Corruption remains top concern for potential U.S. investors to Albania, report shows

Corruption remains top concern for potential U.S. investors to Albania, report shows

TIRANA, July 31 – The U.S. State Department says Albania continues to remain a difficult place to do business with endemic corruption as the top concern that keeps potential American investors away from the country. In its 2018 investment climate

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ECB: Euro-denominated savings, credit increase by €100 mln

ECB: Euro-denominated savings, credit increase by €100 mln

TIRANA, July 30 – Albanians increased their euro-denominated credit and savings by around €100 million in 2017 when lending in the national currency continued gaining ground but yet remaining below half of the total credit, according to reports by the

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Big hotels, restaurants handed 30-day ban for tax evasion

Big hotels, restaurants handed 30-day ban for tax evasion

TIRANA, July 30 – Big Albania seaside hotels and restaurants are facing temporary closure penalties for failing to comply with tax authorities during the peak tourist season as part of a nationwide campaign to tackle widespread tax evasion in the

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Underperforming revenue, stronger national currency trigger mid-year budget cut

Underperforming revenue, stronger national currency trigger mid-year budget cut

TIRANA, July 27 – Underperforming revenue in the first half of this year has forced the Albanian government to undertake a mid-year budget cut in what has become a common practice to handle overoptimistic expectations when drafting budgets over the

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Albanian lek stabilizes against Europe’s single currency

Albanian lek stabilizes against Europe’s single currency

TIRANA, July 26 – Albania’s national currency has finally stabilized against Europe’s single currency in the past one and a half months following unprecedented strengthening trend that risked posing a key threat to the country’s highly euroised economy. The euro

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Albania remains one of Europe’s hardest-hit by modern slavery, report shows

Albania remains one of Europe’s hardest-hit by modern slavery, report shows

TIRANA, July 26 – Albania is one of the top five Europe and Central Asia countries when it comes to people trapped in modern slavery affecting its population. The findings are unveiled in the 2018 Global Slavery Index measuring modern

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Opposition worried over Albania’s failure to make it to U.S. investment climate report

Opposition worried over Albania’s failure to make it to U.S. investment climate report

TIRANA, July 25 – Albania’s main opposition Democratic Party has blamed what it calls a hostile business climate for the country’s failure to make it in the annual investment climate statements published by the U.S. Department of State although the

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Albania’s biggest miner expands operations in Kosovo

Albania’s biggest miner expands operations in Kosovo

TIRANA, July 25 – One of Albania’s largest companies, the Balfin Group, has expanding its mining operations in neighboring Kosovo where it has acquired a ferro-nickel producer that has been facing financial trouble for the past few years following the

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EU critical of Albania’s overoptimistic growth agenda

EU critical of Albania’s overoptimistic growth agenda

TIRANA, July 23 – The European Commission has described the Albanian government’s 2018-2020 economic growth and public debt targets as overoptimistic at a time when Albania continues to face several obstacles to improving potential growth and competitiveness. In its assessment

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Alleged airport concessionaire’s abusive charges under probe

Alleged airport concessionaire’s abusive charges under probe

TIRANA, July 23 – The Albanian government is looking for a consultant to carry out a review of the concession contract it has with the Tirana International Airport, the country’s sole airport with a de facto monopoly on international flights

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                    [post_content] => TIRANA, July 31 - The U.S. State Department says Albania continues to remain a difficult place to do business with endemic corruption as the top concern that keeps potential American investors away from the country.

In its 2018 investment climate statement for Albania, the State Department's Bureau of Economic and Business Affairs says foreign investors cite corruption, particularly in the judiciary, lack of transparency in public procurement and poor enforcement of contracts as continuing problems in Albania.

"The implementation of judicial reform is underway, including the vetting of judges and prosecutors for unexplained wealth, but foreign investors perceive the investment climate as problematic and say Albania remains a difficult place to do business," says the report.

U.S. investors to Albania, whom the State Departments advises to include binding international arbitration clauses in agreements with Albanian counterparts, report ongoing concerns that Albanian regulators use difficult-to-interpret or inconsistent legislation and regulations as tools to dissuade foreign investors and favor politically connected companies.

“Despite hospitable legislation, U.S. investors are challenged by rampant corruption and the perpetuation of informal business practices. Several major U.S. investors have left the country in recent years after contentious commercial disputes, including several that were brought before international arbitration,” says the report.

The U.S. State Department says major foreign investors in Albania report pressure to hire specific, politically connected subcontractors and express concern about compliance with the U.S. Foreign Corrupt Practices Act while operating in the country.

The rising concern came after two major North American oil companies, former Canadian-owned Bankers Petroleum and U.S.-based TransAtlantic Petroleum left the country in 2016 following disputes with tax authorities in the country and a slump in international oil prices.

Public private partnership, which are commonly being awarded through unsolicited proposals favoring proposing companies through bonuses that make them eventual winners in tenders, are also cited as a concern.

“The increasing use of public private partnership contracts has narrowed the opportunities for competition, including by foreign investors, in infrastructure and other sectors. Poor cost-benefit analyses and a lack of technical expertise in drafting and monitoring PPP contracts are ongoing concerns,” says the report.

The U.S. Bureau of Economic and Business Affairs also expresses concern over the long-standing issue of unclear property titles and uneven enforcement of legislation as barriers to doing business in the country.

“Property rights remain another challenge in Albania, as clear title is difficult to obtain. Some factors include unscrupulous actors who manipulate the corrupt court system to obtain title to land not their own. Uneven enforcement of legislation, cumbersome bureaucracy, and a lack of transparency are all hindrances to the business community,” says the report.

