Albania fails to make innovation progress, report shows

Albania fails to make innovation progress, report shows

TIRANA, June 21 – Albania has failed to make any significant progress in innovation during the past decade, according to the Global Innovation Index. The annual report published by U.S-based Cornell University, the INSEAD business school, and the World Intellectual

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Concession HPPs income hit record high of €80 mln in 2016

Concession HPPs income hit record high of €80 mln in 2016

TIRANA, June 21 – Fuelled by favorable hydro situation and the launch of operation by more than a dozen new hydropower plants, private and concession HPPs registered record high income in 2016, despite the sale price slightly being revised downward.

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Albania’s administrative courts fail to render timely justice, OSCE report shows

Albania’s administrative courts fail to render timely justice, OSCE report shows

TIRANA, June 20 – Justice delayed is justice denied, says a legal maxim. That seems to be the case with Albania’s newly established administrative courts which are failing to render timely justice. Insufficient material and human resources and poor infrastructure

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Exports grow by double digits as steelmaker escapes bankruptcy, oil prices pick up

Exports grow by double digits as steelmaker escapes bankruptcy, oil prices pick up

TIRANA, June 19 – Albania’s exports are back to double digit growth rates this year thanks to the resumption of production by the country’s largest steel plant and a pickup in international oil and mineral prices. Data published by state

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Vienna Institute: Albania loses regional race to attract Austrian investors

Vienna Institute: Albania loses regional race to attract Austrian investors

TIRANA, June 15 – Austrian foreign direct investment to Albania has significantly slowed down in the past four years, turning Albania into one of the Western Balkans least attractive destinations for Austrian investors. A report by the Vienna Institute for

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Abandoned Dajti hotel ready to turn into central bank facility

Abandoned Dajti hotel ready to turn into central bank facility

TIRANA, June 14 – The landmark Dajti hotel in Tirana’s central boulevard, once the capital’s city sole luxury hotel during the post-WWII decades of communist rule, will finally be reconstructed under a three-year €16 million project serving as a facility

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Unjustified promises dominate main parties’ electoral platforms, study shows

Unjustified promises dominate main parties’ electoral platforms, study shows

TIRANA, June 14 – The electoral platforms of Albania’s three largest parties, the ruling Socialist Party, the opposition Democratic Party and the third largest Socialist Movement for Integration do not provide the necessary instruments to support sufficient economic growth and

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Eurostat: Albania’s GDP per capita, consumption remain Europe’s lowest

Eurostat: Albania’s GDP per capita, consumption remain Europe’s lowest

TIRANA, June 13 – Albania’s level of economic activity and household material welfare continue to remain one of Europe’s poorest, unveiling growth in the Albanian economy has to sharply pick up in order catch up with its regional competitors. The

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FDI, tourism revenue see modest increase in year’s first quarter

FDI, tourism revenue see modest increase in year’s first quarter

TIRANA, June 13 – Albania’s foreign direct investment and tourism income only modestly increased in the first quarter of this year when foreign companies operating in the country sharply increased transfer of profits, according to the central bank. Data from

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Albania suspends new public tenders, PPPs during electoral campaign

Albania suspends new public tenders, PPPs during electoral campaign

TIRANA, June 12 – Albania has suspended new public tenders and concessions until the June 25 general elections in a bid to curb the misuse of financial resources during the electoral campaign. The government decision came on June 1 following

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                    [post_content] => TIRANA, June 21 - Albania has failed to make any significant progress in innovation during the past decade, according to the Global Innovation Index.

The annual report published by U.S-based Cornell University, the INSEAD business school, and the World Intellectual Property Organization, ranked Albania 93rd out of 127 countries for 2017, lagging behind almost all of its regional competitors. The 2017 rating is almost unchanged to 2016 when the country ranked 92nd out of 128 countries.

A decade ago, when the first report measuring innovation performance was released, Albania ranked 100th out of 107 countries before reaching its best ever ranking of 87th out of 140 economies in 2015.

The 2017 report shows knowledge and technology outputs, business sophistication, creative output and human capital as well as research remain Albania's weakest indicators. The country ranks better when it comes to market sophistication, institutions and infrastructure.

“Innovation is key to sustaining the productivity growth required to meet this rising demand and to helping enhance the networks (food systems) that integrate sustainable food production, processing, distribution, consumption, and waste management,” says the report’s 10th edition focused on innovation in agriculture and food systems.

Experts warn that in the coming decades, the agriculture and food sector will face an enormous rise in global demand, increased competition for limited natural resources, and the effects of climate change.

Agriculture is also a key sector in the Albanian economy, employing about half of the country’s population, but accounting for only a fifth of the GDP unveiling its poor efficiency. A World Bank report has earlier the livelihoods of Albania's rural population will be at risk without a clear plan for aligning agricultural policies with climate change.

The Global Innovation Index provides detailed metrics about the innovation performance of 127 countries with its indicators exploring a broad vision of innovation, including political environment, education, infrastructure and business sophistication.

In its latest country report on Albania, the European Commission says Albania's capacity for technological absorption and research, development and innovation is low.

"Key obstacles include low expenditure on research and development at about 0.4 percent of the GDP, weak links between the scientific and private sectors as well as the fragmentation of the national research and innovation system," says the report about Albania, an EU candidate country, aspiring to launch accession negotiations by the end of the year.

Due to the weak innovation policy infrastructure, almost all sectors of the economy mainly provide low-technology, labour intensive and low-cost products and services.

"Increased funding and a more focused RDI strategy in a number of specific sectors, particularly in energy, agro-food and sustainable tourism, would support the country's capacity to attract investment in research, development and innovation," says the European Commission.

 
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                    [post_content] => TIRANA, June 21 - Fuelled by favorable hydro situation and the launch of operation by more than a dozen new hydropower plants, private and concession HPPs registered record high income in 2016, despite the sale price slightly being revised downward.

