Offshore tax haven has €30 mln Albania projects cancelled over cheating authorities

Offshore tax haven has €30 mln Albania projects cancelled over cheating authorities

TIRANA, Dec. 11 – The ease at which a newly established Albanian company claimed two major public contracts, worth a total of €30 million, by falsifying links to a US-based parent company has unveiled the fragility of Albania’s public procurement

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Inspired by France’s yellow vests, Albanians protest high fuel prices

Inspired by France’s yellow vests, Albanians protest high fuel prices

TIRANA, Dec. 11 – Inspired by France’s yellow vest protests, citizens in central and northern Albanian regions took to the streets on Monday afternoon, calling for lower oil prices and a cut in overall taxes, temporarily blocking roads and highways.

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Government urged to calculate subsistence level for poverty reduction

Government urged to calculate subsistence level for poverty reduction

TIRANA, Dec. 11 – Albania’s Supreme State Audit has urged government authorities to immediately consider a long-awaited subsistence level calculation on households’ basic needs in order to efficiently fight poverty reduction in the country. In a report examining poverty in

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Euro’s free fall, sharp hike in business closures hit Albania government revenue

Euro’s free fall, sharp hike in business closures hit Albania government revenue

By Ervin Lisaku TIRANA, Dec. 10 – The euro’s free fall and more business closures are hitting government revenue which continue underperforming even after a mid-year budget cut. Finance ministry data shows budget revenue grew by a moderate 3.8 percent

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US giant Hyatt takes over former Sheraton Tirana management

US giant Hyatt takes over former Sheraton Tirana management

TIRANA, Dec. 6 – US-based giant Hyatt has entered Albania where it will manage a former Sheraton hotel that in early 2018 was purchased and rebranded by an Albanian investor, filling a void in international brands managing five-star hotels in

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‘Turning migration to advantage,’ experts unveil way out of one of Albania’s top threats

‘Turning migration to advantage,’ experts unveil way out of one of Albania’s top threats

By Ervin Lisaku TIRANA, Dec. 6 – Turning migration from an issue into advantage would require transforming the Albanian economy into more dynamic by easing domestic and foreign investment, experts say. Albanian economy expert Arben Malaj says Albania and other

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EU grants €94 million in support of integration reforms

EU grants €94 million in support of integration reforms

TIRANA, Dec. 6 – The European Commission says it has granted €94 million to support Albania in the European integration process. The programme focuses on core issues for EU accession, such as rule of law, economic development and environmental protection,

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Proposed legal changes target final solution to long-standing property issue

Proposed legal changes target final solution to long-standing property issue

TIRANA, Dec. 5 – Albania is trying to give a permanent solution to the long-standing issue of unclear property titles through legal changes which it says will bring an end to the chaos of property ownership in the country during

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Easier market access offered to first Albania homemade traditional products

Easier market access offered to first Albania homemade traditional products

By Ervin Lisaku TIRANA, Dec. 5 – Local homemade traditional products in Permet, a southern Albanian historic town, are well known throughout Albania, but as in much of the country face difficulty in penetrating markets due to being produced informally

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Euro’s free fall, energy uncertainties could hit Albania’s poorly diversified exports

Euro’s free fall, energy uncertainties could hit Albania’s poorly diversified exports

TIRANA, Dec. 4 – Albania’s exports are heading for double-digit growth rates for the second consecutive year, but uncertainties about euro’s free fall against the local currency, a hydro-dependent electricity sector and oil and mineral sales depending on fluctuating commodity

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                    [post_content] => TIRANA, Dec. 11 - The ease at which a newly established Albanian company claimed two major public contracts, worth a total of €30 million, by falsifying links to a US-based parent company has unveiled the fragility of Albania’s public procurement system and non-transparent use of taxpayer money, leading to allegations of large-scale corruption which the ruling Socialists have downplayed with lack of security checks on the winning company.

DH Albania, a subsidiary of US-based Dunwell Haberman, easily won public tenders to build a section of Tirana's outer ring road for €18 million and an electricity transmission line north of Albania worth around €12 million in the past few months, in public tenders with virtually no competition at all. The Albanian unit falsely claimed it was part of a major US company with 20 years of experience allegedly registered in the state of Delaware in 1998, but later proved to have registered only in mid-2018.

Having registered with the Albanian National Business Center only in mid-July 2018, the company claimed two lucrative contracts cancelled in the past few days only following opposition and media allegations of a fake company registered in tax havens and after authorities in Delaware officially confirmed the status of Dunwell Haberman as a new company registered in June 2018.

In both tenders, the Albanian unit of the US-registered company legally represented by a 26-year old Albanian with no major business background, claimed both tenders by beating sole rivals that were disqualified for lacking documentation or financial security, after bidding almost exactly the same to the amount that the government expected the contracts to be carried out.

Reacting to the Dunwell Haberman scandal, Energy Minister Damian Gjiknuri said he had proposed legal changes making it compulsory to screen documentation submitted by winning bidders before a contract is signed in order to avoid similar future situations.

 

Tax haven issue

The company registered in Delaware, a tax haven in the US, also highlights the need for more attention and security checks for companies coming from offshore tax havens, which in Albania control several major concessions, leading to allegations of avoiding taxes and hiding their real owners.

Back in 2016, when the massive leak of the so-called Panama Papers scandal broke up, Albanian authorities unveiled an initiative for legal changes making the disclosure of shareholders in off-shore companies investing in Albania compulsory, but the initiative was later dropped.

Instead, Albania only recently adopted legal changes that make it compulsory for foreign investors to pay a capital gain tax of 15 percent in case of selling their Albania assets in a bid to avoid key transactions that bring nothing in income to the Albanian government.

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.

Finance Minister Arben Ahmetaj says the legal changes adopted as part of the 2019 fiscal package are aimed at preventing tax-free transactions such as that of the country’s largest oil producer, former Canadian-owned Bankers Petroleum which in mid-2016 was acquired by China’s Geo Jade for C$575 million (€390 mln) following a decade of operations in the country.

Back in 2016, nineteen individuals, six companies and two offshore entities linked to Albania were disclosed in a searchable database that strips away secrecy of hundreds of thousands of offshore entities globally as part of a massive leak of the so-called Panama Papers.

The database published by the International Consortium of Investigative Journalists showed there were three Albanian individuals among the disclosed investors including Ismail Mulleti, who earlier in 2016 was disclosed by Israeli media as behind Global Fluids International, Albania’s fuel marking concessionaire, co-owned with Israeli businessman Assaf Halkin.

 

Highly perceived corruption

Public procurement has traditionally been one of the key concerns for local and foreign investors complaining of corruption and tailor-made criteria favoring specific companies with alleged links to ruling majorities.