The high tax burden, government bureaucracy and monopoly and unfair competition have been the main barriers to doing business in the country for the past few years, according to annual surveys conducted by the American Chamber of Commerce representing some of the key foreign and local investors in the country.

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

 

Potential investment sectors

Despite the considerable number of doing business barriers identified, the State Department says energy and power, tourism, water supply and sewerage, road and rail, mining, and information communication technology represent the best prospects for foreign direct investment in Albania over the next several years.

The identified sectors have also been included in the strategic investment law that the Albanian government approved in 2015 offering tax incentives and state protection and assistance. However, as the December 2018 deadline for application to receive the status of strategic investment/investor is approaching, no major foreign investors have taken advantage of the law and it’s only several projects proposed by domestic companies or consortiums of local and foreign partners that have been designated as strategic investments, mostly in the tourism sector, says the U.S. State Department report.

The critical investment climate report comes at a time when the modest investment and trade ties have failed to make progress in the past few years.

The stock of U.S. foreign direct in Albania has been on downward trend in the past three years, dropping to €74 million in early 2018, down from a peak €97 million in early 2015, according to Bank of Albania of data, ranking the U.S. out of the top 10 largest investors in Albania.

Trade exchanges between the U.S. and Albania are at a modest of about 12 billion lek (€95 mln, $111 mln) annually, accounting for only 1.5 percent of Albania’s trade volume, according to Albania’s statistical institute, INSTAT.

The trade exchanges are overwhelming dominated by machinery and equipment Albania imports while medicinal plants lead the country’s exports to the U.S.

Some 200,000 Americans of Albanian descent live in the U.S. while the number of Albanian-Americans who permanently live in Albania is estimated at 20,000, making it a huge potential for investment at home.
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                    [post_content] => TIRANA, July 30 – Albanians increased their euro-denominated credit and savings by around €100 million in 2017 when lending in the national currency continued gaining ground but yet remaining below half of the total credit, according to reports by the European Central Bank and the Bank of Albania.

A European Central Bank report on the international role of the euro shows euro-denominated savings by Albanian households and businesses rose by a mere €64 million to €3.5 billion in 2017 to account for 43.5 of total savings with the banking system and 85.3 percent of total foreign currency deposits.

Euro-denominated savings have been constantly increasing in Albania where the euro is quite a common currency especially in real estate and vehicle trade.

Meanwhile, credit in Europe’s single currency increased by a mere €41 million to €1.88 billion in 2017 as lending in the national currency increased its share to 45 percent of the total compared to only a fifth a decade ago just before the onset of the global financial crisis.

Euro-denominated loans accounted for 47 percent of the total credit at the end of 2017 with U.S. dollar loans as the second largest foreign currency loans.

The high euroisation levels are part of a Western Balkan trend where half of total loans and deposits are denominated in foreign currency, mostly euro. Kosovo and Montenegro, already use the euro as their de facto currency without the EU’s blessing.

A previous ECB report has shown unofficial euroisation in the Western Balkans is determined by factors such as poor confidence in the domestic currencies, trade relations with the euro area and Euro-denominated 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, about 40 percent less than pre-crisis peak level a decade ago.

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.

Starting mid-2018, Albania's central bank has been implementing some de-euroisation measures in a bid to accelerate the reduction of the current high levels of foreign currency in the country’s banking system, considered a key barrier for the transmission of its easier monetary policy and giving a boost to sluggish credit and consumption.

Albania’s central bank governor says the de-euroization measures will target a gradual reduction in the current widespread use of Europe’s single currency by about 10 percent to below 40 percent as the International Monetary Fund has suggested.

The measures involving higher reserve ratios for foreign-currency assets are expected to make it more expensive for banks to provide Euro-denominated loans, triggering an eventual hike in interest rates and discouraging borrowing in Euro, currently accounting for about half of total.

The de-euroisation package also targets offering protection against currency exchange fluctuations that could hurt both savers and borrowers.

Europe’s single currency is currently trading at a 10-year low of about 126 lek against the Albanian lek with a series of negative effects on Eurozone exporters, local producers facing tougher competition from cheaper imports as well as euro-denominated savings and remittances.
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                    [post_content] => TIRANA, July 30 – Big Albania seaside hotels and restaurants are facing temporary closure penalties for failing to comply with tax authorities during the peak tourist season as part of a nationwide campaign to tackle widespread tax evasion in the emerging tourism sector.

Tax authorities say they have imposed 30-day suspension of activity on dozens of hotels and restaurants along the country’s Adriatic and Ionian coasts for repeated failure to issue tax receipts in what is the first time such penalties are being massively imposed during the peak tourist season.

Tax inspectors say they identified violations in about 40 percent of the inspected tourism-related businesses in the past couple of months as part of nationwide campaign to curb informality in what is gradually becoming one of the key sectors of the Albanian economy.

Authorities say 2,000 businesses have been fined a total of 75.2 million lek (€595,000) out of more than 5,000 inspections carried out in June and July 2018 for violations such as failure to issue tax receipts, undocumented goods and informal workers.

In inspections carried out along the southern Albanian Riviera, inspectors say they also identified several unlicensed hotels which have had their activity suspended until they register with authorities.

In some cases, hotel and restaurant owners have condemned what they call arbitrary behavior by tax inspectors and describe the 30-day bans as severe punishment for their businesses at a golden time such as the peak tourism season.

Hotel owners also complain they face unfair competition from smaller accommodation units operating informally or households who informally rent out their apartments at much cheaper rates.