An annual report by energy regulator, ERE, has shown private and concession HPPs increased their income to a record high of 10.8 billion lek (€80 million) in 2016, up 35 percent compared to 2015.

A revise downward in electricity prices had a negative income on higher production.

Albania's concession HPPs sell their electricity to state-run KESH power utility which manages the country's three biggest HPPs on the Drin River Cascade in northern Albania. Recent legal changes have transferred the HPP concession contracts to OSHEE, the state-run electricity distribution operator.

Since 2015, prices are determined based on a formula taking into account average prices at the Hungarian Power Exchange, a 1.24 coefficient and the average annual euro/lek exchange rate in considerably lower rates affecting new concession HPPs. The government changed the formula following huge losses the state-run power utility was suffering under the previous differentiated rates.

“The increase in income did not follow the same pace to the production hike because of a lower adopted electricity sale price compared to the previous year following the fluctuation of prices at the Hungarian Power Exchange as a key element in the formula of calculating prices for these category of producers,’ says the energy regulator.

As a result, while the amount of electricity generated by private and concession HPPs rose by about 39.5 percent, income from the sale of energy rose by only 31.6 percent.

Power utility KESH bought electricity at a unified rate of 7.448 lek (€0.055)/kWh from all private, concession and new concession HPPs, down from 7.636 lek (€0.0556)/kWh in 2015 and differentiated higher prices for new concession HPPs until 2014.

Albania had plenty of rainfall in 2016 significantly improving the country’s wholly hydro-dependent domestic electricity generation while 16 new HPPs were made operational taking the number of private and concession HPPs to 139. Among the new HPPs launched was also the Banja HPP built by Norway’s Statkraft as part of its major Devoll Hydropower project that is expected to conclude by late 2018 with the completion of a bigger HPP. The two power plants are expected to produce about 700 GWh annually, increasing Albania’s electricity generation by 17 percent.

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 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.

Albania had some 76 small private and concession HPPs with a capacity of up to 2 MW at the end of 2016, compared to 57 HPPs with a capacity of 2 to 15 MW and 6 HPPs of more than 15 MW.

Concession HPPs have seen a boom in the past decade with the government offering incentives to domestic and foreign investors in a bid to meet the country’s domestic demand and turn into a regional electricity exporter.

Concession contracts are usually awarded on a build, operate transfer basis for 35 years.

The nationalization of the country’s electricity distribution operator in 2013 following a failed three and a half years period of 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, June 20 – Justice delayed is justice denied, says a legal maxim. That seems to be the case with Albania’s newly established administrative courts which are failing to render timely justice.

Insufficient material and human resources and poor infrastructure remain problematic in Albania's administrative courts, operational for about three and half years now, a monitoring report by the OSCE Presence in Albania has found.

“Although trials were processed in a timely manner at first instance, this was not the case at the appellate level. Scheduling of hearings and case adjudication in the sole Administrative Court of Appeal tends to be prolonged and violates the 30 day deadline imposed by the law on administrative courts for adjudication of appealed cases,” says the OSCE.

The report is based on an analysis of the data collected during the OSCE Presence in Albania’s monitoring of 159 administrative cases between May 2015 and May 2016.

The OSCE Presence monitored administrative proceedings in all six administrative courts of first instance from May 2015 until end of November 2015, and at the Administrative Court of Appeal from May 2015 to May 2016. The cases most frequently brought before the administrative courts are labor disputes, followed by property restitution or compensation disputes, taxes, customs duties and related fines, licensing for commercial purposes and pension benefits. In the overwhelming majority of 98 percent of cases observed, lawsuits were brought by citizens or private businesses.

Albania’s new administrative justice system, with six specialized first instance courts and one appellate court began operating in November 2013 after a saga in Parliament to get the necessary qualified vote because of political disputes between the two main political forces.

The new court system was described as an important step in reforming the judicial system, ensuring legal review of administrative decisions by independent courts, increasing transparency and fighting corruption in the civil service. It was meant to ease the case burden of other courts and allow specialized judges to deal with administrative cases, provided that the necessary resources are allocated.

The Administrative Courts of Vlora, Shkodra, Durres, Korça and Gjirokastra have four judges each, while the Tirana Administrative Court has 16 judges. The Appeals Administrative Court in Tirana which covers all of Albania has only seven judges. An Administrative College operates at the Supreme Court as the highest Administrative Court instance to complete the full legal infrastructure ensuring the independent legal review of administrative decisions.

In their one-year monitoring, OSCE observers noted good practice before first instance courts which generally processed cases without delay. “The shortcomings which caused delays in adjudicating cases before the Administrative Court of Appeal are a significant concern. A large backlog of cases, which was said to result from the lack of judges and other court staff, is not a justified reason for non-compliance with international fair trial standards in relation to the adjudication of administrative cases within reasonable time,” said the OSCE.

Although most litigants were represented, the Presence noted the very small proportion of litigants who instructed a legal aid lawyer, recommending measures to increase public awareness of this possibility.

In its detailed report, the Presence makes 18 recommendations for the improvement of the administrative justice system, including tackling issues in the location of courts, hearing schedules, public information counters, physical access and amenities for people with disabilities, recording of hearings and duration of trials.

"Coordination with the School of Magistrates should be improved to ensure that hearings are not scheduled for days when the judges are attending training," says one recommendation.

"If the Administrative Court of Appeal is to continue as the sole administrative court at appellate level for the entire country, the Presence recommends that court personnel, including judges, legal assistants and support staff, should be increased. Alternatively, and preferable from the Presence’s perspective, the Albanian legislative and executive could consider increasing the number of administrative courts of appeal in the country," says another recommendation.

"Where there is a case backlog, measures, such as the appointment of additional judges or administrative staff, must be taken promptly to address the problem," it adds.

An earlier 2016 report by the Albanian Investment Council found that two years after their establishment, administrative courts were failing to examine business appeals in time and about three-quarters of their decisions are in favor of the public administration.