Allegations have in the past few years increased as the government has been pursuing an ambitious €1 billion public-private partnership program to upgrade road, health, education and waste management infrastructure with PPP winners emerging out of unsolicited proposals favoring Albanian-owned companies that proposed the projects through bonuses that made them eventual winners in tenders with little competition.

Surveys show public procurement continues to remain one of the main doing business concerns due to perceived limited competition and discriminatory criteria although the country has been offering e-procurement procedures for about a decade now in a bid to reduce corruption and increase transparency.

In the latest Balkan Barometer survey, some Albanian companies cited tailor-made criteria for certain participants and deals before the tender is even published for not participating in public tenders.

An earlier survey by London-based European Bank for Reconstruction and Development has shown about 40 percent of Albanian households and businesses believe political connections are the key to factor behind success.

Earlier this year, a report by the European Court of Auditors, the EU’s independent external auditor, showed About a third of all public procurement in Albania is carried out using the little transparent and limited competition negotiated procedure, making Albania the top Western Balkan country that overuses this procedure.

Some 4,790 public procurement contracts worth 83.5 billion lek (€670 mln) were signed in 2017, when public tenders were suspended for about four months prior and after the June 25 general elections,  down 4.4 percent compared to 2016, representing about 6 percent of the country’s GDP, according to a report by the Public Procurement Agency.
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                    [post_content] => TIRANA, Dec. 11 - Inspired by France's yellow vest protests, citizens in central and northern Albanian regions took to the streets on Monday afternoon, calling for lower oil prices and a cut in overall taxes, temporarily blocking roads and highways.

Chanting anti-government slogans, protesters in the opposition Democratic Party-led Shkodra and Lezha municipalities as well as in Kavaja, central Albania, called on government to revise the high tax burden on fuel that make Albania’s fuel prices one of Europe’s highest, and also complained about what they called unaffordable increase in the cost of living.

Protesters also showed solidarity with student protests in Tirana, demanding a cut in tuition fees and better standards in Albania’s public universities.

"We have the most expensive oil in the region and in Europe. I call on the Albanian businesses to join us in protests and support students and our children who have taken to the streets to fight for their rights and our issues," a protestor in Kavaja, a town some 50 km from Tirana, said as protesters temporarily blocked one side of the highway linking central and southern Albania.

Reacting to protests, Prime Minister Edi Rama noted with irony that it was opposition staff of the municipalities of Shkodra, Lezha and Kavaja that were protesting as 'farmers, drivers and French citizens" in the oil price demonstrations.

Due to the high tax burden levied on oil, Albania’s has one of Europe’s highest oil prices, but poorest income, with a chain effect on their cost of living and economy in general.

The last time the government directly increased taxes on fuel was in 2014-15 when the circulation tax levied on fuel was risen by a total of 20 lek (€0.16)/l over 2014-15.  Fuel traders say high prices also reflect a sharp hike in license fees since 2017.

With crude oil prices having dropped to a year-low of $60 a barrel in the past few weeks following an upward trend that took them to a three and a half-year high of $80 a barrel last October, the situation has not yet been reflected on local prices which have significantly increased this year, reflecting both international oil prices and higher local costs following a hike in license fees for fuel traders.

Diesel and petrol in Albania currently trade at 180 lek (€1.42)/liter, also reflecting lower domestic refining following the temporary suspension of work at the country’s main refiner in early 2018 leading to a sharp hike in oil imports.

At €1.47/liter, Albania’s diesel prices were among Europe’s highest and the Western Balkan’s highest this week, significantly higher compared to neighboring Macedonia’s €0.95/l and Montenegro’s €1.2/l and even more expensive compared to Germany, Europe’s leading economy, at €1.37/l, according to the Global Petrol Prices portal.

Albania is a major oil producer but due to the poor quality and heavy refining needs of domestically produced oil, the Balkan country imports the overwhelming majority of its needs.

Media investigations have unveiled Albania has one of the region’s poorest oil quality, and almost everything goes unpunished despite a series of negative effects on the environment, pollution-related diseases and some 430,000 vehicles possessed by Albanians.

The fuel trading market, one of the country’s biggest industries, is represented by more than 1,000 fuel stations with an annual turnover of more than €1 billion, half of which goes in taxes that consumers pay in excise, circulation, VAT and carbon taxes.

Last October, the country's competition watchdog suspended tender procedures on a controversial concession in the oil and gas inspection following a complaint by a Switzerland-based company over tailor-made criteria favoring a local Albanian company that has also been awarded a bonus for its unsolicited proposal.

The tender to select a concessionaire to inspect fuel and liquid gas measurement systems for the next 20 years, switching to private hands a service currently carried out by the state-run Directorate of Metrology, was initially scheduled for Oct. 18, but will now be recalled only after a decision by the competition appeals body and if no legal battle is initiated with administrative courts.
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                    [post_content] => TIRANA, Dec. 11 – Albania’s Supreme State Audit has urged government authorities to immediately consider a long-awaited subsistence level calculation on households’ basic needs in order to efficiently fight poverty reduction in the country.

In a report examining poverty in Albania and the government’s role in its reduction, state auditors say the current points-based electronic system that the country is applying on social assistance is not enough to meet poor households’ basic needs.

“Albania has no subsistence level or poverty line adopted by the government on which social assistance policies and studies can rely on. The current social assistance system as an instrument of the Ministry of Health and Social Protection and subordinate social care institutions is not efficient in poverty reduction when considering the number of households getting out of the scheme because of employment or improvement in social and economic conditions,” says the Supreme State Audit.

An average Albanian family of four gets modest monthly assistance of an average of 5,247 lek (€42), a small amount in a country where the minimum wage is at 24,000 lek (€191).

Back in 2016, a study backed by the Ombudsman's office calculated Albania's subsistence level at 16,000 lek (€128) a month, an amount unveiling that current minimum wages, social assistance, unemployment benefits and pensions are too low for hundreds of thousands of workers and pensioners.

Calculations by the Albanian Center for Economic Research showed the subsistence level in 2015 was at 16,000 lek a month per person, of which 7,100 lek (€57) on food expenditure and 8,900 lek(€71) in non-food spending. If adjusted for inflation, the subsistence level would be at least 5 percent higher at the end of 2018 considering the country’s cumulative hike in consumer prices since 2016.

Quite expectedly, the Ombudsman’s supported study was never taken into consideration and no initiative taken for an official calculation of the subsistence level on meeting basic needs that is apparently unaffordable by Albania’s state budget, already facing a huge gap in the pension system due to the low number of contributors to the scheme.

The Supreme State Audit says the inefficiency of the electronic system is related to a unified application of a point-based formula that has not been assessed based on coherent needs of the households in need.

“The amount determined by the social assistance scheme does not reflect the real and current needs of individuals and households, as long as there is no official updated amount of the subsistence level in the country,” says the Supreme State Audit.