Small and medium-sized hotel owners along the Adriatic coast say the June and July performance has not been what they expected and rather lower temperatures and rainy days have also had a negative impact compared to last year’s heat wave and one of the hottest summers in decades.

Tourism experts say a hike in prices, often not justifying the quality of service especially in the southern Albanian Riviera, and a sharp strengthening of the Albanian local currency against Europe’s single currency making holidays in Albania much more expensive has also negatively affected this year’s tourist season so far when demand has not met expectations.

All eyes are now on the August performance, the peak season, when dozens of thousands of migrants also come home to spend their holidays, adding to the issue of seasonality in Albania’s emerging tourism industry.

Meanwhile, big hotels and resorts operating under contracts with tour operators have been booked up for summer due to hike in Nordic and central European tourists.

Already in its peak season, tourism is a booming business in Albania in summer when thousands of companies reactivate their business, but informality in the sector is considered one of the highest, second only compared to agriculture sector which employs about half of the country’s population but produces only a fifth of the GDP.

Albania has some 16,000 businesses operating in the travel and tourism industry, about a tenth of the total number of businesses in the country, but a considerable number of them operate only seasonally.

Tourist accommodation units have been facing a reduced 6 percent valued added tax for the past year, down from a previous standards 20 percent VAT, but the lower rate only applies to accommodation fees and excludes food, drinks or entertainment.

In a bid to promote elite tourism, the Albanian government is now offering tax incentives for four and five-star hotels with an investment value between €8 million to €15 million.

The travel and tourism industry was one of the key drivers of the Albanian economy in 2017 when authorities say it generated a record high of €1.7 billion in income from more than 5 million foreign tourists.
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                    [post_date] => 2018-07-27 14:22:57
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                    [post_content] => TIRANA, July 27 - Underperforming revenue in the first half of this year has forced the Albanian government to undertake a mid-year budget cut in what has become a common practice to handle overoptimistic expectations when drafting budgets over the past quarter of a century of transition to democracy and a market economy.

The budget cut is apparently triggered by sluggish consumption and a strong recovery of the Albanian national currency against Europe’s single currency with a series of negative effects for Albania’s exporters, local producers facing tougher competition from cheaper imports and sizeable Euro-denominated savings and migrant remittances.

In addition to revising downward central government spending and revenue targets, the mid-year changes to the 2018 budget also cut dozens of public administration jobs and cancel funds that were initially intended for salary hikes.

The changes envisage the central government spending and revenue targets will each be cut by about 4.5 billion lek (€35.5 mln; $41.5 mln) but the budget deficit left unchanged at 32.3 billion lek (€256 mln; $299 mln), at about 2 percent of the GDP as part of a public debt reduction agenda.

The central government administration staff will also be cut by 81 people to 81,672 and as part of smaller government the Socialists have promoted in their second consecutive term.

Last September, re-elected Prime Minister Edi Rama cut the number of ministries to 11, down from a previous 16, merging several ministries, while the number of government agencies is expected to be cut by a quarter to 104, from a current 141.

A 1 billion lek (€7.9 mln: $9.2 mln) fund initially intended for salary hikes has also been cancelled under the recent budget revision.

The finance ministry said the budget review is more of a reallocation of funds to support priority public investments and intended to provide year-end rewards to pensioners under a 3 billion lek (€23.7 mln; $27.7 mln) solidarity package.

The Albanian government has blamed the slowdown in tax revenue collected in the first half of the year on the free fall of Europe’s single currency against Albania’s national currency.

Earlier this month, Finance Minister Arben Ahmetaj says the considerable strengthening of the Albanian lek has negatively affected government revenue by an estimated 3.6 billion lek (€28.4 mln) over January-June 2018 when he unveils public finances are estimated to have recovered by an annual 3.3 percent or $60 million, but missed the year’s first half target by 2 percent.

The euro has been trading at an average of 126 lek since early June 2018 after Albania’s central bank decided to undertake emergency interventions to buy excess euros from the local currency exchange market, but is down 6 percent from the mid-January peak level of about 134 lek and 10 percent below mid-2015 level when euro’s five-year reign of about 140 lek came to an end.

 

‘Normative act’ intervention

The changes to the 2018 budget will be adopted under a fast-track procedure known as the ‘normative act’ intervention.

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

Last year, the Albanian government also revised the budget downward several times through normative acts as the country faced one of its worst electricity crises triggered by a prolonged drought paralyzing Albania’s hydro-dependent domestic electricity generation forcing the country to make costly imports of about €200 million.

The changes to the 2018 budget come after the Albanian government approved lower corporate income tax and incentives on agribusinesses last June as part of a mid-year fiscal package that is not expected to become effective before next January ahead of the upcoming mid-2019 local elections.

 

Budget cut amid recovering growth?

The budget cut comes at a time when the Albanian economy registered strong growth of 4.45 percent in the first quarter of this year, but growth was largely fuelled by the energy sector thanks to heavy rainfall lifting the country’s hydro-dependent domestic electricity sector out of crisis and a sharp increase in oil exports following the late 2017 bankruptcy of a local refiner and a pickup in commodity prices.

The Albanian government expects growth to recover to 4.2 percent this year, but the World Bank and the International Monetary Fund predict Albania’s growth will slow down to 3.5 to 3.7 percent in the next couple of years as the Trans Adriatic Pipeline and the Devoll Hydropower projects, the two major energy-related projects that drove FDI and economic growth in the past four years complete their investment stage by the end of 2018, leaving a huge gap of about €300 million unless other major projects replace them starting next year.

