Sole Albanian bidder gets €161 mln PPP for 18-km highway

Sole Albanian bidder gets €161 mln PPP for 18-km highway

TIRANA, Oct. 22 – Albania has announced an unsolicited proposal by a local company to build a highway north of the country in a new costly public private partnership project, defying warnings by international financial institutions of giving up such

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Albania mulls cryptocurrency regulation in bid to become regional hub

Albania mulls cryptocurrency regulation in bid to become regional hub

TIRANA, Oct. 22 – The Albanian government says it is mulling a regulatory framework on cryptocurrencies in a bid to diversify investment opportunities in the country in an innovative sector that creates well-paid jobs and apparently become a hub for

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Albania considers state monopoly on sports betting

Albania considers state monopoly on sports betting

TIRANA, Oct. 18 – The Albanian government says it is considering a state-monopoly on sports betting following their expected ban from residential areas starting next January as part of a bill that also relocates electronic casinos in a bid to

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Poor demand, tight standards keep credit at moderate growth rates

Poor demand, tight standards keep credit at moderate growth rates

TIRANA, Oct. 18 – Poor demand and the banking sector’s tight lending policies continue to affect credit performance in Albania, where lending to the private sector in the year’s first half statistically registered negative growth rates, but a moderate growth

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Weak institutions, infrastructure hamper Albania’s competitiveness progress

Weak institutions, infrastructure hamper Albania’s competitiveness progress

TIRANA, Oct. 17 – Albania climbed several steps in the 2018 Global Competitiveness report to rank 76th out of 140 global economies and find itself as the region’s third best performer in a rating that is held back by weak

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Albania to tighten rules against tax evasion

Albania to tighten rules against tax evasion

TIRANA, Oct. 16 – The Albanian government has proposed tighter rules against tax evasion following a series of incentives already approved or pending final approval that are expected to become effective next January in a carrot and stick approach ahead

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Top four businessmen represent half of assets, earnings among Albania’s ten richest

Top four businessmen represent half of assets, earnings among Albania’s ten richest

TIRANA, Oct. 16 – The top 10 richest people in Albania was an all-male list in 2017 with the top four representing more than half of total profits and assets. Almost the same businessmen made it to the 2017 richest

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Albania warned to be well-prepared for timely reaction over external, internal shocks

Albania warned to be well-prepared for timely reaction over external, internal shocks

TIRANA, Oct. 16 – Representatives of key international financial institutions have urged Albanian authorities to continue with economic growth reforms and be well-prepared for timely reaction in case of external or internal shocks. The warning came in meetings that Albania’s

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Albania lags behind regional competitors on top 10 company diversification

Albania lags behind regional competitors on top 10 company diversification

TIRANA, Oct. 15 – Albania’s top ten companies continue to be dominated by energy-related and telecommunication companies unlike some of the region’s main competitors where the automobile industry is one of the key drivers of economy and employers. An annual

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Albania fails to make significant progress in money laundering, report shows

Albania fails to make significant progress in money laundering, report shows

TIRANA, Oct. 11 – Albania only slightly improved its ranking at the 2018 Basel anti-money laundering index, an annual ranking assessing the risk of money laundering and terrorist financing around the world, as it continued remaining a medium risk country,

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                    [post_content] => TIRANA, Oct. 22 – Albania has announced an unsolicited proposal by a local company to build a highway north of the country in a new costly public private partnership project, defying warnings by international financial institutions of giving up such practices that place companies proposing them at an unfair advantage by obtaining bonuses that make them eventual winners in tenders with little or no competition at all.

The government says it has selected Albanian-owned “A.N.K.” company to build an 18-km Milot-Balldren highway that improves access to the northern region of Lezha and neighboring Montenegro as part of the Adriatic–Ionian motorway, also known as the Blue Corridor, a future motorway that will stretch along the entire eastern shore of the Adriatic and Ionian seas, spanning the western coast of the Balkan peninsula. “A.N.K” is a company that has been operating in the Albanian construction sector for about two decades, but with a sole shareholder and a capital of around 247 million lek (€2 million), according to local media.

Its announcement as a winner came after the company had already been awarded a bonus by the government in late June for its unsolicited proposal on the highway segment and was the sole bidder in a tender held later this year. Construction is set to begin by next year once contract negotiations conclude.

The infrastructure ministry says the Albanian-owned company offered €161.5 million for the 18-km highway on a completely new track in construction and maintenance costs for the next 13 years.  The Milot-Balldren project is a 6-lane highway that also includes 9.5 km of secondary roads, new bridges on the Drin and Mat rivers and an 850 meter long tunnel that cuts travel time to Lezha and Shkodra, the main northern Albania tourist destinations.

Similarly to other infrastructure projects as part of the government’s ambitious €1 billion PPP program, the company will build the highway using its own funds and loans that are easily accessible due to the government serving as a guarantor, in return for annual government instalments covering construction and maintenance costs for the next 10 years.

The new PPP comes amid criticism by international financial institutions that the country’s public debt reduction agenda is being put at risk and that the €1 billion PPP program is being carried out under controversial unsolicited proposals and without a clear cost-benefit analysis.

The Albanian government has earlier awarded PPP contracts for the construction of a 40-km segment part the Arbri Road linking Albania to neighboring Macedonia for 33.6 billion lek (€265 million) and the construction of a 21-km highway linking Tirana’s industrial area to the airport and the Albania-Kosovo highway for €226 million.

The €1 billion PPP program that the Albanian government intends to implement for the next four years also includes several other major road projects in central and southern Albania, the construction of a regional hospital in Fier, the country’s second largest district, and several new schools in Tirana.

Interest by foreign companies to participate in the €1 billion PPP projects has been vague amid allegations of pre-determined winners in tenders where major Albanian companies submitting unsolicited proposals have been advantaged through pre-tender bonuses.

The International Monetary Fund has earlier warned Albania’s €1 billion PPP project will not only fail to bring public debt down to 60 percent by 2021, but could create hidden costs which if included in the debt stock could take it to 71 percent of the GDP, a high burden for Albania’s current stage of development.

