Editorial: Thorough investigation needed on Xhafaj affair

Editorial: Thorough investigation needed on Xhafaj affair

The case of Agron Xhafaj, brother of Interior Minister Fatmir Xhafaj, has led to renewed conflict in Albania’s political scene. But, perhaps more importantly, it has raised questions among Albanians that require better answers than what the public has received

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Albania-Grece relations in the context of Albania’s EU integration: gap between reality and perception

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By Alba Çela Albania-Grece relations in the context of Albania’s EU integration process: gap between reality and perception Abstract: Most of Albanian citizens asked in a national poll in 2013 about whether Greece would like to see Albania in the

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                    [post_content] => The case of Agron Xhafaj, brother of Interior Minister Fatmir Xhafaj, has led to renewed conflict in Albania’s political scene. But, perhaps more importantly, it has raised questions among Albanians that require better answers than what the public has received so far.  

Agron Xhafaj is now said to have gone to Italy to serve a prison sentence issued back in 2002 for drug trafficking. Albania’s opposition says his brother, Fatmir Xhafaj, first as a powerful Socialist lawmaker and then as minister of interior shielded him for years. 

Fatmir Xhafaj has denied the charges and said his brother was at the wrong time at the wrong place, and he had not been involved in anything illegal in more than a decade. And, regardless, according to the minister and Prime Minister Edi Rama, the brother has his own life and should not harm the political career of the minister of interior. 

However, an investigation performed by a journalist and then handed to the opposition for making it public has brought forward a series of pressing questions. According to a wiretap done by cooperator, the minister’s brother allegedly continued his criminal activity in drug trafficking until very recently. Based on the wiretap, the opposition alleges that the brother has strong influence in the criminal underworld of Vlora, Albania’s second largest port city and one with a long history of powerful organized crime networks. 

The opposition accuses the minister of in effect granting his brother immunity, not only through not sending him earlier to Italy to serve the sentence -- but also by allowing him to continue his criminal activity in a protected environment. These accusations have been called “nonsense” by the minister.  And the reactions to the accusations from the government have been that they believe the wiretap is fake. The prime minister says he has checked it with an unnamed expert organization and he believes it is not real, but has refused to divulge more details. However, he agrees a proper, thorough and independent investigation should now take place to determine the wiretap findings.  

The brother’s choice to go and surrender to Italian authorities also raises questions whether he did so to escape Albanian authorities, and the conflict of interest with the brother leading the Ministry of Interior. 

This is the second controversy in a few months involving a Socialist interior minister so questions abound: What kind of state is this and based on what standards? These questions are even more pressing as Albania hopes to open membership negotiations with the European Union. The EU is first a family of strong states and second a family of democratic states.

Rama says the DP has invented the scandal to hurt Albania’s chances of opening EU membership negotiations, while the Democrats say they want negotiations to open precisely so there can be more supervision and pressure on Albania’s government when dealing with cases such as this. 

Ultimately, all can agree that the Albanian public and its friends abroad need thoroughly-investigated answers on this case. That’s a good place to start. 

 
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                    [post_content] => [caption id="attachment_137271" align="alignright" width="300"]AIIS conference on “Re-examining Albania-Greece relations: challenges of the present, prospects for the future” held in Tirana in March 2018. Photo: AIIS AIIS conference on “Re-examining Albania-Greece relations: challenges of the present, prospects for the future” held in Tirana in March 2018. Photo: AIIS[/caption]

By Alba Çela

Albania-Grece relations in the context of Albania’s EU integration process: gap between reality and perception 

Abstract:

Most of Albanian citizens asked in a national poll in 2013 about whether Greece would like to see Albania in the European Union answered no[1], an answer that might sound expected in the context of the difficult relationships but that actually sounds perplexing when compared to the past track record of relevant developments. This belief that Greece is out there to become an obstacle to Albania’s integration path is unfortunately present in segments of the population. Yet it sharply contrast to the real performance of the Greek state and representatives when it comes to Albania’s integration. Whereas it remains true that Greek politicians from time to time mention integration when complaining about the handling of some issues in Albania, Greece has not done any significant step to halter integration so far. Greece has never vetoed any significant milestone in Albania’s European path compared to let’s say other countries such as the Netherlands did when it came to granting Albania candidate status. On the contrary Greece, just like Italy and Austria, is one of the engaged supporters of Albania’s European path. This paper tries to analyze this gap between perception and reality and offer a rationale for efforts to improve communication related to this particular issue. 

Keywords: Albania-Greece relations, EU integration, bilateral disputes, communication challenges  

  Introduction

European integration is a complex and rich process that has the potential not only to transform countries internally but also to significantly improve the relations between neighbors sharing a tough history fraught with misunderstandings and even enmity. The European Union’s appeal stands first and foremost in its being a project of and for peace. When it comes to the process of European integration of the Balkan countries, the Union has been clear and determined to outline the condition that countries need to have normalized relations before membership. The solution of bilateral issues for example is one of the key components that has harnessed attention and effort during these years. [2] The solution of bilateral disputes is an unnegotiable condition that stems not only from the values of good neighborhood which are at the core of the EU, but also from the EU’s previous bitter experience with cases such as Cyprus.

