Albania tasks ambassadors with bringing new investors to fill huge TAP, Devoll gap

Albania tasks ambassadors with bringing new investors to fill huge TAP, Devoll gap

TIRANA, Nov. 22 – With some major energy-related investment nearing competition, Albania has tasked the country’s ambassadors and diplomatic representatives in more than 40 countries around the world with the difficult job of bringing new investors to the country through

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Modest Western Balkans FDI declining at a high pace, UN report warns

Modest Western Balkans FDI declining at a high pace, UN report warns

TIRANA, Nov. 22 – Regional EU aspirant Western Balkans countries need to undertake business climate reforms and boost cooperation to attract increasing levels of foreign investment, a report by UNCTAD, the United Nations body responsible for international trade has shown.

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ECB: Albania is one of region’s most euroised economies

ECB: Albania is one of region’s most euroised economies

TIRANA, Nov. 22 – Albania is one of the region’s most euroised economies with euro-denominated deposits and loans accounting for about half of the total and euro cash holdings commonly used as a means for domestic payments, especially real estate

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Big companies warned of penalties over double standard balance sheets, underreported wages

Big companies warned of penalties over double standard balance sheets, underreported wages

TIRANA, Nov. 21 – The renewed nationwide campaign against tax evasion that the Albanian government has launched will focus on the country ‘big fish’ starting next January when the so-called ‘double standard balance sheets’ and underreported wages that private sector

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Albania’s exports on track to register double-digit growth as they slowly diversify

Albania’s exports on track to register double-digit growth as they slowly diversify

TIRANA, Nov. 21 – Albania’s exports are on track to register double-digit growth rates this year following sluggish performance affected by a slump in commodity prices in the past couple of years. Data published by state statistical institute, INSTAT, shows

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Italian legal changes take dozens of call centers to bankruptcy

Italian legal changes take dozens of call centers to bankruptcy

TIRANA, Nov. 20 – Dozens of small call center companies in the country have ceased their operations in the past few months following Italian legal changes making the supply of services for Italy-based companies from non-EU countries such as Albania

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Sole Albanian-owned mobile operator heading for Vodafone, Telekom takeover

Sole Albanian-owned mobile operator heading for Vodafone, Telekom takeover

TIRANA, Nov. 20 – Seven years after launching its operations as the country’s fourth mobile operator, Albanian-owned Plus Communication is about to exit the market following a preliminary deal with the country’s two largest operators to sell its frequency band,

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Albania offers tax incentives in bid to promote luxury tourism

Albania offers tax incentives in bid to promote luxury tourism

TIRANA, Nov. 16 – With tourism on top of the agenda as one of the emerging key drivers of Albania’s growth, the Albanian government is offering a series incentives for current and new investments in a bid to also promote

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Vienna Institute expects Albania’s GDP to recover to 4%

Vienna Institute expects Albania’s GDP to recover to 4%

TIRANA, Nov. 16 – The Vienna Institute for International Economic Studies expects the Albanian economy to grow slightly above 4 percent in the next couple of years driven by energy-related investment, consolidating public finances and a rapidly growing tourism sector.

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Investment funds continue to gain ground over traditional deposits

Investment funds continue to gain ground over traditional deposits

TIRANA, Nov. 16 – With interest rates in traditional deposits at slightly above zero, savers have turned to the more profitable investment funds and are even withdrawing their money from banks, according to Bank of Albania data. Deposits remained almost

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                    [post_content] => TIRANA, Nov. 22 - With some major energy-related investment nearing competition, Albania has tasked the country’s ambassadors and diplomatic representatives in more than 40 countries around the world with the difficult job of bringing new investors to the country through a more active economic diplomacy.

At a three-day conference held in Tirana last weekend, Finance Minister Arben Ahmetaj said FDI which in 2016 hit a historic high of about €1 billion thanks to some major energy-related investment is on track to drop by $200 million annually starting 2019 when major investment such as the Trans Adriatic Pipeline and the Devoll hydropower plant complete their investment stage.

"The challenge is how to replace these big investments that have entered their final investment stage when they become operational. Be aware that if we do nothing, either in improving the country's image, or finding investors be they small or strategic ones, then we will have a gap of $200 million in 2019, 2020 and 2021," minister Ahmetaj told the ambassadors, worried that none of them has suggested any potential investor so far.

Experts estimate the gap could be even bigger unless the major energy-related investments are replaced with new investments in the tourism sector where the ruling Socialists are offering major tax incentives as well as investment in the oil and mining sectors following a recovery in commodity prices after the mid-2014 slump.

The major Trans Adriatic Pipeline, already in its peak construction stage in the Albanian section, is estimated to trigger investment of about €400 million annually for 2017 and 2018.

TAP’s intensive works are expected to finish in 2018 before the project is tested and commissioned in 2019 ahead of the first gas deliveries to Europe in early 2020.

Meanwhile, Norway’s Statkraft has already made operational its first Banja HPP as part of the Devoll HPP project, one of the country largest foreign investment projects and is set to complete its second and final Moglice HPP by 2018.

The Banja and Moglice HPPs, part of the €535 million Devoll Hydropower project, are being built on the Devoll River, about 70 km southeast of Tirana.

Describing Albania's image abroad as the main issue facing the attraction of foreign investment, the finance minister urged ambassadors to contact chained-brand luxury hotels and resorts and inform them on the tax incentives Albania is offering.

In its 2018 fiscal package, the Albanian government has placed the emerging tourism sector on top of its agenda, offering tax incentives for a 10 year-period in return for investments of 8 to 15 million euros.