According to the IMF, PPPs entail construction, financial, demand, political, force majeure and renegotiation risks and the Albanian government’s legislative threshold of annual payments to concessionaires not exceeding 5 percent of the previous year fiscal revenues is not reliable, reflecting a mix of mandatory and expected payments and worst-case estimates if pre-determined minimum revenue guarantees are triggered such as in the case of toll roads not meeting minimum traffic.

 

 

Kukes airport

Albania has also launched a call for a new airport north of the country that would break the current de facto monopoly that the Tirana International Airport has on international flights and apparently lead to lower ticket prices.

Having earlier awarded a bonus for its unsolicited proposal to a joint venture led by Albania's second largest company in terms of turnover and profits, the infrastructure ministry says it now invites bids on the Kukes airport until December 10.

The airport will apparently be reactivated by Kastrati, one of Albania’s top two companies which is now seeking to diversify its investment in the air transport. Kastrati which has teamed up to form a joint venture with T.M.D Systems LTD”, an aviation consultancy with operations in the UK and Israel, was offered an 8 percentage point bonus last July for its unsolicited bid, putting it at an advantage and apparently making it a winner when the tender is held later this year.

A United Arab Emirates investment in north-east Albania near the Kosovo border, the Kukes airport has been ready for use since 2007, but only became available in mid-2016 after the country’s sole airport had its exclusive rights on international flights lifted in return for extending its concession term for 2 years until 2027.

However, its location in Kukes, northeast of Albania, a two-hour drive from Tirana along a toll road, will make the airport competitive only in case of significantly lower prices compared to the Tirana airport, which often forces passengers to fly from neighboring countries offering more low-cost alternatives.

Albania has also announced plans to build a new airport in Vlora, south of Albania, under a concession deal with a Turkish consortium, but contract negotiations have so far failed to materialize.

The government also plans a smaller airport in Saranda, southernmost Albania, in a bid to give a boost to the emerging tourism industry along the Albanian Riviera.
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                    [post_content] => TIRANA, Oct. 22 - The Albanian government says it is mulling a regulatory framework on cryptocurrencies in a bid to diversify investment opportunities in the country in an innovative sector that creates well-paid jobs and apparently become a hub for such investment in a Western Balkan region that still remains skeptical to digital currency.

Prime Minister Edi Rama says cryptocurrency, also known as virtual or digital money, can create a lot of opportunities even in a developing economy such as Albania which he says can become a hub for potential investors targeting to get involved in this revolution of global finances.

The legal initiative comes at a time when the country’s key financial watchdogs, Albania's central bank and the financial supervisory authority, have been repeatedly warning potential investors over the past couple of years of a series of risks related to investing in digital currency, the same as most regional countries.

Bitcoin, the primary cryptocurrency, is now trading at around $6,500 after surging to $20,000 in late December 2017, in a 20-fold hike for the year, leading to bankers, mainstream media and pundits to call Bitcoin a bubble.

"As part of our effort to open up new markets and create new opportunities for well-paid jobs and qualified people... we are exploring the possibility of setting up a regulatory framework on cryptocurrency which is a shocking novelty nowadays and where the opportunity to be innovative and set up a center of gravity for innovative financial markets is open for every country despite their level of development," says Prime Minister Edi Rama.

"For the moment, we are assessing and working on the drafting of a regulatory framework after having conducted a thorough analysis and study. If the results are satisfactory, then we will promote even outside Albania, the country's willingness to become a hub for numerous potential investors that target getting involved in this revolution of global finances,” Rama said last weekend, speaking at a ceremony on the launch of the Albania-Italy offshore section of the major Trans Adriatic Pipeline bringing Caspian gas to Europe.

Bitcoin and other virtual currency is already legal in several countries around the world, with the U.S., Canada, Germany, Denmark, Japan and South Korea rated among the top Bitcoin-friendly countries

Back in July 2017, when bitcoin rose $2,400, from almost zero in 2009 when it was launched, Albania's central bank warned that while electronic money is a legally regulated and supervised activity even in Albania, the virtual currency is an activity completely out of the authorities’ watch and control.

The Bank of Albania says the activity of virtual currency operators is characterized by a considerable level of risk and insecurity, with no full guarantees on the customers’ protection from investment losses and involvement in any operation remains an action of individual responsibility.

The Albanian Financial Supervisory Authority has also informed investors that Albania has licensed no company to issue virtual currency.

"Of course there might be individuals or businesses in Albania investing online using the internet in companies which are issuing these initial coin offerings outside of Albania, but they should be aware that they carry all the risks and are responsible for their own choices when making such an investment,” Ervin Koçi, the head of Albania’s Financial Supervisory Authority told Tirana Times in an interview earlier this year.

The European Banking Authority has earlier warned that risks associated with buying, holding or trading virtual currencies include losing the money on unregulated exchange platforms which may go out of business, fail or be hacked by third parties. Virtual currency users are also unprotected when using it as a means of payment and its value can change quickly and even drop to zero.

The cryptocurrency initiative also comes as more and more Albanians have been studying information technology in the past few years despite the country still ranking poor on innovation capability and ability to retain talent.

New projects focused on digital literacy are also under way. Tirana’s iconic pyramid building, one of the communism era landmarks in the capital city, is soon set to become a youth multifunctional center focused on digital literacy.

 

Vibrant future vs. scam

In a report examining the framework for the regulation of cryptocurrencies, Washington-based Coin Center research and advocacy center, says that tokens, including cryptocurrencies like Bitcoin, will likely have a profound effect on the future of the internet, financial technology, and governance systems in general.

“Perhaps the most exciting aspect of the technology is that it is entirely open for experimentation—there’s no patent or copyright to license, no university or corporation from which to seek a job, no exclusive membership fee to pay. Anyone with a computer and an Internet connection can develop and share their own currency, their own vision of the future,” says the report.

