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INTEGRATIONINTHEBALKANS:ALBANIAANDKOSOVO*
RobertZ.Lawrence,†ErmalFrasheri,‡MariaQazi§
Cambridge,MA,October2014
*ThisreportwascreatedtosupporttheEconomicGrowthinAlbaniaProjectattheCenterforInternationalDevelopmentatHarvardUniversity.TheauthorswouldliketothanktheexpertsattheMinistriesofEconomy,Agriculture,andFinanceofAlbaniaandtheMinistryofTradeandCustomsAuthoritiesofKosovo,andrepresentativesofthebusinesscommunitiesforsharinginformationandperspectives.TheauthorsaregratefulforthefinancialsupportoftheOpenSocietyFoundation.
†RobertZ.Lawrence:AlbertL.WilliamsProfessorofInternationalTradeandInvestment;Mossavar-RahmaniCenterforBusinessandGovernment,HarvardKennedySchool.‡ErmalFrasheri:Fellow,CenterforInternationalDevelopmentatHarvardUniversity.§MariaQazi:MPAIDCandidate,HarvardKennedySchool.
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INTEGRATIONINTHEBALKANS:ALBANIAANDKOSOVO
Abstract
Despitetheirhistoricandethnicties,tradeandinvestmentbetweenAlbaniaandKosovoremainsunderdeveloped.Tobesure,eveniffullydeveloped,KosovoisunlikelytoplayamajorroleinAlbanianexternaleconomicrelations.Nonetheless,increasedeconomicintegrationbetweenthetwocountriescanserveasthebasisnotonlyforenhancingthetiesbetweenthetwocountries,butalsoforspurringthemeasuresthatcouldactasaspringboardforAlbania’sintegrationwithrespecttoothercountriesintheBalkansaswellaswiththeEU.
TABLEOFCONTENTINTRODUCTION………………………………………………………………………………………………………4FREEMOVEMENTOFGOODS……………………………………………………………………………………...5 StateofPlay……………………………………………………………………………………………..5 TradeTrends…………………………………………………………………………………………...8 ProblemAreas……………………………………………………………………………………….12 Customs……………………………………………………………………………………...12 ExistingInstitutionalFramework……………………………………...12 Recommendations……………………………………………………………13 DisputeSettlementSystem…………………………………………………………..15
ExistingInstitutionalFramework………………………………………15 Issues……………………………………………………………………………….16 Recommendations……………………………………………………………16 Standards(Agriculture)……………………………………………………………….19
ExistingInstitutionalFramework………………………………………19 Issues……………………………………………………………………………….20 Recommendations……………………………………………………………21FREEMOVEMENTOFSERVICES....…………………………………………………………………………...…22 StateofPlay………………………………………………………………………………………...…22
DataAnalysis……....…………………………………………………………………………………24Issues…………………………………………………………………………………………………….29Recommendations…....…………………………………………………………………....………30
FREEMOVEMENTOFWORKERS………………………………………………………………………………..32
ExistingInstitutionalFramework……………………………………………………….......32 Issues…………………………………………………………………………………………………….33 Recommendations………………………………………………………………………………....33
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FREEMOVEMENTOFCAPITAL/INVESTMENT……………………………………………………………….34ExistingInstitutionalFramework…………………………………………………..............34Issues…………………………………………………………………………………………………....38
Recommendations………………………………………………………………………………....38CONCLUSIONS………………………………………………………………………………………………………39BIBLIOGRAPHY……………………………………………………………………………………………….….…42
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INTRODUCTION:WHYINTEGRATION?
WhenonethinksaboutadvancingcooperationordeepeningintegrationbetweenAlbaniaandKosovo,itishelpfultocontextualizeitbyidentifyingthefollowingcirclesofintegration.Ontheonehand,AlbaniahasafreetraderegimewithKosovo,intheframeworkoftheCentralEuropeanFreeTradeAgreement(CEFTA)whichregulatestradeingoodsbetweenthetwocountriesandotherregionalpartners.Andontheotherhand,Albania’straderelationswithmostoftheEuropeancountriesaregovernedbytheStabilizationandAssociationAgreementwiththeEuropeanUnionanditsMemberStates,whereaswiththenon-EUcountries,throughitsmembershipintheWorldTradeOrganization.
Inthiscontext,adeeperintegrationwithKosovocouldgobeyondwhatis
alreadycoveredbyCEFTA,andinparticularbyenlargingthescopeoftraderelationsinordertoincludenotonlyanexpandedanddeepenedtradeingoods,butalsotradeinservices,movementofcapital,andmovementofworkers.Inotherwords,adeeperintegrationwithKosovocouldconsistinthecreationofacommonmarketbetweenthetwocountries.Thisparticularprocessiscomplementarytotheotherintegrationprocesseswithregionalcountries,withtheEuropeanUnion,andwithintheWTOframework.Furthermore,asregionalcountriesmoveseparatelytowardsaccessionintheEU,itisworthexploringthepossibilityofdevelopingclosertiesandaregionalapproachvisávistheEUaccessionprocess.
ThevirtueoffocusingonKosovoisthatbeyondtheobvioushistorical
reasonsandgovernments’intentionsinbriningthetwocountriesclosertooneanother,adeeperintegrationwithKosovocouldservetolaunchprovenmechanismsfordeepeningtieswiththerestofregionalcountries,andultimatelytoadequatelycreatecapacitiesandbetterprepareAlbaniafortheeventualaccessionintheEuropeanUnion.Hence,althoughourrecommendationscontainedinthisintroductoryreportareaddressedtotradewithKosovo,theyalsohaveapplicationwithregardtoothercountriesandintegrationprocesses.
DuringourworkinAlbania,wenoticedasenseoffrustrationthatdespite
CEFTA’sfreetraderegimeorgoodwillgesturesfrompublicofficials,therewasn’tmuchofasenseofconnectionbetweenthetwoeconomies.WhenonelooksatthenumberofKosovarbusinessesinAlbania,orAlbanianbusinessesinKosovo,aswellasatthenumberofKosovarworkersinAlbaniaandviceversa,itisdifficultnottoconcludethatbothcountriesarelateintakingactivestepstoenhancebusinessformation,lateincreatingconditionsforlabormobility,andinactivewhenitcomestoeffectivelydealingwithtradeorinvestmentdisputes.
Theeconomicimperativeforbringingthetwocountriesclosertoone
anotherrequiresactiontoremoveinstitutionalbarriersthatcouldunlockthepotentialforgreatersynergybetweenthem.Aproactiveapproachtowardscreatingalargereconomyispremisedontheideathatdeeperintegrationbetweentwo
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countriesofsimilarsocio-economicdevelopmentcouldenhancewelfarebycreatingeconomiesofscale,increasinginvestmentsandimprovingthecompetitivenessofthebusinesssectors,harnessingtheintellectualcapacitiesinbothcountries,andpreparingthebureaucraciestoeffectivelyaddresschallengesposedbytheencounterwithEuropeanorglobalmarkets.
Regardingthemethodsofintegration,deeperregionalintegrationcouldhappenmainlythroughaverticalapproachthatwouldconsistofformalinternationalagreementsbetweentwocountries,whichinturnwouldneedtobeincorporatedandimplementedintherespectivedomesticlegalsystems,inoralternatively,throughahorizontal,bottomup,projectoriented,andsystemicefforttocreatemeaningfulconnectionandaccessforusersandconsumersofdeeperintegration.Theseapproachesarecomplementarybutwefavoranemphasisonthelatterbecauseweareoftheopinionthathorizontalnetworksofregulators,experts,andprivateactors,combinedwithinfrastructureandpublicworksprojects,aswellaswithspecificinitiativestoconnectandcomplementeconomicandsocialsectorscanbemoreinfluential
Inthefollowingfoursectionsofthisreport,weexaminethestateofplayin
thetradeingoods,tradeinservices,movementofworkersandmovementofcapitalinordertoidentifypotentialissuesandofferrecommendationsthatcouldhelpunbindinstitutionalconstraintsandassuchfacilitatetheprocessofdeeperintegrationbetweenAlbaniaandKosovo.Thescopeofthistypeofendeavorisratherlarge,andwiththisintroductoryreport,wewouldliketoraisekeyquestionsandthemesthatwehopewouldgeneratefeedbackfromthegovernment,privateactorsandotherpublicsectorrepresentativesinordertoturnanideaintoanactionplan.
FREEMOVEMENTOFGOODS
I. StateofPlay
TradeingoodsbetweenAlbaniaandKosovo,andtheirregionalpartners,isgovernedbythreemainagreements:
1. CEFTA(CentralEuropeanFreeTradeAgreement–2006):TheCEFTAisan
agreementwhichcurrentlyconsistsofsevenmemberstates:Albania,Serbia,Montenegro,Macedonia,Kosovo,BosniaandHerzegovina,andMoldova,withthestatedaimoffacilitatingthegrowthofthesestatestowardsEUaccession.AprerequisitetoEUaccessionisdeeperregionalintegrationandCEFTAaimstohelptheBalkanstatesachievethatgoal.
UnderCEFTA,thefollowingpointsaresalientwithrespecttotradeingoods:• Quantitativerestrictionsonimportsandexportsaretobeabolished;• Customdutiesonexportsaretobeabolished;
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• Customdutiesonimportsweretobeplacedatastandstillatthetimeofratification.Existingdutieswouldeitherbeabolishedorinsomecasesbereducedtozerowithinatransitionphaseendingin2008.MFNdutieswouldbeapplicableonagriculturalimportswhichwereallowedtohavenonzerodutiesinthetransition;
• Customfeesaretobeabolished;• Cooperationandnegotiationofagreementsonsanitaryandphytosanitary
measures(SPS)areencouragedwiththegoalofeventuallycomplyingwithEUstandards(thesewillbediscussedlaterinthisreport);
• Partiesaretoeliminateexistingtechnicalbarrierstotrade(TBT),andcommittoarrivingatnegotiatedagreementsontheharmonizationoftechnicalstandardsandconformityassessmentprocedures;
• PartiesagreetoabidebyWTOrulesonissuessuchasSPSandTBT.(ThesefeaturesofCEFTAwithrespecttotradeingoodswillbeimportantcornerstonesinnavigatingtheroadblocksintradebetweenAlbaniaandKosovo.)
2. StabilizationandAssociationAgreementwithEU:TheStabilizationandAssociationAgreement(SAA)withtheEU,whichenteredintoforceonApril1,2009,containsobligationsonarangeofpolitical,trade,andeconomicissues.Underthisagreement,goodsfromEUareimportedatzerotariffsandmostAlbaniangoods,withafewexceptions,aretradedfreelywiththeEU.Thekeyprovisionswithrespecttogoodsareasfollows:
• Abolitionofquantitativerestrictionsonimports(industrial,agriculturalandfisheryproducts)andexports(industrialproductsonly);
• Abolitionofanychargeshavinganequivalenteffecttocustomsdutiesonimports(industrialproducts).Customsdutiesoncertainindustrialproducts,tobephasedouttozerograduallyoverafive-yearperiod.Customsdutiesoncertainagriculturalproductstobeprogressivelyreduced;
• Abolitionofexportduties(industrialproducts);• Specialsafeguardforagricultureandfisheriesproducts.Specific
arrangementsforironandsteelproductsandwinesandspiritsrespectively.