“Administrative courts do not possess capacities to objectively review cases within legal deadlines, taking into account the high number of cases filed in such courts and the limited number of judges,” says the Investment Council report about disputes the business community has with the public administration.

Perceived as one of the country’s most corrupt sectors, the Albanian judiciary is currently undergoing a long-awaited reform that will scan all judges and prosecutors for their independence from the influence of the organized crime, corruption and political power. The judiciary reform has been set as a key condition for Albania’s opening of EU accession negotiations and improving the business climate by increasing investor confidence.

 

The three-tier system odyssey, a pensioner’s case 

A pensioner seeking fair compensation for his pension benefit has been waiting for about five years to get a final administrative court ruling, Tirana Times has learned. He is one of thousands of households and businesses to undergo the long wait times through the three-tier administrative court system established in late 2013 that has so far failed to reduce the long time needed to settle administrative disputes.

The pensioner’s odyssey began in 2013 when the administrative court system had not been established yet. The man, now about to turn 70, hired a lawyer to file a complaint with the local district court for unfairly having been stripped of 20 years of social security contributions in the pre-1990s when he worked under communism due to a correction in the local registers.

With the establishment of the administrative court system in November 2013, his case was later transferred to the first instance administrative court because of lack of competence by the district court.

While the first instance decision was quite quick and in favour of the pensioner, the decision was appealed by the local social security directorate at the Administrative Appeals Court which dismissed the first instance court ruling on procedural grounds. The pensioner has been awaiting a final High Court decision for about two and half years since October 2014.

While awaiting for about five years to get a final say, the pensioner, who is recently suffering a progressive incurable disease, has been receiving only 5,000 lek (€37) a month as a partial pension, an amount about three times lower compared to a newly calculated 16,000 lek (€115) subsistence level by the Ombudsman’s office.
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                    [post_content] => TIRANA, June 19 - Albania's exports are back to double digit growth rates this year thanks to the resumption of production by the country's largest steel plant and a pickup in international oil and mineral prices.

Data published by state statistical institute, INSTAT, shows exports grew by an annual 16.7 percent to about 111 billion lek (€830 mln) in the first five months of this year fueled by a strong recovery in steel and oil exports and modest growth in garment and footwear sales, the country’s traditional top exporting industry.

The last time exports were growing at double digit rates was back in 2013 when oil prices were at their peak before the mid-2014 slump severely affected the country’s poorly diversified exports.

Back in the first five months of 2016, Kurum's suspension of works and a sharp decline in commodity prices, extended the decline in Albania’s exports to 8 percent.

Turkish-run Kurum steel plant, which in early 2016 initiated bankruptcy proceedings, has resumed operations this year following a loan restructuring deal with its creditors. Kurum has been operating in Albania for about two decades mainly in steel production through its plant in Elbsan, central Albania, but also manages a container terminal concession in the country's biggest port of Durres and owns four small and medium-sized hydropower plants which it purchased in 2013. Its debts to international and local creditors are estimated at more than Euro 200 million.

Meanwhile, oil exports have significantly picked up this year fuelled by a recovery in commodity prices, reactivating production and new drilling.

Crude Oil Brent prices currently stand at about $50 a barrel, up from a 12-year low of $30 a barrel in early 2016, but yet almost half of the peak level of more than $110 in mid-2014 just before the slump.

The INSTAT report shows the “construction material and metal" group had the key 5.5 percentage point contribution to the exports' growth in the first five months of this year, followed by "minerals, fuel and electricity" with 5.1 percent and "garment and footwear" with 3.5 percentage points.

Due to a 10-year logging ban, "wood and paper” exports slightly contracted with a modest negative contribution to exports as the sixth largest group of exports.  Exports of wood and wood products slightly dropped to 2.2 billion lek (€16.4 million) in 2016 when Albania introduced a 10-year logging ban, down from a record high of 2.5 billion lek (€18.7 mln) in 2015.

The garment and footwear industry, Albania’s traditional top exporting industry relying on cheap labour costs and whose overwhelming majority of products are destined for Italy, led the country’s exports in January-May 2017, accounting for 43 percent of total exports.

Second rank “mineral, fuel and electricity,” within which oil exports hold the lion's share, with a 31 percent increase in the 'first five months of this year, accounting for about a fifth of total exports.

Exports of “construction materials and metals” rose by a record 44 percent, to make up about 16 percent of the country's total exports.

Albania’s exports registered modest growth of 0.1 percent in 2016 following a 5 percent decline in 2015 when they returned to negative growth rates after first contracting in 2009 soon after the onset of the global financial crisis.

The 2017 export prospects appear more optimistic as international oil prices are expected to slightly pick up with a positive impact on new drilling plans by oil companies.

Albania’s exports heavily rely on garment and footwear manufacturing as well as oil and base metals whose share in the country’s exports is estimated at two-thirds, making them vulnerable to international headwinds.

 

Imports, trade exchanges

Meanwhile, imports grew by 4.6 percent in the first five months of this year, slightly narrowing the country's trade gap due to a more robust export growth and increasing the export to import coverage ratio to 46.6 percent.

Imports of “machinery, equipment and spare parts,” an indicator of domestic investment, grew by an annual 4.7 percent to about 50 billion lek (€372 million), mainly thanks to ongoing pipe imports for the major Trans Adriatic Pipeline project bringing Caspian gas to Europe, already in its peak construction stage in its Albania section. Imports of TAP pipes ended their contribution this month with the arrival of the last shipment.

Trade exchanges with top trading partners Italy, the destination of about half of Albania’s exports and 30 percent of imports, continued growing in the first five months of this year.

Exports also grew with traditional second trading partner, Greece, as the neighbouring country escapes its worst ever recession that saw its economy contract by about a quarter since the onset of the global financial crisis in 2008.