“The openness of this system makes it vibrant but it also can make it hazardous. Some new uses of the technology will be nothing more than scams garnished with the sort of techno-babble that inspires, confuses, and beleaguers the caution of naive investors who want to believe. The framework will hopefully enable regulators to more easily delineate between these inevitable scams and the legitimate innovations that will improve our lives, ensuring that a few bad oranges do not spoil the grove,” it adds.

 

Covert call centers acting as brokerage firms

While legal changes on cryptocurrencies are under way, Albania has already had troubled experience with covert call centers operating as brokerage firms, allegedly cheating investors in Albania and abroad.

Several unlicenced brokerage firms have disappeared without trace after defrauding investors or had their operations closed down after warnings by supervisory authorities in the past couple of years.

Last July, Albania launched a probe into dozens of call centers allegedly operating as covert unlicensed brokerage firms involved in fraud operations by offering potential investors attractive return rates for high-risk financial products at a time when interest rate from traditional investment instruments such as bank deposits are close to zero.

The investigation came after an investigative media article identified at least 80 unlicensed brokerage companies operating in Albania, allegedly involved in defrauding foreign investors, tax evasion and exposing young adults to serious legal repercussions.

Albania’s Financial Supervisory said it asked for support by intelligence and money laundering prevention officers to investigate into the suspected companies which could turn into a national issue and mar the country’s image.

Financial authorities have issued several warnings about unlicensed operators involved in online forex or ‘binary option’ trading platform where the payoff is often either some fixed monetary amount or nothing at all. In some cases, local investors often not aware of the risk that such investments bear, are reported to have lost considerable amounts after being lured through aggressive marketing and high return rates.

While no statistics are available yet for the past couple of years, Albanians invested about $1 million in online trading in international stock exchanges in 2015 when several unlicensed operators emerged, triggering concern by the country’s highest financial authorities.

 
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                    [post_content] => TIRANA, Oct. 18 - The Albanian government says it is considering a state-monopoly on sports betting following their expected ban from residential areas starting next January as part of a bill that also relocates electronic casinos in a bid to curb a booming phenomenon which costs Albanians more than a hundred million euros a year and has a series of negative economic and social effects for one of Europe’s poorest countries.

The state monopoly idea comes after legal changes already under way are expected to impose a ban on thousands of electronic casinos, betting and traditional bingo shops scattered around residential areas nationwide and limit their operation to tourist areas, 5-star hotels and non-residential areas.

“We are considering the possibility of treating sports betting and betting on races as a state monopoly and allow their operation by specially set up state structures,” says a report accompanying the proposed legal changes on gambling.

Gambling is a completely privately-run industry in Albania where it officially generates more than €130 million in annual income and employs some 7,000 people, but much more if the informal sector is taken into account.

Gambling is already a state monopoly in several EU countries, but mostly privately-run in the Western Balkans.

The government says it will also discipline online gambling, currently offered by a single licensed operator, but informally by most companies.

Prime Minister Edi Rama says the legal changes will drastically limit gambling and trigger an extra €700 million in household consumption.

The main opposition Democratic Party has earlier voiced concern that the boom in the gambling industry in the past four years is a result of casinos and sports betting run by companies linked to senior government officials and organized crime and that Prime Minister Rama will likely favor an online gambling monopoly under the new law, in allegations that have been dismissed by the majority.

The ban on the booming sports betting industry comes following a two-year extension to a law disciplining gambling in downtown areas that was initially scheduled to become effective in January 2017 and is now set to become effective under new tougher amendments limiting gambling to 5-star hotels that will be determined by the government and non-residential areas.

The new legal changes do not apply to TV bingos, including the National Lottery.

The government says it has also ordered the enforcement of a complete ban on gambling advertising which it says has been largely ignored by the media.

The relocation of casinos and sports betting shops from downtown and residential is expected to provide a severe blow to a booming industry which last year generated more than €130 million in income and paid about €50 million in taxes, not to mention a significant reduction in staff and massive closure of coffee bars that serve as betting shops.

However, Albanians would practically have more disposable income and negative social effects associated with gambling such as domestic violence and divorces, would sharply reduce.

Albania had more than 3,900 betting shops at a rate of one per 730 local residents this year, setting a European record, according to data obtained by local media.

Albanians spent a record 16.6 billion lek (€132 mln) in gambling in 2017, up 10 percent compared to the previous year, according to turnover data reported by the main electronic casino, lottery and sports betting companies.

Gambling is a booming business in Albania and varies from lotteries, electronic casinos and more numerous sports betting shops. A gambling law, which has been in force for several years, bans people under 21 from entering betting shops, but regardless, teenagers are often seen there.

The booming gambling businesses is often linked to gangs laundering crime and drug proceeds. There have been also cases when even senior officials and judges have justified some of their income through winnings in betting shops or casinos in their wealth declarations.
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                    [post_content] => TIRANA, Oct. 18 - Poor demand and the banking sector's tight lending policies continue to affect credit performance in Albania, where lending to the private sector in the year’s first half statistically registered negative growth rates, but a moderate growth rate of 5 percent when adjusted for the bad debt write-off effect and the strong appreciation of the Albanian lek against Europe’s single currency.

Tighter lending standards applied by banks are a result of non-performing loans only slightly dropping to 12.9 percent in the first eight months of this year, down from 13.2 percent at the end of 2017 and around 15 percent during the same period last year, according to Albania’s central bank.

NPLs have been on a downward trend since mid-2014, when they hit a record high of about 25 percent of total credit, but lending has been struggling to recover to positive growth rates amid tight lending standards and poor demand by both businesses and households.

The NPL decline is mainly a result of mandatory write-off of bad debt that has spent three years in the ‘loss’ category since 2015 and loan restructuring with big borrowers, but yet NPLs in Albania remain the highest in the Western Balkan region, posing a key barrier to easier lending standards and credit recovery.

Meanwhile, demand for new loans by both businesses and households remains sluggish as the economy slowly recovers to growth rates of around 4 percent, but mainly due to some large energy-related investment and heavy rainfall lifting Albania’s hydro-dependent electricity sector out of crisis, with not much effect on Albanian households.