3. MembershipintheWTO:AlbaniaaccededtotheWTOinSeptember2000,andnowgrantsMFN,orpreferentialtreatmentbasedonFTAs,toallitstradingpartners.4
4WTOTRADEPOLICYREVIEW:ALBANIA2010-IITradeandInvestmentRegimehttp://www.wto.org/english/tratop_e/tpr_e/tp329_e.htm.
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PolicyreportsandstudiesshowthatAlbaniahasmadeconsiderableprogresstowardsliberalizingandstreamliningitstraderegimeinlinewithAlbania'sWTOobligationsandwiththeacquiscommunautaire,inpursuanceofitsgoalofEUaccession.5Customsproceduresarestreamlinedandacentralizedelectronicsystemisinuse.Thishasreducedcustomsclearancetimes.HowevertheuseofreferencepricesforcalculationofVATonimportsremainsapracticeforsomegoodswhichisoftenacauseforcontention.6
Regardingtaxation,AlbaniaappliesaVATatageneralrateof20%,on
importedanddomesticallyproducedgoods.Excisetaxesareleviedoncertaingoods,includingcoffee;fruitjuicesandothernon-alcoholicbeverages,beer,wine,alcohol,andotherspirits;tobaccoandtobaccoproducts;petroleumby-energyproducts;incandescentbulbs;andperfumesandeaudetoilette.7
Therearefewnon-tariffmeasuresthatAlbaniaappliestoitstrade.Therearenoprohibitedimports,exceptforproductsconsideredtobehazardoustopublichealth,andimportlicensingisusedmainlyforSPSpurposes,security,protectionoftheenvironment,andforcompliancewithobligationsunderinternationalconventions.UndertheSAA(Article75),AlbaniaiscommittedtograduallyconformwithEUtechnicalregulationsandEuropeanstandardization,metrologyaccreditation,andconformityassessmentprocedures.However,itoftenfacestradedisputesoverconformityoftechnicalregulationsandSPSstandards,intheabsenceofbilateralmutualrecognitionagreements.8Noexporttaxesareappliedandlicensesmustbeobtainedforonlyahandfulofmostlysensitiveproducts.Albaniahasafewspecialcustomsregimesthatcontainspecificprovisionsortreatmentforexports.9
5SeealsoWTOTRADEPOLICYREVIEW:ALBANIA2010–IIITradepoliciesandpracticesbyMeasurehttp://www.wto.org/english/tratop_e/tpr_e/tp329_e.htm.6Id.7Id.8Id.9Id.
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II. TradeTrends
Albaniahastradedeficitingoodswiththerestoftheworld,asseeninthegraphbelow:
(Source:INSTAT)
Minerals,FuelsandElectricityandTextilesandFootwear(alsoknownasFason),weretheonlyproductcategoriestohaveapositiveexternaltradebalance.Thesearealsocurrentlytheleadingexportcategories,followedbyconstructionmaterialsandmetals.
AhistoricalgrowthtrendofthesekeyexportcategoriesshowsthatwhileMinerals,FuelsandElectricityhaveshownsteadygrowth,possiblyduetohighcommodityprices,growthintheFasonsectorhasbeenslower,withConstructionmaterialswitnessingnegativegrowthinexportsinrecentyears.
-400,000
-200,000
0
200,000
400,000
600,000
2009 2010 2011 2012 2013
TotalTradewiththeWorld[Value,LEK]
TotalExports TotalImports TradeBalance
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(Source:INSTAT)
Intermsofexportdestinations,Albania’skeymarketsareEUcountries,withCEFTAandEFTAfollowingwithsmallershares.In2013,thisdistributionstoodasfollows:
0 20,00040,00060,00080,000100,000120,000
Foods,beverages,tobaccosMinerals,fuels,electricity
PlasticandchemicallyproductsLeatherandarticlesthereofWoodandpaperproducts
TextilesandfootwearConstructionmaterialsandmetals
Machinery,equipmentandsparepartsOthers
ForeignTradebyProducts,2013[ValueinLEK]
Imports
Exports
0
20,000
40,000
60,000
80,000
100,000
120,000
2009 2010 2011 2012 2013
Exports,LEK
GrowthTrendofKeyExports2009-2013
Minerals,fuels,electricity
Textilesandfootwear
Constructionmaterialsandmetals
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(Source:INSTAT)
Albania’stradelinkswithKosovo,whilesmall,areanexceptiontothosewithothercountries.WithinCEFTA,KosovoholdsthelargestshareofexportsfromAlbaniaandthispointstotheimportanceofKosovoasaleadingregionalmarketforAlbanianexports.Amongtotalexports,KosovoisthethirdlargestmarketofAlbaniangoods,afterItalyandSpain.
(Source:CEFTAwebsite)
TradewithKosovohasseenanincreasingtrendoverthepastfiveyears,withKosovobeingoneofthefewtradingpartnerswithwhichAlbaniaenjoysafavorabletradebalance.Exportsrosefasterthanimports,butleveledoffinrecentyears.ThishelpshighlighttheimportanceofboostingexportstoKosovothroughfacilitationofintegration.
86%
12%2%
TotalExports,2013[Value,LEK]
EUcountries
CEFTAcountriesEFTAcountries
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(Source:INSTAT)
AlbaniahasatradesurpluswithKosovoinmostproductcategories,withthemostimportantproductsbeingConstructionMaterialsandMetals,Minerals,FuelsandElectricity,andFood,BeveragesandTobacco.
0
5,000
10,000
15,000
20,000
2009 2010 2011 2012 2013
TradewithKosovo[Value,LEK]
Exports Imports
-2,000 0 2,000 4,000 6,000 8,000 10,000
Foods,beverages,tobaccos
Minerals,fuels,electricity
Plasticandchemicallyproducts
Leatherandarticlesthereof
Woodandpaperproducts
Textilesandfootwear
Constructionmaterialsandmetals
Machinery,equipmentandspareparts
Others
TradewithKosovo-MajorCategories2013
TradeBalance
Imports
Exports
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III. Problemareas
Afterreviewingtheinstitutionalframeworksthatgoverntradeingoods,statisticaldata,andmultipleconsultationswithgovernmentofficials,privatesectoroperatorsandfieldvisits,wehaveoutlinedthefollowingaskeyareasrequiringattentiontopromotetradeofgoodsbetweenAlbaniaandKosovo:
- Cross-cuttingissues:
o Customs:Inefficienciesinthecustomssystemleadingtorestrictionsintrade.
o DisputeSettlement:IneffectivedisputesettlementmechanismunderCEFTA,andconcernsaboutunfairtradepractices.
- Sectorspecificissues–Agriculture:
o Standards:Problematicmutualrecognitionofstandards,especiallyinFood–VeterinaryandSanitary-Phytosanitary(SPS)regulationsforagriculturalproducts.
A. Customs:Inefficienciesinthecustomssystemleadingtorestrictionsintrade
ExistingInstitutionalFramework
UndertheCEFTA,allpartiesarerequiredtosimplifyCustomsadministrationproceduresandminimizethebarrierscausedbylengthyprocedures.(AlbaniaisalsoamemberoftheWorldCustomsOrganization.)Albaniahassignedbilateralagreementsoncustomsassistancewith:Italy;Greece;FormerYugoslavRepublicofMacedonia;theInterimAdministrationMissioninKosovo(UNMIK);Moldavia;Bulgaria;Slovenia;Romania;Turkey;Croatia;andCyprus.10Thefollowingareafewsalientfeaturesoftheprocess:
• Customslegislationdoesnotrequireimportersandexporterstohavealicense,otherthangoodswhichhavesensitivehealthorsafetyhazards.
• Thereisasimpleimporttariffstructure,witheither0%,2%,5%,or10%beingleviedonallimports.11
10WTOALBANIATRADEPOLICYREVIEW2010–IITradePolicyandMeasures.11AccordingtoCEFTA’sSecretariat,importintoAlbaniaissubjecttocustomstariffwhichareonly"ad-valorem".Customstariffapplyonthe8-digitCombinedNomenclatureofClassificationofGoods.ThisClassificationisfullyincompliancewiththeEuropeanCommunityCombinedNomenclature.Thetariffsystemisverysimple.Themost-favored-nationtariffsystemapplicableis:0%,2%,5%,6%,10%and15%.UnderFTA-s,AlbaniaappliespreferentialimporttariffsforCEFTAparties,EFTAparties,EUMemberStatesandTurkey.Incaseofindustrialproducts(chapters25-97ofClassificationofGoodsNomenclature)thetariffis0%,whileforagriculturalproductstheyare,assetoutintherelevantagreements.Availableat
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• Alongwithtariffs,customsprimarilyadministersthecollectionofVATandExciseduty(Oncertainproducts)onimports.
• AcentralizedcustomssoftwaremonitorstheflowofgoodsacrossAlbania’sborders.Thissystemalsoconductspreliminaryriskanalysisandcategorizesshipmentsaccordingtorisklevel.
• Tariffsanddutiesaresupposedtoappliedontransactioncostofgoodsbylaw,however,inpractice,customsofficialcontinuetousereferencepricesasthebasisforcalculatingtaxestobepaidinsomecases.Theauthoritiescitedunder-invoicingasthekeyreasonforthisprecaution.InrelationtotradewithKosovo,thereisastrongwillandcommitmenton
bothsidestofurtherstreamlinetheprocessorcustoms.Forexample,atthebordercrossingbetweenAlbaniaandKosovoatMorina,aonestop–onechecksystemhasbeenimplemented,withpeopleandtrucksonlyrequiredtoprovideverificationatoneterminalinsteadoftwo.Transitrequirementshavebeensimplified.ExportdeclarationsforgoodsdestinedforKosovoaremadeattheportofDurresandtrucksaresealed,whichhasreducedtransittimeatMorinaby4.5hoursaccordingtocustomsauthorities.However,smugglingandtraffickingwascitedbytheauthoritiesatMorinaasathreat,largelyduetodivergenceinVATandExcisetaxesbeingappliedbyKosovoandAlbania.
