Japan supports farmers have easier access to credit

Japan supports farmers have easier access to credit

TIRANA, Feb. 6 – Japan is supporting Albanian farmers to have easier accesses to microcredit in order to get self-employed in the key agriculture sector and even start businesses. The support is being provided by JICA, the Japan International Cooperation

Read Full Article
Albania Investment Corporation initiative triggers gov’t interference concerns

Albania Investment Corporation initiative triggers gov’t interference concerns

By Ervin Lisaku TIRANA, Feb. 6 – The proposed establishment of an Albanian Investment Corporation as a state-run company aimed at facilitating public or private investment in remaining non-privatized assets in a bid to attract new investment and create employment

Read Full Article
Nationwide campaign fails to improve critical water supply situation

Nationwide campaign fails to improve critical water supply situation

TIRANA, Feb. 5 – A nationwide campaign that the Albanian government launched in 2018 in a bid to reform the critical situation in the country’s state-run tap water sector by cutting illegal connections and collecting accumulated unpaid bills has failed

Read Full Article
New Italian recession signals more trouble for Albanian economy

New Italian recession signals more trouble for Albanian economy

TIRANA, Feb. 5 – Recession in Italy during the second half of 2018 and growth prospects for the next couple of years having received a severe blow for the Eurozone’s third largest economy and Albania’s main trading partner, signal trouble

Read Full Article
Albania fails to get S&P rating upgrade for fifth year in row

Albania fails to get S&P rating upgrade for fifth year in row

TIRANA, Feb. 4 – U.S.-based Standard & Poor’s has reconfirmed Albania’s ‘B+/B’ long- and short-term sovereign credit ratings with a stable outlook, in a rating that remains unchanged for the fifth consecutive year, with not much impact on Albania’s debt

Read Full Article
Albania’s top four banks under probe over alleged abuse of dominant position

Albania’s top four banks under probe over alleged abuse of dominant position

TIRANA, Feb. 1 – Albania’s competition watchdog says it has launched an in-depth probe into the country’s four largest commercial banks to check whether high interest rates amid sluggish credit and high profit rates could be an abuse of their

Read Full Article
Euro’s free fall, lower consumption lead to new 2018 budget cut

Euro’s free fall, lower consumption lead to new 2018 budget cut

TIRANA, Jan. 31 – Facing a slowdown in revenue, mainly due to Europe’s single currency trading at a 10-year low against the Albanian lek, the government has been forced to revise down its 2018 budget for a second time in

Read Full Article
Proposed hike in dental service fees causes stir

Proposed hike in dental service fees causes stir

TIRANA, Jan. 30 – A proposed hike in dental service fees has caused a nationwide stir in the past few days with authorities initiating legal action and suspending new minimum fees proposed by the Albanian Order of Dentists as running

Read Full Article
Insurance market growth slows down to 4.5%

Insurance market growth slows down to 4.5%

TIRANA, Jan. 30 – Albania’s insurance market registered modest growth rates for the second year in a row in 2018 when the dominant non-life sector heavily reliant on compulsory motor insurance gained further market share. A report by Albania’s Financial

Read Full Article
IMF warns of PPP, arrears risks to Albania’s mid-term growth outlook

IMF warns of PPP, arrears risks to Albania’s mid-term growth outlook

TIRANA, Jan. 29 – The International Monetary Fund has reiterated its warning over the growing use of public private partnerships and the accumulation of new unpaid government bills to the private sector as a threat to the country’s GDP growth

Read Full Article
WP_Query Object
(
    [query_vars] => Array
        (
            [cat] => 5
            [paged] => 2
            [error] => 
            [m] => 
            [p] => 0
            [post_parent] => 
            [subpost] => 
            [subpost_id] => 
            [attachment] => 
            [attachment_id] => 0
            [name] => 
            [static] => 
            [pagename] => 
            [page_id] => 0
            [second] => 
            [minute] => 
            [hour] => 
            [day] => 0
            [monthnum] => 0
            [year] => 0
            [w] => 0
            [category_name] => economy
            [tag] => 
            [tag_id] => 
            [author] => 
            [author_name] => 
            [feed] => 
            [tb] => 
            [comments_popup] => 
            [meta_key] => 
            [meta_value] => 
            [preview] => 
            [s] => 
            [sentence] => 
            [fields] => 
            [menu_order] => 
            [category__in] => Array
                (
                )

            [category__not_in] => Array
                (
                )

            [category__and] => Array
                (
                )

            [post__in] => Array
                (
                )

            [post__not_in] => Array
                (
                )

            [tag__in] => Array
                (
                )

            [tag__not_in] => Array
                (
                )

            [tag__and] => Array
                (
                )

            [tag_slug__in] => Array
                (
                )

            [tag_slug__and] => Array
                (
                )

            [post_parent__in] => Array
                (
                )

            [post_parent__not_in] => Array
                (
                )

            [author__in] => Array
                (
                )

            [author__not_in] => Array
                (
                )

            [ignore_sticky_posts] => 
            [suppress_filters] => 
            [cache_results] => 1
            [update_post_term_cache] => 1
            [update_post_meta_cache] => 1
            [post_type] => 
            [posts_per_page] => 10
            [nopaging] => 
            [comments_per_page] => 50
            [no_found_rows] => 
            [order] => DESC
        )

    [tax_query] => WP_Tax_Query Object
        (
            [queries] => Array
                (
                    [0] => Array
                        (
                            [taxonomy] => category
                            [terms] => Array
                                (
                                    [0] => 5
                                )

                            [include_children] => 1
                            [field] => term_id
                            [operator] => IN
                        )

                )

            [relation] => AND
        )

    [meta_query] => WP_Meta_Query Object
        (
            [queries] => Array
                (
                )

            [relation] => 
        )

    [date_query] => 
    [post_count] => 10
    [current_post] => -1
    [in_the_loop] => 
    [comment_count] => 0
    [current_comment] => -1
    [found_posts] => 7680
    [max_num_pages] => 768
    [max_num_comment_pages] => 0
    [is_single] => 
    [is_preview] => 
    [is_page] => 
    [is_archive] => 1
    [is_date] => 
    [is_year] => 
    [is_month] => 
    [is_day] => 
    [is_time] => 
    [is_author] => 
    [is_category] => 1
    [is_tag] => 
    [is_tax] => 
    [is_search] => 
    [is_feed] => 
    [is_comment_feed] => 
    [is_trackback] => 
    [is_home] => 
    [is_404] => 
    [is_comments_popup] => 
    [is_paged] => 1
    [is_admin] => 
    [is_attachment] => 
    [is_singular] => 
    [is_robots] => 
    [is_posts_page] => 
    [is_post_type_archive] => 
    [query_vars_hash:WP_Query:private] => 7c6d40accdf1b7107fd0620ce08e489d
    [query_vars_changed:WP_Query:private] => 
    [thumbnails_cached] => 1
    [stopwords:WP_Query:private] => 
    [query] => Array
        (
            [cat] => 5
            [paged] => 2
        )

    [request] => SELECT SQL_CALC_FOUND_ROWS  wp_posts.ID FROM wp_posts  INNER JOIN wp_term_relationships ON (wp_posts.ID = wp_term_relationships.object_id) WHERE 1=1  AND ( wp_term_relationships.term_taxonomy_id IN (5) ) AND wp_posts.post_type = 'post' AND (wp_posts.post_status = 'publish') GROUP BY wp_posts.ID ORDER BY wp_posts.post_date DESC LIMIT 10, 10
    [posts] => Array
        (
            [0] => WP_Post Object
                (
                    [ID] => 140427
                    [post_author] => 29
                    [post_date] => 2019-02-06 16:17:19
                    [post_date_gmt] => 2019-02-06 15:17:19
                    [post_content] => TIRANA, Feb. 6 - Japan is supporting Albanian farmers to have easier accesses to microcredit in order to get self-employed in the key agriculture sector and even start businesses.

The support is being provided by JICA, the Japan International Cooperation Agency, through Fed Invest, Albania’s largest financial cooperative, as part of a four-year project launched last year targeting the financial inclusion of smallholder households facing difficulty in obtaining traditional bank loans.