A sharp strengthening of Albania’s national currency, lek, against Europe’s single currency is emerging as a new threat to the Albanian economy during this year, in addition to the already high public debt levels, sluggish credit and consumption as well as non-performing loans at declining but still high levels.

Public debt at about 70 percent of the GDP, a high level for Albania’s current stage of development, and a controversial €1 billion public private partnership program which the IMF says could create new hidden arrears and undermine the country’s debt reduction and fiscal consolidation efforts are considered key threats to the Albanian economy.

Economy experts estimate the Albanian economy has to grow by 6 percent annually, a growth rate it only 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 gap with EU member countries.
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                    [post_content] => TIRANA, July 26 – Albania’s national currency has finally stabilized against Europe’s single currency in the past one and a half months following unprecedented strengthening trend that risked posing a key threat to the country’s highly euroised economy.

The euro has been trading at an average of 126 lek since early June after Albania’s central bank decided to undertake emergency interventions to buy excess euros from the local currency exchange market in a bid to curb losses for the country’s Eurozone destined exports, local producers facing tougher competition from cheaper imports and a sharp devaluation of Euro-denominated savings accounting for half of total deposits.

Europe's single currency hit a 10-year low of 124.17 lek in early June 2018 and traded at an average of about 126 lek for the month, down 6 percent from the mid-January peak level of about 134 lek and 10 percent below mid-2015 level when euro’s five-year reign of about 140 lek came to an end.

While exporters continue to incur considerable losses from a stronger lek, the national currency seems to have temporarily stabilized at a time when euro inflows in the country are increasing due to the peak tourism season under way and major energy-related projects concluding their investment stage.

The more stable national currency in the past forty days reflects the ongoing euro purchase operations by Albania’s central bank as it tries to curb the excess euro supply and stop euro’s free fall in the local market where a free floating exchange regime determined by supply and demand is applied.

The currency purchase operations have not been fully disclosed yet, but in one case Albania's central bank converted last June into national currency a €118 million loan disbursed to Albania's state-run power utility, KESH, by London-based EBRD.

 

Mixed reactions, results

Albania's central bank and the government claim the euro's free fall in Albania is a result of recovering economy and higher euro inflows from FDI, tourism and migrant remittances.

However, the main opposition Democratic Party and some economy experts have linked the national currency’s constant strengthening to alleged illegal euro inflows resulting from the peak 2016 cannabis cultivation and ongoing drug trafficking in the country, considered a major cannabis producer and a key transit route for cocaine and heroin for European markets.

While exporters are suffering considerable cuts in profits, the euro’ free fall has not been much reflected on exports in the first half of this year when they grew by double-digits, but the situation was mainly a result of energy-related exports and a low-base effect. Exports in the first half of this year were mainly fuelled by the resumption of electricity sales and a sharp rise in crude oil exports following the suspension of operations by a local refiner and a pickup in commodity prices.

Albanian exporters have warned the considerable strengthening of Albania’s national currency, lek, against Europe’s single currency at least €100 million for the country’s economy for 2018 alone as two-thirds of the country’s poorly diversified exports are destined for Eurozone countries.

The government has also complained the euro’s free fall against the national currency is putting at risk revenue targets for this year and experts predict it will trigger an unavoidable budget review.

The sharp strengthening of Albania’s national currency against the euro is also having some few positive effects on the Albanian economy, and it’s mostly the Albanian government that is benefiting through lower repayment of loans denominated in Europe’s single currency.

While the national currency seems stable for the moment, prospects are it could further strengthen against the euro next August, the peak of the tourist season and a period when dozens of thousands of Eurozone-based Albanian migrants come home to spend their summer holidays, also bringing remittances for their families and making investment at home in a situation further increasing euro supply in the local market and requiring stronger intervention by Albania’s central bank to keep the national currency stable.

A much stronger national currency against Europe’s single currency during the first half of this year has delayed the central bank’s inflation target expectations and its easier monetary plans.

Governor Gent Sejko says the central bank now expects the 3 percent inflation target to be met by 2020, a one-year delay compared to last March’s announcement, and the easier monetary policy to continue until the first half of 2019, postponing plans by six months.

 

‘Unprecedented’ hike

The Vienna Institute for International Economic Studies has slightly revised downward Albania’s 2018 economic outlook, citing an ‘unprecedented appreciation’ of Albania’s national currency against Europe’s single currency.

The 3.8 percent growth scenario that the Vienna Institute now predicts would be a slowdown for the Albanian economy which grew by a 9-year high of 3.84 percent in 2017 backed by major-energy-related investment currently in their final stage and the emerging tourism sector.

The World Bank and the IMF predict the Albanian economy will slow down to between 3.5 percent and 3.7 percent this year as two major energy-related projects, the Trans Adriatic Pipeline and a large hydropower plant, complete their investment stage by the end of this year.

The U.S. dollar, whose weight on the Albanian economy is much lower compared to the euro, has also depreciated by about 9 percent during the past year and currently trades at a three-and-a-half year low of 107.43 lek, compared to a 12-year high of about 130 lek in early 2015.
                    [post_title] => Albanian lek stabilizes against Europe’s single currency
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                    [post_date] => 2018-07-26 12:53:48
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                    [post_content] => TIRANA, July 26 - Albania is one of the top five Europe and Central Asia countries when it comes to people trapped in modern slavery affecting its population. The findings are unveiled in the 2018 Global Slavery Index measuring modern slavery, which it calls a hidden everyday problem, in 167 countries around the world. Modern slavery in the report covers forced labor, debt bondages, forced marriage, slavery and slavery-like practices and human trafficking.