However,despitetheseimprovements,thereismuchscopeforfurthersimplificationoftheprocessbetweenAlbaniaandKosovoiftheyaretobeviewedasonecommonmarketforpracticalpurposes.InaccordancewiththeframeworkagreementsignedbythegovernmentsofAlbaniaandKosovoinJanuary2014,ajointactionplanseekstoundertakemeasurestofurthersimplifycustomsprocessesbetweenthetwocountries.Accordingtogovernmentofficials,aworkinggroupiscurrentlyinplacetoaddresstheseissuesinparticularwiththeircounterpartsinKosovo.Howeverthereisnoconcreteplandevelopedasofyet.Recommendations
• Inclusionofbusinesscommunityintheworkinggroups.ThereiscurrentlyinplaceaworkinggroupconsistingofrepresentativesfrombothcountrieswhichisdevelopingalistofwaysinwhichcustomsbetweenAlbaniaandKosovocanbeunifiedfurther.Onewayofstrengtheningtheworkofthisgroupistoincluderepresentativesofkeyexportersandimportersfrombothcountries.Thiswilladdanotherveryimportantdimensiontothedialogueoncustomsunificationandwillbridgethegapbetweentherealityandlegislation.
• ImproveinformationflowandunificationofprocessesItisimportanttodevelopsystemsofinformationflowwhichfacilitatethesharingof
http://www.ceftatradeportal.com/albania/index.php?option=com_k2&view=item&layout=item&id=51&Itemid=66&lang=en.
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informationinordertoreducebarriers.ThiscouldincludetheuseofasinglecustomselectronicsystembetweenKosovoandAlbaniainwhichbothauthoritieshaveaccesstothesamedataandrequirementstoavoidduplicationofeffortanddelaysofcommunication.Itisalsoveryimportanttoreducethepaperworkrequiredandmakeasmanyprocesseselectronicaspossibleinordertoavoiddelays.
• Removereferenceprices.Inprinciple,theuseofreferencepricesisunlawfulaccordingtoGATT/WTOandhasintherecentpastbeenthesourcetradeskirmishesbetweenAlbaniaandKosovo.Itisveryimportanttoworktowardstheeliminationofthispractice.
• Facilitationoftransittrade.WiththebuildingofahighwayontheAlbania-
KosovosectionofCorridor8ofthePan-Europeantransportnetworkhasledtoadrasticdecreaseinthetimetakenforgoodsandpeopletomovebetweenthetwocountries.Whereaspreviouslyitwouldtake10hourstotravelfromTiranatoPrishtina,thisjourneycannowbecompletedinjustthreeandahalfhours–cuttingthetransporttimebyabouttwothirds.ThishasseriousimplicationsfornotonlytradebetweenKosovoandAlbania,butalsotransittradedestinedforKosovo,sincetransportationcostshavesignificantlybeenreduced.(ThehighwayhasalsothepotentialtolinkupwiththehighwaysystemtoSerbia.)Further,developingandincreasingtheprocessingcapacitiesatthePortinDurresisacorollaryofmaximizingtheuseofthehighway.Hence,theportinDurrescouldserveasalogisticshubforKosovarandregionaltrade,andwithimprovedcapacitiesandhighwaynetworkcompetewithThessalonikiinservingregionalmarkets,e.g.,Montenegro,Macedonia,andSerbia.
Accordingtocustomsauthorities,thishighwayhasledtothediversionofKosovoboundtransitgoodsfromMontenegrotoAlbania.Asaresult,thisisagreatopportunitytostrengthentheconnectionsbetweenthetwoeconomies,andtransittradeshouldbefacilitatedfurtherbyreducingadministrativerequirements.TheCustomsworkinggroupshouldconductananalysisregardingthetransitprocessandeliminatenodesatwhichthereisunnecessaryholdup.
• PossibilityofharmonizingexcisetaxesandVAT.DuringourmeetingsattheCustoms,wewereinformedthatdifferencesintheVATratesbetweenKosovoandAlbaniahadleadtoinstancesoftaxevasionandsmuggling.Moreover,differencesintaxratescreateconditionsfordistortionsinthetradepatterns.Therefore,therespectiveMinistriesofFinanceshouldexaminethepossibilityforconvergingexciseandVATtaxrates.
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B. DisputeSettlementSystemExistingInstitutionalFramework
TheexistingCEFTAframeworkprovidesthatthepartiestothefreetradeagreementoughttofirstattempttosolvedisputesregardingtheinterpretationandapplicationofCEFTArulesthroughcooperationandconsultations.12TheJointCommittee,whichisthemaindecisionmakingbodyofCEFTA,canbeconsultedatthediscretionofpartiesinordertoarriveatamutuallysatisfactoryresolutionofdisputes.13ApartfrominvolvingtheJointCommitteeindisputeresolutions,CEFTAmemberstatescanconductconsultationsinthepresenceofamediator.14Whenthepartiestoadisputecannotagreetoamediator,theJointCommitteeappointsoneforthem.15Incasethemediatorfailstoprovideasolution,theJointCommitteethenattemptstodealwiththeissuewithaviewtofindingacommonlyacceptablesolution.16Ifthisapproachalsofails,theJointCommitteeisentitledtorecommendmeasurestothepartiestoadispute.17
ArbitrationisanothervehiclebywhichCEFTAmemberstatescansolvetradedisputes.Article43oftheAgreementprovidesthatarbitrationcanbeusedafterconsultationsintheJointCommitteehavefailedtosolveorsettletradedisputes.18Onceamemberstaterefersadisputetoarbitrationithastonotifynotonlytheotherpartytothedispute,butalsoithastosendcopiesofnotificationstoallCEFTAmemberstates.19TheArbitralTribunalistaskedwithsettlingdisputesinaccordancewithCEFTAprovisionsandanyotherapplicablerulesofinternationallaw.20TheTribunalcanconsideramicuscuriaebriefsfromapartynotinvolvedinthedispute.21TheawardoftheArbitralTribunalismeanttobefinalandbindinguponthepartiestothedispute.22
CEFTAprovidesthatdisputesunderconsultationorarbitrationarenotbesubmittedtotheWTOfordisputesettlement.23Further,anissueoradisputebeforetheWTODisputesettlementbodyisnottobesubmittedforarbitrationunderCEFTA’sprovisionsonarbitration.2412SeeCEFTAArticles24and42.13SeeCEFTAArticle42.14Id.15Id.16Id.17Id.18SeeCEFTAArticle43.19Id.20Id.21Id.22Id.23Id.24Id.
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Issues
• AccordingtoCEFTAinstitutionalframework,itisnotclearwhetherthereisanyparticularprotocolorprocedureforhowconsultationsbetweentwomemberstatesoramongmorethantwoaretobeconducted,andwhatthatdecisionmakingprocesslookslike.
• BecausethedecisionsintheJointCommitteearebasedonconsensusamong
memberstates,thedisputesettlementsystemcontainedinCEFTAisstructurallyproblematicsinceanyoneofthememberstatescanimposeitsvetoincasesofconflictsofinterests.25
• Further,eveninthecaseofArbitration,thepartiesarelefttotheirown
devicesinordertocomeupwithproceduresandalegalframeworkunderwhichArbitrationcouldproperlyandeffectivelyfunction.26
Recommendations
Inourviewboththedecision-makingmechanismsandtheenforcementoftherulesonwhichdisputesettlementisbasedneedtobeenhanced.ThisdoesnotrequireadditionalagreementstoCEFTA.TheCEFTAallowsforconsultationpriortoformaldisputeresolutionanditestablishesthatWTOrulesshouldserveasthebasisforundertakingmeasuresrelatingtounfairtrade.However,inpractice,CEFTAmembersarestymiedbytheneedforconsensuswithrespecttodisputesettlementsandAlbaniahasnotactuallydevelopedtheinstitutionalmechanismstoimplementtheWTOrules.Inourview,especiallywithrespecttodisputeswithKosovo,aprotocolforbindingarbitrationshouldbereached,andinaddition,AlbaniashoulddeveloptheinstitutionalcapacityintheformofaFairTradeCommissiontoemploythetraderemediesitisentitledtouse.ThereshouldbeanunderstandingtoresolvedisputesbilaterallybetweenKosovoandAlbaniainsteadofseekingconsensusinCEFTA.
DuringourinterviewsattheMinistryofEconomy,MinistryofAgriculture,andattheCustomsAuthoritiesinAlbania,aswellasattheTradeMinistryinKosovo,wehavecometolearnthattherehavebeeninstancesofunfairtradepracticesanddisputeswhereparties,andespeciallyAlbania,couldhavebenefitedfromaneffectivedisputesettlementmechanismaswellasfromanefficientenforcementofremediesagainstunfairtradepractices.IfCEFTA’stradereportsareanindicatorofourassumptionsabouttheineffectivenessofCEFTA’sdisputeresolutionprocedures,AlbaniahasonlyreportedtwocasestoCEFTA’sJoint
25SeeCEFTAArticle41.26SeeAnnex9toCEFTAAgreement.
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Committee,andintotalthereareninecaseswhereAlbaniaisapartytoadispute.27Thesestatisticsdemonstrateaneedforarobustdisputeresolutionmechanismandprocedures.Therefore,werecommendthatAlbanianauthoritiesfocusonthefollowingproposals:
• AprotocolforarbitrationpriortotheuseoftheCEFTADisputeSettlementSystemBecauseCEFTAhasanineffectivedisputesettlementsystem,itcreatestheopportunityforKosovoandAlbaniatodevelopamorerigorousandeffectiveprotocolforresolvingtradedisputes,betweenthetwoofthem.AlthoughCEFTAprovidesaroleformediation,fortheinterventionoftheJointCommittee,andforarbitration,itdoesnotexcludeorprohibitotherformsofdisputeresolutionsystems.Hence,weproposethatAlbaniaandKosovoexplorewaystocomeupwithabilateralarrangementforresolvingandsettlingtradedisputes.(Suchanarrangementcouldtakedifferentforms,forinstance,itcouldbeapermanentbodyoftradeexpertsandsectorialspecialists,oradhoccommittees,withexecutivepowerstosolveandsettletradedisputes.)
• EffectiveUseofExistingInstitutionalFrameworkstoAddressUnfairTrade
Practices.CEFTAprovidesthatifapartyconsidersthatanothermemberstatehasfailedtofulfillanobligation,andbilateralconsultations,mediationortheJointCommitteehavefailedtoarriveatacommonlyacceptablesolution,thepartyconcernedmaytakeprovisionalrebalancingmeasures.28AccordingtotheparagraphfourofArticle42,measurestakenoughttobenotifiedimmediatelytothepartiesandtotheJointCommittee,whichoughttoholdregularconsultationswithaviewtotheirabolition.29ThemeasuresaretobeabolishedwhenconditionsnolongerjustifytheirmaintenanceintheviewoftheJointCommittee(basedonaconsensualdecision),or,ifthedisputeissubmittedtoarbitration,whenanarbitralawardhasbeenrenderedandcompliedwithasdecidedbytheJointCommittee.30AccordingtoArticles22and23ofCEFTA,partiescanusetheWTOlegalframeworkinordertorespondtounfairtradepractices.31Therefore,whereaproductisbeingimportedinsuchincreasedquantitiesandundersuchconditionsastocauseorthreatentocauseseriousinjurytodomesticproducersoflikeordirectlycompetitiveproductsintheterritoryoftheimportingParty,orseriousdisturbancesinanysectoroftheeconomywhich
27SeeCEFTAtradereports,availableathttp://192.232.255.119/~ceftamab/report_dcrp.php.28SeeCEFTAArticle42.29Id.30Id.31SeeCEFTAArticles22and23onantidumpingandgeneralsafeguardsprovisions,respectively.