The sluggish credit growth rates comes at a time when loan rates on both national currency and Euro-denominated credit stand at a record low due to historic low key rates by both the Bank of Albania and the European Central Bank.

Credit growth in the first half of this year was fuelled by household lending which continues to grow faster than corporate lending in the whole Western Balkan region, according to a European Commission report.

“Total lending to the private non-financial sector remained sluggish, with its decline deepening to -1.3 percent year-on-year in the second quarter. Sluggish lending to businesses as well as loan write-offs and the appreciation of the lek cause weak headline credit figures. Adjusting for the latter two factors, the average growth rate of credit to the private sector was around 5 percent year-on-year in the second quarter,” says the latest European Commission economic quarterly on EU candidate and potential candidates.

The country’s banking system is considered well-capitalized, liquid and profitable, but is currently undergoing reconstruction with two mergers and acquisitions having cut the number of commercial banks operating in the country to 14 this year, down from a decade of 16.

The NPL stock dropped by an annual 17 percent to 77 billion lek (€612 mln) in mid-2018 in an ongoing decline since early 2015 when the mandatory write-off of bad loans that have spent three years in the loss category started. The central bank says some 51 billion lek (€405 mln) has been removed from banks' balance sheets since January 2015 in a process that has statistically kept credit at negative rates, but at moderate growth rates when adjusted for the loan write off and this year’s 10 percent strengthening of the Albanian lek against the Europe’s single currency that accounts for about half of total credit.
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                    [post_content] => TIRANA, Oct. 17 – Albania climbed several steps in the 2018 Global Competitiveness report to rank 76th out of 140 global economies and find itself as the region’s third best performer in a rating that is held back by weak institutions, poor infrastructure, ICT adoption and innovation capability and a small market size.

The findings are unveiled in the latest Global Competitiveness report measuring national competitiveness defined as the set of institutions, policies and factors that determine the level of productivity.

The report published annually by the World Economic Forum, a Switzerland-based think tank, shows Albania improved its ranking by 4 steps compared to last year's 80th out of 135 countries outperforming Macedonia and Bosnia and Herzegovina, but lagging behind Serbia and Montenegro.

The regional ranking is topped by Serbia, the region's largest economy that ranks 65th, followed by tourism-reliant Montenegro 71th, Albania 76th, Macedonia 84th and Bosnia and Herzegovina 91st.

Tracking performance on 12 pillars of competitiveness, the report shows Albania's competitiveness is mostly hampered by a small market size, a poor financial system negatively affected by a declining but still high level of non-performing loans and low rates of insurance premiums as a percentage of GDP.

Infrastructure also ranks Albania 100th out of 140 global economies due to ongoing problems with road connectivity, an almost inexistent train service, a single international airport, poor access to water supply and a high level of electric power distribution losses.

However, the country surprisingly ranks the top global performer in the electrification rate as a percentage of population, a process that Albania concluded under communism in the early 1970s, but the outdated grid in most of the country now in emergency need of replacement and contributing to about a quarter of electricity fed into the grid being lost either due to technical losses or thefts.

Public debt at around 70 percent of the GDP, a high level for Albania's stage of development which the government is targeting to bring down to 60 percent of the GDP by 2021, places the country 97th in macroeconomic stability.

High levels of organized crime, poor reliability of police services, lack of an independent judiciary, poor freedom of the press and high levels of corruption rank Albania 68th in the institutions pillar.

Albania is already vetting judges and prosecutors for their wealth and professionalism as part of a judiciary reform aimed at tackling highly perceived corruption in a key sector that hampers rule of law and the business climate.

“Weak institutions—defined as including security, property rights, social capital, checks and balances, transparency and ethics, public-sector performance and corporate governance—continue to hinder competitiveness, development and well-being in many countries,” says the report.

Albania's best performance is in the labor market pillar ranking 34th out of 140 countries with a good pay and productivity, top ease of hiring foreign labor but a labor tax rate of 18.8 percent that ranks the country 86th.

Health, skills, business dynamism, product market rank Albania from 45th to 58th due to life expectancy of 67.8 years, five days needed to start a business and good services and trade openness.

Albania, however, ranks 91th in innovation capability, measuring the extent to which a country’s environment encourages collaboration, connectivity, creativity, diversity and confrontation across different visions and angles and the capacity to turn ideas into new goods and services.

Research and development at only a modest 0.2 percent of the GDP and poor quality of research institutions hamper Albania's ranking in innovation, which the report says requires stable conditions such as well-established institutions, extensive ICT adoption, domestic market competition and a favorable education system—and suggests these factors as priorities for governments in low-income economies that are looking to innovation for employment growth.

 

Overcoming barriers

The World Economic Forum report shows all economies must invest in broader measures of competitiveness today to sustain growth and income in the future.

“Enhancing the fundamentals of competitiveness today will improve resilience to shocks. Building economic resilience through competitiveness is more important than ever in today’s volatile context, with a wide range of vulnerabilities, technological change, geopolitical tensions and potential flash points around the world,” says the report.

A survey conducted as part of last year's 2017-2018 competitiveness report shows tax rates and corruption topped business concerns for doing business in Albania for the third year in a row.

The European Commission has also identified a series of ongoing obstacles to Albania’s growth and competitiveness and urged the EU aspirant Western Balkan country to strengthen its fiscal consolidation efforts in order to bring public debt to 60 percent of the GDP by 2021.

“Structural obstacles to Albania’s growth and competitiveness include still unclear land ownership and insufficient enforcement of property rights, a high level (though decreasing) of informality and corruption despite progress achieved through judicial reform, an excessive regulatory burden and unpredictability in the judiciary system, which act as a discouragement to both foreign and domestic investment,” says the European Commission in a recent report.

Albania lost seven places to rank 65th among 190 economies in the 2018 Doing Business report, lagging behind almost all regional competitors which made considerable progress over the past year, according to a World Bank report.