Albania has also been targeting to attract investors in its first special economic zone of Spitalla close to the country's biggest port of Durres and has recently cut the corporate income tax on IT companies to 5 percent, down from a standard 15 percent.

However, with the EU aspirant Western Balkan region suffering an image problem internationally due to perceived weak rule of law and high levels of corruption and Albania having one of the region’s highest tax rates, the ambassadors’ job is really tough and the small budgets available for the Albanian diplomatic staff make it even more difficult.

Mark Crawford, the president of the American Chamber of Commerce in Albania representing some of the major foreign and local investors, says high taxes are a key concern for doing business in Albania when compared with regional countries and the best promotion Albania can do is treat well the current foreign investors in the country who can be either ‘good or bad advertisement to others.‘

The main opposition Democratic Party who was in power when the major TAP and Devoll projects were contracted, says the hostile investment climate, higher taxes, corruption and crime and drugs are the main barriers to attract foreign investment.

"It's a mission impossible for the ambassadors to bring foreign investors to Albania. [Prime Minister] Rama is well aware of this because he is to blame for the hostile environment toward local and foreign businesses," says Lulzim Basha, the head of the opposition Democratic Party.

With no new major foreign investment in sight and a prolonged political deadlock ahead of the June 25 general elections, FDI suffered a blow in the first half of this year when it hit a three-year low amid poor investor confidence and uncertainties over election results

Central bank data shows FDI dropped to €380 million in the first half of this year, down from €409 million during the same period last year, registering a modest 7 percent decline, but warning of headwinds as two major ongoing energy-related projects are completed in the next couple of years.

Experts have blamed the slowdown in FDI on the sharp cut in commodity prices and Albania’s increase in the tax burden in the past few years, reducing its competitiveness compared to other regional countries applying flat tax regime of about 10 percent, despite the country’s favourable geographical location and investment opportunities, especially in the tourism industry.

The long-standing issue of clear property titles, lack of an efficient judiciary and highly perceived corruption are also considered barriers.

In a bid to compensate for the declining FDI in the post 2018 period, Prime Minister Rama has launched an ambitious €1 billion public-private partnership investment program which the IMF has described as risky for Albania's bid to reduce public debt to 60 percent of the GDP by 2020 from a current 70 percent, a high level for Albania's stage of development.

The Arbri Road linking Albania to Macedonia, some 150 schools, hospitals and healthcare facilities are on the PPP agenda.
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                    [post_content] => TIRANA, Nov. 22 - Regional EU aspirant Western Balkans countries need to undertake business climate reforms and boost cooperation to attract increasing levels of foreign investment, a report by UNCTAD, the United Nations body responsible for international trade has shown.

The recommendations come at a time when FDI in the region as a whole is declining at a faster pace compared to global FDI with the exception of Serbia and Albania, the two key Western Balkans players. It also comes few months after regional leaders at the Trieste Summit reconfirmed support to an EU-backed regional economic area of 20 million consumers to facilitate the EU integration process for the six EU aspirants.

“Enhanced regional cooperation is of crucial importance to enhance FDI in South-East Europe as we aim to guide the region to meet the strategic needs of investors and avoid the race to the bottom,” said Goran Svilanović, the Secretary General of the Regional Cooperation Council.

The report shows FDI in the six Western Balkans countries and Moldova dropped by 5 percent to about 4.5 billion euros in 2016 and is still a long way from reaching the SEE 2020 FDI target of annual inflows of €7.3 billion.  FDI in the region, which remains largely concentrated on financial services and energy, has fluctuated at this level for the past four years.

FDI in the Western Balkans, largely perceived as lacking rule of law and where corruption remains a key barrier to attract big investors, accounted for only about 0.27 percent of total global FDI which in 2016 declined by 2 percent to US$1.75 trillion

Significant progress in investment policy reform across the region and the end of a harmful fiscal race are among the report’s key findings. Easing restrictions on trade, such as simplifying customs procedures and granting market access, remains another area which could help attract investors – especially those firms seeking to export.

Another key proposal in the report is the creation of a regional investment promotion platform.

“Taking a regional approach to investment attraction makes sense. Multinational firms and investors operate and invest regionally, based on strategic decisions about market size, regional production networks and infrastructure links,” says James Zhan, the UNCTAD Director of the Investment and Enterprise Division.

With internal investment resources being quite limited and unable to make the region as whole more competitive in the short and medium run, FDI is seen as a key tool to bring know-how and reduce high unemployment rates and significant brain drain affecting current and future development prospects.

In the latest Doing Business report regional economies ranked in the top 70 out of 190 countries with Serbia and Albania featuring the highest tax burdens.

GDP growth in the region in the past few years has been at modest levels of 1 to 3 percent, negatively affected by spillover effects from crisis-hit Eurozone trading partners.

The UN reports shows Albania has a disadvantage compared to other regional economies when it comes to tax incentives as existing incentives are not periodically evaluated against effectiveness or administered by independent entities.

In the latest UNCTAD 2017 World Investment report, Albania continued to remain the Western Balkan’s second largest FDI recipient for the seventh year in a row, but its FDI stock at the end of 2016 lagged behind three regional competitors.

Albania's 2016 FDI inflows rose to a historic high of €983 million driven by two major energy-related investment such as the Trans Adriatic Pipeline and the Devoll Hydropower plant.

However, the country's FDI stock increased to a total of $5 billion, higher only compared to neighboring Montenegro and Kosovo among regional competitors.