18
couldbringaboutseriousdeteriorationintheeconomicsituationoftheimportingParty,theimportingPartymaytakeappropriatebilateralsafeguardmeasuresagainsttheotherParty.32Regardlessofwhetheraneffectivedisputesettlementsystemisinplaceornot,inordertoenforceArticles23and24,theAlbanianauthoritiesarefullyentitledtoconducttheirowninvestigationsandapplythosemeasuresthatintheirjudgmentareconsistentwiththenatureoftheinjuryordisturbanceinquestion.ThereisnothinginCEFTA,orintheWTOlegalframework,torestricttheabilityordiscretionofAlbanianauthoritiesinrespondingtowhattheydetermineareunfairtradepractices.
Inthiscontext,sincetherearenoeffectivemechanismsforidentifyingwhenproblemsariseandforpursuingthem,weproposetheestablishmentofaFairTradeCommissionthatwouldhavethecapacitytoinvestigateandimplementCEFTAonantidumpingandcountervailingduties.
• UseoftheEuropeanCourtofJusticejurisprudenceinordertoevaluatethe
exceptionstothefreetradearrangementsprovidedforinArticle17.Accordingly,CEFTAdoesnotprecludetheprohibitionorrestrictiononimports,exports,orgoodsintransitjustifiedongroundsofpublicmorality,publicpolicyorpublicsecurity,theprotectionofhealthandlifeofhumans,animalorplants,theprotectionofnationaltreasurespossessingartistic,historicorarchaeologicalvalue,protectionofintellectualpropertyorrulesrelatingtogoldorsilverortheconservationofexhaustiblenaturalresources,ifsuchmeasuresaremadeeffectiveinconjunctionwithrestrictionsondomesticproductionorconsumption.33However,suchprohibitionsorrestrictionsarenotmeanttoconstitutemeansofarbitrarydiscriminationoradisguisedrestrictionontradebetweentheParties.34TheEuropeanCourtofJusticehasanextensivebodyofjurisprudencewithrespecttothedefinitionsandinterpretationsoftheexceptionstothefreemovementofgoods.InlightoftheEUintegrationprocesses,bothAlbanianandKosovarauthoritiescouldbenefitfromusingtheEUjurisprudenceinordertocomeupwithimpartial,andrecognized,standardsofadjudication.
32SeeCEFTAArticles23and24.33SeeCEFTAArticle17.34Id.
19
C. Standards(Agriculture):Problematicmutualrecognitionofstandards,especiallyinFood–Veterinary(FV)andSanitary-Phytosanitary(SPS)regulationsforagriculturalproducts
ExistingInstitutionalFramework:
Withregardtoagriculturalproducts,CEFTAoutlinescertainrequirementstoapproachtheissueofFVandSPSregulations.Theseare:
• Allmembersarerequiredto‘co-operateinthefieldofsanitaryand
phytosanitary(SPS)measures…withtheaimofapplyingrelevantregulationsinanon-discriminatorymanner’andto‘enter,whereappropriate,intonegotiationstoconcludeagreementsonharmonizationormutualrecognitioninthesemattersinaccordancewiththerelevantprovisionsoftheWTOAgreementontheApplicationofSanitaryandPhytosanitaryMeasuresandotherrelevantinternationalagreements’.Currently,thereexistsanSPSCommitteewhichservestoaddresstheseconcerns.
• Formationofacommitteeontechnicalbarrierstotradeto‘facilitateandharmonisetechnicalregulations,standardsandmandatoryconformityassessmentprocedureswiththeaimofeliminatingtechnicalbarrierstotrade’andconformstoWTOrequirementsinthisregard.Ifachangeinregulationisbeingeffected,thismustbecommunicatedbythepartiesinvolvedinadvance.
• CEFTAalsostipulatesthatpartiesenterintonegotiationstoconcludeagreementsonharmonizationoftheirtechnicalregulationsandstandards,andthemutualrecognitionofconformityassessmentproceduresinaccordancewiththerelevantprovisionsoftheWTOAgreementonTechnicalBarrierstoTradeandotherrelevantinternationalagreementsbefore31December2010.
TheSPSAgreementintheWTOreferencedaboverequiresthatmembersoftheWorldTradeOrganization(WTO)shallbasetheirsanitaryorphytosanitarymeasuresoninternationalstandards,guidelinesorrecommendationswhich,inthecaseoffoodsafety,arethoseestablishedbytheCodexAlimentariusCommission.TheSPSAgreementpermitsmemberstointroduceormaintainadifferentstandardofsanitaryorphytosanitarymeasuresifthereisscientificjustification,supportedbyassessmentofriskbasedonappropriatescientificevidence35.
Similarly,theTechnicalBarrierstoTrade(TBTAgreement)citedbyCEFTAcoversallmeasuresorregulationsconcerningtechnical,commercial,ethicalorreligiousmatters–exceptsanitaryorphytosanitarymeasures-appliedtoall35MutualRecognitionAgreementsinInternationalFootTrade:Malik,Rajhttp://www.fao.org/docrep/w9474t/w9474t05.htm.
20
industrialandagriculturalproductsininternationaltrade.Whenmovingtowardsachievinganybilateralormultilateralagreementoramutualrecognitionagreement,itisnecessarythattherequirementsundertheTBTAgreementarealsofullytakenintoconsiderationastheyconcernqualitycharacteristics,fraudulentpracticesandmattersofconsumerinformationthroughlabellingwhichmaynotstrictlybefoodsafetyissues.
Therearetwoimportantthingstonotehere.Firstly,thattheCEFTAcallsontheenforcementofWTOagreementsandrequirementsonTechnicalBarrierstoTradeandapplicationofSanitaryandPhytoSanitarymeasures.Secondly,andmoreimportantlyforourcontext,thereisnoclearcutspecification,orroadmapforagreement,onmutualrecognitionandconformityassessment.ThishasledtoaplethoraofproblemswhichkeepsCEFTAtradebelowitspotential,andalsolimitsAlbania’saccesstoEUmarketsinagriculturalproductsandliveanimals.Issues
• InrelationtotradewithKosovo,therearenumerousexamplesinwhichtradehasbeenblockedduetoproblemswithmutualrecognitionsofstandards.Problemsarisewhenlegislationsonstandardsarenotharmonizedbetweenthetwocountries.Sincebothcountriesareintheprocessofharmonizingalllegislationwiththeacquis,problemsarisewhenthisprocessleadstochangesinrequirementswhichareunanticipated.Forinstance,inearly201336milkfromtwoAlbanianproducerswasblockedbyKosovoduetoconcernsthatlevelsofaflatoxinwerehigherthantheEUacceptablestandards.UponinvestigationitwasfoundthatthelevelsofaflatoxinwereindeedhigherthanEUstandards,butthattheywerewithinthelimitssetbyCodexAlimentariusasprescribedbytheWTO.ThissuddenchangeinstandardsrequiredbyKosovohasbeencitedasacommerciallydrivenmove,butithighlightstheroomfortradedisruptionprovidedbyalackofagreementsofmutualrecognitionandconformityassessment.Inordertoaddressconcernssuchasthese,therehasbeenaFrameworkAgreementreachedbytheCouncilofMinistersinAlbaniaandtheGovernmentoftheRepublicofKosovoonJanuary11,2014,focusedoncooperationforpromotionandfacilitationoftrade.ThisagreementhasculminatedinaJointActionPlan37whichaddressesinparttheissueofstandardsintheareaoffoodsafety,veterinaryandplantsafety.Thisagreementhasalsoledtothecreationofthreecross-countryworkinggroups,withaspecificgroupdedicatedtoharmonizationoflegislationintheareaofSPSstandardsandregulations.Thisgrouphassofardevelopedadraftreportontheprocess.However,thereissomecauseforconcernregardingthefutureoftheseproposals,sincetheagreementdoesnotspecify
36http://www.balkaninsight.com/en/article/albania-kosovo-trade-dispute-escalates.37JointActionPlan:Draft,20February2014.
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whattheimplementationstrategywillbeandwhowillbetheagenciesorministriesresponsibleforoverseeingtheprocess.
• LackofestablishedcommunicationchannelsbetweenrelevantMinistriesand
privatestakeholdersisalsoakeyconstraint.ThroughdiscussionsheldwithdifferentMinistriesresponsiblefortradeingoods,italsobecomesapparentthatthereisaclearfailuretocommunicatekeyconcernswhichleadstoamisalignmentofprioritiesandfailuretoact.AsreportedonCEFTAwebsite’sMarketAccessBarriersDatabase,Albaniareportstheleastnumberofcasesoftradebarriersandthisislargelyowingtothegapincommunicationofthebarriersfacedtotherelevantauthoritieswithinthegovernment.AnyattemptatreachingagreementonmutualrecognitionofstandardsbetweenAlbaniaandKosovomustthereforeovercomethisbarrierinordertoidentifythekeyareasofconcernfortheAlbanianeconomy.
Recommendations
• AugmentationofcurrentAlbania–KosovoworkinggroupsontradeissuesundertheFrameworkAgreement.Thecurrentcross-countryworkinggroupsinplacehavedevelopedadraftplantoharmonizelegislationunderSPSandTechnicalBarrierstoTrade.However,itisimportanttomodifythestructuresofthesegroupsinordertomaximizethepotentialtobegainedfromsuchaconcertedeffortbetweenthetwocountries.Firstly,itisimportanttoestablishclearmechanismsofimplementationandfeedback.ItisnecessarytoidentifywhichMinistryorOrganizationisprovidingoversightandtakingresponsibilityforimplementation.Additionally,thereneedtobepathwaysoffeedbackbuiltintothesysteminordertohoneandimproveupontheimplementation.Secondly,itisimperativetobringprivatesectorrepresentativesintothepolicydialogue.Thiswillservethepurposeofbothhighlightingtherealconstraintsonthegroundtodrivepolicy,andalsotodevelopnetworksofprivatesectoractorsbetweenthetwocountrieswhichwillhavepositivespilloversforintegrationinothermarkets.
Inessence,theseworkinggroupswillhaveatripartiterole:1. Identifytheconcernsofstakeholdersinvolvedintheimportandexportof
productswhosetradesuffersfrombarrierscreatedthroughnon-conformityinassessmentandlackofrecognitioninstandards
2. UndertakeanalysisandformulateacoherentstrategytoresolvethehighlightedconcernsProvidefeedbackonpolicyimplementationtoensurethatthepolicyissolvingtheproblemsitsetouttoaddressinsteadcreatingnewones.