Poverty line in Macedonia, Albania's eastern neighbor with a similar development level was estimated at €112 per capita a month in 2016 and at €128 a month for Serbia, the region's largest economy, the Supreme State Audit says referring to data by Eurostat, the EU's statistical office.

“The government support through the social assistance program would be more efficient if contribution was assessed in parallel with the overall price level, the consumer basket and dynamic studies on households' reintegration into society,” it adds.

An average Albanian household of 3.7 persons spent a total of 73,400 lek (€590) a month in 2017, with the per capita spending at 19,660 lek (€155) and almost half of the monthly budget still going on food items, according to a recent survey conducted by INSTAT, the state-run statistical office.

The World Bank expects Albania’s poverty rate measured at US$5.5/day in purchasing power parity to drop to about a quarter of population by 2020, down from about 28 percent, but yet remain one of the highest in the region.

 

Thousands cut off

Thousands of Albanian households nationwide have had their social assistance cut off in the past three years as part of a reform removing abusers from the scheme and offering vocational education training to beneficiaries no longer qualifying for assistance to prepare them for labor market needs.

Data published by Albania’s state-run statistical institute, INSTAT, shows Albania had had some 53,000 households benefiting social assistance in mid-2018, around 31,000 fewer compared to mid-2015 when Albania was piloting the current system in the country’s three largest regions.

The sharpest cut in the number of beneficiary households was registered in early 2018 after a new scoring formula identifying the poorest households and removing abusers was applied nationwide, cutting off some 26,000 former beneficiaries from the social assistance system.

While the reform has identified people already employed and owning cars as abusively receiving social assistance, there have also been cases when households were punished and stripped of their assistance following inspections because of failing to declare their home appliances in their application forms.

Low income and poor social protection is one of the main reasons for Albania’s massive migration during the past quarter of a century.
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                    [post_date] => 2018-12-10 12:50:20
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                    [post_content] => By Ervin Lisaku

TIRANA, Dec. 10 – The euro’s free fall and more business closures are hitting government revenue which continue underperforming even after a mid-year budget cut.

Finance ministry data shows budget revenue grew by a moderate 3.8 percent over January-October 2018, but missed the target by 2 percent or 8 billion lek (€64.5 mln) for the first ten months of this year.

The government claims the considerable strengthening of Albania’s national currency, lek, against Europe’s single currency and the US dollar has had the main effect on the underperformance, making imports cheaper and as a result reducing tax collection rates.

The Euro currently trades at a 10-year low of 123.87 lek, having lost about 7 percent compared late 2017 and standing 11 percent below the mid-2015 level when its five-year reign of about 140 lek came to an end.

While slightly making Eurozone imports cheaper, the euro’s free fall has had a series of negative effects for the Albanian economy, primarily hitting exporters to the Eurozone due to increased costs, local producers facing tougher competition from cheaper imports, but also sizeable Euro-denominated savings and migrant remittances, increasing uncertainties on the Albanian economy.

On the positive side, the euro’s free fall has made repayment of government, but also business and household Euro-denominated debt much cheaper.

The US dollar, whose impact on the Albanian economy is much smaller, has been more stable against the Albanian lek trading at an average of 108 lek this year after losing around 12 percent last year, on a free fall from 128.4 lek in January 2017.

The finance ministry says the depreciation of both the euro and the US dollar has negatively affected customs income for all categories of imported goods, hitting revenue by 6 billion lek (€48.4 mln) and expects the blow to extend to 9 billion lek (€72.6 mln) for the whole year.

Last September, the ruling Socialist majority cited the euro's free fall as the main reason behind cutting central government spending and revenue targets by about 4.5 billion lek (€36 mln).

While interventions since mid-2018 when the central bank started purchasing undisclosed amounts of excess euros from the local currency exchange market have been unable to stop the euro’s free fall, Albania’s poorly diversified exports have weathered the storm pretty well so far thanks to a boost in hydro-dependent domestic electricity generation and rising commodity prices reinvigorating oil and mineral exports.

However, the European Commission warns in a recent report that delayed negative exchange rate effects on the Albanian economy will likely appear next year when new investment decisions and contracts are made.

The main opposition Democrats and some local experts have blamed illegal euro inflows from drug and crime proceeds for the euro’s free fall in Albania.

London-based European Bank for Reconstruction and Development also recently noted some ‘unrecorded cross-border activities’ may also be contributing to the appreciation pressures on the Albanian lek which it says reflects the ongoing de-euroisation policy initiative of the central bank in the financial sector, as well as the capital conversion of some banks.

 

Massive business closures 

Massive closure of small family-run businesses, accounting for more than 90 percent of total businesses operating in the country and employing some 200,000 people, has also had a negative effect on government revenue during this year.

More than a dozen thousand businesses have switched to passive status during this year, at a much faster pace compared to last year, in a situation apparently triggered by an increase in the tax burden for small businesses and rising competition from shopping centers and supermarket chains.

Tax authorities say the number of businesses temporarily closing down for this year until early December 2018 rose by a record 64.5 percent to around 14,000, at a rate of 41 businesses a day.

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.

The number of businesses officially de-registering with the National Business Center is much lower due to complicated resolving insolvency procedures, which, according to the latest Doing Business report, take 2 years and 10 percent in costs as a percentage of a debtor's real estate.

The finance ministry claims many of the business closures are fictitious and carried out in a bid to escape tax obligations, claiming that 15,000 new businesses have opened up during this year.

Starting next year, businesses will first have to pay all tax obligations before switching to passive status in tighter tax evasion measures approved in the 2019 fiscal package.

Small business owners say the situation for them is getting tougher each year amid a hike in tax burden, lower purchasing power and tighter competition from bigger shopping centers and supermarket chains constantly gaining market shares.

 

2019 fiscal package

In its 2019 fiscal package, Albania’s ruling Socialist Party majority has adopted a series of legal changes aimed at fighting tax evasion among high income earners, local businesses and transactions involving foreign-owned assets starting next January, in addition to several tax incentives in a carrot and stick approach ahead of next year’s June 30 local elections.

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 and diversifying investment.

The government says the 8 percent dividend tax rate will also apply to undistributed profits in the pre-2018 period provided the tax is paid by Sept. 30 2019.

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

Albania’s central bank has identified the much-rumored public private partnerships and the timely execution of government spending as the key threats to the 2019 budget that the ruling majority has approved.
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                    [post_date] => 2018-12-06 17:32:19
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                    [post_content] => TIRANA, Dec. 6 – US-based giant Hyatt has entered Albania where it will manage a former Sheraton hotel that in early 2018 was purchased and rebranded by an Albanian investor, filling a void in international brands managing five-star hotels in the country following Sheraton’s departure.