Trade exchanges with economic superpower China, which made some key acquisitions in Albania’s oil and air transport industries last year and emerged as the country’s second largest trading partner, also slightly grew. Chromium-dominated exports to China more than doubled in January-May 2017 while imports from China slightly fell.

Albania is net importer with exports covering only about 45 percent of imports.

 

Euro depreciation effect

The significant export growth comes at a time when the national currency has hit an 8-year high against Europe's single currency with a negative impact on the country's exports whose two-thirds are destined for Eurozone countries making them vulnerable to Euro fluctuations.

The euro dropped to as low as 133.18 lek this week in levels not recorded since August 2009, depreciating by about 5 percent compared to the average exchange rate of 140 lek for about five years until mid-2015.  Europe’s single currency traded at about 138.3 lek in May 2016, depreciating by 3 percent year-on-year, significantly affecting the country’s exporters who incur a major part of costs in the national currency.

The sharp fluctuations have a huge impact on the local economy which faces high euroization rates, with the single European currency accounting for more than half of total credit and being the main currency in the real estate market.

In its latest monetary policy report, Albania’s central bank says the national currency’s appreciation against the Euro is a result of a pickup in exports, higher tourism income and foreign direct investment since the second half of 2016, increasing the supply of Europe’s single currency in the local market.

Some local experts have partly blamed the rising cannabis cultivation and the increased presence of Euro in Albania due to drugs sales abroad for the sharp depreciation of lek against the Euro.

 
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                    [post_date] => 2017-06-15 10:46:30
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                    [post_content] => austria

TIRANA, June 15 - Austrian foreign direct investment to Albania has significantly slowed down in the past four years, turning Albania into one of the Western Balkans least attractive destinations for Austrian investors.

A report by the Vienna Institute for International Economic Studies, one of the top centers for research in Central, East and Southeast Europe, shows Austrian FDI to Albania has grown by only 10 percent in the past four years to reach a total stock of €424 million at the end of 2016.

However, when compared to 2013, Austrian FDI in Albania has in fact contracted. Albanian central bank data shows Austrian FDI hit a record high of €432 million in 2013 when Austria’s Verbund, already active in Albania through its Ashta hydropower plant sold its 50 percent stake in the Devoll hydropower plant, one of the country’s biggest foreign investment projects, to Norway’s Statkraft.  The wholly-owned state-run Norwegian company has already completed one HPP and is working on its second major HPP that is expected to come into operation by the end of 2018.

The slowdown in Austrian FDI also comes amid an increase in the country’s tax burden after Albania abandoned its 10 percent flat tax in 2014 to apply a 15 percent tax on corporate income, dividends, rents and capital gains, making the country less competitive compared to other regional EU aspirant competitors applying flat tax regime of 9 to 10 percent.

Some fifty Austrian companies operate in Albania employing about 2,800 people with leading investments in the banking, insurance and hydro-electricity sectors.

Austria ranked the sixth most important foreign investor in Albania at the end of 2016 with its FDI stock accounting for 7.5 percent of the total, down from the fourth largest investor in 2012 when it held about 12 percent of the country's FDI stock.

Earlier this year, a survey conducted by the Albanian unit of Advantage Austria, the official trade promotion organization of Austria, showed more than half of Austrian businesses operating in the country consider Albania an unattractive investment destination with corruption, lack of rule of law and bureaucracy as the top concerns.

“Compared to Austrian investments in other regional countries, Albania is a lot behind. There are still old issues such as corruption, the inefficient judiciary and poor public administration services,” said Peter Hasslacher, the head of Advantage Austria for Albania, Kosovo and Slovenia.

Trade exchanges between Albania and Austria remain low and are dominated by Albanian imports of “food and beverages” as well as “machinery, equipment and spare parts.”

The 2016 volume of trade exchanges dropped by a sharp 25 percent to 7.6 billion lek (€55.5 mln), accounting for only about 1 percent of the country’s trade exchanges, according to INSTAT.

Austria has been one of Albania’s main supporters of Albania’s since the country’s independence in the early 20th century to present day Euro-Atlantic integration efforts, also providing key development support.

The Vienna Institute report shows that at €424 million, Austrian FDI stock in Albania is higher only compared to neighboring Montenegro and Kosovo among the six EU aspirant Western Balkans countries. Austrian FDI stock in both Kosovo and Montenegro, which have been independent from Serbia for about a decade now, was at €186 million and €121 million respectively at the end of 2016.

Austrian FDI stock in other regional countries ranged from €525 million in neighboring Macedonia, to €1.27 billion in Bosnia and Herzegovina, and €3.6 billion in Serbia where Austria ranks the second most important and top investor.

Thanks to some major energy-related investment, mainly the Trans Adriatic Pipeline bringing Caspian gas to Europe and the Devoll HPP, Albania has remained the Western Balkans second largest FDI recipient in the past few years with FDI inflow peaking at about €1 billion in 2016.

“In the Western Balkans, Serbia remained the most important FDI target with inflows similar to the previous year. Albania received the second largest amount of FDI in the region, mainly in energy projects – more than before the financial crisis,” says the Vienna Institute.

“In contrast, Bosnia and Herzegovina was less successful than in earlier years, probably on account of its increasingly segmented economic and regulatory environment. Macedonia received more FDI than the year before, despite mounting political uncertainty. Suppliers of the automotive industry and electronics make the country unique in the region, with its high share of FDI in manufacturing,” the report adds.

Vienna Institute experts say forecasts for FDI inflows in 2017 point upwards, as the international economic environment continues to improve, although plagued by uncertainties while economic growth in the Western Balkans is bound to be more robust than in the previous years.

"Both consumption and investments recover and attract foreign companies in the EU-CEE and the Western Balkans. These regions have maintained cost competitiveness, despite surging wages and occasional labour shortages, by benefiting from considerable productivity improvements," says the Vienna Institute.