Foreign investors complain a higher tax burden compared to regional countries applying flat tax regimes of about 10 percent makes Albania less competitive in terms of investment. In addition, high levels of corruption, the long-standing issue of unclear property titles and an inefficient judiciary are perceived as weakness to boosting much-needed investment in the country despite Albania’s geographical advantage compared to other Western Balkan countries.
                    [post_title] => Weak institutions, infrastructure hamper Albania’s competitiveness progress 
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                    [post_date] => 2018-10-16 18:32:10
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                    [post_content] => TIRANA, Oct. 16 – The Albanian government has proposed tighter rules against tax evasion following a series of incentives already approved or pending final approval that are expected to become effective next January in a carrot and stick approach ahead of the upcoming mid-2019 local elections.

In its 2019 fiscal package, the ruling Socialist Party majority has reportedly proposed businesses will no longer be allowed to suspend their activity by switching to passive status without paying off tax obligations.

The move comes at a time when the number of businesses closing down has seen a sharp double-digit increase amid a hike in the tax burden on small businesses, already facing tougher competition from shopping chains and supermarkets as well as a decline in the purchasing power.

Data published by Albania’s tax administration shows the number of businesses shifting to passive status in the first nine months of this year rose to about 11,200, a 60 percent hike compared to the same period last year.

As a rule, businesses switch to the passive register in case of not operating or not submitting tax statements for 12 months or declaring the suspension of commercial operation with the National Business Center for a period of more than 1 year or indefinitely.

In early 2018, tax authorities warned of penalties over what they described as fictitious closures by small businesses to escape the 20 percent VAT system starting April 2018 after a lower turnover threshold became effective increasing the tax burden for some 11,000 businesses nationwide.

Another legal change proposed as part of the 2018 fiscal package is related to small family-run businesses registered as natural persons whose owners will not be allowed to obtain more than one tax ID number to avoid paying profit tax or pay at a lower rate by dividing their business into separate companies and keep the turnover low.

In addition to a reduction in the dividend tax, the ruling majority is also expected to include anti-evasion provisions on capital gains for non-residents. The measure could bring millions of euros in income to the government following a series of takeovers among major foreign-owned businesses operating in Albania in the past couple of years and Albania not collecting the 15 percent capital gain tax rate due to company owners registered in tax havens.

Several major assets in Albania, including the country’s sole international airport, the largest oil producer, banks have changed hands in the past couple of years and shareholders in lucrative concession contracts sold their stakes for ridiculously low prices, reportedly escaping the 15 percent capital gain tax because of operating under offshore tax haven laws.

The tax evasion sanctions came after the government has proposed a cut in the dividend tax, a slight reduction in the tax burden for high income earners and an increase in the mining royalty on chromium exports in its year-end 2019 fiscal package following some mid-year incentives that are also expected to come into force next January ahead of the expected mid-2019 local elections.

Despite a series of nationwide campaigns to fight tax evasion in the past three years, a higher tax burden and a shift to progressive taxation on both households and businesses since 2014 still keeps the grey economy at high levels, with estimates of about 30 percent of the country’s GDP.

The major change in the upcoming fiscal package includes a reduction in the dividend tax to 8 percent, down from a current 15 percent in a measure that foreign business associations say is expected to provide a positive effect on boosting investment and creating more favorable treatment for employees.

The year-end fiscal package follows a mid-2018 package when the ruling majority approved lower corporate income tax for mid-sized businesses and incentives on agribusinesses.

Investors complain a higher tax burden compared to neighboring countries of similar size makes Albania less competitive despite its favorable geographical position.

In addition, widespread corruption and an inefficient judiciary remain key concerns for foreign investors.
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                    [post_content] => TIRANA, Oct. 16 - The top 10 richest people in Albania was an all-male list in 2017 with the top four representing more than half of total profits and assets.

Almost the same businessmen made it to the 2017 richest with only two new entries and the sole female entrepreneur on the 2016 list seeing herself out of the top 10, according to a study conducted by a Tirana-based think tank.

Samir Mane and Shefqet Kastrati were Albania’s two richest men in terms of both net worth and profits in 2017, leading the top two for the third year in a row.

Mane, whose companies are involved in retail trade with several shopping centers, construction and mining operations in Albania and the Western Balkan region, has been previously named by Wealth-X intelligence provider as Albania’s first billionaire with an estimated fortune of US$1.2 billion.

Meanwhile, Shefqet Kastrati is an Albanian oil tycoon whose company has a market share of around 50 percent in the wholesale and retail oil trade, engages in construction, road maintenance, the hotel industry and holds exclusive rights to trade luxury vehicles in Albania.

Politician Tom Doshi, a former Socialist Party MP, who was elected with the Social Democrats in his fourth consecutive term as MP in 2017, is also on the top 10. Doshi’s main business is the Profarma Albanian pharmaceutical company.

The 2017 top ten net worth and profit list also includes several businessmen operating in the construction and food and beverage distribution industry.

The Pashko European Institute, which conducted the study, says the government should consider the country’s richest entrepreneurs as a national asset and undertake a partner approach in every reform affecting them.

“It is only through mutual loyal and functional partnership that the government-business relationship has the highest yield and most positive impact on every sector of the economy and citizens’ lives,” says the study.

The Pashko European Institute is a Tirana-based think tank named after Gramoz Pashko, a late Albanian economist and politician who led the country’s shock therapy in the early 1990s when the communist regime and its planned economy collapsed.

Economy expert Besart Kadia says that Albania should be proud of its own class of capitalists who have been able to extend their investment in the region and beyond in only less than three decades of the switch to a market economy following almost half of a century under a hardline communist regime and a centrally planned economy.

“We should increase the number of millionaires in the country and not look at them with skepticism. It is in our interest, in the interest of the jobless and the poor and Albania's future. The economy has been slowing down and poverty in the country increasing. The golden decade of growth is over and what we have to do now is guarantee the sustainability of its achievements and not fight it,” says Kadia, a former director of the Pashko European Institute.