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• CreationofTradePolicyAdvisoryGroup,andinparticularwithacommitteeon
agriculturaltradeissues.Whilethereappearstobepoliticalwillingnesstoaddressexistingchallengesinbothcountries,informationalasymmetriesbetweendifferentactorsinAlbanialeadtofailuresinhighlightingtheimportantissues.Torectifythisproblem,weproposethedevelopmentofanoverarchingTradePolicyAdvisoryGroup.Theprimaryaimofthisgroupwouldbetoserveasacross-functionalgroupofactorswhowillbringtolightthecriticalissuesandbarrierstotradethatexist.Thegroupwouldbestructuredtoincludesub-groupscreatedaroundspecificareas.InthecontextofSPSstandardsandregulationsinagriculture,thereneedstoasub-groupdedicatedtoissuesrevolvingaroundtradeinagriculturalproducts.Thisgroupwouldconsistofrepresentativesofallthekeystakeholderswhichconduct,regulateandfacilitatethistrade.Theseinclude:TradeDepartment,MinistryofAgriculture,CustomsDepartment,Legalexperts,Exportersofagriculturalproducts,andRegulatorsoffoodandanimalsafetystandards.Thiswillhelphighlighttheissuesfacedonthegroundwhicharethebindingconstraints,andwillprovideamechanismfortheswiftescalationofproblemsfacedtotherelevantauthoritiesandchannels.Toserveitspurpose,thisgroupshouldconveneonaregularbasistoshareinsightsandvoiceconcernsandensurethattherightproblemsarebeingaddressed.WhileKosovoandAlbania,orotherCEFTAmember,couldadoptthehigherEUstandardsinthisfield,theyshouldrecognizethatsincetheywillmovetowardsadoptingsuchstandardsattheirownpace,anearlyadoptionofEUstandardsshouldnotbeanimpedimenttointra-regionaltrade.Inthiscontext,theWTOstandardsshouldcontinuetobeacceptableuntilmembersformallyaccedetotheEuropeanUnion.
FREEMOVEMENTOFSERVICESI.StateofPlay
CEFTArefersinpassingtothetradeinservicesasanareathatneedstobeaddressedandliberalizedbyitsmembersatalaterstage(whilepointingouttotheGeneralAgreementonTradeinServices(GATS)asthebackgroundsetofnormsandprinciplesthatgoverntradeinservicesforWTOMembers).Inthiscontext,CEFTAislargelysilentregardingspecificareasofcooperationandthewaystobringaboutgreaterliberalizationordeeperintegrationamongregionalcountries.Asaresult,tradeinservicesamongtheCEFTAmembers,andparticularlybetweenAlbaniaandKosovo(bearinginmindthatKosovoisnotyetaWTOMember)couldbenefitfromamorerigorousandholisticapproachtowardsdeeperintegration.
23
Traditionally,tradeinservicesconsistsofabundleofspecificelements,andWTOclassifiesitaccordingtofourdifferentmodes.Theseinclude:
1. Mode1:Cross-bordersupplyofservices,includingfinancial,transportation
andprofessionalservices.2. Mode2:Tradeinwhichconsumptionoccursabroadandtheprovidersand
consumersaregeographicallywithinthesameboundaries,suchastourism,healthcarefacilitiesetc.
3. Mode3:EstablishingacommercialpresenceorFDI.4. Mode4:Movementofindividualsprovidingprofessionalservices.
Withinthesemodes,therearefurtherspecificclassificationsconsistingofbusinessandprofessionalservices,communicationservices,constructionandrelatedservices,distributionservices,educationalservices,financialservices,tourismservices,healthandsocialservices,transportservices,andmovementofnaturalpersons(workers).38
TheinstitutionalframeworkinplacethatregulatesAlbania’srelationship
withotherregionalcountries–apartfromKosovo,ontheonehand,andtheEuropeanUnionMemberStates,ontheother,regardingthetradeinservicesisestablishedeitherbythemembershipintheWTO,orbytheStabilizationandAssociationAgreementwiththeEUanditsMemberStates.
SinceKosovoisnotaWTOmember,andsincetradeinservicesfallsoutside
thescopeofCEFTA,thereisthereforeaninstitutionalgapbetweenAlbaniaandKosovowithregardtothemovementofservicesbetweenthetwocountries,whichpotentiallyputsKosovoatadisadvantagevisávisotherregionalcountriesandtheEUMemberStatesandviceversa.Thisgapcouldbefilledouteitherbyaframeworkagreementinservices,orbysector-by-sectoragreementsthatwouldcontainsimplificationmeasuresregardingestablishmentandoperationofserviceproviders,cross-borderprovisionofservices,thepositionofself-employedpersons,therightsofservicerecipients,andmeasuresthatwouldlayoutandstrengthenmutualcooperationbetweenregulatoryagenciesinbothcountries.
38WTO/GATSclassification.TheEuropeanUniongenerallyclassifiesthetradeinservicesasfollows:distributivetrades(includingretailandwholesaleofgoodsandservices);regulatedprofessions(suchaslegalandtaxadvisers,architects,engineers,accountants,surveyors);constructionservicesandcrafts;business-relatedservices(suchasofficemaintenance,managementconsultancy,eventorganization,debtrecovery,advertisingandrecruitmentservices);tourismservices(e.g.travelagents);leisureservices(e.g.sportscentersandamusementparks);installationandmaintenanceofequipment;informationsocietyservices(e.g.publishing–printandweb,newsagencies,computerprogramming);accommodationandfoodservices(hotels,restaurantsandcaterers);trainingandeducationservices;rentalsandleasingservices(includingcarrental);realestateservices;householdsupportservices(e.g.cleaning,gardeningandprivatenannies);financialservices;electroniccommunicationsservices;transportservices;healthcareservices;temporaryworkagencies'services;privatesecurityservices;audiovisualservices;gambling;servicesprovidedbynotariesandbailiffs(appointedbyanofficialactofgovernment).
24
TheactualmovementofservicesbetweenAlbaniaandKosovoisfarbehindthegovernments’goalsofthefreetradeinservices.ConsideringtheweightserviceshaveinthenationalGDP,itisimportanttoeasetheflowofservicesbetweenthetwocountriesinordertofacilitatethecreationofcommonbusinessnetworksandsupplychains,particularlyfocusingonMode3andMode4.AccordingtorepresentativesfromboththeKosovarandAlbaniangovernment,thereismuchtobedoneinthisregard.Forexample,currentlythereareveryfewAlbanian-runbusinessesinKosovoandviceversa.Inparticular,thereare581totallyorpartiallyKosovarownedcompaniesregisteredinAlbania,outofatotalof4654foreignorjointventurescompanies.39Similarly,professionalsfromKosovofacethesamebarriersandquotasasforeignnationalsdowhenattemptingtoprovideprofessionalservicesintheAlbanianmarket.Theseareimportantbarrierstowardstogreaterintegrationandmustbeaddressed.II.Dataandanalysis
TradeinservicesformsasignificantpercentageoftheGDPinAlbania,measuringat35%in2012.However,inthesameyear,totaltradeingoodsandservicesamountedto85%oftheGDP,indicatingthatalargerportionofthetradewasingoods(50%).40HistorictrendsshowthattradeinservicesasashareofGDPhasbeendecreasinginrecentyears,asshowninthegraphofservicesimports(%GDP)overtimebelow.Itisworthinvestigatingwhatthereasonsforthisdecreaseare.
39Source:INSTATandNationalRegistrationCenter.40WorldBankData,retrievedfrom:http://data.worldbank.org/indicator/NE.TRD.GNFS.ZS?display=default.
25
BasedondatareceivedfromtheNationalStatisticsInstituteINSTAT,netservicesexportshaveseenadrasticdecreaseeveninabsolutevalueterms:
OnerecurrentthemeisthatthiswasafalloutoftheGlobalRecessionintotheAlbanianeconomy.However,sincethedataisnotindicatingarecovery,itbecomesevenmoreimportanttofocusonotherwaysinwhichthistradecanbefacilitatedandboosted.
Itisalsoinformativetolookatthebreakdownofdifferentservicesectorsandthisdataisdepictedinthegraphbelow:41
41BasedondatareceivedfromINSTAT.
-200.00
-100.00
0.00
100.00
200.00
300.00
400.00
2005 2006 2007 2008 2009 2010 2011 2012 2013
MillionUSD
NetExports-TotalServices
TotalServices
26
Basedonthissetofstatistics,itisclearthatAlbaniaisandhasbeenanetimporterofTransportandSecurityServices.ThisissomewhatcounterintuitivesinceAlbaniaisuniquelypositionedtoactasanimportanttransitlocationforregionalandnon-regionaltrade.Itislikelythatnegativenetexportsintransportareduetoalackofadequatetransportinfrastructure.ThebuildingoftheDurres–PristinahighwayhashelpedcreateafavorableenvironmentforAlbaniatoexploititsgeographicallocation,andthismustbecomplementedbyfurtherpoliciestoencouragetransittrade42.TravellinghashadpositivenetexportsforAlbaniaintherecenthistory,andthisisdrivenmainlybyhightourismdemand.However,thisdatahassomefailingsinthatthelargestsectorinrecentyearsisanunclassified‘Other’category.Additionally,thereisnoclassificationonprofessionalservicesandotherimportantcontributorssuchasfinancial,communicationandconstructionservices.Inordertoassesthesesectors,weturnedtotheWorldBank’sServicesTradeRestrictionsDatabase(STRD).
Inordertoincreasetheknowledgeanddatawhichexistsregardingservicestradeglobally,theWorldBankhasdevelopedaServicesTradeRestrictionsDatabasewhichcataloguesthekeybarrierstoservicestradeinplacein103countries,andthencategorizesthembasedonanindexofrestrictiveness.43AccordingtothisIndex,AlbaniahasanoverallServicesTradeRestrictivenessIndex
42ThesearecoveredearlierunderthediscussionofcustomsfacilitationinthesectiononFreeMovementofGoods43Moreinformationaboutthisdatabasecanbefoundhere:http://iresearch.worldbank.org/servicetrade/aboutData.htm.