The report published by Australia-based Walk Free Foundation ranks Albania the fifth most affected country among 50 Europe and Central Asia countries, with an estimated absolute number of 20,000 victims and a prevalence rate of 6.9 victims per 1,000 residents considering a population of 2.9 million.

The report ranks Albania sandwiched between Greece and Turkey in the Europe and Central Asia list that is topped by Turkmenistan, Belarus and Macedonia.

On a global level where hardline communist regimes such as North Korea and war-torn countries top modern slavery practices, Albania ranks 43rd on rather poor performance in dimensions such  governance, basic needs, equality, disenfranchised groups and effects of conflict.

Government response to modern slavery rates the country BB in support to survivors, criminal justice, coordination and addressing risk and supply chains with a total score of 60 out of 80.

"In Albania, the establishment of a National Referral Mechanism has been supplemented by standard operating procedures that are used by regulatory and non-regulatory bodies that may come into contact with victims, including those covering teachers, doctors and people working in the tourism sector," says the report.

Data shows Albania has made little progress since the inaugural 2013 report when it ranked 51st out of 160 countries with an estimated 11,000 to 12,000 enslaved people out of a bigger estimated resident population of 3.11 million, making it Europe’s hardest-hit modern slavery country.

Industries such as the garment and footwear and call centers, two of the top employers in Albania and the Balkans, are often referred to as modern slavery due to poor compensation, long working hours and difficult conditions.

An estimated 40.3 million people are victims of modern slavery across the world, with the highest at risk including those who are physically or linguistically isolated, culturally disoriented, subjected to crushing debts and have little to no knowledge of their rights, says the Walk Free Foundation.

“Modern slavery refers to situations where one person has taken away another person’s freedom — their freedom to control their body, their freedom to choose to refuse certain work or to stop working — so that they can be exploited. Freedom is taken away by threats, violence, coercion, abuse of power and deception. The net result is that a person cannot refuse or leave the situation,” says the report.

 
                    [post_title] =>  Albania remains one of Europe’s hardest-hit by modern slavery, report shows 
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                    [post_date] => 2018-07-26 10:27:09
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                    [post_content] => TIRANA, July 25 - Albania's main opposition Democratic Party has blamed what it calls a hostile business climate for the country's failure to make it in the annual investment climate statements published by the U.S. Department of State although the U.S. embassy in Tirana later clarified that the Albania chapter will be published soon.

The opposition Democrats consider the report covering more than 170 countries nationwide punishment for the Albanian economy and blames corruption and ill-governance for the unfriendly business climate that Albania offers to American investors.

"The decision by the U.S. Department of State to exclude Albania from the list of friendly countries to American businesses is punishment for the Albanian economy," says Jorida Tabaku, an opposition Democratic Party MP who is also the deputy head of the parliamentary economy committee.

"Failure to be a friendly country for American businesses means there is a hostile climate toward them with high taxes, unfair competition from dirty drug trafficking and corruption money and that the economy is concentrated on a handful of oligarchs and customers of [Prime Minister] Edi Rama,” she added.

Serbia and Macedonia were also among the Western Balkan countries not immediately included in the 2018 investment climate statements, which the U.S. department says help U.S. companies make informed decisions on doing business in foreign markets, and in doing so help increase U.S. exports and generate U.S. jobs.

The main opposition party claims Russian and Georgian investors are replacing Americans and that public private partnerships are being awarded through unsolicited requests to businessman close to the Prime Minister.

The accusations come amid media allegations that a company with close ties to Russia’s Gazprom oil and gas giant is on track to get major oil fields that were previously run by a U.S.-based company south of the country.

In last year's report on the Albania's investment climate, the U.S. lambasted Albania’s business climate as unfavorable, with corruption, unclear property rights and discrimination against foreign investors as the top concerns.

The State Department’s Bureau of Economic and Business Affairs rated endemic corruption as the top concern holding back U.S. investors to Albania.

The rising concern came after two major North American oil companies, former Canadian-owned Bankers Petroleum and U.S.-based TransAtlantic Petroleum left the country in 2016 following disputes with tax authorities in the country and a slump in international oil prices.

The stock of U.S. foreign direct in Albania has been on downward trend in the past three years, dropping to €74 million in early 2018, down from a peak €97 million in early 2015, according to Bank of Albania of data, ranking the U.S. out of the top 10 largest investors in Albania.

Frequently changing tax policies, almost on an annual basis, unclear land ownership titles and lack of a cadastral map are the key barriers current and potential foreign investors face in Albania, says the American Chamber of Commerce in Albania.

Trade exchanges between the U.S. and Albania are at a modest of about 12 billion lek (€95 mln, $111 mln) annually, accounting for only 1.5 percent of Albania’s trade volume, according to Albania’s statistical institute, INSTAT.

The trade exchanges are overwhelming dominated by machinery and equipment Albania imports while medicinal plants lead the country’s exports to the U.S.

Despite the modest level of trade and investment, the U.S. has been a strategic partner in Albania’s Euro-Atlantic integration and a key donor in the country’s transition to democracy and market economy.

Albania’s affection to the U.S. started after World War I when former President Woodrow Wilson stood up to support Albania’s independence to prevent any further partition of Albanian territories.

The two countries re-established diplomatic relations on March 15, 1991, after a break of 52 years following World War II and Albania’s isolation under communism.

President George W. Bush was the first sitting American President to visit Albania on 10 June 2007.