Austria remains the third most important investor in the EU-CEE in terms of inward FDI stock, after the Netherlands which hosts multinational holdings and Germany which integrates most of the international value chains in the region. Austria occupies prime position in Slovenia, Bosnia and Herzegovina and Croatia. It ranks second in Bulgaria, the Czech Republic, Romania, Slovakia, Macedonia and Serbia and third in Hungary and Belarus.

 

 
                    [post_title] => Vienna Institute: Albania loses regional race to attract Austrian investors 
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                    [post_date] => 2017-06-14 19:14:09
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                    [post_content] => [caption id="attachment_132847" align="alignright" width="300"]dajti hotel The winning design project[/caption]

TIRANA, June 14 - The landmark Dajti hotel in Tirana's central boulevard, once the capital's city sole luxury hotel during the post-WWII decades of communist rule, will finally be reconstructed under a three-year €16 million project serving as a facility for the central bank's operations.

The reconstruction project comes seven years after the country's central bank purchased for €30 million the landmark Italian architecture state-run hotel that had fallen in disuse under a controversial acquisition which the then-opposition Socialist Party called an operation to fill up crisis-hit state coffers.

Until 2010, the government had repeatedly failed to sell the hotel to private investors while plans to turn it into foreign ministry offices were dropped.

Reacting to media reports of lack of transparency in the selection of the company that will make the hotel’s reconstruction, the central bank it had applied a ‘limited international tender’ procedure under which only candidates invited by the central bank can submit bids.

The country's central bank applies the limited tender procedure in case, goods, construction works or services are available only by a limited number of bidders, small-amount tenders or when an open tender is not deemed suitable due to confidentiality and reliability grounds.

The Bank of Albania tenders are held under special procurement procedures envisaged in the central bank’s regulation and do not apply to public procurement law under which all state run institutions publish their calls on the Public Procurement Agency.

The central bank said seven foreign companies expressed interest to reconstruct the former Dajti Hotel building after an invitation published on the Financial Times in October 2016. The winning company will be announced after the signing of the contract, says the central bank.

The project's reconstruction and restoration will be led by Italian architect Marco Petreschi who also carried out the reconstruction of the central bank's headquarters.

In late 2015, Albania’s central bank building, a historic 1938 building and landmark in Tirana’s central bank, was reconstructed under a €12 million project, upgrading the infrastructure in one of the country’s most important institutions for Albania’s economic and financial stability.

The reconstruction, carried out by an Italian firm in three and a half years, preserved the rational architecture of its Italian architect Vittorio Ballio Morpurgo, improving the working conditions and adding a museum which features rare items from the collections of the Bank of Albania which has been operating since 1913, soon after Albania’s independence.

Once Tirana's pride until the early 1990s when it fell into disuse, the Dajti hotel is a four-storey building that had 85 rooms constructed during World War II under the country's Italian occupation. The hotel lying on a 1-hectare area was considered the sole Western facility under the dark years of communism also offering events of ballroom dance and banned Rock and Jazz music for the elite and representatives of diplomatic missions in Albania.

“The building's reconstruction will enable the necessary facilities for the bank's employees to carry out their duties, but also restore the historical and cultural value this building preserves in the capital city's memory. The building's ground floor will preserve its original functional facilities serving citizens and being open to the public while the remaining part will be adjusted to serve the Bank of Albania activity,” the central bank said in a statement.

Dajti hotel

Built in the 1930s by Gherardo Bosio, a Florentine architect of the 20th century rationalist school, and designed by Gio Ponti, the father of modern European design, the building is just a short distance from the Bank of Albania headquarters.

From the historical perspective, Dajti Hotel represents one of the most prominent and coveted buildings to the people of Tirana. It featured elegant and high-level furnishings of a sophisticated kind. At the regional level, it was for a long time considered the most modern hotel in the Balkans.

Despite the damage suffered during the past years, the project foresees restoring the building to its original state and splendour, and adjusting it to service central bank's operations, says the central bank.

“The restoration project is based on the original design of architect Gherardo Bosio, but adjusted to the standards of the new century, together with the green surrounding. Featuring a very rich library, this building will be a window ensuring direct contact with the public, particularly researchers, academics, students and the media,” says the Bank of Albania.

 

 

 

 

 

 
                    [post_title] => Abandoned Dajti hotel ready to turn into central bank facility 
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                    [post_content] => [caption id="attachment_132839" align="alignright" width="300"]Selami Xhepa, the head of the Pashko European Institute Selami Xhepa, the head of the Pashko European Institute[/caption]

TIRANA, June 14 - The electoral platforms of Albania’s three largest parties, the ruling Socialist Party, the opposition Democratic Party and the third largest Socialist Movement for Integration do not provide the necessary instruments to support sufficient economic growth and make unjustified promises, a study has shown.

“There are no clear priorities on well-financed reforms on education and health as two sectors with priority importance for the country's development,” says a study conducted by the newly launched Pashko European Institute, a Tirana-based think tank named after Gramoz Pashko, a late Albanian economist and politician who led the country’s shock therapy in the early 1990s when the communist regime and its planned economy collapsed. The Institute is led by Selami Xhepa, a renowned economist who also previously served as an MP.

“The electoral programs make unjustified promises when it comes to financial resources which is dangerous from the point of view of financial stability. The positive thing in the electoral programs is the trend among the three parties to offer lower taxes unveiling the need for a return to the flat tax,” adds the report.

The report comes as campaigning for the June 25 general elections is already in full gear following a late May deal between the two largest parties paving the way for a caretaker government to handle the upcoming elections. The long-awaited deal also put an end to a three-month political deadlock and possible boycott of elections by the opposition, which would have increased political and economic uncertainties in the country.

The ruling Socialist Party has promised to create some 220,000 jobs for the next four years, admitting that they missed their 300,000 new jobs target for the past four years when they claim to have opened up 183,000 jobs.