The ‘Smallholder Families’ Financial Inclusion Project in Albania” is a €4 million project supported by JICA in partnership with the Albanian Ministry of Finance and Economy, and implemented by the FED invest financial institution. The projects aims at upgrading the overall IT environment and help more than 50,000 Albanian smallholder households living in rural and peri-urban areas facing difficulties in securing a traditional bank loan to get better access to finance in order to become self-employed or set up their own business, Japan's embassy in Tirana said in a statement.

Following a needs assessment survey with rural households and the introduction of up-to-date IT environment at FED invest, the project's focus during this year will be on developing financial products and non-financial services.

Agriculture is a key sector for the Albanian economy, employing around half of the country's population but producing only a fifth of the country's national output due to key barriers such as sharp fragmentation of farm land into small plots, unclear property titles, poor access to credit and subsidies and lack of key infrastructure such as irrigation and machinery.

The world’s third-largest economy, Japan has been a major donor to Albania through its difficult transition from communism to a free-market economy. Tokyo has given millions, primarily in the rehabilitation of infrastructure and healthcare facilities and since mid-2017 is represented in Tirana by Makoto Ito as the first resident ambassador after the two countries re-established diplomatic relations in 1981.
                    [post_title] => Japan supports farmers have easier access to credit 
                    [post_excerpt] => 
                    [post_status] => publish
                    [comment_status] => closed
                    [ping_status] => closed
                    [post_password] => 
                    [post_name] => japan-supports-farmers-have-easier-access-to-credit
                    [to_ping] => 
                    [pinged] => 
                    [post_modified] => 2019-02-06 16:17:19
                    [post_modified_gmt] => 2019-02-06 15:17:19
                    [post_content_filtered] => 
                    [post_parent] => 0
                    [guid] => http://www.tiranatimes.com/?p=140427
                    [menu_order] => 0
                    [post_type] => post
                    [post_mime_type] => 
                    [comment_count] => 0
                    [filter] => raw
                )

            [1] => WP_Post Object
                (
                    [ID] => 140422
                    [post_author] => 29
                    [post_date] => 2019-02-06 13:57:00
                    [post_date_gmt] => 2019-02-06 12:57:00
                    [post_content] => By Ervin Lisaku

TIRANA, Feb. 6 – The proposed establishment of an Albanian Investment Corporation as a state-run company aimed at facilitating public or private investment in remaining non-privatized assets in a bid to attract new investment and create employment has been met with skepticism by economy experts and the opposition over fears that the novelty structure could fail as a state-run enterprise and violate property rights.

Proposed legal changes already approved by the finance ministry but pending further review before a final approval in Parliament envisage the establishment of the Albanian Investment Corporation as a state-run commercial enterprise where international development finance institutions can also hold shares in a bid to carry out joint investments with private investors and help the country’s economy grow faster.

The government argues large-scale investment projects with an impact on economic growth require the use of state-run assets and mobilization of private capital and cannot be implemented without the considerable involvement of authorities in providing permits and making the assets available. Authorities also commit of conducting the initial costly preparatory and pre-investment stages to transform ideas into attractive projects that can obtain financing and allow the state-run enterprise to also undertaking part of the risk through borrowing and investing.

Expected to be set up with an initial state capital of 368 million lek (around €3 mln) in 2019, the Corporation is also entitled to borrow from financial institutions by placing as collateral its state-owned assets without direct implications for the state budget whose fiscal consolidation agenda with a target of reducing public debt to a more affordable 60 percent of the GDP by 2021 leaves little room for new borrowing to initiate major investment projects.

Albania’s public debt currently hovers at around 70 percent, including unpaid bills of €200 million equal to 1.5 percent of the GDP, in what is considered a high level for the current stage of Albania’s economic development. The public debt level excludes potential liabilities that could arise from rising use of the much-rumored public private partnerships, many of which lacking transparency and clear cost-benefit analysis after being initiated by private investors through unsolicited proposals.

The government says the draft law has been compiled with the Center for International Development at Harvard University in a bid to equip state authorities with the capacity to carry out strategic investment by mobilizing private capital through cooperation with the international financial institutions and the private sector.

Differently from private-run companies, the proposed Corporation will be excluded from public procurement rules, which means it can handle projects on state-run property through direct negotiations with investors.

 

State-run assets

While Albania has privatized most of its key public assets during the past quarter of a century of transition to a market economy, state-run enterprises still account for around a fifth of the GDP and employment.

The government is the major electricity producer and sole electricity supplier, it controls the railway system, currently in a critical condition and pending first major investment in the key Tirana-Durres section linking Albania’s two largest cities and sole international airport. State-run companies also conduct around 10 percent of oil extraction, the remaining 90 percent is carried out by private investors on concession contracts. The government also has a minority interest at an oil refiner that has changed hands several times following a failed privatization a decade ago. It also has a minority stake in Albtelecom fixed-line, mobile and internet service provider, whose majority stake is held by Turkish investors.

However, the major assets that the Albanian government owns are coastal lands and former military facilities that could be used to attract much-needed investment in the emerging tourism sector where unclear property titles is one of the main barriers holding back foreign investors to develop high-end tourist resorts, taking advantage of the tax incentives that the Albanian government is offering.

 

Legal initiative

The Corporate Investment initiative comes at a time when Albania has extended until December 2019 incentives on strategic investment to both foreign and domestic investors as it prepares to draft a new comprehensive law that will provide the same protection to both Albanian and foreign investors and specify the country’s strategic sectors.

It also comes as two major energy-related investment projects that drove growth and kept FDI at high levels during the past four years are set to complete by the end of 2019, leaving a huge gap that has to be filled by new projects to keep GDP growth above 4 percent as the government expects in its mid-term outlook.

Under the current legislation set to expire by the end of 2019, investors have to invest a minimum of €30 million to gain the status of strategic investor with an ‘assisted procedure’ and a minimum of €50 million for the ‘special procedure’ status in order to benefit of easier rules and incentives for key investment in energy and mining, transport, electronic communications and urban waste sectors.

The investment thresholds in tourism, agriculture, special economic zones, and special priority zones range from €1 million to €5 million to get the assisted procedure status.

In a bid to promote elite tourism investment, Albania has been offering incentives for a 10-year period  on luxury accommodation units for investments ranging from €8 million to €15 million for four and five-star units that will have to be carried out by internationally renowned chained-brand hotels or local companies under management or franchise contracts with them. The move has already attracted several international brands such as US-based giants Marriot and Hyatt that have already signed contracts to manage key 5-star hotels in Tirana, and the already operational 4-star Hilton Garden Inn.

 

A Chance or risk?

Economy expert Selami Xhepa say the state-run Investment Corporation is a good idea but that will be difficult to apply considering past and current experience with the management of state-run enterprises marred by inefficiency and corruption allegations.

“A state-run financial corporation gives no reason to think that its governance will be oriented for an open, transparent and economically efficient use of public property. In addition, the draft law says that its [Advisory] Board will only have one state representative and the remaining members will be from the private sector, creating an open conflict of interest,” Xhepa says in an op-ed named “Investment Corporation, a chance or risk” published with local media this week.

The economy expert says the corporation’s attribute to place state assets as collateral when getting credit could also create implications for the state-budget in case of loan defaults in order to avoid public property being taking over by creditors.

“This corporation also gets the attribute of selling public property, by avoiding current legislation on privatizations. Despite the government’s positive intentions to find mechanisms that accelerate the country’s development, considering the format that this corporation is being established, it will mostly create more problems about the quality of economic governance and the country’s governance in general,” says Xhepa.

According to him, if the government sticks to Investment Corporation proposal, the minimum that has to be done is “completing this initiative with the legal standards of transparency and corporate governance that should be an integral part of the draft law.”

“Personally I would favor privatization processes in public properties and the completion of the property compensation and restitution process as well as the registration of state-run properties to place them in an asset development agency. We have created enough institutions that can assume larger development responsibility, not as financial corporations, but to a larger extent as negotiators and monitors of investment projects carried out on public assets,” he adds.

Opposition Democratic Party MP Jorida Tabaku is highly more skeptical about the Investment Corporation initiative which she calls "the theft of public property through a special law."

A deputy head of the parliamentary economy committee, Tabaku says that stripping the corporation of the public procurement rules, makes Prime Minister Edi Rama the eventual owner of the public assets with a final say on deciding on how and with whom to develop the asset and also places private property at risk through the “mechanism of seizure for strategic investment.”

