Author: Blerina Allushi, Fjori Sinoruka, Josh Coe
In 1998, Genti Daci saw an opportunity in Albania – or at least the lack of internet access in the post-communist country. Less than a decade later, he co-founded ABCom with a few friends, a telecommunications company that provided more than just internet and cable TV to businesses in and around Tirana.
According to Daci, the company also provided internet service to the American president, George W. Bush, and his staff during the world leader's first official visit to the Western Balkan country.
The 2007 visit provided the Albanian entrepreneur with the opportunity to meet with a representative from Southeast Europe Equity Fund II , an American fund that invests in stocks.
"With an initial investment of over 1 billion lek (about 9.3 million dollars) from this fund, ABCom has fivefolded its revenues," he said, "making it the second largest telecommunications company in a country of about 3 million inhabitants."
He said that he was very optimistic about the development of Albania.
"It was a great experience," says Daci. - I would wish this experience to many other companies, because this type of investment is what the country lacks and needs".
Data dating from April 2018 on the Albanian Investment Development Agency (AIDA) website shows that the type of investment Daci is referring to – foreign direct investment – has increased by more than 43 billion lek (about $400 million) between 2011-2016.
While AIDA declared that "the focus of the future development of the Albanian economy will remain the attraction of foreign investments" and, while the Albanian government has implemented a new program, stimulating "strategic investments", investors, from one country in particular , they didn't eat the bait.
Despite pro-American sentiment in the Balkan country, where statues of American presidents and presidential candidates adorn public squares, American companies appear to be favoring Albania's neighbors.
This is the conclusion of a two-month investigation by the Albanian Center for Quality Journalism and the New England Center for Investigative Reporting in the United States.
While in a post dated August 16, 2017, AIDA listed American brand names like Coca-Cola and KFC among 25 “success stories ” of American investment in Albania, investors from the world’s largest economy are few and far between in Albania and some of them have closed businesses in recent years, including Albanian Sun Petroleum (licensed by Gulf Oil International ).
American investments in Albania constitute about 1 percent of the stock of foreign investments (or accumulated capital, invested from one country to another), in 2017.
According to the Bank of Albania , American investments appear to have been declining in recent years, decreasing from 11.1 billion lek (103 million dollars) in 2014 to 8.9 billion lek (about 83 million dollars) in 2017.
On the other hand, there are more American companies in other countries of the Balkan region than in Albania.
The US Embassy in Serbia confirmed in an email that US investments there amounted to $4 billion since 2000 and that US-owned and franchised companies employed more than 19,000 people in the former Yugoslavia.
In contrast, the American Chamber of Commerce in Albania (AmCham) listed 55 “United States-owned or affiliated” companies in its 2018 annual statistics, although this number is now outdated, considering the aforementioned departures of Gulf Oil and the Sheraton Hotel.
As a former vice president of AmCham in Albania, Daci knows firsthand the reasons why American businesses are reluctant to invest in Albania.
He became acquainted with them on AmCham 's annual trips to the United States, which were partly focused on efforts to attract new, American investors to Albania.
"All of them were afraid to invest in Albania," says Daci about potential American investors. - Everyone".
Daci, who was vice president of the business lobby from 2014 to 2017, says the House of Representatives has encountered problems in convincing American investors to come to Albania.
"The biggest problem is that these foreign investors talk, they talk on Wall Street , they have friends on Wall Street , they have friends everywhere," says Daci, referring to the fact that potential American investors are well-informed about the investment climate in Albania.
Daci points to two issues that create obstacles for businesses like his to operate in Albania: corruption and the government's failure to protect businessmen who play by the rules.
Investors from the United States seem not to be the only ones who share these concerns.
Daci recalls that a representative from an investment fund based in Poland, who was considering investing in ABCom , called Albania "an exotic country."
"Exotic in terms of risks", - adds Daci.
He says the Polish fund decided not to invest.
The cost of corruption
As American investments in Albania have fallen, the country's ranking in Transparency International's corruption perception index has gone in the same direction – eight places lower from 2016 to 2017.
According to the U.S. State Department's 2018 Investment Climate Report , "significant foreign investors" claim they have been pressured to hire politically connected subcontractors. They have also expressed concerns about their ability to comply with the U.S. Foreign Corrupt Practices Act, which makes it illegal for U.S. citizens to bribe foreign officials.
These concerns are not new for the US State Department, which in a 2016 statement called corruption "the biggest obstacle to US investment in Albania."
Even earlier, in a 2010 diplomatic cable to the US State Department, published by Wikileaks , the then US ambassador to Albania, John Withers III, said that, despite pro-American sentiment in Albania and the Albanian government's reforms aimed at improving the business climate, economic obstacles, including "widespread corruption", are having their effect on investments.
"Corruption has a corrosive impact on both overseas market opportunities for American companies and the broader business climate," the ambassador wrote. "It also hinders international investment, stifles economic growth and development, distorts prices and undermines the rule of law."
In July 2017, the Deputy Chief of Mission at the US Embassy in Albania, David Muniz, said in an interview with Gazeta Shqiptare that “the issue of corruption is very widespread here; it creates the impression that this is a place where you probably wouldn’t want to do business, especially for large companies, which have alternatives.”
Since 2011, development funds from the United States have focused on encouraging reforms in Albania's justice system, which USAID has described as "the most corrupt" in the world.