The deal was signed on Thursday with Kastrati Group, the second-largest Albanian-owned company with main operations in the oil trade industry, but which in early 2018 diversified its investment in the hotel industry by purchasing former Sheraton Tirana for around €30 million, and later rebranding it Mak Tirana Hotel following the departure of Sheraton from its management.

Kastrati’s January 2018 deal with Mak Albania, a subsidiary of Kuwait-based Kharafi Group Investments which has been active in the country since the collapse of the communist regime in the early 1990s with several investments in the tourism industry, led to the departure of Sheraton Albania following 15 years of operation in the country under a previous deal with the Kuwaiti investors.

With more than 700 properties in 50 countries around the World, US-based Hyatt is one of the leading luxury brands globally and currently operates a hotel only in Serbia among Western Balkan countries.

Albanian owners of the upcoming Hyatt hotel say they plan to extend the capacity of the 150-room luxury hotel with villas next to the hotel building, situated in a prime downtown Tirana area next to key state institutions and Tirana’s lake park.

Prime Minister Edi Rama says the arrival of Hyatt and other luxury brands will fill the gap of quality service in Albania’s emerging tourism sector where the number of tourists and income has been on a constant upward trend.

Rama says high-end four and five-star hotels which have been offered tax incentives will increase income and employment in the tourism sector and turn tourism in the key driver of Albania's economic growth in a decade.

In a bid to promote elite tourism investment, Albania has been recently offering tax incentives for a 10-year period  on luxury accommodation units for investments ranging from €8 million to €15 million for four and five-star units that will have to be carried out by internationally renowned chained-brand hotels or local companies under management or franchise contracts with them.

Hyatt will next year compete with Marriott, another U.S. giant that will be situated only few hundreds of meters away from the new Marriott Tirana.

Marriott will manage a 24-storey tower under construction at the new national stadium that is being built under a public private partnership with an Albanian-owned company.

Marriott International will cooperate through a franchise deal with Albanian-owned Albstar company which is building the “National Arena” stadium, the new home of the national football side, which will be ready by next year as a stadium, a commercial center and hotel.

The arrival of Marriott International is however not new in Albania. The American hospitality giant was indirectly present in Albania throughout 2017 through Sheraton hotel in Tirana, a global Starwood brand which it acquired in late 2016.

Last September, Hilton Garden Inn, a mid-priced brand owned by Hilton Worldwide, launched its first hotel in Tirana, an Albanian investment of €19 million in partnership with the prestigious US-based hospitality chain through a franchise deal.

Luxury hotel competition in Tirana has now become much tougher in Tirana in the past couple of years following the late 2016 opening of the Albanian-owned Plaza Hotel, a 24-storey tower in Tirana city center and the recent launch of Hilton Garden Inn.

Austrian-owned Rogner Hotel and the landmark 15-storey Albanian-owned Tirana International Hotel, also operate a close distance of around 1 km in the city center.

While the Albanian government supports the idea of the need for luxury investment, some local experts say demand for accommodation in Tirana, which has seen a significant rise in the past few years, is mostly for medium-priced 3 or 4-star hotels and see the new luxury investments with skepticism.
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                    [post_date] => 2018-12-06 14:11:28
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                    [post_content] => By Ervin Lisaku

TIRANA, Dec. 6 - Turning migration from an issue into advantage would require transforming the Albanian economy into more dynamic by easing domestic and foreign investment, experts say.

Albanian economy expert Arben Malaj says Albania and other Balkan countries could soon find themselves facing serious challenges such as older populations and lower human resources available for growth, a sharp hike in the pension gap due to lower contributors, higher costs in education, health, infrastructure development and maintenance as well as more expensive policies aimed at reducing development disparities across the country.

"The most important challenge for Albania is turning the economy into a dynamic economy that eases local and foreign private investment, provides access for companies targeting emerging markets and companies with an ever growing need for young and experienced talents," says Malaj, a former finance minister who has been nominated for another seven-year term as member of Albania's central bank supervisory council, the key decision-making body of the Bank of Albania.

"That creates real opportunities so that talented youngsters who have migrated can find a dynamic employment opportunity with a high degree of flexibility and mobility in the Albanian economy. A dynamic economy triggers the dynamism that attracts the well-educated, lures the return home of youngsters who have migrated and have had a successful professional career with their businesses or  working for international companies, in order to pick Albania for establishing and expanding their own businesses," professors Malaj and Ledjon Shahini say in a research paper published with local Albanian media this week.

Albania has around 1.2 million migrants abroad, almost 40 percent of its 2.8 million resident population, making it one of the countries with the highest per capita migration around the world in the past quarter of century of the country’s transition to democracy and a market economy.

Massive migration, mainly to Italy and Greece, the hosts of around 1 million Albanian migrants, has already contributed to a sharp decline in birth rates in the country with a series of negative economic and social effects for the country’s longer term prospects.

"In the initial migration stage, it’s the host countries that benefit, they gain a young, well-educated and qualified labor force that they have made no public or private investment at all. At this stage, migration is a cost for Balkan countries. In the case when migrants return to their home countries, they come back with extra business knowledge, great professional skills, with a network on the goods and services markets, innovative ideas on potential markets and with a new social and political background which makes them a real advantage for our countries," say professors Malaj and Shahini.

Migration has played a key role in Albania's development during the past quarter of a century though much-needed remittances, investment and know-how following a poor start in the early 1990s after almost five decades of a centrally-planned economy under a hardline communist regime.

However, the impact of remittances has considerably waned in the past decade following the 2008-09 global financial crisis and recessions hitting Italy and Greece, Albania’s main trading partners and the hosts of around 1 million Albanian migrants.

Migrant remittances slightly increased in 2017 when they recovered to €636 million, up from €616 million in 2016, but yet were about a third below their peak level of €952 million in 2007 just before the onset of the global financial crisis, according to Albania’s central bank.

In addition to crisis effects, social experts say remittances will continue to decline because of migrants’ integration in host countries, where they create their own families and often even taking their parents with them.

 

Why Albanians migrate

Income inequality and poor living standards at home compared to developed EU members are the main reasons why Albanian and Balkan youngsters migrate in addition to the poor quality of governance and access to key public services, experts say.

"Long-term factors include the income inequality and living standards which is one of the main migration factors. Per capita income in the EU is 7.5 times higher compared to Albania while Albania's purchasing power is at 30 percent of the EU average, lagging behind Western Balkan countries," says Arben Malaj.

Albania's minimum wage at around €180 is one of the region’s lowest and 8.4 times lower compared to Germany and France, Europe's leading economies which have turned into the new employment targets of Albanian young men and women.

Experts say that in addition to poor income, weak rule of law, inadequate employment, education and healthcare opportunities also drive Albanians to migrate to developed EU markets where there’s high demand for both highly-skilled experts, but also workers with no specific skills.

Currently enjoying visa-free travel for tourist purposes, EU aspirant Albanian and Western Balkan citizens need to have residence permits and work contracts for working in EU member countries, which complicates their legal migration opportunities.