Recent legal changes adopted by the ruling Socialists foresee that real estate registration for agricultural land will be refused in case the land has been destined as strategic investment area or illegal constructions have been built on it, in a provision that mostly affects coastal areas where major tourist investments are planned.

 

Long-standing property issue

Albania is trying to give a permanent solution to the long-standing issue of unclear property titles through legal changes which it says will bring an end to the chaos of property ownership in the country during the past quarter of a century of transition.

Recent legal changes that are about to undergo further review following a suspensive veto by the President, envisage the merge of three property institutions into a single Cadastral Agency that will handle real estate registration, legalization and state-run property affairs under easier procedures expected to provide a solution for more than half of the country’s immovable property with ownership problems, in a situation that has severe consequences for the property owners themselves, but also the country’s business climate.

The complicated property issue is a result of a controversial agrarian reform in the early 1990s following the collapse of the communist regime and subsequent non-transparent privatization of state-run property as well as dozens of thousands of illegal constructions built either on private or state-run land during the past 27 years, a considerable part of which already legalized and registered with real estate registration offices.

Albania has 4.4 million immovable properties, of which 3.8 million are registered with immovable property offices and 600,000 unregistered. Of the 3.8 million registered properties, 2.5 million need to be revised or re-registered, says ALUIZNI, Albania’s Agency for Legalization,

The situation is more problematic in agriculture, a key sector that employs almost half of the country’s population, but where only half of the land distributed on a per capita basis to some 438,000 households in the early 1990s has managed to get registered in a key barrier for the development of larger farms, access to credit and subsidies.
                    [post_title] => Albania Investment Corporation initiative triggers gov’t interference concerns
                    [post_excerpt] => 
                    [post_status] => publish
                    [comment_status] => closed
                    [ping_status] => closed
                    [post_password] => 
                    [post_name] => albania-investment-corporation-initiative-triggers-govt-interference-concerns
                    [to_ping] => 
                    [pinged] => 
                    [post_modified] => 2019-02-06 13:57:00
                    [post_modified_gmt] => 2019-02-06 12:57:00
                    [post_content_filtered] => 
                    [post_parent] => 0
                    [guid] => http://www.tiranatimes.com/?p=140422
                    [menu_order] => 0
                    [post_type] => post
                    [post_mime_type] => 
                    [comment_count] => 0
                    [filter] => raw
                )

            [2] => WP_Post Object
                (
                    [ID] => 140418
                    [post_author] => 29
                    [post_date] => 2019-02-05 18:03:20
                    [post_date_gmt] => 2019-02-05 17:03:20
                    [post_content] => TIRANA, Feb. 5 – A nationwide campaign that the Albanian government launched in 2018 in a bid to reform the critical situation in the country’s state-run tap water sector by cutting illegal connections and collecting accumulated unpaid bills has failed to have any significant effect in either improving access to water or boosting the financial situation of local government-run water companies.

The conclusion is unveiled by the water supply regulatory authority in an annual report showing that performance indicators for most water companies remained the same or only slightly improved at a time when more than a fifth of the population has no access to tap water and the average water supply hours are at less than 12 hours a day, but in reality range from as low as one hour a day in rural areas.

"In 2018, as a result of a reform, the sector performed well regarding the elimination of illegal connections, the increase in the installation of water meters as well as the collection of accumulated unpaid bills," says the water supply watchdog.

"A slight improvement in the sector's financial situation was observed at the end of 2018, but the reform's expectations were not met, especially in cutting losses by eliminating illegal connections," adds the watchdog.

Illegal connections to the supply system is one of the main causes for non-revenue water accounting for two-thirds of water fed into the network during 2018, a 1.5 percentage point improvement compared to 2017.

Authorities say per capita water production in 2018 was at 304 liters a day, but only around a third, some 107 liters/day, were billed at an average nationwide collection rate of around 80 percent for the third year in a row.

In addition, an outdated supply system in huge need of investment which Albania is gradually replacing contributes to the critical situation in Albania’s water supply system.

Despite consecutive hikes in fees, 42 out of the 58 nationwide water companies still fail to meet operation and maintenance costs, requiring subsidies of up to 30 percent by the municipalities that supervise them or the central government.

However, the 17 largest companies covering around two-thirds of the country's 2.8 million resident population, have managed to meet operation and maintenance costs, but yet face challenges with further increasing collection rates and reducing losses to handle much-needed investment on their own.

Average water tariffs for household consumers in Tirana and Durres, Albania’s largest cities and home to around half of the resident population are at around 70 lek (€0.55)/m3, and twice higher for business consumers and state-run institutions.

Albania's water supply watchdog has earlier estimated the country's network needs huge investment of around €6.4 billion, almost half of the country's national output and significantly higher compared to annual public investment of more than €500 million in all sectors, to bring it to normal operation.

The huge investment needs which could take decades to carry out given the limited funds at disposal signal that providing 24/7 water supply will be a tough challenge for the Albanian economy.

Water shortages in many cities including key tourist destinations are a serious problem during summer, the peak of the country’s tourist season, hampering progress in the tourism sector.

In addition, household and business consumer face extra costs due to having to buy water tanks and pumps to get access to water.

 

Nationwide campaign

In late 2017, Prime Minister Edi Rama announced a nationwide campaign to crack down on illegal water supply connections with household and business consumers given a three-month deadline until March 2018 to self-regulate and sign deals to pay off accumulated unpaid bills.

Similarly to a late 2014 nationwide campaign on curbing electricity thefts and unpaid bills, illegal connection to the water supply was made punishable with prison. However, unlike the nationwide campaign that was applied in rather aggressive style and managed to significantly cut electricity losses and trigger a major hike in collection rates, the water reform was applied in softer style with only sporadic legal action against violations, mainly against business consumers.

“We are Europe’s second richest country in natural [water] resources, but Europe’s sole country with problems in tap water supply,” Prime Minister Edi Rama said in late 2017, adding that water supply hours ranging from as low as 1 hour a day in villages to 4 to 5 hours a day in towns, put Albanians in a ‘survival mode.’

“The situation couldn’t be worse. Only a crucial reform with iron determination, similar to the reform in the electricity system, could provide a solution and way out to this degraded system, which remains in agony,” he said.

Water supply companies hired an extra 333 employees in 2018, but staff efficiency only slightly improved to 5.32/1,000 connections due to a significant hike in new water supply and sewerage connections.

In 2017, when Albania held general elections, the water supply watchdog cited electoral grounds for a deterioration in the companies' performance.

“One of the main reasons of this downward trend in performance was that 2017 was an electoral year which is usually accompanied by an artificial increase in the number of water company employees and a lower law enforcement reflected on decline in bill collection rates,” said the water supply authority.

The World Bank and KfW, Germany’s Development Bank, have been investing millions of euros to rehabilitate Albania's water supply and sewerage systems in soft loans with a significant impact on providing thousands with access to water and improving the quality of bathing waters through new wastewater treatment plants.
                    [post_title] => Nationwide campaign fails to improve critical water supply situation
                    [post_excerpt] => 
                    [post_status] => publish
                    [comment_status] => closed
                    [ping_status] => closed
                    [post_password] => 
                    [post_name] => nationwide-campaign-fails-to-improve-critical-water-supply-situation
                    [to_ping] => 
                    [pinged] => 
                    [post_modified] => 2019-02-05 18:03:20
                    [post_modified_gmt] => 2019-02-05 17:03:20
                    [post_content_filtered] => 
                    [post_parent] => 0
                    [guid] => http://www.tiranatimes.com/?p=140418
                    [menu_order] => 0
                    [post_type] => post
                    [post_mime_type] => 
                    [comment_count] => 0
                    [filter] => raw
                )

            [3] => WP_Post Object
                (
                    [ID] => 140414
                    [post_author] => 29
                    [post_date] => 2019-02-05 15:02:56
                    [post_date_gmt] => 2019-02-05 14:02:56
                    [post_content] => TIRANA, Feb. 5 - Recession in Italy during the second half of 2018 and growth prospects for the next couple of years having received a severe blow for the Eurozone’s third largest economy and Albania’s main trading partner, signal trouble also for the small Albanian economy which has strong trade, investment and remittance ties with the neighboring country across the Adriatic.

