€660 mln set to be pardoned under pre-electoral tax amnesty

€660 mln set to be pardoned under pre-electoral tax amnesty

TIRANA, Feb 22 – As the country prepares for next June’s general elections and the opposition Democrats have launched an indefinite protest over free and fair elections, the ruling Socialist Party-led government has reconfirmed a tax amnesty that pardons some

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Companies improve finances as access to tap water drops

Companies improve finances as access to tap water drops

TIRANA, Feb. 22 – The coverage of population with water supply and the average duration of tap water slightly deteriorated in 2016 when only about 79 percent of the population had access to an average of 11.7 hours a day

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Albania mulls minimum wage hike after three-year freeze

Albania mulls minimum wage hike after three-year freeze

TIRANA, Feb. 21 – Albania is mulling a hike in the minimum wage, currently the region’s lowest at €157, amid debates by unionists demanding a high increase after a three-year freeze and private sector employers worried over increased costs reducing

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Rainfall, new HPPs increase domestic electricity generation

Rainfall, new HPPs increase domestic electricity generation

TIRANA, Feb. 20 – The favourable hydro-situation and the launch of several new private and concession hydropower plants, including the Banja HPP by Norway’s Statkraft in late 2016, gave a boost to domestic electricity production last year, according to data

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Eurostat: Albania, one of Europe’s least dependents on fossil fuel imports

Eurostat: Albania, one of Europe’s least dependents on fossil fuel imports

TIRANA, Feb. 20 – The rapid development of the country’s oil industry in the past decade has turned Albania into one of Europe’s top three least dependent countries on imports of fossil fuels, according to a report published by Eurostat,

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Junior Canadian companies get mining, oil licences

Junior Canadian companies get mining, oil licences

TIRANA, Feb. 16 – Two junior Canada-based companies have acquired mining and oil exploration licences in Albania as commodity prices are picking up following the mid-2014 slump. Canada-based Tirex Resources says it has obtained a 25-year mining licence for the

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Albania launches e-inspections

Albania launches e-inspections

TIRANA, Feb. 16 – Albania has launched e-inspections into businesses in a bid to increase transparency, reduce corruption and improve the climate of doing business in the country. Chief inspector Shkelqim Hajdari says the innovation will bring more transparency among

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Business climate rated as unfavorable by two-thirds of investors

Business climate rated as unfavorable by two-thirds of investors

TIRANA, Feb. 16 – Two-thirds of businesses in Albania consider the business climate unfavorable with courts, corruption and frequent changes in legislation and tax procedures as the top concerns, according to a survey conducted on behalf of the Foreign Investors

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Albania loses ground in global economic freedom index

Albania loses ground in global economic freedom index

TIRANA, Feb. 15 – Albania lost six places to rank 65th among 180 world economies in the 2017 Index of Economic Freedom, maintaining its rating as a moderately free economy, but remaining among the best performing regional EU aspirants, according

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Uncertainties over upcoming June elections pose threats to economy, EU report warns

Uncertainties over upcoming June elections pose threats to economy, EU report warns

TIRANA, Feb. 14 – Increased uncertainties over the upcoming June 2017 elections, a longer than expected credit recovery and the conclusion  of a three-year deal with the International Monetary Fund could put Albania’s fiscal consolidation efforts at risk, the European

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                    [post_content] => TIRANA, Feb 22 - As the country prepares for next June's general elections and the opposition Democrats have launched an indefinite protest over free and fair elections, the ruling Socialist Party-led government has reconfirmed a tax amnesty that pardons some 91 billion (€666 million) in accumulated taxes for both businesses and households and approved a 3 percent hike for more than 600,000 pensioners.

The partial amnesty, already approved by the government this week and pending the final okay in Parliament, fully pardons only pre-2011 tax and customs debts which Finance Minister Arben Ahmetaj described as uncollectable due to having exceeded the five-year legal deadline to initiate forceful collection. Fines and late-payment for the 2011-2014 are also pardoned on condition that full taxes, tariffs and social security contributions are paid within six months after the law has become effective.

Potential debts that are pardoned include an unconditional write off of pre-2011 debts of 29.5 billion lek (€216 mln) in principal, fines and late payment penalties and a conditional write-off of 61.45 billion lek (€500 mln) in fines and late payment penalties provided about 35 billion lek is paid in principal for the 2011-2014 debts.

Thousands of car owners who have paid no taxes until December 2011 will benefit from automatic deregistration and be stripped of obligations. Vehicle owners are also offered to have their car fines and late payment penalties pardoned for the 2011-2014 period provided they pay taxes, but the concession is expected to benefit only a few as owners who still possess the cars would have to pay six years in taxes including penalties for the past couple of years. Some 140,000 cars whose taxes during the past five years have not been are expected to be automatically deregistered. A majority of these cars are believed to have been sold for spare parts and scrap.

"This law is a promise kept, but above all very clear and a considerable incentive in the country's fiscal and economic environment," said Finance Minister Arben Ahmetaj.

Companies that have been sentenced under a final court decision for tax evasion and smuggling are not eligible to benefit from the partial amnesty.

The concessions come after two rather aggressive nationwide campaigns to collect accumulated unpaid electricity bills and fight widespread informality that the ruling Socialists initiated in the past couple of years, collecting hundreds of millions of euros.

The tax amnesty initiative, an apparent move to gain an electoral advantage often used by ruling majorities in pre-election times during the past two decades, comes as the incumbent Socialist Party-led government that is seeking a second consecutive term eased some doing business procedures for 2017 but left unchanged the key taxes, one of the key concerns for business representatives.