The quality of governance and policies often based on punishment and a tense social and political environment also play a key part in searching for better opportunities abroad.

"Even though income could be a basic factor, often it is lack of public services and basic rights that push part of youngsters for migration as a solution even though having good jobs and being well-educated. Population in many suburban areas is shrinking due to lack of minimum living standards such as infrastructure, health and lack of social cohesion and solidarity policies and funds," say experts Malaj and Shahini.

Albania spends an equal 3 percent of its GDP on education and health compared to an average of 5 and 8 percent respectively in the European Union.

“In many Balkan countries, governments are focused on punitive policies and campaigns and not incentives. Governments in those countries do little or nothing at all to cooperate with citizens and find alternative solutions to social issues that trigger discontent and lead to a tense social and political environment,” the professors say.

Albanian authorities have undertaken a series of rather tough reforms in the electricity, water supply sectors and fighting tax evasion in the past five years, in nationwide campaigns often criticized for targeting the poorest and leading to massive departures from the country, especially in ungrounded asylum-seeking to Germany and France.

“Developing countries are in general characterized by unfavorable social environments. The overall pessimism is also related to the level of corruption, lack of freedom to act," say Malaj and Shahini.

The latest UN happiness report rated Albania as one of Europe’s least happy countries for 2018, ranking 112 out of 156 surveyed countries globally.

 

Reasons for coming back

Greater opportunities for a career, estimated higher net benefits, globalism and patriotism are cited as reasons that Albanian migrants could consider in settling back home.

"Pursuing a career abroad is not easy and the difficulty can increase because there has been an increase in nationalists and populists who put fight against migrants at the center of their campaigns," experts say.

Net benefits for Albanian migrants to EU countries are also considered low because of much higher housing and living costs which in Albania are at half of the EU average.

Globalism, which has eased self-employment opportunities through IT skills and internet access from everywhere around the world, is also seen as an advantage.

"Developing economies are becoming more and more dynamic, adapting to the international market. Many of the leading global companies have opened their units in developing countries and offering incentives to global companies is a very good way to attract them and offer competitive jobs for youngsters at their home countries," say Malaj and Shahini.

Patriotism is also a pull factor in case migrants lead much better lives and have more opportunities and a brighter future abroad.

"Patriotism is a factor that is taken into account because when migrants have a successful career, higher net income and promotion opportunities under a system of meritocracy, they prefer to turn back home,” they add.

 

A key long-term threat 

Few weeks ago, the International Monetary Fund warned Albania needs stronger and more determined efforts to make current slowly recovering growth more inclusive by improving business climate and strengthening rule of law in order to reduce the appeal of emigration among the country’s residents.

The IMF says the vigorous implementation of judicial sector reform, the enforcement of the rule of law and the anti-corruption strategy, clearer property rights facilitating credit growth and FDI attraction,  improving the quality of health care and education and closing infrastructure gaps with regional peers are key to promoting faster and more inclusive growth, stronger regional integration and blunt the appeal of emigration.

In particular, improving the quality of healthcare and education is described as critical for curtailing the deepening shortage of skilled labor in Albania, a country’s which already has one of world’s top per capita migration rates and where polls shows one out of two would consider leaving the country if they were given the opportunity.

While ungrounded asylum-seeking has curbed in the past couple of years following a surge during 2014-2016, more and more have turned to learning German and legally move to Europe’s leading economy, in a phenomenon that has not spared skilled professionals such as doctors and nurses leaving the country.

International financial institutions have also warned shrinking populations, such as in Albania’s case, pose a formidable fiscal challenge, placing public finances under pressure on increased spending on pensions and health, reduce economic growth and make it more difficult to reduce public debt as a share of GDP.

Albania’s public debt is currently at 70 percent, in a high level for a developing economy, which a declining population could make it more expensive due to national debt being carried on fewer shoulders.

With birth rates having hit a historic low and the population rapidly growing older due to drastic changes in lifestyle and massive migration following the collapse of the hardline communist regime in the early 1990s, the Albanian government has unveiled a social reform encouraging Albanian parents to have more children through a sharp hike in baby bonuses.

Once the country with the highest fertility rate under communism, Albania has seen its average number of children per woman drop to 1.78, down from 3 in 1990 just before the transition to a multi-party system and a record 6 in the early 1960s, which has contributed to the population shrink and ageing.

The latest 2011 census showed Albania’s resident population dropped by 8 percent to 2.8 million people compared to a decade earlier due to lower fertility rates and high immigration.

A decline is also expected in next year's population census that Albania is going to conduct following a wave of ungrounded and illegal asylum-seeking and ongoing legal migration during the past decade.

Prospects for the next few decades are grim as in much of the Western Balkan region, where population is expected to undergo sharp declines.

 

Grim Diaspora prospects

Only one out of five Albanian PhDs holders living and working abroad say they would be willing to return and contribute to the country’s development through know-how gained in top North American and European universities, according to survey.

A recent UNDP-commissioned research study examining the brain drain situation in Albania, ranked among top countries for tertiary-educated emigrants globally, shows a grim situation about the prospects of the Albanian scientific diaspora returning home at a time when Albania continues losing qualified workers in an ongoing upward trend during the past quarter of a century of the country’s transition to democracy and a market economy.

“Our survey data show that 17.1 percent of Albanian PhDs ‘would like to return’ to Albania, 49.7 percent say they ‘have not decided yet,’ and 33.2 percent say they ‘will not return.’ A breakdown of answers from the group that would like to return shows that this desire is higher among PhD candidates (20%) than it is among those already with a PhD (15%),” says the UNDP study.

Yet, more than half of those who wished to return pushed back the return for at least five years, long enough to assess the development of the social and economic conditions at home and progress made in the research system.

Asked about the conditions that should be in place in order for them to return, the majority of PhD respondents looked for greater economic and political stability, reduced levels of corruption at home, higher job security and social security, better public order and infrastructure, a clean environment and a rich social and cultural life.

Back in late 2016, a major summit on Albania’s large diaspora was held with much fanfare in Tirana, discussing a series of issues on the topic, including how to engage Albanian intellectuals abroad in the country’s economic development.

However, two years on, there have been sporadic cases of successful Albanians abroad returning home and what’s worse a rising number of Albanians, including professionals like doctors and nurses have been leaving the country in search of better alternatives such as Europe’s leading economy, Germany, the destination of dozens of thousands of Albanians seeking ungrounded asylum in the past few years.

 
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                    [post_content] => TIRANA, Dec. 6 - The European Commission says it has granted €94 million to support Albania in the European integration process. The programme focuses on core issues for EU accession, such as rule of law, economic development and environmental protection, says the EU Delegation to Albania.