The Italian recession is a new external threat to the Albanian economy, which is already facing a series of problems at home, mainly related to Europe’s single currency having lost around 7 percent against the Albanian lek, credit struggling with moderate growth rates over a declining but still high level of non-performing loans, two large-scale energy-related investment nearing completion, public debt reduction agenda at risk over a hike in controversial public private partnership contracts, as well as new unpaid government bills of around €200 million, equal to 1.5 percent of the country’s GDP, putting liquidity pressure on the private sector.

In addition, a prolonged drought hitting the country’s hydro-dependent electricity generation, has forced authorities to switch to costly imports to meet domestic demand in quite a different picture compared to 2018 when a favorable hydro-situation made the country a net exporter of electricity and the state-run electricity sector was one of the key drivers of growth in the first half of last year.

The Italian economy contracted for two consecutive quarters in the second half of 2018, technically putting the euro area’s third largest economy into recession though average growth for the whole of 2018 was positive at 1 percent, down from 1.6 percent in 2017.

Italy’s recession is mainly a result of declining manufacturing activity and investor confidence dropping over soaring debt amid lower than expected growth after Italy’s populist government struggled to reach a late 2018 deal with EU leaders over higher spending plans running against the EU's fiscal rules.

Last month, Italy's central bank slashed growth forecasts for 2019-20 to 0.6 percent and 0.9 percent respectively amid fears of a new recession that recently proved real as Italy slipped into its third recession over the past decade when it has been one of the hardest-hit Eurozone economies.

 

Possible implications for Albania 

Due to the sizeable trade, investment and remittance ties, a slowdown in Italy, the destination of half of Albania’s exports and the host of half a million Albanians, means more trouble for the Albanian economy and growth outlook could be revised downward, with a negative effect on the country’s fiscal consolidation and debt reduction agenda.

International financial institutions such as the World Bank and the IMF forecast the Albanian economy will slow down to 3.5 to 3.7 percent this year, after an expected decade high of 4.2 percent in 2018.

However, the newly confirmed Italian recession and grim prospects ahead for the Eurozone’s third largest economy and Albania’s main trading partner, could lead to a new downward revision even by the Albanian government which expects growth to pick up to 4.3 percent this year.

"It has been proved that the stronger the trade partnership between two countries, the higher the positive or negative effect coming from the trading partner," economist Arben Malaj has told a local TV.

A former finance minister and current member of the Bank of Albania’s Supervisory Council, the highest decision-making body at the central bank, Malaj says the tough economic situation in Italy could be long-term and the Albanian government should be well-prepared to handle negative effects on thousands of Albanian resident households relying on migrant remittances from Italy and create opportunities for potential migrants considering coming home in case of massive loss of jobs.

Experts have warned that due to stronger trade, investment and human ties with Italy, a possible slowdown in Italy's GDP growth, could affect the Albanian economy more than the Turkey and global trade dispute spillover effects.

Over 90 percent of Albania’s garment and footwear products, an industry relying on cheap labor costs but employing dozens of thousands of people and producing the country’s top exports, go to Italy, which is often not the final destination of those products.

Relying on raw material coming from Italy and cheap labor costs at home, garment and footwear producers in Albania, among whom even Italian investors, have been facing a sharp cut in profits over Europe’s single currency losing a sharp 7 percent against the Albanian lek last year and continuing trading at a 10-year low of 124.5 lek. Exporters also complain over delays in value added tax refunds putting them in financial straits.

The call center industry employing thousands of young men and women also relies on marketing and customer service campaigns targeting Italians.

Unlike the severe recession in Greece, the recession in Italy did not have any significant effect on trade and investment ties that have followed an upward trend, although the flow of migrant remittances suffered a major blow.

Trade exchanges between Albania and Italy slightly dropped to 324.4 billion lek (Euro 2.6 billion) in 2018 on higher Albanian exports, but lower imports narrowing Albania's trade gap with Italy.

The stock of Italian FDI to Albania also rose to €650 million in Sept. 2018, up 30 percent compared to early 2014, according to Albania’s central bank.

Meanwhile, the 500,000 Albanian migrants living and working in Italy are estimated to bring home around €120 million annually in remittances, in inflows that have been constantly declining over the past decade due to recession and economic slowdown in Italy, family reunions and a new generation of Italy-born migrants with weaker links to Albania.

Meanwhile, growth prospects in Greece, Albania's traditional second largest trading partner, have slightly improved over the next couple of years, with growth expected above 2 percent.

The host of some 500,000 Albanian migrants, Greece faced an 8-year recession ending in 2016 that saw its economy shrink by about a quarter, with a series of spillover effects also in Albania, mainly hitting exports and thousands of migrants.

Albania's current trade links with Greece are at around 7 percent of total, half of what the country traded with Greece just before the onset of the global financial crisis

Prolonged recession in Greece, the country’s traditional top foreign investor, has also led to a number of Greek-owned banks and businesses leaving the country in the past few years.

Facing spillover effects from main trading partners, the Albanian economy has been growing by an average of 2.7 percent annually in the past decade, less than half of a pre-crisis decade of 6 percent annually that is estimated to bring tangible welfare to Albanian households and bridge huge development and income gaps to EU member countries.

 

Investment, human capital effect

Economy expert Besart Kadia says lower private investment in the past five years and the loss of human capital due to a new migration wave hint Albania's economic growth will be lower in the upcoming years.

"Albania's economic growth will be at low rates in the coming years due to the fact that private investment has been declining since 2014 and that human capital is also contracting and scarce. The sluggish growth rates will translate into lower income for state budget which means that public debt and the social security system will put further pressure on our economy and require tax hikes and as a result further lower private investment,” Kadia says in an op-ed published with a local business portal.

"In case high taxes are compensated with reforms and institutional modernization, then the challenge is not that big. But implementing economic reforms under tough economic circumstances is difficult. That's why economists recommend 'repairing the roof in sunny weather’,” says Kadia.

High taxes compared to regional competitors, a long-standing issue of unclear property titles and an inefficient judiciary that is undergoing reform are the main concerns for current and potential foreign investors to the country, mainly focused on low value-added sectors such as oil, mining, hydropower in the past decade.
                    [post_title] => New Italian recession signals more trouble for Albanian economy
                    [post_excerpt] => 
                    [post_status] => publish
                    [comment_status] => closed
                    [ping_status] => closed
                    [post_password] => 
                    [post_name] => new-italian-recession-signals-more-trouble-for-albanian-economy
                    [to_ping] => 
                    [pinged] => 
                    [post_modified] => 2019-02-05 15:02:56
                    [post_modified_gmt] => 2019-02-05 14:02:56
                    [post_content_filtered] => 
                    [post_parent] => 0
                    [guid] => http://www.tiranatimes.com/?p=140414
                    [menu_order] => 0
                    [post_type] => post
                    [post_mime_type] => 
                    [comment_count] => 0
                    [filter] => raw
                )

            [4] => WP_Post Object
                (
                    [ID] => 140403
                    [post_author] => 29
                    [post_date] => 2019-02-04 19:58:34
                    [post_date_gmt] => 2019-02-04 18:58:34
                    [post_content] => TIRANA, Feb. 4 - U.S.-based Standard & Poor’s has reconfirmed Albania’s ‘B+/B’ long- and short-term sovereign credit ratings with a stable outlook, in a rating that remains unchanged for the fifth consecutive year, with not much impact on Albania’s debt servicing whose cost is expected to pick up on a hike in bond rates following a decade of easier monetary policy.

In its latest rating, S&P, one of the ‘big three’ credit rating agencies, says “high public debt remains a key credit risk for Albania, although the debt burden continues to gradually shrink.”

S&P says it expects Albania’s public debt, currently hovering at around 68 percent of the GDP, including unresolved government arrears of 1.5 percent of the GDP (around €200 mln), to meet the Albanian government’s 60 percent target by the end of 2022. The forecast is made on a fiscal consolidation agenda and assuming that the country's economy will grow by nearly 4 percent on average in the next four years.

Albania’s public debt is considered too high for the current stage of Albania’s economic development and is the highest among Western Balkan economies, being a drag on much-needed investment due to spending on interests at 2.5 percent of the GDP, around half of what the country spends on public investment.