-200.00
-150.00
-100.00
-50.00
0.00
50.00
100.00
150.00
200.00
250.00
300.00
2005 2006 2007 2008 2009 2010 2011 2012 2013
MillionUSD
Years
NetExports-ServicesCategories
SecurityServices
TransportServices
Travelling
OtherServices
27
of19.4,44whichislowerthanthemedianindexfor103countriesof23.7.45TheIndexisconstructedsuchthatascoreon0signifiescompletelyopentradeinservices,whereasanindexvalueof100signifiescompleterestrictiveness.Asperthischaracterization,Albaniaisvirtuallyopenwithsomebarriers.Ifwebreakthisdownintothedifferentsectorsofservices,thisgivesusthefollowingmapping:
(Source:WorldBankSTRD)
Accordingtothedatabaseofpoliciesinplace,whileservicestradeisquiteliberalized,therearesomesystematicbarriersinplaceforforeignfirmsandindividualstoprovideservicesinAlbania.Forexample,licensingrequirementsforforeignanddomesticapplicantsaredifferentforsomeservices,withalimitednumberoflicensesavailable.Foreignfirms,inthefinancialandprofessionalservicessector,needtoclearanEconomicNeedsTest(ENT)tobeallowedtoestablishacommercialpresence.Theyalsofacerestrictionssuchasnationality
44RetrievedfromtheServicesTradeRestrictivenessDatabasetoolonline:http://iresearch.worldbank.org/servicetrade/default.htm45Brochertetal.,PolicyBarrierstoInternationalTradeinServices(2012).
7.533.3
00
27.8
45
0
20
40
Banking
Insurance
Telecommunications
Retail
Transportation
Professional
ServicesTradeRestrictivenessIndex(STRI)bySector
28
requirementsfortheirboardofdirectors,andemployeenationalityrequirements.However,therearenoequityrestrictionsonforeignerslookingtoincorporateinAlbania.
Thediagramabovemakesitclearthatthefollowingarethekeyservicessectorswhichimposethegreatestamountofrestrictionsintradeacrossborders:
• ProfessionalServices.Thisincludesaccounting,auditingandlegalservices,outofwhichaccountingandauditingismorerestrictive46.UnderAlbanianLawitisnotallowedforforeigncorporationsandprofessionalstoofferaccountingandauditingservicesinAlbaniaunlesstheyhaveanauthorizedcommercialpresencelocally,henceMode1ofservicestradeisblocked.Formostprofessionalservices,foreignfirmsareallowedtosetupabusinessinAlbania.Howevertheyfaceadomestichiringcondition47aswellasrestrictionsonservingdomesticstate-ownedfirms.Therearealsodifferentiallicensingcriteriaforforeignersandnationals,andlimitedquotaofforeignlicensesavailable.Forforeignprofessionals,foreignqualificationsareattimesrecognized,butentrantsmustpassalocalqualificationexaminordertopractice.Additionally,thereisaquotainplaceforforeignnationals.ThiswascorroboratedbyaseniorrepresentativeoftheAlbanianBarAssociation,whostatedthatforeignfirmscannotpracticelawinAlbaniaunlesstheyenterintoapartnershipwithalocalfirm,andforeignlawyersarenotallowedtorepresentcasesinacourtoflawunlesstheypasstheAlbanianBar.Legalservices.AccordingtorepresentativesoftheAlbanianBarAssociationtherearealargenumberoflawdegreeholdersandprofessionalsinAlbania,nearly7600.However,muchfewer,around1000,actuallypracticelaw.Whileseverallawyerschoosetotakeupotherprofessions,thereisalsoaconsiderabledegreeofinformalityinthemarket.Asizeableproportionofprofessionallawyerschoosetopracticeinformallyinordertoevadetaxes,andthesearefocusedonlegaladvisoryinnon-criminalandcivilcaseswherechancesofdetectionarelow.Additionally,owingtothesmallmarketsize,thereisalackofspecializationamonglawyersaswell.Comparatively,Kosovohasamuchsmallernumberofqualifiedlawyers,andliberalizationoflegalservicestoallowprofessionalstopracticeacrosstheborderwillallowforcompetitionandequalizationofdemandandsupplyoflegalservices.Financialservices.Withinfinance,bankingismoreliberalized,withseveralforeignbanksinoperation,thantheinsurancesector.AccordingtotheWorldBankdatabase,marketentryinallowed,but33%oftheemployeesneedto
46AccountingandAuditinghasahigherSTRIof50ascomparedto41.7forlegalservices.47ThisisbasedontheWorldBankSTRDdatabasewhichincludesinformationonrestrictivepoliciesinplace.Thisupdatedtill2008.
29
beAlbanian.Similartoprofessionalservices,therearedifferentiallicensingrequirements,withforeignquotasinplace.
TherehasrecentlybeenadialogueamongCEFTApartiesonregionalmobilityforprofessionalsintheregionandnegotiatinggreaterMode4access.48Thiscoveredtopicssuchasmechanismsofmutualrecognitionofprofessionalqualificationsandpoliciestoenhancelabormobilityattheregionallevel.However,thereisnoagreementinplacetoimplementthesemechanismsandthispresentsanareawhereAlbaniaandKosovocanmadeadvancements.
AlbaniaandKosovohavedeeplinkagesasfarastourismisconcerned.AccordingtodatareceivedfromtheCustomsborderpostatMorinainAlbania,nearly1.5millionpeoplecrosstheborderpostinbothdirectionsduringthecourseoftheyear.Thisflowintensifiesduringthetouristicsummermonths,whenKosovarsflocktotheAlbaniancoastline.Otherreasonsincludeeducationandaccessinghealthcarefacilities.ThisindicatesthatmovementunderMode2isrelativelyliberalbetweenthetwoeconomies.
III.Issues
Basedonthediscussionabove,movementofservicesisrelativelyopeninMode2,withsomerestrictionsplacedinMode3(establishingacommercialpresence).Mode4isalsoproblematic,withbarriersinplaceinrecognizingforeignqualifications.WhilenegotiatingamultilateralagreementunderCEFTAislikelytobealongandpainstakingprocess,thereisscopeforshorter-termgainsbynegotiatingagreementsbetweenKosovoandAlbania.
Themostimportantissuesthenare:
1. LackofaMostFavoredNationstatus(MFN)andnationaltreatmentforKosovarprofessionalsandfirmsseekingtoprovideservicesinAlbaniaeitherbysettingupanestablishmentinAlbaniaorbyprovidingcross-borderservices.
2. Lackofarecognitionsystemforforeignprofessionalserviceproviders.
3. Nocleardefinitionoftradeinservices.Thismeansthatthereisverylittledataavailableonthemovementofservices,andthisisinadequatelycategorized.Asaresult,wedonothaveaclearestimateofthemagnitudeoftradethatoccurswithKosovoandotherregionalpartnerswithrespecttothedifferentchannelsofmovementthatexist.
48CEFTAWebsite.Retrievedfrom:http://192.232.255.119/~cefta/events/dialogue-regional-mobility-professionals-ceftaon7/17/14.
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IV.Recommendations• Frameworkagreementforservicestradeorsector-by-sectoragreements.
Althoughthetwocountrieshaverecentlynegotiatedaframeworkagreementtofacilitatetradeingoodsbetweenthem,thereisnosuchagreementinrelationtoservicestrade.Sinceasignificantshareofexportsistakenupbyservices,thisisanimportantareaforcooperation.Thefirststepistodevelopamutualcommitmenttowardsliberalizationofservices.ThemostimportantchannelsareModes3and4,whichwillnotonlyhelptapintothepotentialofAlbania-KosovoasonebiggermarketbutwillalsohelpthetwocountriesmovetowardstheirgreateraimofEUaccession.Assuch,regardlessoftheformat,anagreement,shouldcommittoembodyaprincipleofequaltreatmentwhenitcomestomarketaccessandconditionsofoperationinthemarket.Inparticular,theagreementshouldcommitto:
o Givedirecteffecttotheprincipleoffreedomofestablishment,whichenablesaneconomicoperator(whetherapersonoracompany)tocarryonaneconomicactivityinastableandcontinuousway;aswellastotheprincipleofthefreedomtoprovideservices,whichenablesaneconomicoperatortoofferservicesonatemporarybasiswithouthavingtobeestablished.
o Simplifyproceduresandformalitiesthatserviceprovidersneedtocomplywith.
o Grantingmostfavorablenationstatus,marketaccess,andnationaltreatmentwithreferencetotheabilityofnaturalandlegalpersonstoprovideservicesinAlbaniaandviceversa,aswellastoreceiveservices.
o RemovebarriersexistingonbothsidesinestablishingacommercialpresencesuchthatKosovarsshouldfacethesameregulationsasanAlbanianational.
o Eliminatebarrierstowardsthemovementofprofessionalsintheregionandtheirabilitytoprovideservices.
o Setupsinglepointone-stopshopsthroughwhichserviceproviderscanobtainallrelevantinformationandcompleteallproceduresrelatingtotheiractivities.
o Ensurethatformalitiesandprocedurescouldbecompleteindistanceandviaelectronicmeans.
o Periodicreviewandevaluationofauthorizationandlicensingrequirementswithaviewtoincreasetheirtransparencyandsimplification.
Asafirsttask,thiswillinvolvedefiningtherelevantsectorsandidentifyingthepolicyconstraintswhichareinplace.Itwillbeimportantalsotohold
31
consultationswiththeprivatesectorandindividualserviceproviderstomapoutissuesfacedontheground.Thesecondtaskwouldbetoidentifymodesofliberalizationandharmonizetheexistingframeworksinbothcountries.Anongoingprocesswillbetodevelopafeedbackchannelandacommunicationplatformwhereissuescanbehighlightedonacontinuousbasis.
• MutualRecognitionofProfessionalQualificationsbetweenAlbaniaandKosovo.
ItisusefultorefertotheEUdirectiveconcerningrecognitionofprofessionalservices.49Thisprovidesthreesystemstoenablemutualrecognitionofqualifications.
o Thefirstisautomaticrecognition.Thisisapplicableinprofessionswhereharmonizationoftrainingandeducationhasbeenachieved.
o Thesecondisthegeneralsystem,whichallowsforsomerequirementtobefulfilledinordertoharmonizequalifications.Thiscouldbeanaptitudetestoratrainingperiod.
o Thethirdcaseisoneinwhichmutualrecognitioncanbeextendedbasedonprofessionalexperienceinthehomecountry.
InstatingasystemliketheoneproposedbytheEUwillnotonlybecrucialinthecreationofaneffectivesinglemarketforservicesbetweenAlbaniaandKosovo,butcanalsobeseenasajointmovetopreparethetwocountriesforeventualEUaccession.ThisisespeciallytrueifharmonizationofminimumtrainingrequirementsisdonetomatchtheEUcriteria.Suchasystemisparticularlyimportantforthecaseoflegalservices,wherethereareclearlyopportunitiestoclearthemarketandfunctionmoreefficiently.
• Creationofaservicessub-groupinthetradepolicyadvisory.Aspartofthe
tradepolicyadvisorygroupwhichwillconsistofprivatesectoractors,itwillbeimportanttoalsohaveaservicessub-groupwithinthisgroup.Thiswillconsistofprofessionalsandindividualserviceproviders,corporations,alongwithregulators,whowillconveneonaregularbasistoidentifythenextstepsintheliberalizationofservicesmovement,specificallyacrosstheborderwithKosovo.Theywillassesscurrentpolicybarriersandhelpescalatetheseconcernstopolicymakerswithinthegovernment.