The financial support comes as the country hopes to launch long-awaited accession talks next year after a decision was delayed earlier this year, pending further progress on rule of law and the judiciary reform that the country is implementing.

EU Ambassador to Albania Luigi Soreca described the financial support as “concrete support for continuing action on strengthening rule of law, but also helping economic and social development for the benefit of all people."

“EU funds will focus on strengthening the rule of law and fighting corruption by continuing the EU support to the implementation of the justice reform. The programme will also help Albania to improve the efficiency and effectiveness of the law enforcement authorities in fighting organized crime and drug trafficking. It will complement these actions with investments in the socio-economic development of the affected areas,” says the EU Delegation in a statement.

“Recognizing the great potential of tourism for the economic growth in Albania, the EU funds will also contribute to the preservation of the cultural heritage and the promotion of high quality and sustainable tourism,” it adds.

The European Union has committed a total of €650 million in financial assistance under the Instrument for Pre-Accession Assistance II from 2014 to 2020, but Albania’s absorption capacities remain poor.
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                    [post_date] => 2018-12-05 17:43:55
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                    [post_content] => TIRANA, Dec. 5 – Albania is trying to give a permanent solution to the long-standing issue of unclear property titles through legal changes which it says will bring an end to the chaos of property ownership in the country during the past quarter of a century of transition.

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

Legal changes already submitted to Parliament by the ruling Socialists envisage the merge of three property institutions into a single Cadastral Agency that will handle real estate registration, legalization and state-run property affairs under easier procedures expected to provide a solution for more than half of the country’s immovable property with ownership problems, in a situation that has severe consequences for the property owners themselves, but also the country’s business climate.

Artan Lame, the head of Albania's Agency for Legalization, ALUIZNI, that has been legalizing dozens of thousands of illegal buildings during the past decade, says legal changes will turn property ownership into an element of development by providing a solution to 2.5 million immovable properties with ownership problems.

"New legislation closes once and for all the ownership process in Albania by turning property into a development element that is no longer transferred as a gift from the government, but as a capitalist relationship like in every normal country of this system," Lame said this week, introducing the two bills at a parliamentary committee.

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

The situation is more problematic in agriculture, a key sector that employs almost half of the country’s population, but where only half of the land distributed on a per capita basis to some 438,000 households in the early 1990s has managed to get registered in a key barrier for the development of larger farms, access to credit and subsidies.

Albania had some 700,000 hectares of agricultural land in the early 1990s when communism collapsed, most of which was distributed under the controversial “7,501 law” portioning agriculture land on a per capita basis and not taking into account compensation of owners expropriated under the 1946 agrarian reform soon after the communists came to power.

Thousands of families in Albania were expropriated by the communists when they took power following the end of World War II and efforts of many post-communist governments to definitively resolve the property restitution and compensation issue have so far failed.

The unresolved property issue has had serious financial consequences as well as social effects in Albania. Not only it holds back foreign investments due to ownership disputes, but it has also resulted in an extra financial bill because of several rulings of the European Court of Human Rights in Strasbourg in favour of families who have been expropriated.

The ALUIZNI agency says it has already completed 165,000 legalizations of illegal buildings and expects to carry out another 60,000 in the next couple of years to complete a process that started in 2006 when the Agency for Legalization, Urbanization and Integration of Informal Areas and Buildings was set up.

The government expects the situation to be handed a final solution in ten years due to complicated issues related to mistakes and abuses in initial land distribution certificates in the early 1990s, lack of accurate maps leading to overlapping, field verification and the establishment of an electronic register.

 

Coastal area land registration

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

The proposed legal change follows a March 2018 government decision suspending the real estate registration process in coastal areas as part of a strategic investment law providing investors tax incentives and state-owned land in return for investment and job creation.

The bill is primarily intended to support investment in the tourism industry following legal changes, offering tax incentives for investment in luxury tourist accommodation units.

The main opposition Democratic Party has earlier condemned the suspension of coastal area land registration as violation of property rights to pave the way for investment without due compensation.

Due to long-standing property disputes, some major foreign investors have quit their Albania projects, while several local investors have opted to build resorts on development contracts rather than purchasing the land.

Currently, eight Albanian investors have been granted a strategic investor status to develop tourist resorts in central and southern Albanian coastal areas, some of which with disputed land ownership titles, under which they benefit state property in return for investment and job creation.

 

Property tax

Albania will start applying a value-based property tax next January after postponing it for ten months pending the establishment of a fiscal cadaster under which every building will have its real surface area and value.

The new tax applies a 0.05 percent rate on homes and 0.2 percent on business facilities under a new formula that is set to increase fees for downtown apartment owners almost two-fold especially in major cities, compared to current fixed rates depending on the size and location of the property.

When it comes to business owners, the new 0.2 percent property tax rate is not going to make much difference compared to current tariffs.

Albania’s 61 municipalities, which are going to collect the new fees either through the state-run water company or the OSHEE electricity distribution, can reduce or increase the rate by 30 percent.
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                    [post_content] => By Ervin Lisaku

[caption id="attachment_139538" align="alignright" width="300"]permet 2 Permet town[/caption]

TIRANA, Dec. 5 – Local homemade traditional products in Permet, a southern Albanian historic town, are well known throughout Albania, but as in much of the country face difficulty in penetrating markets due to being produced informally and lacking certification.

A town of some 10,000 residents, Permet, nicknamed the ‘City of flowers,’ is known for the Benja thermal springs, the iso-polyphony of late master Laver Bariu whose ‘kaba’ instrumental music has been placed under UNESCO protection as ‘a masterpiece of the oral and intangible heritage of humanity,’ and most recently as an emerging adventure travel destination for rafting along the Vjosa River canyons.

Two of the town’s characteristic products, gliko, a fruit compote, and raki, the traditional alcoholic drink of Albania, can now easier access local markets following investment in a local production facility known as an ‘incubator’ of typical Albanian products, the first of this kind in the country.

The incubator, a joint investment by the Albanian and Italian governments at a modest €140,000, is a novelty which Albanian authorities say will be extended nationwide to help small farmers access markets by preserving traditional production methods, but certifying them under market requirements to meet food safety standards.

“We will extend this model nationwide so that typical products certified by these incubators can easier access markets,” says Albania's Agriculture Minister Niko Peleshi.

The Permet business incubator is a facility with two production lines, one for the local raki, and the other to dry, cut and package local fruit and vegetables, in an investment that has also been supported by the Italian Development Cooperation, the Italian government's agency responsible for official development aid abroad.

Minister Peleshi says the business incubator model in Permet is an opportunity for artisan farmers and housewives to meet food safety standards and easily access markets to increase their household income.

"The Permet gliko and raki as well as other dishes are well known, but not everybody can easily find them on sale because many of these products are informal and lack standardization. They are excellent and so tasty, but cannot prove that to the National Food Authority," the agriculture minister said during the recent inauguration of the Permet business incubator.