Meanwhile, the opposition Democratic Party is offering a sharp cut in taxes in a bid to trigger investment and consumption. The opposition’s electoral program offers a 9 percent flat tax on personal and corporate income, a reduction in the key value added tax by 5 percent to 15 percent and a zero dividend tax.

The smaller Socialist Movement for Integration, a kingmaker in the past two general elections, is also promising to create some 170,000 new jobs and offer lower taxes.

Since 2014, when Albania abandoned its 10 percent flat tax regime, 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 the country one of the region’s highest.

Experts have earlier warned fulfilling the promises would require an economic growth at least twice higher compared to current 3.5 percent growth rate for several years in a row and reforms strengthening rule of law in order to boost investor confidence and attract FDI in key sectors. Mid-term prospects show Albania’s GDP growth will not be higher than 4.3 percent until 2020, making the delivery on these promises within the next four years an unlikely scenario.

Unlike previous elections, no pre-electoral coalitions have been formed ahead of the elections, and all major three parties, the ruling Socialist Party, the opposition Democratic Party and the Socialist Movement for Integration, the third largest Party which has emerged as a kingmaker since 2009, will be running alone, making the winning coalition a bid difficult to predict, at a time when a grand coalition between the two biggest parties is also possible following the recent last minute deal between the two main political forces over a caretaker government to handle elections and a series of major reforms.

 

Below are the findings and suggestions of the Pashko European Institute for the June 25 elections:

1. The Pashko European Institute appreciates the positive climate the general elections are being held thanks to the political agreement between the country's main two political forces, the ruling Socialist Party and the opposition Democratic Party. That brings a political and social context that promotes the country's stability, creates necessary space for public debate on important issues facing the country's economic and social life and gives way to positive future expectations.

2. In order for the main governing parties to communicate transparently with the public and be held accountable to public opinion, the electoral programs should be published and the public have online access to them. Unfortunately, not all parties have fulfilled such an obligation, even though they could have programs drafted by their political teams which are referred to by political leaders in their speeches.

3. The Pashko European Institute considers it a right approach the assessment that the three largest parties have regarding to taxation policies, especially on the income and capital tax. The increase in income and capital tax has had a negative impact both on the promoting employment and failure to make use of the capacities the economy has to attract more private, domestic and foreign investment. Expressing our preference for the revised return of the flat tax, we also support the initiatives of the two other political forces that preserve progressive taxation, but producing a considerable reduction in the tax burden. More specifically, the reduction of the profit tax and other sources of income to not more than 10 to 12 percent would be a significant ease in the businesses' tax burden. This maximum level of taxation should be unified even for personal income for high income earners, as this is the only way to prevent tax evasion practices in reporting personal income. On the other hand, tax reductions or exemptions on consumption (VAT), have proved to be inefficient in stimulating consumption or cutting prices as an incentive for people in need. We believe people in need can be assisted more efficiently through higher government spending or earned income tax credit for low income earners. On the other hand, cuts in all kinds of taxes and strong cuts, would have a destabilizing effect on public finances and should therefore be avoided.

4. The Pashko European Institute estimates that the most serious concern facing the country's economy is the explicit commitment of political forces to preserve unaffordable public debt levels. We think that public debt could by the end of 2021 possibly drop to 65 percent of the GDP and to 60 percent of the GDP by 2025. Every policy of tax maneuver putting this target at risk, would pose an eminent risk to the country's economic and financial stability and be a danger for budgetary crisis with serious economic and social consequences. On the other hand, the debt reduction under this softer trajectory allows for sufficient space for active economic activity and strong supportive public policies.

5. Regarding the public investment priorities, the Institute thinks that education and health should be absolute priorities and intervention through policies and financing should be considered as emergencies. Unfortunately, the liberalization of these two sectors has not managed to produce competitive markets among service providers, at a time when public education and health services remain problematic. The policymaking and monitoring capacities remain weak and the services provided strongly underfinanced. The populist stances that are often publicly articulated, do not offer solutions that the society needs, but on the other contrary, further deteriorate the situation in the education and health sectors. There is a global initiative in developing countries that spending on education should increase to 6 percent of the GDP by 2020 and Albania should by all means get closer to this target. On the other hand, creating incentives for private operators offering public services should also be given space in the parties' political programs. Reforms in these sectors should be oriented toward service and infrastructure quality and not quantitative indicators. That's why the reforms should be qualitative when it comes to the content changes.

6. Structural domestic business climate reforms, which in most cases have no cost but unfreeze funds currently used in inefficient projects or agencies, should be specific, well-targeted and with measurable targets of the results they will produce. Thus, the programs should shift from input measures and indicators to output indicators. For example, reforms on improving competitiveness will improve the country's ranking in the categories Albania lags behind other competitors.This way of drafting programs would be clearer and more transparent to monitor the targets that the country intends to achieve after the next four years. To date, electoral speeches mainly focus on tax incentives while neglecting (de)regulatory reforms and other measures of structural character.

7. Considering that employment is a major concern for the society, especially the younger generation, the Pashko European Institute recommends that employment promotion policies should be accompanied with concrete targets of increasing private sector wages. Employment that leaves people in poverty cannot be considered efficient employment, especially when it leaves the Albanian society at an underdevelopment stage.

8. Lastly, a small government with a small number of policy-making ministries and enforcement, controlling, monitoring and supervisory agencies, well-financed and well-equipped with the necessary resources to fulfill its mission, is in the public's best interest. Even this important concern has not been duly reflected in the parties' programs. The Institute suggests that political forces should mull over concrete alternatives and solutions.

 

 

 

 

 

 

 
                    [post_title] => Unjustified promises dominate main parties’ electoral platforms, study shows
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                    [post_date] => 2017-06-13 17:41:39
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                    [post_content] => TIRANA, June 13 - Albania's level of economic activity and household material welfare continue to remain one of Europe's poorest, unveiling growth in the Albanian economy has to sharply pick up in order catch up with its regional competitors.