Since 2014, the corporate income tax and the withholding tax on dividends, rents and capital gains have increased by 5 percent to 15 percent, making the tax burden in Albania one of the region’s highest and the key concern for the business community in the country.

The bill envisages a pardon of fines and penalties from 2011 to 2014 on condition businesses pay the initial obligation, but no amnesty for the 2015-2016 obligations except for penalties mistakenly imposed by the tax administration’s IT system. Heavy fines of €70,000 imposed under a law turned down by the country’s constitutional court in early 2016 for violating the principle of proportionality following the launch of a nationwide campaign against informality in late 2015 will also be pardoned.

In addition to a modest inflation-adjusted hike for pensioners, the ruling Socialists will also apply wage hikes of 7 to 36 percent for some 164,000 public sector employees starting next March as part of $100 million spending plan on wages and pension increases for 2017.

The move comes as another amnesty offering households and businesses to reassess their property at modest tax rates of 2 percent, compared to a mandatory 15 percent, initially set to expire in late February after remaining effective for six months, has been postponed until the end of May.

The tax amnesty also comes at a time when the government has just concluded its binding three-year deal with the International Monetary Fund supported by a €331 million loan. The IMF and several business representatives have been skeptical of the amnesties, especially during pre-election periods because of creating a culture of impunity among businesses that avoid paying taxes and damaging fair businesses.

The American Chamber of Commerce, representing some of the country's top foreign investors, says the amnesty, is viewed with concern by regular and fair taxpayers.

"This is a draft law that worries AmCham members and I think there is a problem with it. Repeated tax amnesties favour only taxpayers who don't pay their obligations at a time when the bill says that only taxpayers who give up their court proceedings will benefit from this amnesty," Alketa Uruçi, an AmCham board member said at a meeting with top tax administration officials on Wednesday.

The Albanian economy has been growing by 1 to 3 percent in the past eight years compared to a pre-crisis decade of 6 percent annually, a growth rate that is considered to bring welfare to the country's economy suffering one of Europe's lowest levels of GDP per capita.

Non-performing loans at 20 percent and public debt hovering at 70 percent of the GDP are considered key barriers for the Albanian economy which is set to grow by 3.8 percent in 2017 boosted by some major energy-related investments such as the Trans Adriatic Pipeline bringing Caspian gas to Europe and a big hydropower plant by Norway's Statkraft.

 
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                    [post_content] => TIRANA, Feb. 22 - The coverage of population with water supply and the average duration of tap water slightly deteriorated in 2016 when only about 79 percent of the population had access to an average of 11.7 hours a day of water, but the local government-run companies' financial performance considerably improved, according to a report by the state-run Water Regulatory Entity, ERRU.

Back in 2015, some 81 percent of the population had access to tap water at an average of 12.1 hours a day.

Data shows the situation has remained unchanged in the past three years with water supply hours ranging from 3 to 24 hours a day and only three towns in southeastern Albania providing uninterrupted tap water thanks to funding provided by foreign donors. The low hours of water supply are problematic everywhere, but especially in tourist areas where limited access to tap water is a huge barrier for the emerging tourism industry, making water tanks and pumps a common view in almost every apartment block and house.

The coverage of operating and maintenance costs and bill collection rates slightly improved, but access to wastewater services remained unchanged at about two-thirds of total water produced, unveiling poor management and a dilapidated distribution network in huge need of investment.

“There are still operators operating at low tariffs and considering the relatively low bill collection rates, they hardly manage to cover at their own income half of the their operating and maintenance costs, i.e. direct costs. Unfortunately, some 39 water supply companies, out of a total of 59 companies are facing this issue,” says the report.

For the majority of operators, covering the total costs for the services provided would require a significant increase in tariffs, likely unaffordable by consumers, and that is why the Water Regulatory Entity's goal is the immediate coverage of operating and maintenance costs, while the coverage of total costs, that also includes depreciation and credit costs is a longer-term objective which in addition to improving infrastructure and management will also require a gradual increase in tariffs, says the regulator.

The coverage of operating and maintenance costs rose by 18 percent to 120 percent in 2016 while total cost coverage rose to 90 percent, up from 79 percent in 2015. The number of companies which fully covered their operating and maintenance costs is 19, while only eight companies managed to cover the total cost.

The 2016 data cover only the first three quarters of 2016 while the full picture of the local government run water supply companies will be unveiled later in a performance report.

Reducing losses, increasing the bill collection rate, installing meters, improving staff efficiency and energy efficiency are indicators that have a huge impact on reducing spending and management plays an important role, say energy regulator experts.

Currently, only 79 percent of the population is provided water supply, compared to only 49 percent of households who are offered collection and wastewater disposal and only 10 percent of residents covered with treatment of wastewater.

The water regulator says the decline in access to water is a result of an increase in the number of population under the jurisdiction of water supply companies following the 2015 administrative reform that cut the number of local government units from a previous 384 municipalities and communes, but which has not been accompanied by an increase in water supply service of the extra consumers.

Rural areas are strongly disadvantaged when it comes to services provided by water companies with only two-thirds of people living in villages having access to water and only 6.6 percent to wastewater services, compared to a rate of 90 percent and 76.7 percent for urban areas, respectively.

The report notes Albania's staff of 8.3 workers per 1,000 connections is almost double compared to regional countries, unveiling the inefficiency of human resources and often political patronage as noted in a previous World Bank report.

The level of losses at 67 percent shows that the majority of water produced is lost and as a result not generating income and increasing water supply costs, remaining the main concern in the past few years. More than a third of consumers are still charged fixed rate bills due to not being equipped with water meters.