A fruit compote, Gliko is a dessert offered to every guest in Permet, a town known for its hospitality in addition to natural and cultural heritage.

"The solution is this incubator, artisans can come here and use this incubator's equipment and have their products packaged, labelled and certified to easily sell them by increasing the quantity produced and marketing them better,” he adds.

The Permet incubator will be managed by a local association promoting traditional products.

Permet is also known for fine white wines, honey and dairy products and has been selected by an Albanian woman and her French husband as the site of an agribusiness farm, operational for the past couple of years, offering local organic food and accommodation.

The business incubator initiative comes as Albania has undertaken a campaign to brand its unique agriculture products to boost agritourism through the promotion of quality authentic Albanian products such as olive oil, mountain tea, medicinal and aromatic plants considered some of Albania’s rarest riches.

Korça apples and honey, Berat olive oil, Tropoja chestnuts, Saranda mandarins and northern Albanian medicinal plants as well as Fier region vegetables are already renowned products regionally, in addition to the local Raki, a clear liquor usually made from grapes which is the traditional alcoholic drink of Albanians. However, they lack international recognition and certification to penetrate EU markets.

Farm-to-table restaurants are also being offered tax incentives in a bid to boost the country's nascent agritourism sector.

Agriculture is a key sector to the Albanian economy, employing about half of the country’s GDP but producing only a fifth of the GDP, unveiling its low productivity which is hampered by the fragmentation of farm land into small plots and poor financing and technology employed.

 

Permet Gliko 

“Gliko is an important element of the local cuisine in Përmet and is made from many different fruits and vegetables, all grown locally by many of the valley’s small-scale farmers. ‘Walnut husk’ gliko, made from whole green walnuts, is the most common style and other popular variations include white cherry, eggplant, wild fig, plum and apricot,” says Italy-based Slow Food Foundation for Biodiversity.

“The production method, although differing depending on the type of gliko, involves the careful selection of the fruit, which is then left to soak for one hour and twenty minutes in a mix of cold water and lime so that it becomes firm and resistant. The fruit is then mixed with sugar and boiled in a traditional copper pot placed over an open flame, to cook for one hour. Lemon is added at intervals to maintain a bright color. When the fruit has absorbed the syrup the gliko is cooled and packaged in glass jars,” adds the foundation.

 

A historic town

Back in early 2017, the southern Albanian town of Permet was declared a historic center, paving the way to restoration projects in a bid to make it more attractive to tourists who are already discovering the town through rafting on the Vjosa River canyons.

Permet boasts characteristic buildings although transformed, arched front doors and centuries-old cypress trees.

There are two religious buildings within the historic center, the 1776 St. Premte church, a first-category cultural monument, and the 19th century St. Nicholas church. There are indications the cobbled streets and narrow paths date back to the early 19th century.

The Varrosh neighborhood houses, mostly two-storey ones, stand next to each other, with small front gardens surrounded by stone walls and wooden front doors.

The Permet district is known for its Benja thermal waters, the Hotova fir national park, the Trebeshinë – Dhëmbel – Nëmëreçkë mountain chain and the Kelcyra Gorge.

A town of some 12,000 residents, situated some 224 km south of Tirana, Permet has been inhabited for centuries, and is the hometown of the famous 19th century Frasheri brothers who had a key contribution to Albanian Renaissance movement ahead of the country’s declaration of independence in 1912 after almost five centuries under Ottoman rule.
                    [post_title] => Easier market access offered to first Albania homemade traditional products 
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                    [post_author] => 29
                    [post_date] => 2018-12-04 18:23:17
                    [post_date_gmt] => 2018-12-04 17:23:17
                    [post_content] => TIRANA, Dec. 4 – Albania’s exports are heading for double-digit growth rates for the second consecutive year, but uncertainties about euro’s free fall against the local currency, a hydro-dependent electricity sector and oil and mineral sales depending on fluctuating commodity prices could pose a threat to the country’s economic growth outlook.

Albania’s poorly diversified exports of goods grew by around 15 percent to 231.4 billion lek (€1.85 billion) in the first three quarters of this year to account for only half what the country imports, seemingly defying the negative effects that the sharp strengthening of Albanian’s national currency against Europe’s single currency has had for producers of two-thirds of Albania’s Eurozone destined exports by significantly curbing their profits.

However, data published by state-run statistical institute, INSTAT, shows more than half of exports growth during this year has been a result of the resumption of electricity exports as well as recovering commodity prices giving a boost to the country’s oil, mining and steel industry.

The contribution of the garment and footwear industry, the country’s traditional largest exporter, has been quite modest this year, with its exports struggling with a moderate 6 percent growth rate amid a hike in local producer costs due to Europe’s single currency trading at a decade low against the Albanian lek, having lost around 6 percent this year.

Employing about 100,000 people, the textile and shoe industry is one of the country’s top employers and strongly relies on cheap labor costs, being one of the hardest-hit from euro’s free fall in Albania during this year.

The low base effect also plays a key role in the double-digit export growth for the past couple of years as Albania’s exports contracted by 5 percent in 2015 following the mid-2014 slump in commodity prices and registered a mere 0.1 percent growth in 2016 before recovering by 12 percent in 2017.

 

Oil, electricity uncertainties

Export growth prospects for next year are less optimistic as Brent crude oil prices have embarked on a downward trend since early October 2018 and currently stand at an almost year-low in a blow for the country’s major oil industry where investment and production have been picking up following a standstill in 2016 and 2017 as prices hit a decade-low.

New Chinese investors of Bankers Petroleum, the former Canadian-owned largest oil producer in Albania, announced a hike in investment and a plan to drill dozens of new oil wells for 2019 as crude oil prices temporarily picked to hit a four-year high of about $80 a barrel last September, gradually recovering from a 12-year low of $30 a barrel in early 2016 after dropping from as high as $115 in mid-2014.

However, recent prospects of oil prices averaging at around the same levels of $70 a barrel for 2019 could reduce production and exports as a result.

By contrast, Albania’s oil industry could receive a major boost if prices pick up and global oil giant Shell, currently involved in some key promising exploration projects, decides to engage in production.

Albania oil exports, which make up about a fifth country’s poorly diversified exports, are low-value added as oil is mostly exported as crude and only a small amount is domestically refined.

With the country’s hydro-dependent domestic electricity relying on rainfall, the resumption of major electricity exports remains uncertain due to several months of little rainfall that could force the country to switch to costly electricity imports.

A prolonged drought forced Albania to import €200 million in electricity last year, but a favourable hydro-situation in the first half of this year generated around €60 million in revenue for state-run KESH power utility.

