Strategies of the Development of Entrepreneurship and SME

The following data represents some indicators of SME sector in Albanian economy,according to data of Albanian Institute of Statistics:• The share of SMEs sector in total number of enterprises was more than 99%, both for2004 and 2005.• Until the end of 2004. the number of the enterprises reached the figure ofapproximately 55.000 enterprises (micro 93%, small 4%, medium-sized 2%, accordingto the criteria for SME classification above).• The business natality rate for 2005 was 19%, so in 2005 number of SMEs exceeded65,000.• SME sector contribution to GDP is 64% (2005).• SME sector contribution to employment is 60% (2005).• The most important sectors for SME activities are trade and services, which contributeto total number of enterprises and private sector employees with 73.5% and 45.2%,respectively, and generate 74% of total turnover.3.1.2. LEGISLATION AND STEPS OF DOING BUSINESSThe Albanian government has applied a set of liberal fiscal policies during the last fewyears, drastically reducing fiscal burden, social security, and health contributions. These policymeasures consist of:• Reduction of corporate and personal income taxes, implementing a “Flat tax” of 10% bythe end of 2007.• Unification of the simplified profit tax and the tax on small business as defined in thenew Law No. 9632, “On local taxes in the Republic of Albania”, dated as of 30 October2006. According to this law, local authorities are now responsible for the collection ofthe new tax.• Reduction of the fiscal burden of social security paid by employers from 29% to 20%.• A 30% reduction of electricity rates for businesses.• A tax exemption of dividends designated for investments.On 28 July 2003, the law No.9121 “On the Protection of Competition” was approved by theAlbanian Parliament. This law entered into force by 1 December 2003 abrogating the law No.8044 dated as of 7 December 1995. The Competition Law No. 8044 dated as of 7 December1995 applies to all investors, domestic or foreign, private or state-owned, who supply ordemand goods, the acquisition or consumption of which is subject to their own free will andinitiative. On the basis of this law, every business, consumer or association has the right tocomplain to the Competition Department regarding any violation of the law. This law representsa deep reform in the field of competition in Albania. Differently from the former law, „the Lawon the Protection of Competition”, is a pure antitrust law, dealing with the abuse of dominance,the control of concentrations and illegal agreements, such as cartel agreements. The approachin dealing with these issues is the same with the one pursued in European Legislation.Incentives are regulated by the „Law on State Aid” approved by Albanian governmentand parliament with the primary aims of promoting the implementation of important projects,facilitating the development of certain economic activities, and promoting culture and theheritage conservation. Law No. 9374, dated on 21 April 2005. “On State Aid” applies to allsectors of manufacturing and services and all measures undertaken by central and localgovernments, as well as other entities acting on behalf of the State, that confer benefits toparticular enterprises, except those acting in the sectors of agriculture and fisheries. The StateAid may take the form of subsidies or grants; exemptions, reductions, deferrals or tax creditand other fiscal contributions; writing off of overdue fees and penalties; debts write offs oroffsetting of losses; loan guarantees or loans at reduced rates; reduction in the price of goodssupplied and services provided, including sales/leases of public property below market price or16