Albania’s recent FDI has mainly been focused in non-tradable and natural resource-based, making it vulnerable to international headwinds such as the 2014 slump in commodity prices paralyzing investment in the oil and mining industry or weather-related factors such as this year's prolonged drought halting hydro-dependent domestic electricity generation.

“Attracting FDI to higher value-added activities would integrate the economy better into global supply chains, boost productivity and create more and better jobs throughout the economy. This, however, would require wide-ranging structural reform to bring about substantial improvements in the investment environment,” says the European Commission in a recent report.

Albania’s current cooperation with CEFTA member countries that includes six Western Balkan member countries and Moldova is currently poor and already hurt by frequent trade disputes and barriers.

Albania’s exports to CEFTA countries account for only about 14 percent of the total while imports for only less than 7 percent, compared to about three-quarters of exports and two thirds of imports to and from EU member countries.

The Western Balkans regional economic area, which Balkan leaders agreed to at the Trieste Summit last July, aims at developing an area where goods, services, investments and skilled workers can move without obstacles.

The Western Balkan region is Europe’s most underdeveloped suffering huge gaps in terms of economic development, rule of law and unemployment compared to Western Europe. Ethnic tensions are frequent especially in Bosnia and Herzegovina, Macedonia and Kosovo.

Only Serbia and Montenegro have currently launched accession talks. Albania is waiting to initiate talks pending the implementation of a long-awaited justice reform.  Macedonia seems stuck because of a name dispute with Greece. Bosnia is struggling with inter-ethnic disputes while Kosovo which gained independence from Serbia in 2008 is still not recognized by five EU members.

Enlargement prospects remain pessimistic in the short and medium-run considering internal developments in the bloc with the Brexit, the migrant and financial crises as well as rising populism high on the agenda.
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                    [post_content] => TIRANA, Nov. 22 - Albania is one of the region's most euroised economies with euro-denominated deposits and loans accounting for about half of the total and euro cash holdings commonly used as a means for domestic payments, especially real estate and cars, according to a report by the European Central Bank.

In a report examining the euro’s international role, the ECB says unofficial loan and deposit euroisation is salient feature among EU aspirant Western Balkans countries with Kosovo and Montenegro, already using the euro as their de facto currency without the EU's blessing.

“There are encouraging signs of progress in de-euroisation in the countries concerned, although this progress remains slow and is largely concentrated on the lending side,” says the report.

At Euro 1.9 billion, Euro-denominated loans in Albania dropped to 47 percent of the total credit at the end of 2016, down 2.3 percentage points year-on-year, following a regional trend of central banks applying de-euroisation measures to encourage lending in the local currency in order to boost the efficiency of their easier monetary policies and protect depositors and borrowers from exchange rate fluctuations.

At 47 percent, Albania's share of euro-denominated loans is slightly higher than in Macedonia but considerably below Bosnia and Herzegovina and Serbia's 60 and 62 percent shares respectively.

Euro-denominated loans in Albania account for 88 percent of foreign currency loans with the rest being mainly denominated in U.S. dollar.

When it comes to deposits, Albanians prefer to hold 40 percent of their total savings in Europe’s single currency, compared to Euro-denominated deposits accounting for about 36 percent of the total deposits in Bosnia and Herzegovina and Macedonia and 64 percent in Serbia

Albania’s total euro-denominated deposits at the end of 2016 were estimated at about 2 billion euros.

The report says unofficial euroisation is determined by factors such as confidence in the domestic currency, trade relations with the euro area and remittances.

Albania conducts two-thirds of its trade exchanges with Eurozone countries, mainly Italy, and receives about €600 million in remittances from more than 1 million migrants, mainly in Italy and Greece, 40 percent less than pre-crisis peak level a decade ago.

The Euro is a common currency in real estate, car sales and huge inflows from several major energy-related foreign direct investment and the rapidly growing tourism sector have taken Europe’s single currency to an eight-year low of 133.6 lek with a negative impact on the country’s exports. Anecdotal evidence hints the euro has also sharply depreciated as a result of an increase in euro inflows due to a hike in illegal cannabis cultivation and trafficking in the past couple of years.

A survey conducted as part of the ECB report shows euro cash holdings remain widespread in the region with about 30 percent of respondents in Albania reporting euro cash, lower only compared to Bosnia and Herzegovina.

"Results from studies suggest that agents in the region continue to prefer euro cash for reasons that are predominantly related to trust. In particular, depreciation expectations and memories of past crises are important determinants of households’ decisions on whether to save or pay in euro cash," says the report.

Besides being used for hoarding, euro cash is also used as a means for domestic payments, especially real estate and cars which are frequently paid for in euro in some south-eastern European countries.

Lending in the first half of this year in Albania, mainly grew in the national currency, which now accounts for about 43 percent of total credit, compared to only about a quarter just before the onset of the global financial crisis in 2008. The situation unveils the country’s declining but still high euroization rate, a barrier preventing the transmission of the central bank’s easier monetary policy which has led the country’s central bank to undertake de-euroisation measures for next year.
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                    [post_content] => TIRANA, Nov. 21 - The renewed nationwide campaign against tax evasion that the Albanian government has launched will focus on the country ‘big fish’ starting next January when the so-called ‘double standard balance sheets’ and underreported wages that private sector companies commonly employ to avoid paying taxes will be the tax inspectors’ new target.

Prime Minister Edi Rama says nearly half of the country’s 800 largest enterprises underreport wages and double balance sheets is a common phenomenon when it comes to borrowing from banks and reporting to the tax authorities.