Some 200,000 Americans of Albanian descent live in the U.S. while the number of Albanian-Americans who permanently live in Albania is estimated at 20,000.
                    [post_title] => Opposition worried over Albania’s failure to make it to U.S. investment climate report
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                    [post_date] => 2018-07-25 11:32:34
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                    [post_content] => TIRANA, July 25 - One of Albania's largest companies, the Balfin Group, has expanding its mining operations in neighboring Kosovo where it has acquired a ferro-nickel producer that has been facing financial trouble for the past few years following the mid-2014 slump in mineral prices.

The acquisition, made for an undisclosed amount, comes after one of Kosovo's largest employers had been operating at partial capacity for the past couple of years and halted its operations for the past four months, leaving more than 800 workers jobless and negatively affecting more than a thousand others involved in supplying the plant with raw material and logistics both in Kosovo and Albania.

Balfin Group, which runs the country's largest shopping centers and chromium mine and is a major developer in the Balkan region, says it has fully acquired the ferro-chromium smelter that has changed hands several times during the past 13 years following its privatization and plans to make immediate investment to reactivate the plant.

"Balfin will immediately inject sufficient funds to restart the plant and bring it back to full production within August and has agreed to repay the existing supplier debts of the company as soon as possible as well as paying outstanding salaries," the company said in a statement.

Balfin, which in 2013 acquired Albania's largest chromium producer, the Bulqiza mine, has been investing in chromium and smelting facilities in Albania and is now planning to make new investment in Kosovo’s Drena’s facility “to realize the full potential of the mining sectors in Albania and Kosovo and increase the production of nickel.”

Chromium, copper and iron ore are the main three minerals that Albania extracts in the mining sector employing about 5,000 people and producing one of the country’s top exports.

Kosovo is also a major mineral producer, with its lignite reserves estimated to be one of the world's largest.

The Kosovo acquisition comes as part of Balfin Group's regional expansion and follows a new major €350 million investment in Macedonia where it plans to build residential and business facilities.

Balfin Group is run by Samir Mane, an Albanian businessman whose fortune is estimated at be at $1 billion, making him Albania's fist billionaire, according to Wealth-X, a global ultra-high net worth intelligence provider.

 

 

 
                    [post_title] => Albania’s biggest miner expands operations in Kosovo 
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                    [post_date] => 2018-07-23 16:51:37
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                    [post_content] => TIRANA, July 23 - The European Commission has described the Albanian government’s 2018-2020 economic growth and public debt targets as overoptimistic at a time when Albania continues to face several obstacles to improving potential growth and competitiveness.

In its assessment of Albania's 2018-2020 economic reform programme, the EU's executive arm says Albania’s mid-term growth prospects will be hampered by two large energy-related projects completing by the end of this year which forced it to revise downward Albania’s 2018 forecast by 0.2 percentage points earlier this year.

TAP and the Devoll Hydropower, the two major energy-related that drove growth in the past four years complete their investment stage by the end of 2018, leaving a huge gap of about €300 million unless other major projects replace them.

“A baseline scenario with output growth of around 4 percent is not implausible in the current context, but the projected trajectory appears slightly optimistic. Steady output acceleration in 2018-2020 is likely to be prevented by decelerating investment activity as the two large energy projects approach completion… and it seems slightly optimistic to expect the remaining impact to be overcompensated by higher consumer spending and public investments,” says the Commission.

The Albanian government’s baseline scenario is that the country’s growth will range between 4.2 percent to 4.4 percent over the next three years on stronger domestic demand leading to higher consumption as well as rising public investment.

However, in its latest ‘Spring’ European economic forecast report, the European Commission downgraded Albania's growth outlook for the next couple of years and now expects the Albanian economy to slow down to 3.6 percent in 2018, down from a 9-year post crisis high of 3.8 percent and recover to 3.9 percent in 2019 to register the highest growth rates among regional EU candidates.

The Commission says there is risk that new investment will be unable to bridge the gap that TAP and Devoll HPP leave in the country's FDI.

"The ERP [economic reform programme] recognizes that FDI inflows associated with the two large projects, which are about to be completed, will diminish, but seems to expect — without any discussion — that this will be compensated by new FDI projects,” says the report.

“Albania’s success in attracting foreign investment in recent years has been heavily concentrated in non-tradable and natural resource-based industries. There is a risk that new investment opportunities in these industries will dry up and that investments in other sectors like tourism will be on a smaller scale," says the Commission, adding that attracting FDI to higher value-added activities would require wide-ranging structural reform to bring about substantial improvements in the investment environment.

Albania's FDI is largely focused on energy, with electricity and natural gas having attracted a record €1.7 billion in the past four years mainly as a result of the two major energy-related projects. Major investment has also been made in the low value-added oil and mining industry, the majority of which ends up being exported as crude oil and chrome ore.

 

Weaknesses to growth

The EU says institutional weaknesses to growth and competitiveness have only been partially addressed so far.

"Albania faces several obstacles to improving potential growth and competitiveness. A weak judiciary, insufficient enforcement of property rights and burdensome administrative procedures are institutional weaknesses that have been only partially addressed so far. This is hampering both local businesses and potential FDI inflows, unfortunately these important weaknesses are not being taken into account despite ongoing reforms," says the report.

EU experts also warn plans to increase the use of public-private partnerships and concession contracts entail significant fiscal risks in the form of contingent liabilities for the state budget and the public debt reduction agenda.

The warning comes at a time when the Albanian government is implementing an ambitious but rather controversial €1 billion PPP program which the IMF says risks creating new hidden arrears which if included in the public debt stock could increase it by another 7 percent of the GDP.

Albania's public debt currently stands at about 70 percent of the GDP, a level considered too high for the current stage of Albania’s economic development, with its high servicing cost curbing much-needed public investment in key education, health and road infrastructure. The government expects it to drop to 60 percent of the GDP by 2020.