“From a society that stifled free enterprise, we should accept the new social order that not everybody has the same ability, not everybody has the same ambition and efficiency and for this reason we should not view successful entrepreneurs as people who unfairly possess assets,” says Kadia.

“Successful entrepreneurs should turn into role models for youngsters who should change their targets that political engagement and corruption are the sole methods to get rich and respected in the society,” he adds.

Albania’s inequality gap slightly narrowed in 2017 as the richest 10 percent of households spent 2.4 times more than the overwhelming 90 percent of Albanians, a modest 0.1 percent drop compared to the 2016 findings, according to a recent survey by INSTAT, the state-run statistical institute.

A person belonging to the richest 10 percent spent an average of 62,330 lek (€492) a month in 2017, slightly less compared to a year before, but 3.4 times more compared to the 90 percent of households in the bottom income decile spending an average of 18,311 lek (€144) a month.
                    [post_title] => Top four businessmen represent half of assets, earnings among Albania’s ten richest 
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                    [post_date] => 2018-10-16 12:38:26
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                    [post_content] => TIRANA, Oct. 16 – Representatives of key international financial institutions have urged Albanian authorities to continue with economic growth reforms and be well-prepared for timely reaction in case of external or internal shocks. The warning came in meetings that Albania's central bank governor Gent Sejko held last weekend in Indonesia’s Bali as part of the IMF and World Bank annual meetings.

While Albania’s central bank does not specify the threats that the small Albanian economy could face, the IMF and the World Bank have earlier warned of a series of threats related to both external and internal developments.

Current external threats are mainly related to developments in Turkey, one of the world’s fastest growing emerging economies, whose growth prospects have received a severe blow this year after the Turkish lira lost 40 percent of its value against the US dollar leading to double-digit inflation and a sharp downgrade in GDP growth forecasts.

The World Bank says a possible escalation in trade disputes among the world's leading economies such as the US and China could also have implications for the Western Balkan region by reducing investor confidence and negatively affect much-needed investment in an EU-aspirant region that is already not well-perceived due to weak rule of law and corruption.

Due to stronger trade and investment ties with Turkey, a possible escalation of the crisis in Turkey could affect Albania more than the current round of trade disputes involving the United States, China and other U.S. trading partners, which a recent World Bank report says may create both opportunities and risks for Western Balkan countries.

The IMF says it expects Turkey’s 2019 GDP growth to drop to a mere 0.4 percent in 2019, down from an expected 3.5 percent in 2018, less than half of last year's 7.4 percent expansion.

Examining the channels for a possible transmission of Turkish market volatility to the Western Balkans, a recent World Bank report shows Albania is little exposed in terms of exports, but to a higher degree if imports, foreign direct investment and the banking sector assets are concerned.

Albania's trade exchanges with Turkey are at about 50 billion lek (€395 mln) annually, representing 6 percent of Albania’s total but overwhelming dominated by Albanian imports from Turkey. Meanwhile, the stock of Turkish FDI to Albania, at €565 million in mid-2018, represents about 8 percent of total FDI stock in Albania, according to Albania’s central bank.

Turkey is more actively engaged in Albania’s banking sector, with the country’s largest commercial bank, Turkish-owned BKT, accounting for 28 percent of banking assets in the country, but not estimated to pose any significant risk due to operating as a separate legal entity and with modest exposure to Turkish government lira-denominated securities.

In a recent report, the European Commission says the exposure of the Albanian banking sector to Turkey is low with only 6.6 percent of total assets related to Turkish companies, mainly involved in hydropower and steel industry in Albania.

However, due to stronger trade, investment and human ties with Italy, a possible slowdown in GDP growth in the Eurozone’s third largest economy and Albania’s top trading partner, could affect the Albanian economy more than the Turkey and global trade dispute spillover effects.

The IMF has cut Italy’s growth forecast to around 1 percent over 2018-19 and expects its economy to grow below 1 percent by 2023 over fears that the breach of EU spending rules by its populist government could trigger a debt default.

Albania conducts about 36 percent of its trade exchanges with Italy, the host of some 500,000 Albanian migrants who are a major source of remittances for Albanians at home. Over 90 percent of Albania’s garment and footwear products, an industry relying on cheap labor costs but employing about 100,000 people and producing the country’s top exports, go to Italy.

The IMF also expects GDP growth in Greece, Albania's traditional second largest trading partner, to linger around 2 percent over the next six years after the neighboring country overcame its 8-year recession in 2016.

Recessions in Italy and Greece, Albania’s main trading partners, top investors and the hosts of 1 million Albanian migrants, had a series of negative effects on Albania through lower trade, investment and remittance flows in the aftermath of the 2008-2009 global financial crisis.

 

Internal threats 

International financial institutions have warned the Albanian economy could face a spiral of risks related to its ambitious but controversial €1 billion public private partnership program posing a threat to the public debt reduction agenda and an expected slowdown in foreign direct investment following the completion of two major energy-related projects that drove growth in the past four years.

The International Monetary Fund has earlier warned public private partnerships and the accumulation of new arrears pose two of the key threats to Albania’s public finances.

Both the IMF and the World Bank have expressed concerns over lack of transparency and cost-benefit analysis concerning PPPs whose contracts are being mostly awarded through unsolicited proposals favoring companies that propose them in tenders with little competition.

The International Monetary Fund has earlier warned the Albanian government’s ambitious €1 billion public private partnership project will not only fail to bring public debt down to 60 percent by 2021, but could create hidden costs which if included in the debt stock could take it to 71 percent of the GDP. The government’s target is to bring public debt to a more affordable 60 percent of the GDP by 2021.

The World Bank has upgraded its 2018 growth forecast on Albania to 4 percent supported by weather-related spike in hydroelectric power production and a strong tourism season but expects medium-term growth to slow down to 3.5 percent with risks to the outlook involving the international situation in emerging markets, growth in the EU, and the success of the fiscal consolidation and tax reform.