Spending on debt interests is expected to rise to 53.5 billion lek (€428 mln), representing a 6-year high of 2.7 percent of the GDP by 2021, assuming GDP growth will pick up to 4.5 percent of the GDP, according to the Albanian government’s mid-term outlook.

Last October, Albania raised €500 million at a rate of 3.5 percent, down 2.2 percent compared to three years ago, but at higher rates compared to regional countries with lower debt level. The 7-year €500 million Eurobond also included  €200 million in a buyback from the previous €450 million in a five-year Eurobond that was due to mature by November 2020, in a move aimed at taking advantage of favorable environment ahead of an expected hike in bond rates at European markets.

Albania’s central bank says it could consider a hike in the key rate by mid-2019, putting an end to nearly a decade of easy monetary policy in the aftermath of the 2008-09 global financial crisis as it tried to stimulate economic growth through lower interest rates despite its effectiveness being hampered by the country’s high levels of euroisation.

Albania’s key rate currently stands at a historic low of 1 percent, but Euro-denominated deposits and credit at half of the total, hold back the efficient pass-through of the easier monetary policy, in addition to barriers such as high levels of non-performing loans and poor demand for new loans.

The decision on a possible hike comes at a time when the Federal Reserve, America’s central bank, undertook several key rate hikes during 2018 and the European Central Bank stopped its quantitative easing programme in late 2018, but said its key rates will remain unchanged at least through the summer of 2019 before considering a possible hike.

 

 Growth outlook

Standard & Poor's expects Albania’s growth to embark on a downward trend in the next four years after picking up to 4.2 percent of the GDP in 2018 as major large-scale investment projects such as the Trans Adriatic Pipeline and the Devoll Hydropower complete by the end of this year and the fast-growing tourism sector is forecast to emerge as a new key driver of growth in addition to expected rising domestic consumption.

S&P expects Albania’s growth to slow down to 3.9 percent in 2019 and linger around 3.7 percent annually in the next three years until 2022, in forecasts that are around 0.5 to 0.8 percent lower compared to the Albanian government's more optimistic scenario.

Predicting that reform momentum could slow down as seven new ministers, half of the cabinet, have taken over in the past few weeks in a reshuffle ahead of the mid-2019 local elections and an upcoming EU decision on the possible opening of long-awaited accession talks, the rating agency urges continued reforms to support growth and rule of law, with a focus on the judiciary reform.

“The [judiciary] reform has the potential to sustainably improve the country's business environment, for example, by increasing the effectiveness of property rights enforcement,” says the rating agency about judiciary reform that is slowly progressing but has already ousted half of vetted senior judges and prosecutors over failing to justify their assets.

"Further structural reforms are necessary to strengthen Albania's still-weak institutional framework, in our view. In general, the country has a considerable shadow economy, with prevalent corruption and  constrained effectiveness of the rule of law," says S&P.

Weak headline credit growth and high euroization are also rated as key challenges for Albania’s central bank's monetary policy, which the S&P rates as a downside risk for a possible downgrade.

Inflation rate, currently at 2 percent, is not expected to meet the central bank's 3 percent target before 2023, at a time when the Bank of Albania and the government expect it to achieve the 3 percent target, estimated to have a positive effect on consumption and growth in general, by 2020.

Europe’s single currency losing a sharp 7 percent against the Albanian lek, making key imports much lower, and sluggish growth in consumption, kept inflation at a 2 percent rate for the second year in a row in 2018.

 

PPP risk

In similar style to key international financial institutions, S&P also warns of risks that the rising use of the much-rumored public private partnerships could pose to the country’s fiscal consolidation agenda through hidden debt.

"While we acknowledge high infrastructure needs for the country, the risk framework governing these projects [PPPs with local construction companies] is currently not yet sufficiently developed and many of these proposals remain unsolicited tenders. Annual expenditures for PPP projects currently stand at an estimated 2%-5% of government revenues, but the full amount of potential financial risks for the administration is impossible to evaluate," says S&P.

Albania is set to lift controversial unsolicited proposals in PPPs for major road projects and replace bonuses awarded to companies preparing feasibility studies with financial compensation in case of failing to win in final tenders by mid-2019. The proposed legal changes expect unsolicited proposals to continue for non-road PPP projects despite a series of transparency concerns and a major scandal with a phantom offshore company that falsified links to a US company to get a multi-million lucrative PPP before having it cancelled following media revelations.

The rating agency warns it might take a negative rating action if it observed material fiscal slippages, potentially resulting from higher fiscal deficits or materialization of contingent liabilities from PPP projects.

The last time S&P downgraded Albania was in late 2013 when the country’s long-term sovereign credit ratings were changed to ‘B’ from ‘B+ with a negative outlook affected by a significant widening of the fiscal deficit and rollover risk on increased debt stock following the June 2013 general elections.

Obligations rated B are considered speculative and subject to high credit risk. Both S&P’s B+ and Moody’s B1 ratings signify that the issuer or carrier is relatively stable with a moderate chance of default and that investors and policyholders of the rated entity are taking a low to medium risk.

 

 
                    [post_title] => Albania fails to get S&P rating upgrade for fifth year in row 
                    [post_excerpt] => 
                    [post_status] => publish
                    [comment_status] => closed
                    [ping_status] => closed
                    [post_password] => 
                    [post_name] => albania-fails-to-get-sp-rating-upgrade-for-fifth-year-in-row
                    [to_ping] => 
                    [pinged] => 
                    [post_modified] => 2019-02-04 19:58:34
                    [post_modified_gmt] => 2019-02-04 18:58:34
                    [post_content_filtered] => 
                    [post_parent] => 0
                    [guid] => http://www.tiranatimes.com/?p=140403
                    [menu_order] => 0
                    [post_type] => post
                    [post_mime_type] => 
                    [comment_count] => 0
                    [filter] => raw
                )

            [5] => WP_Post Object
                (
                    [ID] => 140392
                    [post_author] => 29
                    [post_date] => 2019-02-01 14:38:58
                    [post_date_gmt] => 2019-02-01 13:38:58
                    [post_content] => TIRANA, Feb. 1 – Albania’s competition watchdog says it has launched an in-depth probe into the country’s four largest commercial banks to check whether high interest rates amid sluggish credit and high profit rates could be an abuse of their dominant position.

Preliminary findings by the competition authority shows all four leading banks apply extremely low deposit rates and high interest rates and commission fees in behavior that could be part of a banned deal and distort market competition in a banking system that for about a decade until mid-2018 had 16 commercial banks that are about to be reduced to 13 following three mergers and acquisitions.

The competition watchdog says it has also noted high commission fees and penalty rates in case of customers switching banks and high fees for transfers in foreign currency.

Deposit interest rates applied by the country’s banking system have hit historic lows of close to zero as the key rate stands at an all-time low of 1 percent following a decade of easier monetary policy pursued by Albania’s central bank in a bid to stimulate credit growth and consumption. Albania’s inflation rate has been at 2 percent in the past couple of years, and is yet below the central bank’s 3 percent target estimated to have a positive effect on Albania’s economic growth.

Meanwhile, average loan rates in the national currency stood at 6.6 percent in late 2018, according to Albania’s central bank.

“There have been very low interest rates on deposits (as low as 0.55 percent on an annual basis and below the inflation rate), a relatively high difference (spread) between loan and deposit interest rates, a trend of rising interest rates on government securities, especially long-term debt financing instruments (bonds) under conditions of an easy monetary policy and at a time when the key rate has been on a downward trend," the competition watchdog said in late 2015 when it initiated a preliminary probe into the country’s banking system.

 

Top four banks

The in-depth probe will cover the 2016-2018 behavior of Turkish-owned BKT, the country’s largest bank in terms of assets, part of Turkey’s Calik Holding that also owns Albtelecom, the country’s fixed-line and internet service provider running the country’s third largest mobile operator.

The audit also includes the Albania unit of Austria’s Raiffesen Bank, the country’s largest commercial bank for about a decade until 2013 when it lost its leading position after gradually lowering exposure to Albania’s domestic public debt following the 2008-09 global financial crisis, but later diversified its portfolio in the country’s emerging investment and pension funds.