Losses are a result of the companies’ poor management such as illegal connections, inaccurate metering and technical losses caused by depreciation of water systems. Both managerial and technical water losses are estimated at the same level.

Avni Dervishi, the head of the Water regulator, had earlier warned Albania needs to invest a staggering 6.4 billion euros in order to provide uninterrupted water supply all over the country.

The amount which is around 64 percent of the country’s GDP and ten times higher compared to total annual public investments of around 5 percent of the GDP  Euro 560 million) is completely unaffordable by the state budget and would take decades under current investment levels, experts say.

Only Korça, Pogradec and Librazhd provide uninterrupted water supply at adequate pressure.

According to the World Bank, Albania is better off in water resources than many developing countries, but not for all yet. Albania is endowed with an estimated 8,600 m3 per capita per year in water resources – an enviable position from the vantage point of many countries. The country has relatively high access to water in urban municipalities at 90 percent, but much lower access to piped water connections in rural municipalities at 58 percent.

Water prices for household consumers in Tirana are currently at 45 lek (€0.32)/m3. State institutions pay 120 lek (€0.87)/m3, while private companies 135 lek (€1)/m3.

 
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                    [post_content] => TIRANA, Feb. 21 - Albania is mulling a hike in the minimum wage, currently the region's lowest at €157, amid debates by unionists demanding a high increase after a three-year freeze and private sector employers worried over increased costs reducing the country's competitiveness in some key sectors, such as the garment and footwear industry, the country's top exporter relying on low labour costs.

Trade union representatives have demanded a 4,000 lek (€29) to 26,000 lek (€190) increase in the minimum wage after repeated demands for a hike were not taken into account in the past three years. Meanwhile, business representatives seem willing for a 2,000 lek (€15) hike to 24,000 lek (€176) and a lower 1,000 lek (€7.3) wage increase for some 100,000 garment and footwear workers, most of whom are paid at minimum wages.

The debate comes ahead of the upcoming June general elections at a time when the Socialist Party-led government has announced a 7 to 36 percent hike for some 164,000 public sector employees, accounting for 18 percent of total employees, following a three-year freeze.

The minimum wage for some 6,900 public sector workers is set to increase by 36 percent to 30,000 lek (€220) starting next March, ahead of the June 18 elections. The hike is part of the government’s plans to spend about $100 million on wage and pension increases in 2017, when police forces will benefit a 17 percent hike and the public administration is expected to get a 10 percent increase in monthly wages.

"Taking into account the past four years, the increase that business representatives are proposing is lower than adjusting it to inflation rate and economic growth. That is why we oppose it. Our initial demand was for a 30 percent hike, while the final compromise is at 26,000 lek (€190)," said Kol Nikolla, the head of Albania's Confederate of Trade Unions, at a meeting last weekend with the National Labour Council, a consultative body with government, employer and employee representatives.

Luan Bregasi, the head of the Business Albania association, said the 24,000 lek (€176) minimum wage is accepted by all industries, except for the garment and footwear industry.

"All industries accept a 2,000 lek (€15) increase in the minimum wage. Our proposal for garment and footwear producers is a 1,000 lek (€7.3) increase for this year and adjusting the hike to inflation rate in the coming years," said Bregasi.

Other business representatives say the hike could have negative impacts on exporting businesses relying on low labour costs.

"It is likely that the products' cost will artificially increase and the effects low profit businesses will suffer will be either cutting exports or cutting staff," says Alban Zusi, the head of Albanian Exports' Center.

Finance Minister Arben Ahmetaj said next March's government decision on the minimum wage would be a traditional increase that will not damage the country's competitiveness, hinting a 5 percent increase to 23,000 lek (€168).

Social Welfare Minister Blendi Klosi said the "increase will be made by taking into account interests of both employees and employers without damaging the labour market compared to the regional one."

Albania's current minimum wage of €157 is lower compared to all regional EU aspirant countries, including Kosovo which applies a €130 minimum wage for people aged up to 35 and €170 for elder employees.

Minimum wages in the other Western Balkans EU aspirants range from €206 in Bosnia and Herzegovina to €213 in Macedonia, €235 in Serbia and €288 in Montenegro.

While Albania offers the cheapest labour skills in the region, the tax burden is one of Western Balkan’s highest, being a barrier to attract foreign direct investment in sectors other than oil and mining despite the country’s favourable geographic position and Mediterranean climate.

Employment in Albania's private sector is led by self-employment in the agriculture sector, which provides about half of the country's jobs, but only 20 percent of the GDP, unveiling the poor efficiency of the sector which suffers underfinancing and poor investment and technology.

Employment in the private non-agricultural sector, led by the garment and footwear industry with some 100,000 workers, accounts for 37 percent of the total 972,000 employees in the country where the official unemployment rate is at 15.2 percent and youth unemployment at 30 percent. The real jobless figure is estimated to be far higher as jobless people in rural areas are almost all counted as self-employed in the agriculture sector due to possessing farmland.
                    [post_title] =>  Albania mulls minimum wage hike after three-year freeze
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                    [post_content] => TIRANA, Feb. 20 - The favourable hydro-situation and the launch of several new private and concession hydropower plants, including the Banja HPP by Norway's Statkraft in late 2016, gave a boost to domestic electricity production last year, according to data published energy regulator, ERE.

The wholly hydro-dependent domestic electricity generation rose by 21 percent to 7,136 GWh in 2016, meeting the overwhelming majority of the country's needs.

