Bureaucracy killed Innovation in Albania

2015-09-16

Woke up this morning to a tweet relating to an article on Medium titled: Startup ecosystem in Albania: Does it exist yet?. As the keywords startup & Albania were on it, I couldn’t resist but rush to read the article. The article is a 2 minute read and definitely worth reading it, but if you are looking for a short overview: the author argues that there is a lack of (creative) entrepreneurship in Albania, due to the inherited isolation from the Communist era. Well, she is partially right, and as strange as this might seem, she is also dead wrong!

The author is wrong because there have been a lot of creative efforts in the Albanian Entrepreneurship arena. The author is also right because most of these initiatives have been terminated by the bureaucratic mentality of the regulation institutions in the country.

In 1998 I was a 20 year old studying informatics (software development) in the University of Tirana. Internet was a non-realistic concept, email was a little bit more approachable when I started work at Intellectual Communication Center (ICC) an NGO dedicated to the provision of internet services in Albania.

Basically ICC provided communication services to foreign agencies and few (very very few) local companies. This was mainly because the price for an internet connection where stratospheric (I believe the whole ISP had a 256MB downlink from a satellite). Without knowing my employers, for the first few months I thought the organization was a foreign investment, to realize that in fact it was work of three humble local guys that worked beside me everyday (one of them was basically spending more time manholes on the street actually).

ICC evolved into ABCOM, one of the largest ISPs in Albania. Working there was a great opportunity through which I came to understand a lot about the technology “startup” (the term did not exist back then) environment in the country. In 1999, I was promoted from technical support (the guy answering the phone, and asking clients to restart their modems), to webmaster of the company. During that time I managed about 100 websites for the company and basically came to know any local with capacity and interest in information technology in the city.

Below are some of the main criteria that have influenced to the halt of the information related start-up initiatives in the country.

 

Limited Advertising Market

Today the biggest portals in the world are backed by advertising revenue! Google, Twitter and other IPO start-ups have data and advertising as their primary source of income.
In 2001 I managed to borrow some money (360$ exactly, a massive amount of money for a domain in that time) to buy the domain shqiperia.com.

I partnered with a talented friend to launch a website and built a community around it. Sometime in 2003-2004 we had steady 25000 unique visitors daily, same as BalkanWeb, another highly influencing news portal at the time. We had a local website (language was only Albanian) and a limited audience (Albanian speaking population many of whose were students and emmigrants). (Some years ago I saw in a movie that FB had about the same number of visitors in that period, targeting also a local audience in a specific university).

When we tried to monetize the website, we focused on marketing approaching the biggest companies operating in the country. At the time, the potential companies were the insurance companies. We tried explaining that we have 25K of the best language speaking visitors in a time where Albania had about 100K internet subscriptions. We have the right audience (those with a car, with a business a property to secure, the travelers…). I remember the Head of Marketing of INSIG by the time, saying that marketing has almost no benefits to his perception, he almost never watches the commercials in TV and he was not sure that our commercials would be 24/7 online for anyone to see. I thought the guy is dumb, but in fact it was me who was dumb. I believed in marketing and ethics of people, the guy believed in communism and money he can touch!

By that time, there were a few Albanian portals, mainly forums running on free platforms with no commercialization needs. The biggest websites were the news-paper presence, who used their print marketing to cover minimal expenses for their web-presence. I know of a few portal-initiatives of the time who all failed and most of them closed within 1-2 years.

 

E-Commerce or Lack of Merchant and Logicist Solutions

We did not give up. If marketing and ads do not work, then we should make money on a different way. We attempted to launch an e-commerce section. Music, Movies, Books, basically we decided to do what Amazon was for the World, we would do for our little Albanian world. Here comes the second mood-killer for entrepreneurship in Albania.

Infrastructure is painful. Regarding Logistic Infrastructure, we had to ship books in US, Canada and through our postal service which charged more for the shipping than for the price of the book. The price for sending these goods within the country where also very high (and the service not reliable). There is a big minus in the logistics in Albania, although this might have changed.

Beside the logistics problem, there is also the problem of merchant gateways, or the way money is processed from the online purchase to the moment it reaches your bank. At the time we started our online shop, we managed to find some providers that charged us like hell and retrieved the funds in delays of 30 days constantly creating problems with the cash-flow. After some hundred orders we decided it is too early for e-commerce in Albania. Shqiperia.com was the only e-commerce website before 2010. Blej.com was another competitor, runned from the far US with some benefits when it came to infrastructure as well. We shut down shop, but others opened. New startups such as Ikub.al and Grepi.al are still trying to make profits from e-commerce nowadays.

The service is a little bit better since recently PayPal allows selling goods and retrieving them in a VISA card. While the fees of PayPal are acceptable, there are other fees introduced by the banks. Basically in every 500€ an Albanian (or greek) Bank will deduct 20-25€ for a service offered for free in any German or US Bank. Add this to the other fees, an online order lose about 10% only from the moment it is charged to the moment it reaches your bank. And if you attempt Bank Transfers in the country, the fees are completely absurd. Transferring money from an account to another, in most banks in Europe (and within Europe) is free, but in Albania it has a fixed price. For a .al domain sold for 12.99€ the bank charged 5€ transfer fee. Anyone want to do business in Albania?

 

Welcoming Innovation and Techno-Legal Infrastructure

If there is one factor that has penalized the development of information technology entrepreneurship in Albania is the evil presence of bureaucratic apparatus in Albania. For many years Internet Service providers have been forced to work on the dark because of continuous pressure not to implement technologies that would have allowed a boom in the country. Basically any new technology that could have been applied to improve internet and data distribution was marked illegal until a regulation was approved. And by the time that regulation gets to be approved, that technology is no longer feasable.

Wimay, Internet through electrical infrastructure, wireless hotspots… all of them have been banned. Cable infrastructure was also a no-go or a privilege of the ISP that had a politician on board (for the limited time this politician was a factor in the internal politics). Sometime in 2005, the time where we still used ICQ and Windows Messenger we bought a big number of Sipura Modems, a device that could have allowed us to provide VOIP services and free phone numbers.

Basically, at a time where having a fixed phone land were still a privilege and inter-state calls were a budget killer, we could have provided business with VOIP phones that provided free calls within the peers and extremely cheap international phone calls. Just as we tried to advertise the service to our clients (we had by the time a software development department with many clients), we were unofficially informed that if we do it, we will certainly face legal charges by ERT, the Albanian Telecommunication Regulation Entity. (While those guys from Estonia were inventing Skype, running on a similar technology, in Albania you would be threatened for any attempt to break some laws that still did not exist).

There was no law prohibiting VOIP services, but there has constantly a will from incompetent bureaucrats to kill anything innovative technology. We halted and buried our investment. But we were not the only ones. Many other young and energic business runners lost way much more then we did in coaxial infrastructure, in optic fibre etc. Thanks to ERT and other incompetent public institutions, the progress of internet penetration in the country has been slowed down all these years. Believe me, there has been a real war of nerves, money and time between entrepreneurs vs incompetent decisions from the public institutions.

Consider a student who consumes information at 120MBit/s and his family pays 1.5% of the salary for the internet connection (29.99€ out of a salary of 2400€), versus the internet speed in Albania. This speed would have been better (although probably not cheaper) if the state had a different approach toward the regulations.

So in conclusion, there have been a lot of creative initiatives in Albania, that unfortunately did not make it, or their progress was slowed down due to legal, technical and logistic constraints. It is not a surprise that most of us are leaving the country and looking to launch the next initiative elsewhere…