Majority Albanian-owned Credins Bank, the country’s third largest bank, and Italy’s Intesa Sanpaolo Bank Albania, which last year acquired the small loss-making Veneto Banka Albania through a merger without any significant impact on its assets, are also on the probe list.

All four banks represented 67.8 percent of assets in the Albanian banking system at the end of the third quarter of 2018, with top two BKT and Raiffeisen holding 28.4 and 15.1 percent in market shares respectively, in only slightly lower market share of 0.8 percent compared to the end of 2015, according to the Albanian Association of Banks.

Austrian-owned Raiffesein is the sole commercial bank to have seen its market share drop in the past three years, with its 6 percentage point loss gained by main three rivals.

 

Ample liquidity amid high rates, poor demand

Despite a series of mergers and acquisitions and new market entrants in the past couple of years, Albania’s central bank describes the country’s banking system as well-capitalized, liquid and profitable. However, due to poor demand and tight lending standards as a result of declining but still high non-performing loans, credit has been growing at moderate rates of around 4 percent when adjusted for effects such as euro’s free fall and the write-off of non-performing loans statistically keeping lending at negative growth rates.

As a result commercial banks have been investing more in government securities, Bank of Albania deposits and interbank placement both in Albania and abroad.

Surveys conducted by Albania’s central bank blame poor demand for new loans and tight lending standards amid a declining but still high level of non-performing loans of around 13 percent for the poor credit growth in key barriers that prevent making use of ample deposit-funded liquidity.

Commercial banks operating in Albania posted record profits of about 22 billion lek (€175 mln) in 2017, more than double compared to 2016 and breaking a previous record of about  15.7 billion lek (€125 mln) in 2015.

However, several small banks, some of which have changed hands in the past few years and others reportedly on sale, have been accumulating losses in the past few years amid sluggish credit growth.

Three EU-owned banks, including two Greek units and a French-owned one, have left Albania in the past couple of years, with bank ownership switching to domestic and non-EU conglomerates that international financial institutions estimate has limited credit supply.

"As bank ownership is shifting to domestic and non-EU conglomerates, bank supervision has a critical role in containing risks stemming from related-party lending, cross-border lending, and large exposures," the IMF warns in its latest Albania report.

Central bank governor Gent Sejko has called on commercial banks operating in the country to ease lending standards so that the current sluggish credit growth receives a boost, in a move that would also help the country’s economy grow at faster and more sustainable rates.

“The banks’ role is essential in this direction. The banking sector preserves the Albanians’ savings, but it has to put those savings at the disposal of the country’s growth and development. There is no growth without credit and savings lose their value without growth,” governor Sejko has recently appealed.

The Albanian economy has been growing by around 2 to 3 percent annually in the aftermath of the 2008-09 global financial crisis, almost half of a pre-crisis decade of 6 percent annually that is estimated to have tangible effects on Albanian household and bridge huge development and income gaps with EU member countries.

The country’s economy is estimated to have recovered to a decade-high of 4.2 percent in 2018, but growth prospects for this year are mixed with the Albanian government expecting growth to pick up to 4.3 percent, and international financial institutions forecasting growth will slow down between 3.5 to 3.7 percent amid lower FDI as two major energy-related projects are in their final stage and possible spillover effects from main trading partners in the Eurozone, a slowdown in Turkey and global trade tensions.
                    [post_title] => Albania’s top four banks under probe over alleged abuse of dominant position
                    [post_excerpt] => 
                    [post_status] => publish
                    [comment_status] => closed
                    [ping_status] => closed
                    [post_password] => 
                    [post_name] => albanias-top-four-banks-under-probe-over-alleged-abuse-of-dominant-position
                    [to_ping] => 
                    [pinged] => 
                    [post_modified] => 2019-02-01 14:38:58
                    [post_modified_gmt] => 2019-02-01 13:38:58
                    [post_content_filtered] => 
                    [post_parent] => 0
                    [guid] => http://www.tiranatimes.com/?p=140392
                    [menu_order] => 0
                    [post_type] => post
                    [post_mime_type] => 
                    [comment_count] => 0
                    [filter] => raw
                )

            [6] => WP_Post Object
                (
                    [ID] => 140345
                    [post_author] => 29
                    [post_date] => 2019-01-31 13:28:04
                    [post_date_gmt] => 2019-01-31 12:28:04
                    [post_content] => TIRANA, Jan. 31 – Facing a slowdown in revenue, mainly due to Europe’s single currency trading at a 10-year low against the Albanian lek, the government has been forced to revise down its 2018 budget for a second time in six months.

Europe’s single currency lost around 7 percent against the Albanian lek last year and currently trades at a 10-year low of 124.6 lek in a situation that has also hit government revenue through lower taxes collected from cheaper Eurozone imports among a series of negative effects on the Albanian economy, primarily on exporters, but also savers and remittance recipients in euro.

Using a fast-track procedure known as the ‘normative act’ intervention for the second time after a similar review in mid-2018, the ruling Socialists have proposed to cut both initial spending and revenue targets on the 2018 budget by 2.8 billion (€22.6 mln).

Approving the legal changes this week at the parliamentary economy committee, new Finance Minister Anila Denaj said the budget review was also intended to reallocate funds on priority public investment and serve to pay off part of the accumulated unpaid bills which a recent report by the International Monetary Fund said had increased to around €200 million by Sept. 2018, representing about 1.5 percent of the country’s GDP.

Latest finance ministry data shows budget revenue rose by an annual 4.3 percent in the first eleven months of 2018, but failed to meet targets by a considerable 2.8 percent equal to 11.4 billion lek (around €91 mln).

In its 2019 budget, the government cited the euro’s free fall effect hitting customs revenue as the main reason behind the revenue underperformance.

The finance ministry says the depreciation of both the euro and the US dollar has negatively affected customs income for all categories of imported goods, hitting revenue by 6 billion lek (€47.8 mln) for the first eight months of 2018 and expected the blow to extend to 9 billion lek (€71.7 mln) for the whole year.

On the positive side, the euro’s free fall has reduced interest rates on sizable Euro-denominated loans for both the Albanian government and businesses and households.

A hike in business closures and sluggish domestic consumption as also identified by tax administration data and poor credit growth also hit government revenue last year.

The tax administration says more than 15,000 small and medium-sized enterprises in 2018, two-thirds more compared to 2017, temporarily suspended their activity in 2018, in a sharp hike apparently fuelled by poor purchasing power and rising competition by shopping centers and supermarket chains that are gaining constant market share over traditional small businesses.

Meanwhile, credit struggled with growth rates of around 4 percent when adjusted for the euro’s free fall effect and the write-off of bad debt has spent three years in the ‘loss’ category of banks' balance sheets.

A key barrier to credit growth and easier lending standards, non-performing loans in Albania's banking system stood almost unchanged at around 13 percent in 2018, following sharp declines in previous years after hitting a record 25 percent in mid-2014.

The new budget review kept unchanged the initial budget deficit at 32.3 billion lek (€258 mln), equal to 1.6 percent of the country’s GDP in a bid to continue the debt reduction agenda with a target of bringing it down to a more affordable 60 percent of the GDP by 2021.

The finance ministry says public debt dropped to 67.2 percent of the GDP in 2018, down 3 percentage points compared to 2017, in an estimate that does not include government arrears of 1.5 percent of the GDP and potential liabilities resulting from the rising use of controversial public private partnership to carry out public investment in the road, health, education and waste management sectors.

Back in mid-2018, the ruling Socialists also revised the budget through a fast track 'normative act' intervention.

The normative act, which has the force of law for temporary measures and must be approved by Parliament within 45 days to turn into law, has been commonly used by incumbent Albanian governments to speed up procedures for emergency interventions to the state budget, especially mid-year and year-end cuts due to revenue underperformance.

The ruling Socialists expect the country's economy to recover to 4.3 percent and public debt to drop to 65.5 percent of the GDP for 2019 in more optimistic forecasts compared to key international financial institutions such as the and the World Bank and the IMF, which expect growth to slow down on lower foreign investment following the completion of TAP and the Devoll Hydropower projects that led FDI growth for the past four years.

Albania will be holding local elections on June 30 in a pre-electoral period that traditionally produces political tension, negatively affects government revenue because of soaring spending ahead of the elections and potentially has a negative effect on the peak tourism season unless everything goes smooth.