"Companies operating on double balance sheets will receive a severe blow next January as the government will only recognize the balance sheets that these companies have submitted to banks," Prime Minister Edi Rama said this week, warning that the story of companies boasting to banks about how much they possess when it comes to borrowing and complaining to tax authorities when they have to pay taxes will soon come to an end.

The Prime Minister says tax authorities have unveiled that 42 percent of employees working in the country’s largest 800 private sector enterprises are reported with tax authorities as being paid at only 30,000 lek (€222) a month, something which he says is intolerable when it comes to social protection benefits and contribution to the state budget.

Since mid-2017, Albania’s minimum wage on which compulsory social security contributions and health insurance is calculated has increased to 24,000 lek (€177), yet remaining one of the region’s lowest.

Due to the low number of contributors and big number of pensioners, Albania suffers a huge pension gap of more than 300 million euros annually.

The Prime Minster’s comments came at a time when a renewed nationwide campaign against informality has been in place since last October after Prime Minister Edi Rama’s Socialist Party was reconfirmed for a second clearer term of office in last June’s general elections.

The renewed campaign against informality comes after a rather aggressive late 2015 nationwide operation accompanied by a sharp increase in penalties, later turned down by the country’s Constitutional Court as “disproportionate” to income and offences committed. The campaign, mainly focused on small businesses, formalized thousands of businesses previously operating informally and lifted thousands of workers out of informality, but failed to bring a considerable increase in tax revenue.

Along with high taxes and inefficient justice system, informality or unfair competition is one of the top concerns facing businesses in Albania, especially foreign investors.

International financial institutions and independent experts estimate Albania’s informality to be at about 30 percent of the GDP, one of the region’s highest.

At about 28 percent of its €11 billion GDP, Albania's has one of the region's poorest tax collection rates despite applying one of the highest tax rates among the six EU aspirant Western Balkans countries, unveiling the inefficiency of the tax administration and high informality rates.

Earlier this month, Prime Minister Rama also announced nationwide campaigns to fight organized crime, reform the tap water system and discipline river quarrying to prevent further soil erosion and flooding

The campaigns come at a time when the political situation in the country has been tense over a probe into former Socialist Party Interior Minister Saimir Tahiri, one of Rama's closest allies, over alleged links to some distant cousins arrested over drug trafficking in Italy and a cash amount of €835,000 found in the car of 25-year-old businessman who also carried two speedboat driving licences belonging to the former interior minister.

Starting April 2018, the VAT threshold on businesses will be lowered to annual turnover of 2 million lek (about €15,000), down from a current 5 million lek (€37,000) while the property tax will be collected on a value-based formula applying a 0.05 percent rate on homes and 0.15 percent on business facilities starting next January, according to the 2018 fiscal package.

 

Wage, GDP growth paradox 

The Albanian economy grew by a 6-year high of about 3.4 percent in 2016, but average wages in the country’s private and public sectors registered a paradoxical decline, hinting Albania’s post-crisis growth of 1 to 3 percent annually is failing to produce much-needed welfare in one of Europe’s poorest countries.

Recent data published by state statistical institute, INSTAT, shows gross average wages in the private and public sector, dropped by 2.1 percent in 2016 when the economy grew by 3.4 percent. The wage decrease is bigger considering an annual inflation rate of 1.3 percent.

Albania’s average gross wage (net wage + social security and health insurance contributions as well as personal income tax) slightly fell to 45,845 lek (€336) in 2016, mainly as a result of a decline in wages by foreign-owned and joint ventures between Albanian and foreign companies.

The gap between wages paid by the public sector and foreign-owned companies, almost twice higher compared to wages paid by Albanian-owned businesses unveils the high level of informality in the Albanian economy despite a tough late 2015 nationwide campaign to tackle widespread tax evasion.

Experts estimate Albania’s economy needs to grow by 6 percent annually in order to produce obvious welfare for its households who have taken to massive migration in the past couple of years, applying for apparently ineligible asylum in EU member countries, mainly in Germany and France.

The Albanian economy is on track to grow by 4 percent this year, fuelled by some large energy-related investment such as the Trans Adriatic Pipeline and a big hydropower plant.

The country’s GDP has been growing by an average of 1 to 3 percent annually since 2009 following a pre-crisis decade of 6 percent annually, the growth rate estimated to bring welfare to the EU aspirant Balkan economy.
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                    [post_date] => 2017-11-21 13:49:48
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                    [post_content] => TIRANA, Nov. 21 - Albania's exports are on track to register double-digit growth rates this year following sluggish performance affected by a slump in commodity prices in the past couple of years.

Data published by state statistical institute, INSTAT, shows Albania's exports grew by an annual 13.4 percent in the first ten months of this year but were not fuelled by the pickup in commodity prices as a considerable amount of domestically produced crude oil by the now China-owned Bankers Petroleum is being sold to a local refiner and destined for domestic use which has cut fuel imports by a quarter during this year.

The indicator hints Albania’s exports, heavily reliant on garment and footwear accounting for 43 percent of total exports and “minerals, fuel and electricity” for 16 percent, down from 40 percent ahead of the mid-2014 slump in oil prices, are slowly moving to becoming more diversified as they now account for 61 percent of total exports compared to about 68 percent in 2013 when oil topped Albania’s exports.

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.

The country's exports registered modest growth of 0.1 percent in 2016 following a 5 percent oil-price affected decline in 2015.

Brent oil prices have currently risen to a 2-year high of above $60 a barrel, up from a 12-year low of $30 a barrel in early 2016, but yet stand at almost half of the peak level of more than $110 in mid-2014 just before the slump. The hike has had a positive impact on Albania’s oil industry whose exports have halved since the mid-2014 slump in international oil prices.