The Commission says government’s projection for the downward path of public debt might require additional fiscal measures due to downside risks to growth and budget execution.

The European Commission says Albania's inflation rate running below the central bank's 3 percent target for five consecutive years reflects the absence of upward price pressures from a domestic economy that is still operating below potential, in combination with disinflationary impacts from the external environment.

Local Albanian experts have also rated the currency exchange risk as one of the key threats facing the Albanian economy this year following an unprecedented stronger lek against Europe’s single currency with a series of negative effects on the country’s Eurozone destined exports, local producers facing tougher competition from cheaper imports and major euro-denominated savings.

In late June 2018, EU leaders at the European Council decided to delay Albania's opening of EU accession talks for mid-2019, requiring the Balkan country to show more progress with reforms in the judiciary, tackling high level corruption and organized crime.

 
                    [post_title] => EU critical of Albania’s overoptimistic growth agenda
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                    [post_date] => 2018-07-23 12:31:35
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                    [post_content] => TIRANA, July 23 – The Albanian government is looking for a consultant to carry out a review of the concession contract it has with the Tirana International Airport, the country’s sole airport with a de facto monopoly on international flights and whose high charges on carriers are often blamed for Albania having one of the region’s highest ticket prices.

In an announcement published on the Public Procurement Agency, state-run Civil Aviation Authority invites bids until August 3 for consultancy services on the "independent economic review of the TIA concession contract" to carry out a review in 40 days for about 29.5 million lek (€234,000).

The economic review comes following frequent concerns the country’s competition watchdog has expressed in the past four years over the concessionaire’s alleged abuse of its monopoly position in charging high fees that make the operation of low-cost carriers difficult and lead to high costs for Albanian passengers who often choose to fly from neighboring countries offering cheaper flights.

The probe also comes after Albania’s sole international airport has already been operating under a build-own-operate-transfer concession contract for the past 13 years and a Chinese consortium has taken over the airport’s operations from the original German-led concessionaire since mid-2016.

The Tirana International Airports is one of the most profitable companies in Albania with profit rates of up to 38 percent. The Chinese-led concessionaire saw its net profit climb to about 2.3 billion lek (€18 million) in 2017, up 25 percent compared to the previous year, according to reports filed with the National Business Center.

While the airport’s exclusive rights on international flights were lifted in mid-2016 paving the way to the operation of the small Kukes airport in northeast Albania in return for extending its concession term for 2 years until 2027, no new airports have been activated in the past couple of years and TIA continues to have a de facto monopoly.

The Albanian government says it is preparing to launch two new airports that would break the current monopoly that the Tirana International Airport has on international flights in an operation that is expected to increase market competition and lead to lower ticket prices and also serve the country’s emerging tourism industry through faster access to southern and northern travel destinations.

While negotiations with a Turkish consortium to build a new airport in southern Albania are in their final stage, the government is also planning to reactivate Kukes airport, a north-eastern Albania airport that has been abandoned for about a decade.

The Kukes airport will apparently be reactivated by Kastrati, one of Albania’s top two companies which has been offered an 8 percentage point bonus for its unsolicited bid, putting it at an advantage and apparently making it a winner when the tender is held later this year.

The operation of the Vlora airport could extend the Tirana International Airport’s concession term by three to four years, depending on the year when it becomes operational.

 

Ignored recommendations

The ‘economic review’ also comes at a time when several previous recommendations by the competition watchdog have been ignored for years by authorities.

Under a recent July 20 decision, the competition authority asks Albanian air transport authorities to revise the concessionaire's charges every three years as envisaged in the original contract at a time when they have not been reviewed since 2005 when the 20 year-concession kicked off and also adopt a cost-oriented methodology on them.

In an early 2014 decision on some recommendations to increase competition in the air transport industry, Albania's Competition Authority unveiled the airport's landing and take-off, base ground handling, parking and lighting fees were much higher compared to regional airports which have more than one airport, including Kosovo which has a single airport.

The watchdog also recommended that authorities must adopt a cost-based approach in deciding on the concessionaire's proposed charges.

In another late 2015 decision, the Competition Authority recommended lifting the concessionaire's exclusive rights on international flights and liberalizing services such as ground handling, landing and take-off, as well as passenger, cargo, parking and lighting services.

Competition authorities are reported to have insisted on its recommendations being enforced during the past couple of years at a time when the sole development was the removal of the TIA concessionaire’s exclusive rights on international flights.

Albania's Air Transport Code allows the Civil Aviation Authority to intervene in preventing discriminatory tariffs and practices, abusive high prices as a result of dominant position as well as abusively low prices.

The Competition Authority has also earlier probed the monopoly aviation fuel services offered at the airport, but concluded there was no request by other operators to offer the service despite concerns over alleged market entry barriers.

The watchdog had earlier warned the monopoly conditions under which the Tirana International Airport concessionaire and the aviation fuel company operate are increasing operating costs for airlines and affecting ticket prices.

The aviation fuel is provided by Air BP Albania, the Albanian subsidiary of the specialized aviation division of British Petroleum oil giant.

“Although the exclusiveness of aviation fuel trade at the Tirana international airport area expired in January 2015, this market remains a monopoly of Air BP company which is the only operator providing this service in the air passenger market,” said the Competition Authority said in late 2016 when it initiated a probe.

 

Drawing lessons

As the Albanian government is concluding negotiations with a Turkish consortium over building a new airport in Vlora, southern Albania, the International Monetary Fund has warned the country’s officials to be careful and draw lessons from the 2005 airport concession as it proceeds with new public private partnerships that could put Albania's public debt agenda at risk.