Albania also expects a long-awaited okay to the launch of its EU accession talks which experts say could have a positive impact on the Albanian economy, boosting investor confidence and helping the country continue rule of law and economy reforms.
                    [post_title] => Euro’s free fall, lower consumption lead to new 2018 budget cut
                    [post_excerpt] => 
                    [post_status] => publish
                    [comment_status] => closed
                    [ping_status] => closed
                    [post_password] => 
                    [post_name] => euros-free-fall-lower-consumption-lead-to-new-2018-budget-cut
                    [to_ping] => 
                    [pinged] => 
                    [post_modified] => 2019-01-31 13:28:04
                    [post_modified_gmt] => 2019-01-31 12:28:04
                    [post_content_filtered] => 
                    [post_parent] => 0
                    [guid] => http://www.tiranatimes.com/?p=140345
                    [menu_order] => 0
                    [post_type] => post
                    [post_mime_type] => 
                    [comment_count] => 0
                    [filter] => raw
                )

            [7] => WP_Post Object
                (
                    [ID] => 140340
                    [post_author] => 29
                    [post_date] => 2019-01-30 17:59:43
                    [post_date_gmt] => 2019-01-30 16:59:43
                    [post_content] => TIRANA, Jan. 30 - A proposed hike in dental service fees has caused a nationwide stir in the past few days with authorities initiating legal action and suspending new minimum fees proposed by the Albanian Order of Dentists as running against its powers and distorting competition in a privately-run sector.

The proposed minimum fees for common dental services sparked public anger after initial media reports that dentists in Tirana were applying new rates almost twice higher following a mid-December 2018 decision by the Order of Dentists, a public entity tasked with defending dentists’ interests and protecting patients from ill-treatment that financially relies on membership and licensing fees for its operation.

The country’s health ministry has initiated legal action against the Order of Dentists, demanding the cancellation of its proposed minimum tariffs and the Competition Authority launched an enquiry this week to check whether the fees were affecting market completion.

Reacting to the situation, the Order of Dentists said the reference prices it had approved were simply orienting and not binding and were set to alert patients that prices below its proposed minimum fees “put their health at risk by dentists whose main criteria is making a profit.”

New minimum fees proposed by the Order of Dentist range from 3,000 lek (€24) for teeth cleaning to 4,000 to 5,000 lek (€32 to €40) for fillings and up to 70,000 lek (€560) for dental implants, almost double compared to average current fees.

In its December 14, 2018 decision, the Order of Dentists said it would propose the new minimum fees to the finance ministry so that they are applied as reference prices for tax purposes when issuing tax receipts in a market where more than 90 percent of clinics are privately run.

The Albanian competition watchdog said the decision ran counter to the protection of competition, ordering its immediate suspension and initiating a probe to check if there is any market distortion.

Dental clinics are a booming business in Albania and also attract foreigners in a small but growing segment of medical tourism taking advantage of Albania’s relatively cheap prices and good quality.

Albanians in Italy and Greece, the hosts of around 1 million Albanian migrants, also regularly repair their teeth at home when on vacation and even travel on purpose to have major repairs such as bridges, implants and cosmic dentistry to take advantage of both price and quality.
                    [post_title] => Proposed hike in dental service fees causes stir 
                    [post_excerpt] => 
                    [post_status] => publish
                    [comment_status] => closed
                    [ping_status] => closed
                    [post_password] => 
                    [post_name] => proposed-hike-in-dental-services-fees-causes-stir
                    [to_ping] => 
                    [pinged] => 
                    [post_modified] => 2019-01-30 18:00:48
                    [post_modified_gmt] => 2019-01-30 17:00:48
                    [post_content_filtered] => 
                    [post_parent] => 0
                    [guid] => http://www.tiranatimes.com/?p=140340
                    [menu_order] => 0
                    [post_type] => post
                    [post_mime_type] => 
                    [comment_count] => 0
                    [filter] => raw
                )

            [8] => WP_Post Object
                (
                    [ID] => 140338
                    [post_author] => 29
                    [post_date] => 2019-01-30 16:10:50
                    [post_date_gmt] => 2019-01-30 15:10:50
                    [post_content] => TIRANA, Jan. 30 – Albania’s insurance market registered modest growth rates for the second year in a row in 2018 when the dominant non-life sector heavily reliant on compulsory motor insurance gained further market share.

A report by Albania's Financial Supervisory Authority shows growth in the insurance market slowed down to around 4.5 percent in 2018 when insurance premiums reached 16.92 billion lek (€135 mln) to account for only around 1 percent of the country’s GDP.

The 2018 performance marks a slowdown for the fourth year in a row after growth slowed down to 5.4 percent in 2017 following double-digit hikes of around 25 percent annually from 2014 to 2016 and a moderate contraction in 2013 when insurers suffered the first blow following the 2008 global financial crisis.

The market continued remaining heavily reliant on the compulsory motor insurance whose share in the total market income increased by 1.4 percentage points to 68.2 percent.

Albania has some 421,000 motor vehicles that undergo the compulsory technical control, with the average annual insurance rate for five-seaters at €130.

The current compulsory motor insurance system applies almost identical fees and fails to offers incentives for drivers with a clean record despite several legal changes introduced last year to also make it compulsory for insurers to take into account drivers’ regular geographical area in addition to the vehicles’ age and the engine capacity as well as apply penalties for drivers causing road accidents.

While Albania’s vehicle insurance rates are one of region’s lowest, oil prices in the country are at one of Europe’s highest, making owning a car unaffordable to most Albanians at a time when the per capita income is at third of the EU average and about half of new EU member states, in slightly lower levels compared to other EU aspirant Western Balkan countries.

Paid claims in the insurance market, the overwhelming majority of which belongs to vehicle insurance, continued their upward trend, increasing by around a quarter to 7 billion lek (€55.6 mln), to account for around 40 percent of total market revenue.

Insurance market operators relying at a modest per capita insurance rate of about €35 million see the potential introduction of compulsory natural disaster insurance or channeling a portion of the mandatory social security contributions to the country’s nascent private pension funds as a golden opportunity to boost their income considering about 1 million home and businesses and more than 700,000 contributors to the pension system.

Some nine companies operate in the country’s insurance system, including former state-run Insig insurer, privatized in early 2016 for 2.2 billion lek (€17.5 mln).
                    [post_title] => Insurance market growth slows down to 4.5%
                    [post_excerpt] => 
                    [post_status] => publish
                    [comment_status] => closed
                    [ping_status] => closed
                    [post_password] => 
                    [post_name] => insurance-market-growth-slows-down-to-4-5
                    [to_ping] => 
                    [pinged] => 
                    [post_modified] => 2019-01-30 16:10:50
                    [post_modified_gmt] => 2019-01-30 15:10:50
                    [post_content_filtered] => 
                    [post_parent] => 0
                    [guid] => http://www.tiranatimes.com/?p=140338
                    [menu_order] => 0
                    [post_type] => post
                    [post_mime_type] => 
                    [comment_count] => 0
                    [filter] => raw
                )

            [9] => WP_Post Object
                (
                    [ID] => 140300
                    [post_author] => 29
                    [post_date] => 2019-01-30 12:52:32
                    [post_date_gmt] => 2019-01-30 11:52:32
                    [post_content] => TIRANA, Jan. 29 – The International Monetary Fund has reiterated its warning over the growing use of public private partnerships and the accumulation of new unpaid government bills to the private sector as a threat to the country’s GDP growth and debt reduction agenda over the next five years.

In a newly released report following a visit to the country last November, IMF representatives expect Albania's economy to slow down to 3.7 percent in 2019, down from an expected decade of 4 percent in 2018, and linger around 3.9 to 4 percent over 2020-2023. The IMF forecasts are around 0.5 percentage points lower compared to the Albanian government’s more optimistic baseline scenario of growth gradually picking up to 4.5 percent by 2022.

However, lack of transparency in the PPP decision-making and the accumulation of new government arrears at around 1.5 percent of the GDP are rated as key internal risks to Albania’s mid-term fiscal consolidation path whose main target is reducing public debt to more affordable levels of below 60 percent of the GDP by 2021 compared to around 70 percent currently.