The GDP per capita, a measure of economic activity remained unchanged at 30 percent of the EU average for the third year in a row in 2016, according to a report by Eurostat, the statistical office of the European Union.

In other regional EU aspirant countries, GDP per capita expressed in purchasing power standards (PPS), an artificial currency unit that eliminates price level differences between countries, ranged from 31 percent of the EU average in Bosnia and Herzegovina to 36 percent in Serbia, 38 percent in Macedonia and 42 percent in Montenegro.

Albania’s actual individual consumption (AIC), a measure of households’ material welfare, slightly rose by 1 percentage point to 39 percent of the EU average in 2016 as the country's economy picked up to about 3.5 percent, one of the highest growth rates in the past eight years following a pre-crisis decade of 6 percent annually. Experts estimate the Albanian economy has to grow above 6 percent annually in order to produce welfare for households.

At 39 percent of the EU average, actual individual consumption also ranks Albania poorest in a 37-country list which includes 28 EU member states, three EFTA members, five EU candidate countries and one potential candidate.

Albania's GDP per capita and actual individual consumption are apparently higher only compared to neighboring Kosovo and Moldova, Europe's two poorest countries not covered by the Eurostat report.

Meanwhile, Albania has one of Europe's lowest price levels at 43 percent of the EU 28 average, higher only compared to neighboring Macedonia’s 42 percent of the EU average.

Data shows Albania's price levels rose by 2 percentage points to 43 percent of the EU average in 2016 as international oil and food prices picked up. When compared to disposable income, price levels, especially food one, are too high for the average Albanian. The situation is a result of high level of imports and VAT being applied at an undifferentiated 20 percent even on basic food.

“Food and non-alcoholic beverages” takes the majority 44.3 percent of households budgets, a survey by Albania’s state statistical institute has shown.

Albania’s GDP of about Euro 11 billion is lower only compared to that of Serbia and Bosnia and Herzegovina among the six EU aspirant Western Balkans countries.

 
                    [post_title] => Eurostat: Albania’s GDP per capita, consumption remain Europe’s lowest
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                    [post_date] => 2017-06-13 10:51:21
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                    [post_content] => TIRANA, June 13 - Albania's foreign direct investment and tourism income only modestly increased in the first quarter of this year when foreign companies operating in the country sharply increased transfer of profits, according to the central bank.

Data from the quarterly balance of payments also shows migrant remittances, which have been on a constant downward trend during the past decade, remained unchanged in the first quarter of this year, while Albanians slightly increased their spending in trips abroad.

The increase in exports in the first quarter of this year mainly due to a recovery in commodity prices also had a positive impact on narrowing the gap in the country’s current account. A key indicator of a country’s economic health, the current account deficit measuring the flow of goods, services and investment into and out of the country, dropped to €179 million in the first quarter of this year, down from €224 mln in the first quarter of 2016 when oil prices hit a 12-year low, considerable affecting Albania's poorly diversified exports.

Foreign direct investment continued relying on some old major projects such as the Trans Adriatic Pipeline and the Devoll hydropower project by Norway’s Statkraft even in the first quarter of this year.

Central bank data shows FDI rose by an annual 7.6 percent in January-March 2017 mainly due to the TAP project bringing Caspian gas to Europe entering its pipeline construction stage.

FDI hit a historic high of about Euro 1 billion in 2016 but investment in oil and mining remained sluggish as commodity prices only slightly picked up from the mid-2014 slump, delaying scheduled investment and strongly affecting the country’s poorly diversified exports mainly relying on ‘garment and footwear’ and ‘oil and minerals.’

Lack of newly contracted major FDI projects in the past few years has sparked concern over the future of FDI in the country in the post 2020 when TAP and Devoll hydropower are completed. However, the implementation of a long-awaited justice reform increasing investor confidence in the country’s highly perceived corrupt judiciary and a revise downward in the tax burden, currently one of the region’s highest, could give a real boost to FDI and know-how especially in non-energy related sectors creating more jobs.

Travel income during the first quarter of this year also rose by 6.3 percent to about €300 million as the some 602,000 foreign tourists were reported to have entered the country.

Albania’s emerging travel and tourism industry registered a strong recovery last year when a record 4.7 million foreign tourists were reported to have visited the country, bringing more than €1.5 billion in travel income, according to central bank and INSTAT data.

The industry which directly employs 85,000 people is emerging as a key driver of the Albanian economy already accounting for about 9 percent of the country's GDP and with optimistic mid and long-term growth prospects as the country's attracts more and more tourists.

Meanwhile, Albanians increased their spending in trips abroad to €226 million in the first quarter of this year when about 1 million Albanians travelled abroad.

Albanians only slightly increased their spending in trips abroad in 2016 when they spent about €1.1 billion, mainly in trips to neighbouring Italy and Greece, where about 1 million Albanians live and work, but also holidaying in other destinations such as Turkey which despite security concerns continues remaining a favourite destination for summer vacations among Albanians.

On a downward trend since the outbreak of the global financial crisis in 2008, migrant remittances remained unchanged at about €136 mln in the first quarter of this year, still playing an important role for thousands of poor households in the country.

Fuelled by a recovery in Italy and Greece, Albania’s main trading partners and migrant hosts, remittances slightly recovered for the third year in a row in 2016 when they climbed to €616 million, but remained about a third below their peak level of €952 million in 2007 just before the onset of the global financial crisis, according to the country’s central bank.

Foreign companies operating in Albania transferred about €71 mln in profits in the first quarter of this year, double compared to the same period last year, raising concerns about lack of reinvestment.

Since the onset of the global financial crisis, foreign companies operating in Albania have considerably increased the transfer of profits to their parent companies rather than reinvesting them in Albania.

The transfer of profits slightly dropped to about €203 million in 2016, but remained at almost the same annual outflow for the past three years.

The transfer of profits hit a record high of €401 million in 2009 at the onset of the global financial crisis compared to a pre-crisis decade of €19 million to €57 million annually, according to the Bank of Albania.