State-run KESH power utility, which manages the country's three biggest hydropower plants situated in the northern Drin River cascade and produces about three-quarters of domestic electricity, saw its energy production increase by 14 percent to about 5,100 GWh compared to 2015.

Meanwhile, private and concession hydropower plants increased their share in the domestic hydropower production by 4 percent to 28 percent with a production of 2,000 GWH in 2016.

The 73 MW Banja HPP that delivered its first electricity in Sept. 2016, being the first of two major HPPs Norway's Statkraft is building as part of its Devoll hydropower project, produced only about 70 GWh during its first three months of operation in 2016.

The Ashta HPP, a €200 million by Austria’s Verbund and EVN, operational since early 2013, increased its production to 276 GWH in 2016, accounting for 13 percent of electricity produced by about 100 private and concession hydropower plants.

The Vlora thermal power plant, a new 97 MW $112 million low-sulphur distillate oil fuelled power plant, available for use since 2010, but which has not been put to use because of high fuel costs, was not involved in electricity production. The power plant has not been taken over by Albanian power utility KESH yet as it faces an arbitration trial with an Italian company that built it due to financial disputes and problems in the plant’s cooling system. The Trans Adriatic Pipeline, already in its construction stage and scheduled to bring the first Caspian gas flows to Europe by 2020 is the only hope to make the plant operational due to its cheaper operation on natural gas.

Earlier this month, the Albanian Parliament approved a new renewables law following a deal with small HPP investors who had raised concerns and warned of a legal battle over the initial draft law on promotion of energy use from renewable sources.

The Albanian Renewable Energy Association (AREA), representing some 60 small and medium-sized HPPs with a capacity of up to 15 MW with a total investment of Euro 650 million, had warned the proposed transfer of the HPP contracts from state-run power utility KESH to the other state OSHEE distribution operator did not guarantee the sale of the electricity they produce and was a high-risk move that could take investors to bankruptcy. The dispute was settled last December following months of disputes with mediation by Vienna-based Energy Community Secretariat which will be involved in the setting of a methodology for the calculation of a support scheme applicable to existing producers.

Albania is liberalizing its energy market by disconnecting big electricity consumers from the state-run OSHEE distribution operator, but the reform has faced difficulties due to few private sector operators.

Most recently, some 73 companies linked to the 35 kV grid have had their deadline to disconnect from the public operator and find other alternatives by June 30, 2017.

The nationalization of the country’s electricity distribution operator in 2013 following a failed three and a half years privatization and the launch of a nationwide campaign to collect hundreds of millions of euros in accumulated unpaid debts and cut off illegal connections has considerably improved the country’s electricity situation with grid losses estimated to have dropped to 28 percent, compared to a record 43.4 percent in late 2013.

With domestic energy production relying on rainfall dependent hydroelectricity, Albania has also diversified its electricity resources by building a new interconnection line to Kosovo but its operation is being held back by Serbia over a transmission grid dispute with Kosovo, in a conflict that continues nine years after majority ethnic Albanian Kosovo declared its independence from Serbia.

The new German-funded interconnection line and the expected joint power exchange will help Kosovo’s lignite-fired power plants and Albania’s hydro-dependent electricity system exchange electricity during their peak production levels, reducing dependency on costly imports.
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                    [post_content] => TIRANA, Feb. 20 - The rapid development of the country's oil industry in the past decade has turned Albania into one of Europe's top three least dependent countries on imports of fossil fuels, according to a report published by Eurostat, the European Union's statistical office.

With an import dependency rate on fossil fuels at 11 percent in 2015, Albania lagged behind only Norway and Denmark, two of Europe's largest oil producers. A decade earlier, just before the first concession oil exploration and production contracts were signed in 2005, Albania had an import dependency rate of 73 percent.

Back in 1990, just before the collapse of the country's communist regime, Albania also ranked as Europe's third least dependent economy on imports of fossil fuels, with a dependency rate of only 8 percent, showing the extent to which an economy relies upon imports in order to meet its energy needs.

Due to lack of investment and its outdated drilling and refining technology, Albania's state-run oil sector almost paralyzed for more than 15 years to take a new impetus only in 2004 when a 25-year concession contract was signed with Canada-based Bankers Petroleum to develop Patos-Marinza, the largest onshore oilfield in continental Europe situated in southwestern Albania.

Huge investment turned Bankers Petroleum into the country's largest exporter with a production that peaked at slightly more than 20,000 barrels of oil per day in 2014 ahead of the slump in commodity prices forcing the company to revise downward its drilling and investment plans until it was sold to China's Geo Jade for €392 mln in mid-2016 following disputes with the Albanian government over taxes and the safety of its drilling operations affecting local residents.

The Eurostat report shows Albania's energy consumption has remained unchanged at 2.2 tonnes of oil equivalent (toe) in the past decade, compared to 2.6 toe in 1990 just before the collapse of the 45-year communist regime and much of its industry. The country’s resident population during the past 25 years has also dropped from an estimated 3.2 million in the early 1990s to a current 2.8 million affected by massive migration and lower birth rates.

Albania’s share of fossil fuels, involving non-renewable energy sources such as coal, natural gas, crude oil, petroleum products, dropped to 59 percent in 2015, down from 67 percent a decade earlier and 76 percent in 1990.

The decline is also a result of rising renewable energy production as dozens of new hydropower plants have been made operational in the past decade on concession contracts, making domestic electricity production wholly hydro-dependent.

An earlier Eurostat report showed that thanks to its huge oil and renewable hydro-electricity production, Albania is one of Europe’s least dependent countries on energy imports.