• Improvedcategorizationandcollectionofservicestradedata.Thereisa
dearthofclearandusefuldataontheservicessectordatawhichiscollectedandmaintainedbythegovernment.ThecategoriesofservicesincludedarefewanddonotcoverimportantclassificationssuchasprofessionalservicesandICTandcommunication.Inaddition,thereisnoclassificationaccording
49Directive2005/36/EChttp://ec.europa.eu/internal_market/qualifications/directive_in_practice/index_en.htm.
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thedifferentmodesofexchange.Inparticular,thereislittleornoinformationcollectiononMode4–whichisthemovementofprofessionalstoprovideservices.Thesedataareessentialinordertoinformmorerelevantandeffectivepolicymakinginthisarea.
FREEMOVEMENTOFWORKERSI.ExistingInstitutionalFramework
TheresidenceandemploymentrelationsinAlbaniaforforeignersaremainlyregulatedbytheStatuteonAliens(No.108/2013)50andtheLaborCode.51TheStatuteregulatestheconditionsofentryandresidenceofforeigncitizens,aswellastheconditionsunderwhichforeigncitizensmayenterintoemploymentrelations(includingself-employment).52TheStatuteprovidesforpreferentialtreatmentforEUandUScitizensbyexcludingthemfromtheneedtoobtainmostofresidenceandworkpermits,aswellasprovidingforthemequaltreatmentwithAlbaniancitizensregardingemploymentrelationsandconditions.53Forinstance,Article147providesthatUScitizenscanstayinAlbaniaforatleastoneyearwithoutaresidencepermitandafterthatperiod,theinitialresidencepermitcanbeissuedforuptofiveyears.54Whereas,regardingemployment,UScitizensenjoyequalrightsasAlbaniancitizens.55TheLaborCode,ontheotherhand,providesthegeneralnormativeframeworkthatgovernsemploymentrelationsandconditionsforAlbanianandnonAlbaniancitizensalike.
Currently,thereare462workpermissionsforKosovars,comparedto2712workpermissionsforEUcitizens,followedby11workpermissionsforBosnians,219forCroatians,321forMacedonians,68forMontenegrins,and151forSerbians.56During2013,therehasbeena50percentincreaseinworkpermissionsforKosovars.57Thistrendreflectedageneralincreaseinthenumberofworkpermitsforforeignersduring2013(a75percentincrease,outofwhichtheKosovarratiorepresented7.5percentofthetotal).58Thegeneralnumberofemployees,
50LawonForeigners,No.108(2013).51LaborCode,No.7961(1995).InadditiontotheLaborCode,thereareanumberofotherregulationsinthearea,suchastheStatuteonSafetyandHealthattheWorkplace,No.10237(2010).52Inparticular,theStatuteregulatesthreemainareas:residencepermitsincludingtypesofvisas,workpermits,anddeportationandtransportationofforeignersinAlbania.53LawonForeigners,No.108(2013).54Article147,LawonForeigners,No.108(2013).55Id.56StatisticsfromtheMinistryofSocialWelfareandYouthfortheperiod2006-2013.57Id.58Id.
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includingself-employedpersons,inAlbaniaisestimatedtovarybetweenapproximately850,000to955,000.59
Recently,theCouncilofMinistersadoptedaDecisiontoexcludeKosovocitizensandAlbaniansfromSerbiafromtheobligationtoobtainworkpermitsorcertificatesofemploymentregistrationwhentheyarelawfullyresidinginAlbaniaandenjoyingtherighttoemploymentandtoself-employment.60II.Issues
ThecurrentstateofplayregardingtheintegrationoflabormarketssuggeststhatthereisroomforinstitutionalinterventionsinordertoensurethefreemovementofworkersbetweenAlbaniaandKosovo.
Inparticular,theprincipleofnon-discriminationoughttounderpin
situationsconcerningoffersofemployment,remuneration,andworkconditions.Inthiscontext,positiverightssuchas:
• therighttoacceptoffersofemployment,• therighttomovebetweenAlbaniaandKosovoforthatpurpose,• therighttostayineithercountryforthepurposeofemployment,• andtherighttoremain(undercertainconditions)intheStateafter
employmenthasended,oughttosatisfytheequaltreatmentofAlbanianandKosovarcitizensrespectivelyinKosovoandAlbania,aswellastoacceleratelabormobilitybetweenthetwocountries.III.Recommendations
InordertostartanddeepentheintegrationoflabormarketsandthereforeprovideforthefreemovementofworkersbetweenAlbaniaandKosovo,whilemaintainingapublicserviceexception,werecommendthattheAlbanianauthoritiesfocusonthefollowingproposals:
• ExtendthepreferentialtreatmentequaltothatofEUcitizensorUScitizensto
Kosovocitizens.WhiletheStatuteonAliensprovidesforapreferentialtreatmentofEUandUScitizenswhenitcomestoexcludingthemfromtheobligationstoobtainresidenceandworkpermits,itdoesnotaddressthesituationwhenKosovocitizenswanttoresideinAlbaniainordertoacceptoffersofemployment,whileatanemploymentrelationshipandtoremainin
59INSTAT.60DecisionoftheCouncilofMinistersNo.2655(2014)ExcludingCitizensoftheRepublicofKosovoandoftheAlbanianCitizensoftheRepublicofSerbiafromtheObligationtoObtainWorkPermitsandCertificatesofEmploymentRegistration.
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thecountryinordertoseekemploymentaftertheiremploymentrelationshiphasbeenterminated.
• Extendthesametreatmenttofamilymembersofprincipalworkers.Ifaworker
mayfacedifficultiesinbringingfamilymembersalong,thentheconceptoffreemovementofworkersbecomesdiluted,hencefamilymembersoughttobeincludedinthemeasuresthataimtoliberalizeandintegratelabormarketsbetweenthetwocountries.
• RemoveworkquotasforKosovocitizens.Article82oftheStatuteonAliens
providesforworkquotasforforeigncitizensinAlbania,andassuchitrepresentsabarriertothefreemovementofworkers.
• BroadinterpretationofDCMNo.2655(OntheWorkPermitsforKosovo
citizensandAlbaniannationalsinSerbia).TheimplementingauthoritiesshouldtakeanexpansiveinterpretationofthesaidDecisioninordertoaddresssituationssuchasthedurationoftheworkpermit(whethertheDecisionismeanttoregulateshorttermorlongtermpermits),orthetypeofemployment(whethertheexclusionfromobtainingaworkpermitisrelatedtoaspecificjoborwhethertheDecisionauthorizesjobtransfers).
• Negotiateanagreementonpensionsschemes.TheMinistryofSocialWelfare
andYouthhasalreadynegotiatedandconcludedaseriesofinternationalagreementsonretirementcontributionswithcountrieswithlargeAlbaniandiaspora.AlthoughatthistimethenumberofKosovocitizensinAlbaniaandAlbaniansinKosovoisminimal,anagreementonpensionswithKosovowouldrepresentasymbolicgesturefordeepeningintegrationbetweenthetwocountries.
FREEMOVEMENTOFCAPITAL/INVESTMENTSI.ExistingInstitutionalFramework
AccordingtotheUNConferenceonTradeandDevelopment,Albaniahasenteredinto44BilateralInvestmentTreatiesoutofwhich34areinforce61.ItalsohasotherInvestmentAgreementswithregions,includinganFTAwithEFTAcountries,anFTAwithTurkey,CEFTA,andaSAAwiththeEUwhichalsocoversinvestmentagreements.62
61Retrievedfrom:http://investmentpolicyhub.unctad.org/IIA/CountryBits/2#iiaInnerMenu.62Retrievedfrom:http://investmentpolicyhub.unctad.org/IIA/CountryOtherIias/2#iiaInnerMenu.
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AlbaniahasenteredintoaBilateralInvestmentTreatywithKosovo(BIT–2004),whichprovidesforfairandequitabletreatmentofrespectiveinvestments.63TheagreementgrantsdomesticorMFNtreatmenttoinvestorsfromeachcountry,itstipulatesagainstexpropriationsortakings,itprovidesforthefreemovementofcapitalbetweenthetwocountries,aswellasitaddressesthequestionsofdisputesettlementsbetweenthetwoPartiesandbetweenaninvestorandoneofthePartiestotheagreement.64BasedoninterviewsattheMinistryofEconomy,wehavecometolearnthatnegotiationsaretakingplacebetweenAlbaniaandKosovoaimingtoconcludeanewBilateralInvestmentTreatywithKosovo.
IntermsofFDI,AlbaniaisthemostimportantcontributorforKosovoafter
EUstates65.Thiscanbeseeninthegraphbelow:
(Source:InvestmentinKosovo2013–KPMGReport)WhenanalyzingthestateofplayinthemovementofinvestmentbetweenAlbaniaandtherestoftheregion,specificallyKosovo,itisusefultoconsiderthefollowingareasofcooperationandliberalization:63AgreementbetweenAlbaniaandUNMIKontheReciprocalPromotionandProtectionofInvestments(2004).64Id.65InvestmentinKosovo2013–KPMGReport,availableat:https://www.kpmg.com/AL/en/IssuesAndInsights/ArticlesPublications/Brochures/Documents/2013-Investment-in-Kosovo-website.pdf.
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• Entryandestablishment:ThisreferstotheabilityofforeignfirmstoestablishacommercialpresenceinAlbania.AccordingtotheWorldBankInvestingAcrossBorders(IAB)indicators66,Albaniafaresbetterthanbothitsregionalpartnersaswellastheglobalaverage.Theseindicatorsareillustratedbelow:
IndicatorsCountryscore
IABregionalaverage
IABglobalaverage
Procedures(number) 7 8 10Time(days) 7 22 42Easeofestablishmentindex(0-100) 84.2 76.8 64.5(Source:WorldBankInvestingAcrossBorders(IAB))
Easeofentryandestablishmentincludethefollowingcriteria:o Ownershipandcontrol:Basedonourdiscussionswiththerepresentatives
oftheNationalRegistrationCentre,thereisnodiscriminationbetweenforeignandnationalcitizenswhenitcomestosettingupacommercialpresence.Theprocessofregistration,whetherasanaturalpersonorasacompanyoftwoormore,hasbeengreatlystreamlinedsothatitiscompletedwithinthetimeframeof24hours.Forforeignfirms,thereisanextrarequirementofdocumentsfromtheirhomecountry’sregisteringauthority,buttherearenorestrictionssuchasequityownershiprequirements.
o Accesstoland:TheWBIABindicatorsonacquiringindustriallandshowthatAlbaniadoesbetterthantheglobalaverageinstrengthofownershiprightsindex,accesstoandavailabilityoflandinformationindices,andhasamuchshortertimetoleaseprivatelandthantheglobalaverage67.Regionally,itappearstobeatparwiththeregionalaverages.Whilethereareclearlysomestrongassumptionswhichgointotheconstructionoftheseindices,theygiveagoodsnapshotoftheeasewithwhichlandisaccessiblerelativetotheregion.