Although the justice reform, approved by the Albanian parliament in 2016, foresees new justice institutions, such as the Special Anticorruption Structure or SPAK - which will include a special unit for investigation and a court for high-level corruption and crimes - almost two years have passed and none of them are still operational.
Institutions, apathetic in protecting the interests of companies
After eight years of trying to expand its business in the southeastern city of Korça, ABCom began the process of installing new cable lines last summer.
Daci claims that one of the local competitors cut these lines, causing ABCom over 10 million lek (about 93 thousand dollars) in damages.
"Forget the cables, they're replaced immediately," he said, "but we lost customers, we lost service." We should have started offering the service in August, but we did it in November."
ABCom 's lawyer notified the Albanian Center for Quality Journalism with a letter sent to the Korça police in July 2017. The letter claims that video evidence shows that an employee of MRM , a local competitor in Korça, had cut ABCom 's cables.
Daci says the municipal police and prosecutor's office did not accept the evidence he offered. He said that ABCom 's cables have been cut three more times since then.
Unable to trust local authorities, Daci says ABCom was forced to hire private insurance companies to protect its investments in Korça.
In response to these claims, the Korça Municipal Police said that ABCom 's video evidence was examined, but the offender could not be identified.
Police also said they patrol areas where ABCom supplies service, working extended hours over the past two months.
Contacted via Facebook , MRM refused to respond to the accusations against them.
"We only respond to those who have subscribed to MRM in Korça," the telecommunications company replied.
A company proves the presence of bribes
In another case, a source, who asked to be named for protection as Klodi , claims that an official working for the Audiovisual Media Authority, AMA, approached him with a demand to pay him nearly 400,000 lek (about $3,700) when he went to Tirana in January to renew his small cable company's license - a process he says is done every 6 years at a cost of 40,000 lek (about $370).
Bribes, known as "tips", have a long history in Albania, dating back to Ottoman times.
A word taken from Turkish, tipping is traditionally paid under the table to show appreciation for speedy service.
"The problem is this," says Claudio, "if I tip them once, they'll always ask for it."
Klodi claims he is going bankrupt: he lost at least 400 clients in May alone and two of his four employees now work part-time.
His small cable service, located 30 minutes outside Tirana, can't compete with competitors' cheaper packages of pirated channels that don't pay the necessary license fees, he says.
AMA does not have an account on e-albania.al , an absence that Klodi accuses of being intentional.
According to its website , the National Agency for the Information Society administers the e-Albania portal , developed to increase transparency and give individuals and businesses the opportunity to complete licenses or permits online .
"Forcing the managers of the cable Services to come to Tirana to fill out the documents, the AMA officials, - says Klodi, - can personally demand bribes".
USAID has called the government's online E-Systems a " key tool " for increasing transparency and fighting corruption.
AMA responded to these allegations via email , saying that it would need the name of the accused official and recommended that this matter be brought before the relevant institutions.
While Claudio says he will take the AMA to court if necessary.
He also describes bribes as a part of the "Albanian reality".
"Corruption is rampant in Albania", he says.
Foreign investors have problems getting from A to B
A 2017 report by the Harvard University Center for International Development on economic growth in Albania found that bribery was seen as more prevalent in Albania than anywhere else in the region and that corruption was “ubiquitous.”
However, the same report revealed that businesses did not perceive corruption in Albania as much worse than in other Balkan countries and that many companies operating in the country considered it a "manageable cost of doing business".
"We are not saying that it is not a problem, - said Ljubica Nedelkoska, one of the authors of the report on corruption, in a telephone interview, - but we are saying that, if we remove corruption, there are still other problems that stop investments".
One of those problems, cited by the authors of the Harvard report, is the fact that AIDA, Albania's investment promotion agency, has been chronically underfunded and never staffed enough.
"It makes things more difficult for potential investors," said Nedelkoska, referring to AIDA's inadequate Services to investors.
AIDA's executive director, Sokol Nano, was unavailable for an interview.
Corruption was among the top 10 concerns of AmCham members currently operating in the country, but the “general level of taxes” was listed as the biggest concern.
“What makes taxes so challenging for AmCham ’s 250 member companies is Albania’s ever-changing and unpredictable tax laws.
Local tax laws, for example, have changed 14 times since 2007.
"With this ever-changing tax regime and laws, their problem is that they cannot plan accurately," said Enida Beshani, executive director of AmCham.
Dr. Selami Xhepa, a research scientist for the Albanian Center for International Trade, a USAID-funded project, agrees that Albania's tax situation is not attractive to foreign investors.
"The fiscal burden compared to other countries in the region has been high, - says Xhepa about Albania's taxes, - and, on the other hand, the tax and fiscal administration has been problematic, bringing even more tax increases."
"In general, foreign investors - not only Americans - prefer countries like Serbia because of an even more interesting market", - says Xhepa, adding that "Serbia is a bigger market and has a more stable and better economy sophisticated".
American companies aren't the only ones looking elsewhere.
Daci says that ABCom 's most important personnel are considering leaving the country for Germany, the United Kingdom and Canada.
He says five of his best engineers have already left.
"You get tired," he says. "It's that simple."
Author's note : All amounts in dollars and lek have been converted based on exchange rates as of July 24, 2018.
*The first photo at the beginning of the article, on the right, the former Sheraton hotel building in Tirana. Photo: Josh Coe