Due its poor quality and heavy-refining needs, much of Albania’s crude oil is exported, making the country almost totally reliant on oil imports for its consumption needs, with fuel prices being one of Europe’s highest due to their huge tax burden, despite the country having one of the continent's lowest GDP per capita.

The gradual pickup in international oil prices following the mid-2014 slump is expected to give a new boost to the country's oil industry where Dutch giant Shell is also involved in some major explorations.

Meanwhile, domestic electricity production is currently wholly dependent on the hydro-situation making it vulnerable to weather conditions, but meeting the overwhelming majority of the country’s needs.

A World Economic Forum report has also ranked Albania as one of the top 20 performers globally on its ability to deliver secure, affordable and sustainable energy because of the country's wholly hydro-dependent electricity production and huge oil production.

In addition to hydropower, Albania is estimated to have large untapped wind and solar energy potential that can be cost-competitive.
                    [post_title] => Eurostat: Albania, one of Europe’s least dependents on fossil fuel imports 
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                    [post_date] => 2017-02-17 11:13:07
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                    [post_content] => TIRANA, Feb. 16 - Two junior Canada-based companies have acquired mining and oil exploration licences in Albania as commodity prices are picking up following the mid-2014 slump.

Canada-based Tirex Resources says it has obtained a 25-year mining licence for the Rehova copper property in the southeastern Albanian district of Korça.

The license came after a court battle with another private company whose Rehova licence had been revoked by the Albanian government to meet contractual obligations.

Rehova is a high grade past producing copper mine with approximately 84 percent of the pre-mining historic mineralization reported to be intact and with deposits largely untested as to gold, silver and zinc content.

"The approval of the license will finally allow Tirex to move ahead with its plans on Rehova which has been on hold while the court case was being heard. With this license we can begin work on Rehova and update our plans on our Mirdita assets in northern Albania which has also been put on hold as we wait for the resolution on Rehova," said Tirex president Fred Tejada as quoted in a statement.

Tirex's Mirdita Project covers an area of approximately 344 km2 and is located approximately 70 km northeast of Albania's capital city, Tirana and 85km northeast of the port city of Durres on the Adriatic Sea with copper, zinc, gold, and silver mineralization.

Penine Petroleum, another junior Canada-based company, says it has reached a deal with Albania's state-owned Albpetrol oil company on the exploration and development of the Velca Block, southern Albania.

The production sharing agreement is a 6-year exploratory lease, convertible to a 25-year production lease upon discovery of oil or natural gas accumulations.

"We believe this agreement provides a balanced risk-and-reward contract for the exploration and development of the Velca Block—and, we hope, many other opportunities in Albania,” says Pennine chairman Richard Wadsworth, who led Bankers Petroleum Ltd. in re-developing the Patos Marinza oilfield as its president from 2004 through 2008.

Last year, Canada-based Bankers Petroleum, the country's biggest oil producer, was acquired by a Chinese company after more than a decade of operations in the country. The acquisition by China’s Geo Jade for $575 million (€392 mln) came as international oil prices dropped to a record low and a company tax dispute with the Albanian government escalated.

The slump in commodity prices since mid-2014 has severely affected Albania's oil and mining industry, producing the country's second largest exports, paralyzing investment and cutting staff with a negative impact on the country's economy.

The 2017 oil and mining prospects seem more optimistic as commodity prices are picking up.
                    [post_title] => Junior Canadian companies get mining, oil licences
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                    [post_date] => 2017-02-17 10:00:33
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                    [post_content] => TIRANA, Feb. 16 - Albania has launched e-inspections into businesses in a bid to increase transparency, reduce corruption and improve the climate of doing business in the country.

Chief inspector Shkelqim Hajdari says the innovation will bring more transparency among inspection teams and enterprises.

In an earlier interview with the VoA in the local Albanian service, Hajdari said Albania faces a number of problems in meeting standards in the food, construction, water and mining sectors.

Back in 2011, Albania cut the number of inspectorates from 36 to 11 in an effort to increase efficiency and cut costs for businesses. The country currently has eight inspectorates and some 1,500 inspectors in the labour, food, health, mining, education, metrology and environment sectors.

Albania's general tax administration has also recently made available a hotline to assist businesses with tax related enquiries. Starting Feb. 1, businesses can phone 0800 00 02 to get information of electronic filing, tax legislation and services offered by the tax administration.

Relations with tax authorities are considered problematic by more than a third of businesses in Albania, according to a survey by the American Chamber of Commerce.

 
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                    [post_date] => 2017-02-16 12:57:11
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                    [post_content] => survey

TIRANA, Feb. 16 – Two-thirds of businesses in Albania consider the business climate unfavorable with courts, corruption and frequent changes in legislation and tax procedures as the top concerns, according to a survey conducted on behalf of the Foreign Investors Association of Albania, representing the country’s top investors.

Expectations for 2017 remain grim with only 10 percent of the 70 surveyed foreign investors describing the business environment as favorable and more than a third as unfavorable.

Courts and corruption became a tougher issue for about three-quarters of foreign investors in 2016 as the country struggled to approve a long-awaited justice reform that is expected to overhaul the highly corrupt perceived judiciary by vetting all prosecutors and judges over their professional proficiency, moral integrity and independence from the influence of the organized crime, corruption and political power.

Courts were rated as a severe problem by 78 percent of the surveyed businesses, followed by corruption with 72 percent. Both ratings registered a 10 to 12 percent increase compared to 2015.

Interestingly enough, the poor efficiency of administrative courts became a severe problem for more than two-thirds of the surveyed businesses compared to only about half in 2015.