Albania’s double-digit growth in the first ten months of this year was fuelled by a sharp 40 percent hike in exports of construction materials and metals, apparently triggered by the resumption of production by the country’s largest steelmaker.

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 €200 million.

At 36 billion lek (€267 million) in January-October 2017, exports of construction materials and metals were almost on par with exports of "minerals, fuel and electricity" which this year remain almost unchanged due to one of the driest summers on record almost paralyzing the country’s domestic hydro-dependent electricity generation and no significant increases in oil exports due to domestic sales.

The garment and footwear sectors, Albania’s traditionally top exporting industry in the past two decades, is also performing well this year, with its exports rising by about 10 percent to 98 billion lek (€724 mln) in January-October 2017.

Employing about 100,000 people and relying on cheap labor costs, the sector is largely dependent on demand from top trading partner Italy and remains mostly involved in cut-make-trim production with few companies having created their own in-house brands.

Exports of "food, beverages and tobacco" and "machinery, equipment and spare parts" also registered significant double-digit hikes in the first ten months of this year, but yet accounting for only 16 percent of total exports.

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 currently trades at 133.61 lek 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.

 

Trade gap widens

Imports in the first ten months of this year also grew by a significant 7.7 percent, widening the trade gap for a net importer such as Albania where exports account for only about half of total imports.

Fuelled by about €100 million in costly electricity imports due to prolonged drought paralyzing domestic electricity generation and rising imports of "machinery, equipment and spare parts" thanks to some large energy-related investment such as the Trans Adriatic Pipeline, Albania's trade gap widened by an annual 3.5 percent to 285 billion lek (€2.1 billion) in the first ten months of this year.

Imports of “machinery, equipment and spare parts,” an indicator of domestic investment and the country’s top imports, grew by an annual 3.2 percent to about 108 billion lek (€802 million), mainly thanks to pipe imports for the major Trans Adriatic Pipeline project bringing Caspian gas to Europe, already in its peak construction stage in its Albania section.

Italy, Greece, Germany and China were Albania's main trading partners in the first ten months with Italy alone accounting for about 36 percent of Albania's trade exchanges, making the Balkan country heavily reliant on developments in Italy where the economy has been slowly progressing to 1 percent growth rates after overcoming its recession.

Recessions in Italy and Greece, Albania’s top trading partners and the hosts of about 1 million migrants, had a huge impact on the Albanian economy in terms of trade exchanges, remittances, and foreign investment flows for several consecutive years following the 2008 global financial crisis.
                    [post_title] => Albania's exports on track to register double-digit growth as they slowly diversify
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                    [post_date] => 2017-11-20 15:39:12
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                    [post_content] => TIRANA, Nov. 20 – Dozens of small call center companies in the country have ceased their operations in the past few months following Italian legal changes making the supply of services for Italy-based companies from non-EU countries such as Albania much tighter starting April 2017, according to the tax administration data.

Company representatives say the law regulating offshore outsourcing and a deal by 13 big energy and telecommunication operators in Italy with the Italian government to conduct 80 percent of their call center outsourcing work on home soil has already had severe negative effects for small operators in Albania and big companies are looking to diversify, shifting to English-language support services and speculative services such as online trading platforms or currency exchange investments.

H & L Communication has already closed down two of its Tirana units, employing more than a hundred people following a sharp cut in contracts with Italy. The company, which started operations in mid-2015  is one of more than 30 that have shifted into a passive status with the tax administration during this year.

"If the situation continues like this, we won't be for long. I have made my life investment, I have a loan to pay off but it seems that I am running out of work,” the company’s administrator is quoted as saying by Monitor magazine.

The call center closures are also having a negative impact on youth unemployment, currently about 30 percent. The positive impact that the call center industry has had on the Albanian economy came to an end in the second quarter of the year after it suffered its first quarterly contraction since early 2011 just before the industry began to rapidly grow.

Employing some 25,000 people, the call center industry had emerged as a catalyst for youth unemployment, and the mismatch between skills earned at universities and labor market needs, making use of good language skills by Albanian youngers, especially fluent Italian, and cheap labor costs.

More and more companies have recently diversified to mediating services in online trading platforms luring potential investors with high return rates and often targeting markets such as Italy and England. The services are considered highly speculative as customers tend to lose most of the times and experts say they cannot serve as replacement for call centers which can consider diversifying their services in languages other than Italian and also target new markets as a way out.

Italian experts say small Albanian companies are also suffering because of lack of professionalism, losing the confidence of Italian contractors because of cheating with promotional campaign contracts.

The country's financial supervisory authorities have warned Albanians to be careful with online trading in international stock exchanges, describing such investments as highly risky, especially if offered by unlicensed operators and used by investors lacking appropriate knowledge.

Potential investors are being lured by online brokers through phone calls and aggressive marketing campaigns at a time when only three brokers have been licensed by the Financial Supervisory Authority and the Bank of Albania to offer such services.

Online trading platforms offer investors opportunities to invest in financial products in international stock exchanges, mainly in government securities, foreign exchange and commodity products such as oil and precious metals.
                    [post_title] => Italian legal changes take dozens of call centers to bankruptcy 
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                    [post_date] => 2017-11-20 12:00:03
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                    [post_content] => TIRANA, Nov. 20 - Seven years after launching its operations as the country's fourth mobile operator, Albanian-owned Plus Communication is about to exit the market following a preliminary deal with the country's two largest operators to sell its frequency band, the Competition Authority has announced.

