation (GDA). The responsibility for plant health has been allocated to the NFA and the Directorate of Crop Production Policies is responsible for plant protection. Fish production and fi shery inspections are the responsibilities of two diff erent departments of the Ministry of Environment, Forests and Water Administration, and fi sh diseases are covered by the Animal Health Directorate in the Ministry of Agriculture, Food and Consumer Protection (MAFCP). Processed fi shery products are the responsibility of the Food Safety Department in MAFCP and the NFA. Work on drafting a new fi sheries law has been advancing, with the aim of strengthening the surveillance and monitoring system in fi sheries in order to enable the sector to apply the satellite-based vessel monitoring system and to combat illegal, unreported and unregulated fi shing and processing.

Quality control and certifi cation: All standards have voluntary status. Sanitarian controls are imposed and monitored by the directorates in the Ministry of Agriculture, Food and Consumer Protection. For imported food and agri-products, license must be granted by the food quality and inspection directorate in the MAFCP.

Under the Instrument for Pre-accession Assistance (IPA) of the EU, Albania receives fi nancial support for the implementation of food safety standards such as GMP, HACCP and ISO. ALBINVEST, a governmental body, plays an important role and is running a EUR 5 million grant program. It can off er grants of up to 50 percent of the establishment costs of entities that are ready to implement such systems. However, the enforcement of adopted legislation is weak due to the lack of fi nancial resources for offi cial control. While some organic farming has been subsidized through direct schemes, most activities in the sector have been driven by donor funding.

18 FAO/REU (2011) Assessment of the human capacity development needs for, and gaps in, the Agricultural Advisory Services in Western Balkans. Final Report. Budapest

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In the 2011 Progress Report19, the EC noted that Albania had made some progress with regard to the establishment of the NFA, the registration of bovines, the adoption of the hygiene rules and in implementing a regulation for food safety. However, the control of agro-food products continues to face many problems and is not yet fully effi cient. The food hygiene package has been adopted and feed hygiene legislation aimed at aligning with the acquis has been drafted. Technical documentation to sustain suffi cient risk management capacity with regard to offi cial controls has been prepared. IT infrastructure and a database for electronic registration of food establishments, recording of offi cial controls and accessing the Rapid Alert System for food and feed has been developed and tested. More specialized staff will need to be recruited in order to carry out offi cial controls on food and feed hygiene. Only a few establishments in the meat, fi sh and dairy sectors apply hazard analysis and critical control point-based procedures and self-controls. Laboratory capacity needs to be improved. A harmonized animal database (which also includes the animal health database) is under development.

Business environment and competitiveness

SME development: According to the OECD SME Policy Index assessment 201220, Albania has made progress in entrepreneurial skills and education, with entrepreneurship recently introduced as a subject across the secondary school curriculum and enterprise skills requirements being tracked by the Albanian Investment Development Agency (AIDA), which also supports SME development in the country. However, the replacement of AlbInvest with AIDA in 2011 disrupted the development of a broader range of SME support services and AIDA’s information portal is yet to become fully active. SMEs make up 99.9 percent of registered entities in Albania and employ 81.8 percent of the workforce. SMEs also account for 57.0 percent of value added.

Business environment: According to the Doing Business Report21, in comparison with 2010, Albania has made starting a business easier by making the notarization of incorporation documents optional (possible to complete in four days) and by registering property and enforcing contracts. The economy was ranked 85 (out of 185 economies) in 2012 (eight points down compared to 2010 but 32 points up compared to 2006). Cross border trading is ranked at 79, paying taxes at 160, protecting investors at 17, getting credit at 23, and starting a business at 62. Property registration has been made easier by setting time limits for the land registry to register titles.

Property registration was made easier by setting time limits for the land registry to register a title. Dealing with construction permits in the opposite way became more diffi cult. Albania is second of the top 10 countries the most improved in protecting investors with 48% since 2005.22

Tax relief: According to a PWC report23 the tax system in Albania has not improved in 2012. The tax burden on companies was eased by amending several laws, introducing electronic fi ling and payment and reducing social security contributions (2011). Corporate income tax decreased from 20 to 10 percent (2008). The total tax rate of 38.5 percent in Albania is below the world average of 44.8 percent, although there is a more diffi cult compliance environment, with more time needed for tax compliance and more tax payments. As of 2012, Albania is also a party to 36 (32 in force) double tax treaties with various countries. For all businesses that exceed the threshold of ALL 5 million the VAT rate is 20 percent. Local and foreign entities with annual sales revenues of less than ALL

19 EC (2011) Albania 2011 Progress Report. Commission stuf working paper. Enlargement Strategy and Main Challenges 2011-2012. Brussels

20 OECD (2012) Western Balkans and Turkey 2012. Progress in the implementation of the small business act in Europe. SME Policy Index. Supported by EC, ETF, EBRD, CEI.