Meanwhile, the IMF has also revised upward its 2018 economic outlook on Albania to 4 percent, but expects the country’s growth to linger around 3.7 percent to 4 percent over 2019-2023.

Europe’s single currency currently trading at a 10-year low against Albania’s national currency, having lost 6 percent since late 2017, with a series of negative effects on Albania’s highly euroised economy, primarily hitting Eurozone-destined exports, but also sizeable Euro-denominated savings and remittances, is also considered a threat to the Albanian economy in case of further shocks.
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                    [post_date] => 2018-10-15 17:57:22
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                    [post_content] => TIRANA, Oct. 15 – Albania’s top ten companies continue to be dominated by energy-related and telecommunication companies unlike some of the region’s main competitors where the automobile industry is one of the key drivers of economy and employers.

An annual report examining the top 100 South East Europe companies in terms of turnover shows almost the same companies are making it to Albania’s largest enterprises for several years in a row now,  on a list dominated by a state-run electricity operator and oil producing and trading companies.

The annual report produced by Bulgaria-based SeeNews agency shows Albanian companies failed to make it to the top SEE 100 for the third year in a row in a ranking that includes five Western Balkan EU aspirants, four EU members and Moldova.

State-run OSHEE distribution operator was Albania’s largest company in terms of income for the second year in a row in 2017 despite its profits receiving a severe blow due to costly electricity imports after one of the worst droughts in decades paralyzed hydro-dependent domestic electricity generation.

The state-run electricity distribution monopoly generated €462 million in income in 2017 to rank the 137th largest SEE company, compared to 125th in 2016, according to the SEE report.

In its 2017 financial report, OSHEE distribution operator says its net profit dropped by 10 times to a mere 1.8 billion lek (€14.5 mln) last year, down from a record high of 18.7 billion lek (€148 mln) in 2016 to register its worst financial result for the past three years. The sharp cut in profits was negatively affected by costly imports of around €200 million that both state-run OSHEE and power utility KESH handled in the second half of 2017 amid an internal drought-triggered electricity crisis.

The top 10 list also includes four Albanian-owned major oil importers and wholesale and retail traders, Chinese-owned Bankers Petroleum, the country's largest oil producer whose investment and production is rising as international oil prices gradually pick up, and the Albanian unit of France's Spiecapag contracted for the construction of the Albanian section of the major Trans Adriatic Pipeline bringing Caspian gas to Europe.

Turkish-owned Kurum, Albania's largest steelmaker, and two mobile and electronic communication operators are also on Albania's top 10 list.

Regional competitors of a similar size to Albania such as Macedonia and Serbia, the region’s largest economy, have their top ten companies also diversified in higher value added sectors such as the car industry with major Italian and Belgian investment.

Romanian car maker Automobile Dacia, a unit of France’s Renault, led the top 100 SEE list for the fourth year in a row on a top 10 list dominated by Romanian, Slovenian and Bulgarian companies mainly operating in the oil industry.

Almost no changes at all on the top 10 largest companies in Albania for several years in a row unveils a poorly diversified economy relying on state-run electricity generation and oil imports and domestic production represented by only two companies focused on low value added crude oil as well as steel, most of which destined for exports.

The garment and footwear industry and the call center industry, both of which relying on cheap labor costs and producing goods and services mainly destined for Italy, Albania’s top trading partner, are two of the top private sector employers in Albania.

IMF research shows Albania has managed to attract only about a tenth of the inward foreign direct investment stock in the Western Balkans in an FDI race that is led by Serbia, the region’s largest economy.

Albania is the third largest recipient in terms of FDI stock with a 10 percent share among the six Western Balkan economies, lagging behind Bosnia and Herzegovina with a 12 percent share and Serbia with a 55 percent share alone.

Albania has been the region's second largest FDI recipient in the past eight years with average inflows of $1 million annually, but much of the energy-related FDI has flown out of the country and the country’s FDI stock was at €7.1 billion in the first half of this year, representing about 60 percent of the country’s GDP.

As in much of the region, corruption is a key concern for potential foreign investors to Albania, where unclear property titles, an inefficient judiciary also remain key concerns.

FDI concern has recently grown in Albania as TAP and Devoll Hydropower, the two major energy-related projects that led FDI growth in the past four years, are set to complete their investment stage by early 2019 and no major project replaces them. The FDI gap of some €200 million to €300 million that is expected to be created unless major investment replaces the energy-related projects in their final stage is the main reason why some international financial institutions such as the World Bank and the IMF expect Albania's growth to slow down to 3.5 to 3.7 percent in 2019, down from an expected 4 percent this year.

The Albanian economy grew by an average of 4.4 percent in the first half of 2018 fuelled by heavy rainfall lifting the state-run electricity sector out of crisis. However, quite paradoxically Albania's business and consumer confidence hit a surprise 2-year low in the third quarter of this year, the peak of the tourist season, signaling that the decade-high energy-fuelled GDP growth rate that the country registered in the year’s first half is not having any positive effect on overall confidence, according to a central bank survey.

Experts say the Albanian economy needs to grow by at least 6 percent annually, a growth rate it enjoyed for about a decade ahead of the 2008-09 global financial crisis in order to produce tangible welfare for the country’s households and bridge the huge gaps with EU member countries.
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                    [post_content] => TIRANA, Oct. 11 - Albania only slightly improved its ranking at the 2018 Basel anti-money laundering index, an annual ranking assessing the risk of money laundering and terrorist financing around the world, as it continued remaining a medium risk country, lagging behind two regional competitors.

The 2018 report ranked Albania as the 55th country most at risk of money laundering out of 129 countries worldwide with mere 0.08 improvement in its score compared to 2017 when it ranked 85th out of 145th. The 2018 report placed Albania a 5.57 score in a scale of rating where zero indicates low risk and 10 a high risk, better than Serbia and Bosnia and Herzegovina, but significantly worse compared to Montenegro and Macedonia, the region’s top performers.