Three years after their establishment, administrative courts are failing to examine business appeals in time and about three-quarters of their decisions are in favour of the public administration, according to an earlier report by the Albanian Investment Council, an institution with the goal of enhancing public private dialogue.

Frequent changes in legislation and tax procedures are also an issue for 67 percent of surveyed businesses.

One year after a rather aggressive nationwide campaign against informality that formalized thousands of businesses previously operating informally, informal or illegal competition remains a top concern for 66 percent of foreign investors compared to 65 percent in the previous year after the campaign was launched in Sept. 2015.

The predictability of policies and the clarity and understanding of the tax framework and procedures also remain a concern for two-thirds of businesses.

The long-standing issue of clear property titles was a concern for about 60 percent of the respondents while the tax burden remained a concern for 55 percent of investors.

Violence against an American-Lebanese executive last August led to a Dubai-based company withdrawing from a major tourist resort investment worth $450 million that was supposed to create 1,200 jobs by 2018 at the Gjiri i Lalzit Bay, just outside Durres, some 35 km from Tirana.

Businesses have often voiced concern over high taxes as a barrier curbing foreign direct investment considering tough competition from neighboring countries applying lower tax rates.

Since 2014, the corporate income tax and the withholding tax on dividends, rents and capital gains have increased by 5 percent to 15 percent, making the tax burden in Albania one of the region’s highest and the key concern for the business community in the country.

Labor regulations, access to electricity, finance and skilled labor as well as the crime and theft situation are rated as Albania’s best performing indicator but yet are considered an issue by more than a third of surveyed businesses.

Silvio Pedrazzi, the president of the Foreign Investors Association in Albania and the CEO of one of the country’s leading commercial banks, said the implementation of reforms and rule of law were the biggest concerns for doing business in Albania.

“Businesses are moving through a complicated path. The level of expectations goes hand in hand with the level of the implementation of reforms. The business environment is becoming more demanding as competition gets tougher,” Pedrazzi was quoted as saying.

Dietlof Mare, the CEO of Vodafone Albania which has been operating in the country for the past 15 years, singled out the issue of corrupt judges as the top concern affecting businesses in Albania, demanding transparency, consistency and rule of law.

Finance Minister Arben Ahmetaj, who has been repeatedly praising progress with the country’s economy, described the survey findings as not representative of the business climate due to the small sample of only 70 companies taken into account, citing progress in the latest Doing Business report.

Albania climbed 32 steps to rank 58th among 190 global economies in the latest Doing Business report to score its best ever ranking, but yet lagged behind some of its key regional competitors offering lower taxes and easier procedures.

Albania’s foreign direct investment is set to register a considerable boost in the next few years boosted by some major energy-related projects and a pickup in commodity prices but face headwinds by 2020 when key investments such as the Trans Adriatic Pipeline have been completed.

The Devoll hydropower plant and TAP have been the main sources of FDI in Albania in the past couple of years following the mid-2014 slump in commodity prices paralyzing investment in the key oil and mining sectors and considerably affecting the country’s poorly diversified exports.

Albania has been the second largest FDI recipient among five EU aspirant SEE economies for the past six years lagging behind only Serbia which is a much bigger economy. Thanks to huge investment in energy-related projects such as oil and hydropower plants, Albania has managed to attract about $1 billion in FDI annually in the past few years.
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                    [post_date] => 2017-02-15 17:05:22
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                    [post_content] => heritage

TIRANA, Feb. 15 – Albania lost six places to rank 65th among 180 world economies in the 2017 Index of Economic Freedom, maintaining its rating as a moderately free economy, but remaining among the best performing regional EU aspirants, according to a report published by Heritage Foundation, one of the top think tanks in the U.S.

The report that evaluates countries in four broad policy areas that affect economic freedom shows Albania made steps backwards in the rule of law, government size, regulatory efficiency and open market.

Albania still outperformed most of its regional EU aspirant competitors, except for neighbouring Macedonia which ranked 31st as a mostly free economy and Kosovo as moderately free but 46th. Serbia ranked 99th as mostly unfree, while Montenegro and Bosnia and Herzegovina 83rd and 92nd respectively as moderately free economies.

Albania achieved its best ever result in the Index of Economic Freedom in 2010 when the country ranked 53rd.

The Heritage Foundation report notes more reform in needed to ensure the growth of economic freedom and encourage vibrant economic development.

“Albania continues on a path of gradual economic recovery, confronting challenging external conditions, but more reform is needed to ensure the growth of economic freedom and encourage vibrant economic development,” says the report.

“The judicial system remains inefficient and vulnerable to political interference, and corruption is still perceived as widespread. Expansionary government spending has led to budget deficits and growing public debt in recent years, but the deficits have been narrowing,” it adds.

Rule of law

“Development of property legislation has been piecemeal and uncoordinated. Real estate registration procedures are cumbersome. The judiciary, although constitutionally independent, is subject to political pressure and intimidation and has limited resources. A 2015 law bars convicted criminals from holding public office, but public administration continues to be plagued by inefficiency, incompetence, and widespread corruption,” says the report.

 Government size

“The top individual income tax rate is 23 percent, and the top corporate tax rate is 15 percent. Other taxes include a value-added tax and an inheritance tax. The overall tax burden equals 23.6 percent of total domestic income. Government spending has amounted to 30.3 percent of total output (GDP) over the past three years, and budget deficits have averaged 4.9 percent of GDP. Public debt is equivalent to 71.9 percent of GDP.”