Albanian-owned Plus, the smallest and sole Albanian-owned mobile operator, has preliminarily agreed to sell half of its frequency spectrum to Vodafone Albania and the remaining half to Telekom Albania for an undisclosed amount, in a move which makes the country’s mobile telephony market fully foreign-owned and reduces market competition.

In a statement on the upcoming acquisition, the Competition Authority says Plus Communication has signed an October 17 deal with leading Vodafone Albania operator, part of UK-based giant Vodafone Group and second largest Telekom Albania (former AMC) operator, part of German Deutsche Telekom, to transfer each of them an equal 50 percent share of its 900 MHz, 1800 MHz and 2100 MHz frequency bands.

The watchdog says the move is an "integral and inseparable part of a broader package of negotiations and mutual agreement Plus Communication is holding with Vodafone Albania and Telekom Albania."

The sale operation comes amid a sharp decline in income Plus registered in 2016 and failure to increase its 5 percent market share despite obtaining its long-awaited 3G licence last year at a time when its three competitors were already offering 4G services.

Plus Communication, owned by some of the country’s richest businessmen, saw its annual income drop by 30 percent to about €16 million in 2016 and net profit drop by ten times to a mere 87.7 million lek (€ 644,000), according to annual reports filed with the country's National Business Center.

The company's difficult financial continued this year with the closure of several shops in Tirana in the past few months.

Plus Communication launched operations in late 2010 after it was awarded the fourth GSM licence in an international tender for €7.2 million.

Plus’s market exist means the country’s two largest operators Vodafone and Telekom Albania (former AMC), which have been operating in Albania since the early 2000s, are due to increase their market shares by 2.5 percent each.

Meanwhile, no immediate effect is expected for Turkish-owned Albtelecom, the third largest mobile operator which launched its operations in early 2008, breaking the then-duopoly by increasing market competition.

Few months ago, Albania's Competition Authority failed to find evidence of an alleged price-fixing deal in the country’s mobile communications market following a probe into the main three operators as they almost simultaneously increased subscriber costs during the past one and a half years.

The probe came after, the country’s main three mobile operators cut their monthly pre-paid packages to 28 days, down from a previous 30 days, indirectly increasing costs for prepaid users who account for the overwhelming majority of 92 percent of active mobile subscribers.

A year later, in March 2017, the three main mobile operators changed the key standard packages in the course of 2 weeks in common changes that lifted unlimited internet at reduced speed and cut international airtime.

Plus Communication, the only Albanian-owned operator, with a market share of 5 percent was not involved in the probe as it has kept its 30-day package unchanged in a bid to attract new subscribers and compensate for its network coverage and internet access limitations in some parts of the country.

The competition watchdog had earlier warned the mobile phone market has the structure of an “oligopoly market with an operator having a dominant position in the respective retail mobile services and two other operators having stable market shares.”

Albania’s mobile operators struggled to significantly increase their income for the fourth year in a row amid tougher competition leading to lower rates and increasing use of smartphone apps replacing traditional call and text message services.

Mobile operators’ revenue slightly rose by 2.4 percent to 33.9 billion lek (€250 million) in 2016 after hitting a decade-low in 2014, according to a report by the electronic communications regulator, AKEP.

Latest 2016 data shows leading Vodafone Albania operator, part of UK-based giant Vodafone Group, continues dominating the mobile market with 48.6 percent market share in terms of revenue, followed by Telekom Albania (former AMC), part of German Deutsche Telekom with 30.7 percent, Turkish-owned Albtelecom with about 12 percent, and Albanian-owned Plus Communication with 5 percent share.

The number of active mobile phone users, defined as those that have made or received at least a call or SMS in the last three months, slightly dropped to 3.4 million in 2016. About half of the active users, some 1.7 million subscribers had access to 3G and 4G services.

In its annual report, AKEP said pre-paid subscribers not using promotional offers face tariffs up to 14 times higher than the average rates of 2.83 lek (€0.02) /minute VAT included for 2016.
                    [post_title] => Sole Albanian-owned mobile operator heading for Vodafone, Telekom takeover  
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                    [post_date] => 2017-11-16 17:02:06
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                    [post_content] => TIRANA, Nov. 16 – With tourism on top of the agenda as one of the emerging key drivers of Albania’s growth, the Albanian government is offering a series incentives for current and new investments in a bid to also promote luxury travel in the country in addition to the rapidly growing mass tourism.

Earlier this year, the Albanian government cut VAT on hotel accommodation to 6 percent, from a previous 20 percent and has now introduced in its 2018 fiscal package incentives to extend the 6 percent VAT on all services offered by new chained-brand luxury hotels and resorts which will also be stripped of the corporate income tax for a 10-year period.

In some amendments to the tourism law, the ruling Socialist government proposes that new luxury accommodation units built by internationally renowned companies will benefit tax incentives for a ten-year period for building and operating four-star hotels and resorts with an investment value of at least €8 million.

In case of five-star accommodation, the minimum investment value to obtain the special investor status is €15 million. Investments will have to be carried out by internationally renowned chained-brand hotels or under management or franchise contracts with them.

The criteria, procedures and documentation that operators have to meet in order to obtain the special status investor will be determined under another government decision.

The government says the incentives are similar to regional countries with a longer tradition in tourism and aimed at making the country’s tourism industry more competitive by offering quality accommodation units and services in a bid to attract a new segment of high-income tourists.

"The rapidity that the number of foreign tourists is growing at in the country is unfortunately not being accompanied yet with the same pace as far as improvement in the quality of accommodation infrastructure is concerned. Although the number of hotels and accommodation units is increasing, the service standards and the general quality they offer still leaves a lot to be desired when compared to the constantly growing number of tourists or their requests or expectations," says an explanatory report to the proposed changes.