21 WB/IFC (2012) Doing Business 2013: Smarter Regulations for Small and Medium-size Enterprises. 10th edition. Washington, USA

22 WB/IFC (2012) Doing Business in a more transparent world; regional profi le for Eastern Europe and Central Asia (ECA).23 PwC (2012) Paying Taxes 2012. The Global Picture, PriceWaterHouseCoopers supported by WB and IFC

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5 million are not required to register for VAT purposes. However, as of 1 February 2011, taxpayers that provide services in the areas of agriculture, medicine, fi nancial advice, law, real estate, engineering, and hotels are required to register for VAT purposes regardless of their annual turnover. Exports are exempt from both excise and VAT, although there are excise taxes on tobacco, alcohol, soft drinks and coff ee.

Retail; domestic market and international trends. According to the Global Retail Development Index 201224, Albania is ranked 25th (out of 30 developing economies for retail expansion) with a score GRDI of 46.7, getting down by 12 points to 2011. Albania remains attractive to some international retailers, mainly to neighboring markets, but other are skeptical worried about its small size and low consumer wealth. Domestic retail market is underdeveloped and fragmented across the country. Grocery sector has few international players, and it still accounts for a large portion of consumer spending. Supermarket density is the highest in Tirana, Durres and Fier.

Competitiveness: According to the Global Competitiveness Report 2012-201325 Albania is at the second stage of development (effi ciency driven economy) and received score of 89 overall on the Global Competitiveness Index (from 144 economies) with a score of 3.91 (88 in 2010-2011 from 139 countries). Albania is ranked only 123 for Innovation, 98 for Business sophistication factors, and 92 (score 3.6) for agricultural policy costs26. The fi ve most problematic factors regarding doing business in Albania are as follows: access to fi nancing, corruption, ineffi cient government bureaucracy, tax regulation and policy instability. According to IDR 201127, Albania in the context of the Competitive Industrial Performance index (CIP) was ranked 76 in 2009, one place up compared to 2005 with manufacturing value added per capita of US$ 202 and US$ 295, respectively.

24 A.T.Kearney (2012) Global Retail Expansion: Keeps on moving. The Global Retail Development Index is an annual study that ranks the top 30 developing countries for retail expansion worldwide. The Index analyzes 25 macroeconomic and retail-specifi c variables to help retailers devise successful global strategies and to identify emerging market investment opportunities. The GRDI score includes: market attractiveness, country risk, market saturation, and time pressure.

25 World Economic Forum (2012) The Global Competitiveness Report 2012–2013, by Klaus Schwab & X.Sala-i-Martín. Switzerland26 Agricultural policy costs: How would you assess the agricultural policy in your country? [1 = excessively burdensome for the economy; 7

= balances the interests of taxpayers, consumers, and producers] | 2011–12 weighted average27 UNIDO (2012) Industrial Development Report 2011. Industrial energy effi ciency for sustainable wealth creation: Industrial energy

effi ciency for sustainable wealth creation: capturing environmental, economic and social dividends. Vienna, Austria. UNIDO’s Competitive Industrial Performance (CIP). Note: 144 economies in total. From 2011 the CIP index comprises eight indicators classifi ed in six dimensions: (i) Industrial capacity, measured by MVA per capita; (ii) Manufactured export capacity, measured by manufactured exports per capita; (iii) Impact on world MVA, measured by an economy’s share in world MVA.

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Ranking Albania

Agribusiness Indicators values in 2012 Doing Business Indicators ranking in 2012

Source: Author’s estimations and calculations; WB/IFC Doing Business Rankings online, accessed in October 2012

Source: EBRD database; UNCTAD; Author’s calculations of EECA average

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The designations employed and the presentation of material in this information product do not imply the expression of any opinion whatsoever on the part of the Food and Agriculture Organization of the United Nations concerning the legal or development status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. The mention of specifi c companies or products of manufacturers, whether or not these have been patented, does not imply that these have been endorsed or recommended by the Food and Agriculture Organization of the United Nations in preference to others of a similar nature that are not mentioned. The views expressed in this publication are those of the author(s) and do not necessarily refl ect the views of the Food and Agriculture Organization of the United Nations.

For more information please contact:Stjepan Tanic

Agribusiness and Enterprise Development Offi cerFAO Regional Offi ce for Europe and Central Asia

Email: stjepan.tanic@fao.org