 Regulatory efficiency

“Business start-up procedures have become less costly, and there is no longer a minimum capital requirement for setting up a company. Labor demand in the formal economy, which has a high level of self-employment, is significantly influenced by the public sector. The government is on course to phase out many subsidies and price controls for electricity, water, agricultural products, and railroad transportation.”

Open markets

“Trade is important to Albania’s economy; the value of exports and imports taken together equals 71 percent of GDP. The average applied tariff rate is 1.1 percent, and bureaucratic barriers deter international trade and investment. Most banks are foreign-owned. The banking system has benefited from increased competition and remains stable, but the number of nonperforming loans hinders credit growth.”

 

Opposition concerned

Reacting to the findings of the report, the opposition Democratic Party said losing 11 places in the past four years of the Socialist Party-led government was an indicator of deteriorating business climate.

“The Heritage Foundation report unfortunately places Albania 11 places below 2013. As businesses already know, even international reports express concern over the regress that is taking place with economic policies in Albania where high public debt, high fiscal pressure and inefficient public spending remain concerning,” said Besart Kadia, the Secretary for Entrepreneurship at the opposition Democratic Party.

The opposition Democrats say the Heritage Foundation report, which in 2014 received praise by Prime Minister Edi Rama for ranking the country’s 54th, is an indicator showing doing business is becoming more difficult.

“The only thing a government can do is offer businesses an efficient and professional administration. But, for Heritage Foundation, the most authoritative institution in the Republican administration policies in the U.S., Albania has ended up with an administration that has become a burden to do business because ‘the administration is plagued by inefficiency, incompetence and corruption,'” said Kadia.

The opposition Democrats pledge to introduce a 9 percent flat tax should they win the upcoming June 18 elections “to ease Albanian businesses from the complicated progressive taxation and promote employment and economic growth.”
                    [post_title] => Albania loses ground in global economic freedom index
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                    [post_date] => 2017-02-14 17:07:01
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                    [post_content] => TIRANA, Feb. 14 – Increased uncertainties over the upcoming June 2017 elections, a longer than expected credit recovery and the conclusion  of a three-year deal with the International Monetary Fund could put Albania’s fiscal consolidation efforts at risk, the European Commission warns in its latest Winter European economic forecast.

The warning comes as the run-up to general elections has always been accompanied by threats to public finances in Albania in the past 25 years of transition with incumbent governments sharply increasing public investments and putting at risk budget deficit and public debt targets, apparently to gain an electoral advantage.

“Increased political uncertainty related to the parliamentary election in June 2017 might dampen consumption and investment. Credit recovery might take longer than expected in the context of persistently high non-performing loans. The elevated level of sovereign debt provides little room for countercyclical policies in case of need,” says the Commission.

Albania’s credit has struggled to recover in the past year as non-performing loans stand at 20 percent contributing to tighter lending standards by banks while demand by both households and businesses remains poor despite loan rates having considerably reduced.

The report also notes Albania’s fiscal consolidation efforts are associated with two major risks such as the upcoming June 18 elections and the conclusion of a binding 3-year deal supported by a €331 million loan with the IMF in early 2017.

“The fiscal projection is associated with two significant risks. One is that the government may relax its fiscal policy stance in the context of the upcoming elections. The other is the scheduled termination of the IMF’s Extended Fund Facility Arrangement for Albania in February 2017 which means that the government’s consolidation strategy will lose an important anchor,” adds the Commission.

The European Commission expects the Albanian economy to slightly pick up to 3.5 percent and 3.6 percent respectively for 2017 and 2018 in forecasts which are 0.3 to 0.6 percent lower compared to the Albanian government’s more optimistic forecasts. Public debt, currently hovering at a record high of 71 percent of the GDP, is expected to only slightly reduce to 68.7 percent of the GDP, compared to the Albanian government’s more optimistic forecast of 65.7 percent by 2018.

“Economic growth is picking up gradually based on household spending and private investment. An accommodative monetary policy stance, an improving labour market, and strong FDI inflows are set to support consumer spending and business investment over the next two years. The fiscal deficit and the public debt ratio are projected to decline, but the government’s commitment to fiscal consolidation may be tested by the end of the IMF programme and the upcoming elections,” says the Commission.

On the upside, the Commission expects the implementation of structural reforms, such as the recently started comprehensive overhaul of the justice system, to improve the business environment and, in the longer run, the economy’s growth potential.

The EU also expects Albania’s upward investment trend to continue, mainly thanks to some major energy-related projects such as the Trans Adriatic Pipeline bringing Caspian gas to Europe and the Devoll hydropower plant.

Investment in the extraction sector is also expected to pick up as commodity prices recover with a positive impact on Albania’s oil and mining industry, producing the country’s second largest exports.

 Italy, Greece’s recovery to help

The moderate economic recovery in Italy and Greece, Albania’s top trading partners and investors, is also expected to have a positive impact through higher demand for Albanian exports and potentially higher migrant remittances from an estimated 1 million migrants who live and work there.

The recession in the two neighboring countries following the 2008 global crisis significantly affected the Albanian economy through lower trade, investment and remittances.

The European Commission expects Italy, the country’s top trading partner accounting for half of total exports and 30 percent of imports, to grow by about 1 percent in 2017 and 2018 supported by low real interest rates and stronger external demand. The Italian economy has been growing by sluggish rates of slightly above zero since 2014 after overcoming a three-year recession.

Meanwhile, neighbouring Greece, the host of about half a million Albanian migrants and whose economy contracted by about a quarter since 2008 in its worst ever recession is expected to return to moderate growth rates of 2.7 percent to 3.1 percent in 2017-2018.