“The rapid increase in PPPs has raised fiscal risks, and [IMF] staff proposed further steps to control these. In addition to the existing stock of PPPs of 31 percent of GDP (covering more than 220 projects, including concessions in energy of more than 23 percentage  points), the 2019 budget documents foresee a pipeline of potential new PPPs capped at 15 percentage points of GDP,” the IMF says.

The IMF estimates Albania’s public debt will not drop to below 60 percent of the GDP before 2023 in a forecast which differently from the Albanian government’s estimates also includes central and government arrears, but excludes potential liabilities that could arise from rising use of PPPs.

“It will also be critical to ensure value for money through a competitive bidding process for all projects by halting the acceptance of unsolicited PPP proposals. While annual PPP-related government spending is projected to remain below the legal limit of 5 percent of tax revenues, this ceiling leaves little room left for additional government-funded PPPs, especially given the need to incorporate risks from contingent liabilities,” says the IMF.

Albania is planning to scrap the use of controversial unsolicited proposals for public private partnerships in the road sector but continue allowing it for a series of other sectors it considers strategic, only partly meeting IMF and World Bank recommendations of scrapping the controversial procedure.

The practice of awarding bonuses for unsolicited proposals is also set to be replaced by financial compensation in case the company initiating the project through a feasibility study fails to win a tender in a bid to place bidders under equal competition when tender procedures are held despite concerns of tailor-made criteria favoring certain companies marring the public procurement process.

Albania recently cancelled a €244 million 21-km highway that was set to be built on a PPP contract over allegations that the winning Albanian company was involved in an offshore scandal through a phantom company that claimed another €30 million in public road and electricity tenders before it had them cancelled over falsifying links to a newly established US company which it claimed had two decades of experience in the construction sector.  The winning company owned by a so-called Albanian ‘oligarch’ was awarded the highway project through an unsolicited proposal and a bonus putting it at an advantage in a tender with virtually no competition.

The €244 million highway project linking Kashar, an industrial area just outside Tirana, to northern Albania Thumane village was part of a major €1 billion controversial PPP program that the Albanian is implementing to upgrade road, education, health infrastructure in a major project that has been criticized for lack of transparency and hidden costs that could likely affect Albania's plans to reduce public debt.

 

Gov’t arrears 

The International Monetary Fund also warns the accumulation of new government arrears are hurting private economic activity and undermining trust in the public sector.

"Budgetary arrears—mostly related to VAT refunds, central government payments for road construction, and local governments—have posed a perennial problem in Albania, undermining trust in the tax administration and the government more broadly. The prevention and control of arrears requires strengthening revenue forecasting (including of VAT refunds) and cash management, and improving commitment controls, particularly by the Road Authority," says the IMF.

The IMF says the stock of central and local government arrears rose to 24.6 billion (around €196 million) in Sept. 2018, representing 1.5 percent of the GDP, almost double compared to 2016 when Albania started accumulating new unpaid government bills.

Albanian authorities say that VAT refund arrears, representing almost half of total stock of arrears are mainly related to large energy-related investment such as TAP and the Devoll Hydropower and will be cleared as soon as the projects come to an end by 2020.

Local government units also accumulated arrears worth around 7.1 billion lek (€56.7 mln) at the end of the third quarter of 2018, representing 0.4 percent of the GDP. The arrears, mostly related to investment projects, are considerably below a stock of 9.4 billion lek (€75.4 mln), 0.6 percent of the GDP, in 2016 just before a mid-2015 territorial and administrative reform cutting the number of local government units to 61 municipalities.

Albania cleared around €500 million in arrears over 2013-15  in payments estimated to have strengthened private sector balance sheets and reduced the level of non-performing loans that soared to 25 percent in mid-2014.

 

External threats

The IMF warns risks related to main trading partners Italy and Greece, a hike in interest rates following a decade economic slowdown-triggered lower interest rates could affect Albania’s trade, investment flows as well as borrowing costs.

“Over the medium-term, risks are tilted towards the downside. Albania is strongly exposed to the increasing risks to growth in Europe, notably in its main trading partners. A downturn in these countries could spill over through lower exports, remittances, and foreign direct investment,” says the IMF.

“Moreover, the expected tightening in global financial conditions would raise Albania’s cost of financing. On the domestic side, public debt is high, while low domestic savings and the absence of large institutional investors amplify dependence on foreign sources of financing,” it adds.

Albania's relations with IMF, a Washington-based lender of last resort, were revised to advisory in early 2017 following a three-year binding deal accompanied by a loan.
                    [post_title] => IMF warns of PPP, arrears risks to Albania’s mid-term growth outlook 
                    [post_excerpt] => 
                    [post_status] => publish
                    [comment_status] => closed
                    [ping_status] => closed
                    [post_password] => 
                    [post_name] => imf-warns-of-ppp-arrears-risks-to-albanias-mid-term-growth-outlook
                    [to_ping] => 
                    [pinged] => 
                    [post_modified] => 2019-01-31 18:27:01
                    [post_modified_gmt] => 2019-01-31 17:27:01
                    [post_content_filtered] => 
                    [post_parent] => 0
                    [guid] => http://www.tiranatimes.com/?p=140300
                    [menu_order] => 0
                    [post_type] => post
                    [post_mime_type] => 
                    [comment_count] => 0
                    [filter] => raw
                )

        )

    [post] => WP_Post Object
        (
            [ID] => 140427
            [post_author] => 29
            [post_date] => 2019-02-06 16:17:19
            [post_date_gmt] => 2019-02-06 15:17:19
            [post_content] => TIRANA, Feb. 6 - Japan is supporting Albanian farmers to have easier accesses to microcredit in order to get self-employed in the key agriculture sector and even start businesses.

The support is being provided by JICA, the Japan International Cooperation Agency, through Fed Invest, Albania’s largest financial cooperative, as part of a four-year project launched last year targeting the financial inclusion of smallholder households facing difficulty in obtaining traditional bank loans.

The ‘Smallholder Families’ Financial Inclusion Project in Albania” is a €4 million project supported by JICA in partnership with the Albanian Ministry of Finance and Economy, and implemented by the FED invest financial institution. The projects aims at upgrading the overall IT environment and help more than 50,000 Albanian smallholder households living in rural and peri-urban areas facing difficulties in securing a traditional bank loan to get better access to finance in order to become self-employed or set up their own business, Japan's embassy in Tirana said in a statement.

Following a needs assessment survey with rural households and the introduction of up-to-date IT environment at FED invest, the project's focus during this year will be on developing financial products and non-financial services.

Agriculture is a key sector for the Albanian economy, employing around half of the country's population but producing only a fifth of the country's national output due to key barriers such as sharp fragmentation of farm land into small plots, unclear property titles, poor access to credit and subsidies and lack of key infrastructure such as irrigation and machinery.

The world’s third-largest economy, Japan has been a major donor to Albania through its difficult transition from communism to a free-market economy. Tokyo has given millions, primarily in the rehabilitation of infrastructure and healthcare facilities and since mid-2017 is represented in Tirana by Makoto Ito as the first resident ambassador after the two countries re-established diplomatic relations in 1981.
            [post_title] => Japan supports farmers have easier access to credit 
            [post_excerpt] => 
            [post_status] => publish
            [comment_status] => closed
            [ping_status] => closed
            [post_password] => 
            [post_name] => japan-supports-farmers-have-easier-access-to-credit
            [to_ping] => 
            [pinged] => 
            [post_modified] => 2019-02-06 16:17:19
            [post_modified_gmt] => 2019-02-06 15:17:19
            [post_content_filtered] => 
            [post_parent] => 0
            [guid] => http://www.tiranatimes.com/?p=140427
            [menu_order] => 0
            [post_type] => post
            [post_mime_type] => 
            [comment_count] => 0
            [filter] => raw
        )

    [queried_object] => stdClass Object
        (
            [term_id] => 5
            [name] => Economy
            [slug] => economy
            [term_group] => 0
            [term_taxonomy_id] => 5
            [taxonomy] => category
            [description] => 
            [parent] => 0
            [count] => 7680
            [filter] => raw
            [cat_ID] => 5
            [category_count] => 7680
            [category_description] => 
            [cat_name] => Economy
            [category_nicename] => economy
            [category_parent] => 0
        )

    [queried_object_id] => 5
    [post__not_in] => Array
        (
        )

)

Latest News

Read More