Albania’s exports are currently poorly diversified with three-quarters of them relying on ‘garment and footwear,’ ‘minerals, fuels and electricity’ and ‘construction materials and metals,’ exposing the country’s economy to industry-specific shocks such as the mid-2014 slump in commodity prices or weather-related conditions in the case of the hydro-dependent electricity.

The Albanian government expects exports of goods and services to grow by an average of 7.2 percent annually over 2019-2021 and contribute by 2.3 percentage points annually to the GDP growth, but a mere 0.1 percentage points when adjusted for the negative effect of huge imports.

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

 

Euro’s effect on new contracts

Europe’s single currency trading at a 10-year low against the Albanian lek has so far not had any significant impact on the country’s overwhelmingly Eurozone-destined exports which grew by an annual 15 percent in the first three quarters of this year, apparently defying a 10 percent depreciation of the euro against the Albanian lek, despite exporters complaining of huge losses.

However, the European Commission warns in a recent report that delayed negative exchange rate effects on the Albanian economy will likely appear next year when new investment decisions and contracts are made.

“The recent real appreciation of the Albanian currency weighs on price competitiveness and the export industries’ margins, but a negative effect on exports is likely to appear only in 2019 when new investment decisions and contracts will be made,” says the Commission.

“In 2019 and 2020, export growth is forecast to decelerate partly on account of the lagged appreciation effect, but mainly because of lower oil and electricity exports,” says the Commission.

The euro has been trading at a 5-month low of 124.5 lek in the past few weeks, in a new downward trend since mid-Sept. 2018 after stabilizing at 126 lek since early June when Albania’s central bank decided to apply its uncommon emergency intervention policy and purchase excess euro from the local currency exchange.

The main opposition Democrats and some local experts have blamed illegal euro inflows from drug and crime proceeds for the euro’s free fall in Albania.

London-based financial institution recently said some ‘unrecorded cross-border activities’ may also be contributing to the appreciation pressures on the Albanian lek which it says reflects the ongoing de-euroisation policy initiative of the central bank in the financial sector, as well as the capital conversion of some banks.
                    [post_title] => Euro’s free fall, energy uncertainties could hit Albania’s poorly diversified exports  
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            [post_date] => 2018-12-11 18:15:18
            [post_date_gmt] => 2018-12-11 17:15:18
            [post_content] => TIRANA, Dec. 11 - The ease at which a newly established Albanian company claimed two major public contracts, worth a total of €30 million, by falsifying links to a US-based parent company has unveiled the fragility of Albania’s public procurement system and non-transparent use of taxpayer money, leading to allegations of large-scale corruption which the ruling Socialists have downplayed with lack of security checks on the winning company.

DH Albania, a subsidiary of US-based Dunwell Haberman, easily won public tenders to build a section of Tirana's outer ring road for €18 million and an electricity transmission line north of Albania worth around €12 million in the past few months, in public tenders with virtually no competition at all. The Albanian unit falsely claimed it was part of a major US company with 20 years of experience allegedly registered in the state of Delaware in 1998, but later proved to have registered only in mid-2018.

Having registered with the Albanian National Business Center only in mid-July 2018, the company claimed two lucrative contracts cancelled in the past few days only following opposition and media allegations of a fake company registered in tax havens and after authorities in Delaware officially confirmed the status of Dunwell Haberman as a new company registered in June 2018.

In both tenders, the Albanian unit of the US-registered company legally represented by a 26-year old Albanian with no major business background, claimed both tenders by beating sole rivals that were disqualified for lacking documentation or financial security, after bidding almost exactly the same to the amount that the government expected the contracts to be carried out.

Reacting to the Dunwell Haberman scandal, Energy Minister Damian Gjiknuri said he had proposed legal changes making it compulsory to screen documentation submitted by winning bidders before a contract is signed in order to avoid similar future situations.

 

Tax haven issue

The company registered in Delaware, a tax haven in the US, also highlights the need for more attention and security checks for companies coming from offshore tax havens, which in Albania control several major concessions, leading to allegations of avoiding taxes and hiding their real owners.

Back in 2016, when the massive leak of the so-called Panama Papers scandal broke up, Albanian authorities unveiled an initiative for legal changes making the disclosure of shareholders in off-shore companies investing in Albania compulsory, but the initiative was later dropped.

Instead, Albania only recently adopted legal changes that make it compulsory for foreign investors to pay a capital gain tax of 15 percent in case of selling their Albania assets in a bid to avoid key transactions that bring nothing in income to the Albanian government.

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.

Finance Minister Arben Ahmetaj says the legal changes adopted as part of the 2019 fiscal package are aimed at preventing tax-free transactions such as that of the country’s largest oil producer, former Canadian-owned Bankers Petroleum which in mid-2016 was acquired by China’s Geo Jade for C$575 million (€390 mln) following a decade of operations in the country.

Back in 2016, nineteen individuals, six companies and two offshore entities linked to Albania were disclosed in a searchable database that strips away secrecy of hundreds of thousands of offshore entities globally as part of a massive leak of the so-called Panama Papers.

The database published by the International Consortium of Investigative Journalists showed there were three Albanian individuals among the disclosed investors including Ismail Mulleti, who earlier in 2016 was disclosed by Israeli media as behind Global Fluids International, Albania’s fuel marking concessionaire, co-owned with Israeli businessman Assaf Halkin.

 

Highly perceived corruption

Public procurement has traditionally been one of the key concerns for local and foreign investors complaining of corruption and tailor-made criteria favoring specific companies with alleged links to ruling majorities.

Allegations have in the past few years increased as the government has been pursuing an ambitious €1 billion public-private partnership program to upgrade road, health, education and waste management infrastructure with PPP winners emerging out of unsolicited proposals favoring Albanian-owned companies that proposed the projects through bonuses that made them eventual winners in tenders with little competition.

Surveys show public procurement continues to remain one of the main doing business concerns due to perceived limited competition and discriminatory criteria although the country has been offering e-procurement procedures for about a decade now in a bid to reduce corruption and increase transparency.

In the latest Balkan Barometer survey, some Albanian companies cited tailor-made criteria for certain participants and deals before the tender is even published for not participating in public tenders.

An earlier survey by London-based European Bank for Reconstruction and Development has shown about 40 percent of Albanian households and businesses believe political connections are the key to factor behind success.

Earlier this year, a report by the European Court of Auditors, the EU’s independent external auditor, showed About a third of all public procurement in Albania is carried out using the little transparent and limited competition negotiated procedure, making Albania the top Western Balkan country that overuses this procedure.

Some 4,790 public procurement contracts worth 83.5 billion lek (€670 mln) were signed in 2017, when public tenders were suspended for about four months prior and after the June 25 general elections,  down 4.4 percent compared to 2016, representing about 6 percent of the country’s GDP, according to a report by the Public Procurement Agency.
            [post_title] => Offshore tax haven has €30 mln Albania projects cancelled over cheating authorities  
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