While Greece has maintained its top investor position in Albania in the past crisis years, its position as Albania’s traditional second largest trading partner has considerably waned.

The Commission report notes the European economy is set to continue at a moderate pace but the forecast is surrounded by uncertainty.

“There is a high degree of uncertainty surrounding the global economic outlook at present. This comes after an already difficult 2016, in which the European economy had to cope with numerous international and domestic challenges including the lowest pace of global and trade growth since 2009, geopolitical tensions, terrorist attacks in several member states, stressed banking sectors, the UK’s vote to leave the EU and a mounting backlash against globalization,” the report says.

Albania, an EU candidate since mid-2014 is hopeful of launching accession negotiations with the EU by late 2017 pending results from the implementation of a long-awaited justice reform and the conduct of fair elections next June when a new government will come out.

 

 

 
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            [post_date] => 2017-02-22 17:33:27
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            [post_content] => TIRANA, Feb 22 - As the country prepares for next June's general elections and the opposition Democrats have launched an indefinite protest over free and fair elections, the ruling Socialist Party-led government has reconfirmed a tax amnesty that pardons some 91 billion (€666 million) in accumulated taxes for both businesses and households and approved a 3 percent hike for more than 600,000 pensioners.

The partial amnesty, already approved by the government this week and pending the final okay in Parliament, fully pardons only pre-2011 tax and customs debts which Finance Minister Arben Ahmetaj described as uncollectable due to having exceeded the five-year legal deadline to initiate forceful collection. Fines and late-payment for the 2011-2014 are also pardoned on condition that full taxes, tariffs and social security contributions are paid within six months after the law has become effective.

Potential debts that are pardoned include an unconditional write off of pre-2011 debts of 29.5 billion lek (€216 mln) in principal, fines and late payment penalties and a conditional write-off of 61.45 billion lek (€500 mln) in fines and late payment penalties provided about 35 billion lek is paid in principal for the 2011-2014 debts.

Thousands of car owners who have paid no taxes until December 2011 will benefit from automatic deregistration and be stripped of obligations. Vehicle owners are also offered to have their car fines and late payment penalties pardoned for the 2011-2014 period provided they pay taxes, but the concession is expected to benefit only a few as owners who still possess the cars would have to pay six years in taxes including penalties for the past couple of years. Some 140,000 cars whose taxes during the past five years have not been are expected to be automatically deregistered. A majority of these cars are believed to have been sold for spare parts and scrap.

"This law is a promise kept, but above all very clear and a considerable incentive in the country's fiscal and economic environment," said Finance Minister Arben Ahmetaj.

Companies that have been sentenced under a final court decision for tax evasion and smuggling are not eligible to benefit from the partial amnesty.

The concessions come after two rather aggressive nationwide campaigns to collect accumulated unpaid electricity bills and fight widespread informality that the ruling Socialists initiated in the past couple of years, collecting hundreds of millions of euros.

The tax amnesty initiative, an apparent move to gain an electoral advantage often used by ruling majorities in pre-election times during the past two decades, comes as the incumbent Socialist Party-led government that is seeking a second consecutive term eased some doing business procedures for 2017 but left unchanged the key taxes, one of the key concerns for business representatives.

Since 2014, the corporate income tax and the withholding tax on dividends, rents and capital gains have increased by 5 percent to 15 percent, making the tax burden in Albania one of the region’s highest and the key concern for the business community in the country.

The bill envisages a pardon of fines and penalties from 2011 to 2014 on condition businesses pay the initial obligation, but no amnesty for the 2015-2016 obligations except for penalties mistakenly imposed by the tax administration’s IT system. Heavy fines of €70,000 imposed under a law turned down by the country’s constitutional court in early 2016 for violating the principle of proportionality following the launch of a nationwide campaign against informality in late 2015 will also be pardoned.

In addition to a modest inflation-adjusted hike for pensioners, the ruling Socialists will also apply wage hikes of 7 to 36 percent for some 164,000 public sector employees starting next March as part of $100 million spending plan on wages and pension increases for 2017.

The move comes as another amnesty offering households and businesses to reassess their property at modest tax rates of 2 percent, compared to a mandatory 15 percent, initially set to expire in late February after remaining effective for six months, has been postponed until the end of May.

The tax amnesty also comes at a time when the government has just concluded its binding three-year deal with the International Monetary Fund supported by a €331 million loan. The IMF and several business representatives have been skeptical of the amnesties, especially during pre-election periods because of creating a culture of impunity among businesses that avoid paying taxes and damaging fair businesses.

The American Chamber of Commerce, representing some of the country's top foreign investors, says the amnesty, is viewed with concern by regular and fair taxpayers.

"This is a draft law that worries AmCham members and I think there is a problem with it. Repeated tax amnesties favour only taxpayers who don't pay their obligations at a time when the bill says that only taxpayers who give up their court proceedings will benefit from this amnesty," Alketa Uruçi, an AmCham board member said at a meeting with top tax administration officials on Wednesday.

The Albanian economy has been growing by 1 to 3 percent in the past eight years compared to a pre-crisis decade of 6 percent annually, a growth rate that is considered to bring welfare to the country's economy suffering one of Europe's lowest levels of GDP per capita.

Non-performing loans at 20 percent and public debt hovering at 70 percent of the GDP are considered key barriers for the Albanian economy which is set to grow by 3.8 percent in 2017 boosted by some major energy-related investments such as the Trans Adriatic Pipeline bringing Caspian gas to Europe and a big hydropower plant by Norway's Statkraft.

 
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