IndicatorsCountryscore
IABregionalaverage
IABglobalaverage
Strengthofleaserightsindex(0-100) 80.7 82.9 82.1Strengthofownershiprightsindex(0-100) 100 97.6 92.2Accesstolandinformationindex(0-100) 47.4 50.3 41.4
66Retrievedfrom:http://iab.worldbank.org/Data/Explore%20Economies/Albania#/Starting-a-foreign-business67Ib.
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Availabilityoflandinformationindex(0-100) 85 78.9 70.6Timetoleaseprivateland(indays) 36 43 61Timetoleasepublicland(indays) 129 133 140(Source:WorldBankInvestingAcrossBorders(IAB))
o Approvalandadmission:Whiletherearesomerestrictionsinplaceingrantinglicensestoforeignprofessionalsandcompanieslookingincertainsectors,ingeneralthereisnopreferentialtreatmentgiventonationalswhenaccordinglicensesaccordingtorepresentativesoftheNationalLicensingCentre.
• Treatmentandoperation: o CapitaltransferandFOREX:BasedonourdiscussionsfortheGovernorof
theBankofAlbania,capitalmovementisveryopenandtherearevirtuallynorestrictionstothemovementacrosstheborderwithKosovo.
o Disputesettlement:Asmentionedabove,AlbaniahassignedaBITwithKosovowhichmentionsalternativedisputesettlementalternativesinthecaseofinvestor-statedisputes.TheWorldBankIABindicatorsfordisputesettlement68areasfollows:
IndicatorsCountryscore
IABregionalaverage
IABglobalaverage
Strengthoflawsindex(0-100) 84 82.5 85.2Easeofprocessindex(0-100) 40.7 69.7 70.6Extentofjudicialassistanceindex(0-100) 68.5 64.4 57.9(Source:WorldBankIAB)
ThisshowsthatAlbaniaisatparwiththeregionalandglobalaveragewithregardstostrengthoflaws,butperformsmuchlowerthanboththeregionalandglobalaverageindexforeaseofprocess.
68Ib.
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II.Issues
Basedonaninvestorsurveyconductedrecently(Dec.2011-Jan.2012)onbehalfoftheAlbanianInvestmentDevelopmentAgency(AIDA),69whichtheoreticallyincludesalsoKosovarbusinessesinAlbania,thefollowingareasneedtobeexaminedmorecloselyinordertoforegroundproblemsandinturntoprepare,adoptandapplyremedies:
• Reviewoflicensingandauthorizationprocedureswiththeaimofreducingandsimplifyingproceduresandbureaucraticpractices,aswellasincreasingthetransparencyandaccountability;
• Improvementofcapacitiesandmanagementoffiscaladministrationinordertoimproveenforcement,increasetransparencyandaccountabilityoftaxcollectionproceduresandpractices;
• Establishmentofmechanismsandprocessestomobilizefeedbackfromtheprivatesector;
• Systematicimplementationandenforcementoftechnicalregulations;• Accesstolandandlandtitlereform;• FinancialincentivesforR&Dandtraining;• Governanceandpublicsectorintegrity;• Judicialreform;• Zoningregulationsandproceduresregardingconstructionpermits;• Settingupfreeeconomicorindustrialzones;• Creationofaskilledworkforce;• Clarityoflegislation;• Qualityofinfrastructure;• Abilitytosourcelocally.
III.Recommendations
AmeaningfulanddeepintegrationwithKosovo’smarketsdemandsthefreemovementofcapitalandinvestmentswherebyallrestrictionsonthemovementofcapitalandpaymentsbetweenAlbaniaandKosovoandwiththirdcountriesareprohibitedexceptincircumstanceswherethemovementofcapitaltoandfromthirdcountriescausesorthreatenstocauseseriousdifficultiesfortheoperationofoneoftherespectiveeconomiesofAlbaniaorKosovo.
Towardsthisend,anapproachconsistingoftreatmentnolessfavorablethanAlbanianpersons(naturalorlegal),minimumharmonization,homecountrycontrol,andmutualrecognitioncouldensurethatinvestors,aswellasindividuals,wouldface:
• asinglesetofrulesconcerningfinancialservices;
69AIDA,InvestorsSurvey(December2011–January2012).
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• haveequalaccesstotheseserviceswithoutdiscrimination;• aretreatedequallywhenoperatinginthemarket.
Inthiscontext,thefollowingmeasurescouldbetakenwithrespecttothe
renegotiationoftheBilateralInvestmentTreatywithKosovo:• Developmentofamechanismofpreliminaryinvestigationandadjudication
betweenAlbaniaandKosovo:WhilethebilateralagreementwithKosovo(BIT)providesfortheprotectionofrespectiveinvestmentsaswellasforthefreemovementofcapital,werecommendthattheAlbanianauthoritiesfocusonsettinguparbitrationproceduresorprotocolsinordertofacilitatetheresolutionofinvestmentdisputesbetweenAlbaniaandKosovoaswellasdisputesbetweeninvestorsandoneofthePartiestotheagreement.
• EstablishmentofcommonbusinessregistriesbetweenKosovoandAlbania:DuringthediscussionswiththeNationalRegistrationCentreitbecameclearthatwhilethereisnocleardiscriminationbetweenforeignandnationalapplicantswhenformalizingregistration,foreignapplicantshaveanextrasetofdocumentationtosubmitwhichisissuedbyregistrationauthoritiesintheirhomecountry.OnewaytomaketheprocesseasierforbusinessesfromtheothersideoftheborderistocreateacommonregistrybetweenAlbaniaandKosovo.Thiswouldaidinformationflowandsharing,reduceverificationrequirementsandreducetheregistrationrequirementsforapplicants.
CONCLUSIONSThereareafewcommonthemes(apartfromthespecificcommentsand
recommendationsthataddressedissuesintheareasofmovementofgoods,services,workersandcapitaldiscussedearlierinthisreport)thatemergefromouranalysisoftheexistinginstitutionalframeworkinAlbania.Thesethemesarecentraltothenextstepsthatcouldbetakeninordertoimproveinternationaltradepolicy,deepenregionalintegration,andcontributetowardsgreatereconomicdevelopment.
Inparticular,wewouldliketodrawattentiontothefollowing:
Inter-ministerialcommunication.Internationaltradepolicyandregional
integrationarecoordinationintensiveendeavors,andthereforeimprovedcoordinationproceduresamongministriesarecentralinordertoincreasetheeffectivenessofpolicymakingandreflectthediverseinstitutionalinterests.
Feedbackmechanisms.Thereisaneedtosetupconcretemechanismstomobilizesmallactors(corporationsandindividuals)toalertrelevantauthorities
40
regardingtraderelatedbarriers,andprovideinputforgeneraltradepolicyquestions.
TradePolicyAdvisoryGroup.Albanianeedsacentralorganizationdedicatedtopreparingandmonitoringtheimplementationoftradepolicies.TheTradePolicyAdvisoryGroupwouldstreamlinetheinputandfeedbackfromanumberofgovernmentalandnon-governmentalactorsandthereforetakeaholisticandcomprehensiveperspectivewhenformulatingtradepoliciesandadvice.Thisbodycouldconsistofareaexperts,governmentalrepresentatives,andrepresentativesfromtheprivateandnon-profitsectors.
Networksofexpertise.Whatoftenmakesintegrationworkarehorizontalnetworksofpeople.Inthiscontext,weproposethatAlbanianandKosovarauthoritiessetupformalandinformalnetworksofexpertsandregulatorsfromthepublicandprivatesectors,whothroughsystematicinteractionwouldcometosharethesamevernacularandsensitivitiesofthefield,wouldidentifybarrierstotradeandaccordinglyproposesolutions,andinthiswayinfluencethedecision-makingprocessandmakeinroadstowardsdeeperintegrationinmorewaysthansimplyrelyingonverticalorformalrelationshipsbetweentherespectivegovernments,andagencies.
LinkswithregionalandEuropeanmarkets.Botheconomies,i.e.,AlbanianandKosovar,needtobelinkednotonlywithoneanotherandotherregionalpartners,buttheyneedtotapintotheresourcesofEuropeanUnionpublicandprivateactors,andhaveaccesstotheEuropeanUnionmarketsinwaysthatwouldenablethemtoconnectlaggingwithleadingEUsectors.LinkingupwithEuropeanUnionmarketsegmentsandoperatorshastheadvantageofnotonlyensuringmarketaccessforAlbanianandKosovarsuppliers,butalsoinassistingthemwithadoptinghigherEUstandards,andasaresult,withadequatelypreparingbothcountriesfortheeventualaccessionintotheEuropeanUnion.
Regionalinfrastructureprojects.DevelopingabilateralandregionalapproachtowardsinfrastructureprojectswouldpositAlbaniaandKosovoinanoptimalplacetomakeeffectiveuseoftheirgeographicallocationtofacilitateintraregionaltradeaswellastradewiththeEuropeanUnionmarkets.
Disputesettlementsystem.SinceKosovoisnotyetaWTOMember,andsinceCEFTAdoesnotprovideaneffectivedisputesettlementsystem,itisindispensibleforAlbaniaandKosovotocomeupwiththeirownalternativesystemtosolvetradeandinvestmentdisputes,whichmightincreaseinfrequencyasthetwocountriesmovetowardsdeeperintegrationwitheachother.
Onalastnote,thisreportispreparedfortheAlbanianGovernmentwithaviewtoraisekeyquestionsthatneedtobediscussedinthecontextofdeepeningintegrationwithKosovobutalsowithotherregionalcountries.Assuch,we
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welcomefeedbackfromourpartnersinthegovernment,fromtheprivatesector,aswellasfromotherpublicsectororganizations.
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AgreementbetweenAlbaniaandUNMIKontheReciprocalPromotionandProtectionofInvestments(2004)
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Brochertetal.,PolicyBarrierstoInternationalTradeinServices(2012)
CENTRALEUROPEANFREETRADEAGREEMENT(2006)
CEFTAstatistics
DecisionoftheCouncilofMinistersNo.2655(2014)ExcludingCitizensoftheRepublicofKosovoandoftheAlbanianCitizensoftheRepublicofSerbiafromtheObligationtoObtainWorkPermitsandCertificatesofEmploymentRegistration
Directive2005/36/EC
INSTATstatistics
InvestmentinKosovo2013–KPMGReport
JointActionPlan:Draft,20February2014
InvestmentinKosovo2013–KPMGReport
LaborCode,No.7961(1995)
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MutualRecognitionAgreementsinInternationalFoodTrade:Malik,Raj
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WORLDBANKstatistics
WORLDTRADEORGANIZATIONAGREEMENTSANDSCHEDULESOFCONCESSIONS
WTOTRADEPOLICYREVIEW:ALBANIA2010-TradeandInvestmentRegime
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