"In addition, the few accommodation units of relatively high quality Albania currently offers are concentrated mainly in Tirana and their number in the Albanian coastline or mountain areas is quite limited," it adds.

The government says the new 'elite' tourism investments will contribute to new jobs, increase the number of high-income tourists and boost the 'country's image.

However, the main opposition Democratic Party is worried the new tax-free investments could serve as money-laundering schemes for drugs proceeds, especially cannabis money following a hike in cultivation in the past couple of years.

In a tense parliamentary session on Thursday debating the 2018 draft budget, Prime Minister Edi Rama said some of the country’s richest men have already expressed interest to invest in such facilities, denying money-laundering accusations.

The long-standing issue of unclear property titles, a key concern for foreign investors, also remains a barrier to the incentives and it is unclear yet whether the government will provide the land in return for investment. Big investors have previously quit their projects over land disputes following prolonged legal battles with local residents.

Due to property disputes, several investors have opted to build resorts on development contracts rather than purchasing the land.

Some 4.2 million foreign tourists visited Albania during the first three quarters of this year, up 5.7 percent compared to the same period last year, making tourism a key driver of Albania’s expected 4 percent growth rate for this year at a time when the economy has been mainly fueled by some large energy-related projects such as the Trans Adriatic Pipeline (TAP) bringing Caspian gas to Europe through Albania, Greece and Italy.

The contribution of the tourism industry in the first half of this year was at €722 million, making it one of the key drivers of growth at a time when the long-ailing construction sector has only revived thanks to TAP and some major hydropower plants.

Prospects remain positive as some big resorts are under construction, further improving Albania’s tourism standards and appealing European tourists.

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 13 percent of the country’s GDP and with optimistic mid and long-term growth prospects as the country’s attracts more and more tourists.

Albania’s emerging tourism industry is set to register one of the region’s highest growth in the next decade in terms of its contribution to GDP, employment, investment and exports, according to a report by London-based World Travel & Tourism Council, WTTC.

In its latest Economic Impact Research report, the WTTC ranks Albania 26th out of 185 countries for its travel and tourism long-term growth prospects from 2017 to 2027, leaving behind almost all regional competitors.
                    [post_title] => Albania offers tax incentives in bid to promote luxury tourism
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                    [post_date] => 2017-11-16 13:52:45
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                    [post_content] => TIRANA, Nov. 16 - The Vienna Institute for International Economic Studies expects the Albanian economy to grow slightly above 4 percent in the next couple of years driven by energy-related investment, consolidating public finances and a rapidly growing tourism sector.

The Vienna Institute outlook is in line with the Albanian government’s expectations and considerably more optimistic compared to forecasts by international financial institutions expecting Albania’s growth to slightly slow down next year as major energy-related investment such as the Trans Adriatic Pipeline enter their final stage.

The Institute expects Albania’s growth to recover to 3.9 percent in 2017, before accelerating to 4.2 percent in 2018 and slowing down to 4.1 percent by 2019. Consumer prices, currently at about 2 percent, are expected to meet the central bank’s 3 percent target by 2019.

"Strong investment in energy infrastructure will keep real GDP growth at around 4 percent in 2017 and during the remainder of the forecast period. These investments are mostly privately financed," says the Vienna Institute, one of the top centers for research in Central, East and Southeast Europe.

The Institute refers to the Trans Adriatic Pipeline, already in its peak construction stage and a major hydropower project by Norway’s Statkraft, both of which complete by 2018.

"The budget of the re-elected government of Prime Minister Rama is in surplus. In addition, the tourism sector is doing well, and promises to be an ever more important driver of growth in the coming years," adds the Institute.

Unlike previous electoral years, Albania's public finances have performed well this year, with budget revenues registering a 7.2 percent increase in the first three quarters of this year and spending kept in check to produce most deficit in January-September 2017.

Meanwhile, prospects for the emerging tourism sector and the tax incentives the Albanian government is offering in its 2018 fiscal package for quality investment seem optimistic.

The tourism sector produced a record high of about €1.5 billion in 2016 when it emerged as one of the key drivers of the Albanian economy.

Albania's 2017-2019 expected growth of about 4 percent is considerably higher compared to the Vienna Institute outlook for the other five EU aspirant Western Balkans countries.

Albania has been growing between 1 to 3 percent in the past eight years compared to a pre-crisis decade of 6 percent annually, estimated to bring welfare to the EU aspirant Western Balkan country.

 
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                    [post_date] => 2017-11-16 11:09:36
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                    [post_content] => TIRANA, Nov. 16 - With interest rates in traditional deposits at slightly above zero, savers have turned to the more profitable investment funds and are even withdrawing their money from banks, according to Bank of Albania data.

Deposits remained almost unchanged in the first three quarters of this year, but the emerging investment funds heavily investing in more profitable and risk-free government securities continued there moderate growth.

Meanwhile, money outside banks surged in the first nine months of this electoral year when it rose by an annual 17.4 billion lek (about €129 million) to 254.5 billion lek (€1.88 bln), about a fifth of the Albanian GDP, triggering informality concerns.

With credit struggling to recover amid tight lending standards and poor demand, the central bank has warned there has been a rising trend in informal lending while some banks have shifted to lending abroad amid high deposit-funded liquidity.

Central bank data shows the annual deposit growth at the end of September 2017 was at about 1.5 billion lek (€11 mln), considerably lower than the 3.8 billion lek (€28.5 mln) growth in the three investment funds.