"Most countries are making little or no progress towards ending corruption and public transparency is showing signs of decline, with governments making less information available about how they manage public funds," says the report.

An earlier 2018 report by the US Department of State said Albania remains at significant risk for money laundering due to rampant corruption and weak legal and government institutions.

"Real estate (particularly in the coastal areas), business development projects, and gaming are among the most popular methods of hiding illicit proceeds," said a money laundering report by the US Bureau of International Narcotics and Law Enforcement Affairs.

Commenting on the report, main opposition Democratic Party MP Jorida Tabaku said the Basel Index sounds alarm bells on the situation with money laundering in Albania.

"After the US Department of State, the Basel Index once again points out Albania as a money laundering country which has made no significant progress compared to a year ago. Gambling, construction, hotels and currency exchange shops are the main sectors where this happens," says Tabaku, a deputy chair of the parliamentary economy committee.

Albanian law enforcement authorities seized about €9 million in suspected money laundering transfers and bank accounts in 2017 with the majority of identified cases originating from drug trafficking and cultivation, according to an annual report by the country’s Financial Intelligence Unit.
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            [post_content] => TIRANA, Oct. 22 – Albania has announced an unsolicited proposal by a local company to build a highway north of the country in a new costly public private partnership project, defying warnings by international financial institutions of giving up such practices that place companies proposing them at an unfair advantage by obtaining bonuses that make them eventual winners in tenders with little or no competition at all.

The government says it has selected Albanian-owned “A.N.K.” company to build an 18-km Milot-Balldren highway that improves access to the northern region of Lezha and neighboring Montenegro as part of the Adriatic–Ionian motorway, also known as the Blue Corridor, a future motorway that will stretch along the entire eastern shore of the Adriatic and Ionian seas, spanning the western coast of the Balkan peninsula. “A.N.K” is a company that has been operating in the Albanian construction sector for about two decades, but with a sole shareholder and a capital of around 247 million lek (€2 million), according to local media.

Its announcement as a winner came after the company had already been awarded a bonus by the government in late June for its unsolicited proposal on the highway segment and was the sole bidder in a tender held later this year. Construction is set to begin by next year once contract negotiations conclude.

The infrastructure ministry says the Albanian-owned company offered €161.5 million for the 18-km highway on a completely new track in construction and maintenance costs for the next 13 years.  The Milot-Balldren project is a 6-lane highway that also includes 9.5 km of secondary roads, new bridges on the Drin and Mat rivers and an 850 meter long tunnel that cuts travel time to Lezha and Shkodra, the main northern Albania tourist destinations.

Similarly to other infrastructure projects as part of the government’s ambitious €1 billion PPP program, the company will build the highway using its own funds and loans that are easily accessible due to the government serving as a guarantor, in return for annual government instalments covering construction and maintenance costs for the next 10 years.

The new PPP comes amid criticism by international financial institutions that the country’s public debt reduction agenda is being put at risk and that the €1 billion PPP program is being carried out under controversial unsolicited proposals and without a clear cost-benefit analysis.

The Albanian government has earlier awarded PPP contracts for the construction of a 40-km segment part the Arbri Road linking Albania to neighboring Macedonia for 33.6 billion lek (€265 million) and the construction of a 21-km highway linking Tirana’s industrial area to the airport and the Albania-Kosovo highway for €226 million.

The €1 billion PPP program that the Albanian government intends to implement for the next four years also includes several other major road projects in central and southern Albania, the construction of a regional hospital in Fier, the country’s second largest district, and several new schools in Tirana.

Interest by foreign companies to participate in the €1 billion PPP projects has been vague amid allegations of pre-determined winners in tenders where major Albanian companies submitting unsolicited proposals have been advantaged through pre-tender bonuses.

The International Monetary Fund has earlier warned Albania’s €1 billion PPP project will not only fail to bring public debt down to 60 percent by 2021, but could create hidden costs which if included in the debt stock could take it to 71 percent of the GDP, a high burden for Albania’s current stage of development.

According to the IMF, PPPs entail construction, financial, demand, political, force majeure and renegotiation risks and the Albanian government’s legislative threshold of annual payments to concessionaires not exceeding 5 percent of the previous year fiscal revenues is not reliable, reflecting a mix of mandatory and expected payments and worst-case estimates if pre-determined minimum revenue guarantees are triggered such as in the case of toll roads not meeting minimum traffic.

 

 

Kukes airport

Albania has also launched a call for a new airport north of the country that would break the current de facto monopoly that the Tirana International Airport has on international flights and apparently lead to lower ticket prices.

Having earlier awarded a bonus for its unsolicited proposal to a joint venture led by Albania's second largest company in terms of turnover and profits, the infrastructure ministry says it now invites bids on the Kukes airport until December 10.

The airport will apparently be reactivated by Kastrati, one of Albania’s top two companies which is now seeking to diversify its investment in the air transport. Kastrati which has teamed up to form a joint venture with T.M.D Systems LTD”, an aviation consultancy with operations in the UK and Israel, was offered an 8 percentage point bonus last July for its unsolicited bid, putting it at an advantage and apparently making it a winner when the tender is held later this year.

A United Arab Emirates investment in north-east Albania near the Kosovo border, the Kukes airport has been ready for use since 2007, but only became available in mid-2016 after the country’s sole airport had its exclusive rights on international flights lifted in return for extending its concession term for 2 years until 2027.

However, its location in Kukes, northeast of Albania, a two-hour drive from Tirana along a toll road, will make the airport competitive only in case of significantly lower prices compared to the Tirana airport, which often forces passengers to fly from neighboring countries offering more low-cost alternatives.

Albania has also announced plans to build a new airport in Vlora, south of Albania, under a concession deal with a Turkish consortium, but contract negotiations have so far failed to materialize.

The government also plans a smaller airport in Saranda, southernmost Albania, in a bid to give a boost to the emerging tourism industry along the Albanian Riviera.
            [post_title] => Sole Albanian bidder gets €161 mln PPP for 18-km highway 
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