 

FDI 

Q1 2017 = €168 mln

Q1 2016 = €156 mln

 

Travel income

Q1 2017 = €301 mln

Q1 2016 = €283 mln

 

Travel spending 

Q1 2017 = €226 mln

Q1 2016 = €216 mln

 

Migrant remittances 

 

Q1 2017 = €136 mln

Q1 2016 = €136 mln

 

 

Transfer of profits 

Q1 2017 = €71 mln

Q1 2016 = €35 mln

Source: Bank of Albania 

 

 
                    [post_title] => FDI, tourism revenue see modest increase in year’s first quarter
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                    [post_content] => TIRANA, June 12 - Albania has suspended new public tenders and concessions until the June 25 general elections in a bid to curb the misuse of financial resources during the electoral campaign. The government decision came on June 1 following a late May deal breaking a three-month political deadlock that paved the way for the opposition's participation in the elections.

The new government following the deal between the main ruling Socialist Party and the opposition Democratic Party continues to be led by Prime Minister Edi Rama but includes six caretaker ministers, a deputy PM and several key directors proposed by the opposition Democrats, preparing the ground for free and fair elections and the advancement of the long-awaited justice reform, a key condition for Albania’s opening of EU accession negotiations.

The government decision bans all ministers and their subordinates from initiating new public tenders and concession or PPP procedures during all 30-day electoral campaign until the electoral silence on June 24 except for emergency purchases necessary for the institutions’ operation.

The decision is part of deal to curb the use of public administration and its human, financial and logistics resources during the electoral campaign. Several public administration officials have been suspended over allegations of vote-buying or involvement in electoral campaign during office hours following recent legal changes to the Criminal Code making the offences punishable by prison.

One of the main doing business barriers for local and foreign investors in Albania, public procurement continues to face issues related to limited competition and discriminatory criteria although the country has been offering e-procurement procedures since eight years in a bid to reduce corruption and increase transparency.

Reports by the Public Procurement Agency and the Procurement Commission appeals body show state-run institutions continue abusing public tender procedures awarding contracts with no race and placing discriminatory criteria apparently to select pre-determined winners.

Public-private partnerships have also become a hot topic in Albanian politics after some risky concessions and warnings by international financial institutions that some 55 public-private partnerships the Albanian governments have signed during the past decade, have created commitments with a present value of about 7 percent of the GDP or €700 million in which the government will either pay the cost of the investment in installments or guarantee the revenue of concessionaires.

The concessions, especially the medical check-up and hemodialysis, have been marred by accusations of lack of transparency and inexperience by concessionaires.

The freeze on public tenders and concession procedures could temporarily halt new public investment scheduled for June 2017. Public investment rose by an annual 37 percent to about 14.5 billion lek (€106 mln) in the first four months of this year, but was down by 8 percent compared to the January-April target, according to finance ministry data.

Albania's public finances exceeded expectations in the first four months of this electoral year when government revenue rose by an annual 6.6 percent and spending was in line with targets.

Government revenue has traditionally underperformed in electoral years during the past two decades with incumbent governments increasing spending to apparently gain an electoral advantage but a mid-2016 law set a fiscal rule with a long-term debt target of 45 percent, also disciplining spending in electoral years.

Albania’s public debt, currently stands at about 68.4 percent of the GDP, down from a record high of 72.6 percent of the GDP in 2015. The debt level is still considered too high for the current stage of the Albania's economic development with its high servicing costs, curbing much-needed investment in key priority areas.
                    [post_title] => Albania suspends new public tenders, PPPs during electoral campaign
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            [post_content] => TIRANA, June 21 - Albania has failed to make any significant progress in innovation during the past decade, according to the Global Innovation Index.

The annual report published by U.S-based Cornell University, the INSEAD business school, and the World Intellectual Property Organization, ranked Albania 93rd out of 127 countries for 2017, lagging behind almost all of its regional competitors. The 2017 rating is almost unchanged to 2016 when the country ranked 92nd out of 128 countries.

A decade ago, when the first report measuring innovation performance was released, Albania ranked 100th out of 107 countries before reaching its best ever ranking of 87th out of 140 economies in 2015.

The 2017 report shows knowledge and technology outputs, business sophistication, creative output and human capital as well as research remain Albania's weakest indicators. The country ranks better when it comes to market sophistication, institutions and infrastructure.

“Innovation is key to sustaining the productivity growth required to meet this rising demand and to helping enhance the networks (food systems) that integrate sustainable food production, processing, distribution, consumption, and waste management,” says the report’s 10th edition focused on innovation in agriculture and food systems.

Experts warn that in the coming decades, the agriculture and food sector will face an enormous rise in global demand, increased competition for limited natural resources, and the effects of climate change.

Agriculture is also a key sector in the Albanian economy, employing about half of the country’s population, but accounting for only a fifth of the GDP unveiling its poor efficiency. A World Bank report has earlier the livelihoods of Albania's rural population will be at risk without a clear plan for aligning agricultural policies with climate change.

The Global Innovation Index provides detailed metrics about the innovation performance of 127 countries with its indicators exploring a broad vision of innovation, including political environment, education, infrastructure and business sophistication.

In its latest country report on Albania, the European Commission says Albania's capacity for technological absorption and research, development and innovation is low.

"Key obstacles include low expenditure on research and development at about 0.4 percent of the GDP, weak links between the scientific and private sectors as well as the fragmentation of the national research and innovation system," says the report about Albania, an EU candidate country, aspiring to launch accession negotiations by the end of the year.

Due to the weak innovation policy infrastructure, almost all sectors of the economy mainly provide low-technology, labour intensive and low-cost products and services.

"Increased funding and a more focused RDI strategy in a number of specific sectors, particularly in energy, agro-food and sustainable tourism, would support the country's capacity to attract investment in research, development and innovation," says the European Commission.

 
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