In a report examining public infrastructure in the six EU aspirant Western Balkans countries, the IMF notes that the region’s economies have one of the worst scores for the management of PPPs.

The IMF brings Albania’s experience with the 20-year concession contract it signed back in 2005 with a German-led concessionaire on upgrading and operating the country’s sole international airport as a deal under which important lessons can be learned.

“The PPP achieved some main objectives, but important lessons can be learned. Albania secured construction and operation of a modern airport of high standards, allowing for continued strong growth in travel demand and imposing only minimal fiscal risks on the country. The investment, however, could have been better designed from the onset, facilitating stronger traffic growth, increasing revenue growth associated with higher levels of activity, and positioning Albania more competitively in the regional aviation market,” says the IMF.

“Many Albanians travel by bus to airports in Kosovo, Montenegro, and Macedonia, and the relatively high costs of flights to Albania may also have affected inbound tourism,” says the IMF, attributing the low number of low-cost carriers to the airport’s high landing fees.

Some 18 airline companies operate in Tirana, the overwhelming majority of which foreign-owned, linking Tirana to dozens of foreign destinations through direct flights, mainly Italy.

New low-cost carriers have been linking Tirana to Budapest, Amsterdam and more recently to London in the past year in what looks like a policy change under the new Chinese takeover since mid-2016 amid government plans to build new airports.

The Tirana airport handles more than 2 million passengers a year, being one of the country’s main hubs.
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            [post_date] => 2018-07-31 11:08:27
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            [post_content] => TIRANA, July 31 - The U.S. State Department says Albania continues to remain a difficult place to do business with endemic corruption as the top concern that keeps potential American investors away from the country.

In its 2018 investment climate statement for Albania, the State Department's Bureau of Economic and Business Affairs says foreign investors cite corruption, particularly in the judiciary, lack of transparency in public procurement and poor enforcement of contracts as continuing problems in Albania.

"The implementation of judicial reform is underway, including the vetting of judges and prosecutors for unexplained wealth, but foreign investors perceive the investment climate as problematic and say Albania remains a difficult place to do business," says the report.

U.S. investors to Albania, whom the State Departments advises to include binding international arbitration clauses in agreements with Albanian counterparts, report ongoing concerns that Albanian regulators use difficult-to-interpret or inconsistent legislation and regulations as tools to dissuade foreign investors and favor politically connected companies.

“Despite hospitable legislation, U.S. investors are challenged by rampant corruption and the perpetuation of informal business practices. Several major U.S. investors have left the country in recent years after contentious commercial disputes, including several that were brought before international arbitration,” says the report.

The U.S. State Department says major foreign investors in Albania report pressure to hire specific, politically connected subcontractors and express concern about compliance with the U.S. Foreign Corrupt Practices Act while operating in the country.

The rising concern came after two major North American oil companies, former Canadian-owned Bankers Petroleum and U.S.-based TransAtlantic Petroleum left the country in 2016 following disputes with tax authorities in the country and a slump in international oil prices.

Public private partnership, which are commonly being awarded through unsolicited proposals favoring proposing companies through bonuses that make them eventual winners in tenders, are also cited as a concern.

“The increasing use of public private partnership contracts has narrowed the opportunities for competition, including by foreign investors, in infrastructure and other sectors. Poor cost-benefit analyses and a lack of technical expertise in drafting and monitoring PPP contracts are ongoing concerns,” says the report.

The U.S. Bureau of Economic and Business Affairs also expresses concern over the long-standing issue of unclear property titles and uneven enforcement of legislation as barriers to doing business in the country.

“Property rights remain another challenge in Albania, as clear title is difficult to obtain. Some factors include unscrupulous actors who manipulate the corrupt court system to obtain title to land not their own. Uneven enforcement of legislation, cumbersome bureaucracy, and a lack of transparency are all hindrances to the business community,” says the report.

The high tax burden, government bureaucracy and monopoly and unfair competition have been the main barriers to doing business in the country for the past few years, according to annual surveys conducted by the American Chamber of Commerce representing some of the key foreign and local investors in the country.

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

 

Potential investment sectors

Despite the considerable number of doing business barriers identified, the State Department says energy and power, tourism, water supply and sewerage, road and rail, mining, and information communication technology represent the best prospects for foreign direct investment in Albania over the next several years.

The identified sectors have also been included in the strategic investment law that the Albanian government approved in 2015 offering tax incentives and state protection and assistance. However, as the December 2018 deadline for application to receive the status of strategic investment/investor is approaching, no major foreign investors have taken advantage of the law and it’s only several projects proposed by domestic companies or consortiums of local and foreign partners that have been designated as strategic investments, mostly in the tourism sector, says the U.S. State Department report.

The critical investment climate report comes at a time when the modest investment and trade ties have failed to make progress in the past few years.

The stock of U.S. foreign direct in Albania has been on downward trend in the past three years, dropping to €74 million in early 2018, down from a peak €97 million in early 2015, according to Bank of Albania of data, ranking the U.S. out of the top 10 largest investors in Albania.

Trade exchanges between the U.S. and Albania are at a modest of about 12 billion lek (€95 mln, $111 mln) annually, accounting for only 1.5 percent of Albania’s trade volume, according to Albania’s statistical institute, INSTAT.

The trade exchanges are overwhelming dominated by machinery and equipment Albania imports while medicinal plants lead the country’s exports to the U.S.

Some 200,000 Americans of Albanian descent live in the U.S. while the number of Albanian-Americans who permanently live in Albania is estimated at 20,000, making it a huge potential for investment at home.
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