Net assets in the three investment funds rose by an annual 5.5 percent to 73.6 billion lek (€544 mln) at the end of September 2017 as the number of investors rose by about 750 to 31,710, according to the Financial Supervisory Authority.

Operational since early 2012, the two Raiffeisen-run investment funds and a newly launched Albanian-owned fund have increased their market share to 5 percent of the GDP, but yet account for only 7 percent of the bank deposits.

The emerging investment fund market is dominated by investments in government bonds and T-bills, accounting for about 80 percent of total assets.

Yields on 2-year notes rose to 3 percent last October while yields on 12-month T-bills, the government's key instrument for internal borrowing, rose to 2.54 percent in the latest November auction, making them much more favourable option compared to average interest rates of about 0.26 percent in traditional bank deposits.
                    [post_title] => Investment funds continue to gain ground over traditional deposits
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            [post_date] => 2017-11-22 18:07:33
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            [post_content] => TIRANA, Nov. 22 - With some major energy-related investment nearing competition, Albania has tasked the country’s ambassadors and diplomatic representatives in more than 40 countries around the world with the difficult job of bringing new investors to the country through a more active economic diplomacy.

At a three-day conference held in Tirana last weekend, Finance Minister Arben Ahmetaj said FDI which in 2016 hit a historic high of about €1 billion thanks to some major energy-related investment is on track to drop by $200 million annually starting 2019 when major investment such as the Trans Adriatic Pipeline and the Devoll hydropower plant complete their investment stage.

"The challenge is how to replace these big investments that have entered their final investment stage when they become operational. Be aware that if we do nothing, either in improving the country's image, or finding investors be they small or strategic ones, then we will have a gap of $200 million in 2019, 2020 and 2021," minister Ahmetaj told the ambassadors, worried that none of them has suggested any potential investor so far.

Experts estimate the gap could be even bigger unless the major energy-related investments are replaced with new investments in the tourism sector where the ruling Socialists are offering major tax incentives as well as investment in the oil and mining sectors following a recovery in commodity prices after the mid-2014 slump.

The major Trans Adriatic Pipeline, already in its peak construction stage in the Albanian section, is estimated to trigger investment of about €400 million annually for 2017 and 2018.

TAP’s intensive works are expected to finish in 2018 before the project is tested and commissioned in 2019 ahead of the first gas deliveries to Europe in early 2020.

Meanwhile, Norway’s Statkraft has already made operational its first Banja HPP as part of the Devoll HPP project, one of the country largest foreign investment projects and is set to complete its second and final Moglice HPP by 2018.

The Banja and Moglice HPPs, part of the €535 million Devoll Hydropower project, are being built on the Devoll River, about 70 km southeast of Tirana.

Describing Albania's image abroad as the main issue facing the attraction of foreign investment, the finance minister urged ambassadors to contact chained-brand luxury hotels and resorts and inform them on the tax incentives Albania is offering.

In its 2018 fiscal package, the Albanian government has placed the emerging tourism sector on top of its agenda, offering tax incentives for a 10 year-period in return for investments of 8 to 15 million euros.

Albania has also been targeting to attract investors in its first special economic zone of Spitalla close to the country's biggest port of Durres and has recently cut the corporate income tax on IT companies to 5 percent, down from a standard 15 percent.

However, with the EU aspirant Western Balkan region suffering an image problem internationally due to perceived weak rule of law and high levels of corruption and Albania having one of the region’s highest tax rates, the ambassadors’ job is really tough and the small budgets available for the Albanian diplomatic staff make it even more difficult.

Mark Crawford, the president of the American Chamber of Commerce in Albania representing some of the major foreign and local investors, says high taxes are a key concern for doing business in Albania when compared with regional countries and the best promotion Albania can do is treat well the current foreign investors in the country who can be either ‘good or bad advertisement to others.‘

The main opposition Democratic Party who was in power when the major TAP and Devoll projects were contracted, says the hostile investment climate, higher taxes, corruption and crime and drugs are the main barriers to attract foreign investment.

"It's a mission impossible for the ambassadors to bring foreign investors to Albania. [Prime Minister] Rama is well aware of this because he is to blame for the hostile environment toward local and foreign businesses," says Lulzim Basha, the head of the opposition Democratic Party.

With no new major foreign investment in sight and a prolonged political deadlock ahead of the June 25 general elections, FDI suffered a blow in the first half of this year when it hit a three-year low amid poor investor confidence and uncertainties over election results

Central bank data shows FDI dropped to €380 million in the first half of this year, down from €409 million during the same period last year, registering a modest 7 percent decline, but warning of headwinds as two major ongoing energy-related projects are completed in the next couple of years.

Experts have blamed the slowdown in FDI on the sharp cut in commodity prices and Albania’s increase in the tax burden in the past few years, reducing its competitiveness compared to other regional countries applying flat tax regime of about 10 percent, despite the country’s favourable geographical location and investment opportunities, especially in the tourism industry.

The long-standing issue of clear property titles, lack of an efficient judiciary and highly perceived corruption are also considered barriers.

In a bid to compensate for the declining FDI in the post 2018 period, Prime Minister Rama has launched an ambitious €1 billion public-private partnership investment program which the IMF has described as risky for Albania's bid to reduce public debt to 60 percent of the GDP by 2020 from a current 70 percent, a high level for Albania's stage of development.

The Arbri Road linking Albania to Macedonia, some 150 schools, hospitals and healthcare facilities are on the PPP agenda.
            [post_title] => Albania tasks ambassadors with bringing new investors to fill huge TAP, Devoll gap
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