Unfortunately countries have become veto-powers and obstacles when it comes to the progress of European integration and have continued their conflictual rhetoric even after becoming members such as the cases of Croatia and Slovenia show. The most obvious example is that of Greece vetoing any further steps of the European integration of the Former Republic of Macedonia based on the name issue.

The fear that something similar can happen to Albania is quite present in Albanians discourse, shadowing the real relationship that has existed these years between the two countries when it comes to EU integration.

The risk is alarming. The European integration process is not only a national aspiration with no political alternative in Albania. It is the process by which all important reforms are vested with legitimacy, assistance and are monitored. The EU conditionality pushes forward the transformation of the country. All delays and obstacles in this process are simultaneously delays in the overall progress achieved in the transformation of the country.

However the record has shown that Greece has had a different attitude towards Albania, at elats until recently. It has supported the reforms and shown considerable backing for Albania’s integration milestones in the past such as status issue or even visa liberalization.

As Albania approaches a hopeful time for the possibility of opening negotiations, with a positive appraisal from European actors[3] upon the solution of its recent political crisis and the regular held elections, the issue of guaranteeing the support of its neighbors becomes a primary importance item. In the first address to the Albanian Assembly, Prime Minister Rama said that the only country with which Albania had ‘issues’ was Greece and that he was determined to seek a collaborative relation while upholding Albania’s rights.

These declarations come at a time when the press is pushing hard once again the possibility of Athens blocking the integration path upon unresolved issues, including a recent one concerning properties in Himara. This context brings forward once again the persisting contrast between the fiery rhetoric of both countries when it comes to their relationship and the European integration framework and the previous experience of sustaining constructive assistance in the process of accession.

Brief history 

Despite many political problems, confrontations and unfortunate events, Greece has been a crucial partner in Albania’s transition. One need to remember the impact of hundreds of thousands of Albanian citizens who found an economic viability and then build a life in the southern neighbor, providing precious remittances to their parents; the important economic investments and assistance provided by the southern neighbor and most pertinently its continuous political and international support when it comes to both NATO and European integration processes.

More specifically during the decision making times in the Union regarding Albania, Greece has consistently fallen in the supporting camp.

Of course the complexity of relations between Albania and Greece has been often reflected in the EU integration developments. For instance right wing MPs in the European Parliament regularly debate and challenge the progress reports and relevant positive resolutions on Albania on grounds that they don’t reflect the problems of the Greek minority here or even worse raising issue about ‘Greater Albania’ aspirations. [4] However these claims are usually not getting in the way of real developments since they are clarified and dismissed by EU actors.

Furthermore recently there have been some promising attempts to address the outstanding issues in a more formal and constructive manner, the most recent one being the Bushati-Kotsias package which has been highly praised by Commissioner Hahn. However even in this case the debate has brought up sensitive claims on the Greek side that the Commissioner wrongfully addressed the Cham issue, which remains unrecognized by Greece. [5]

Political context and electoral rounds greatly influence the serenity of the relations and therefore the integration narrative as well. In the last elections round in Albania, the perception was that the political establishment was siding with the rhetoric of the PDIU, the political party in Albania most at odds with Greece since they represent the Cham community in the country. This was coupled with a decreasing frequency of high level meetings and   generally tepid bilateral relations.

More recently integration is coming up repeatedly in the complaints from the Greek side, as a potential negotiating chip further exacerbating existing perception and fears that Greece could indeed bloc Albania’s future in the EU.

Perceptions

There is a widely held perception among Albanians than when push comes to shove, Greece will block Albania’s entry to the European Union. This perception is comfortably nested within some other myths often perpetuated by the media or irresponsible politicians.  Quite a significant number of Albanians also mention Greece to be a threat to the security of Albania,[6] despite the fact that both countries have signed a Treaty of Friendship and most importantly that they are NATO members.

In general the perceptions of Albanian regarding Greece and relations with Greece reveal a very mixed picture. The results of a public poll in 2013 show that “45 percent of the citizens believe that these relations are normal. 22 percent believe they are in a bad shape and a small group of 5 percent say that they are in a very bad shape. Similarly 27 percent believe the relations are in a good or even very good divided respectively between 21 and 6 percent. Albanians seem to believe that governments of Albania and Greece enjoy a better relationship with each other than do the respective people of each state. While 52 percent of Albanians believe relations between Greek and Albanian government are normal only 42 percent say the same about the relations between Greeks and Albanians themselves.”[7]

When it comes specifically to the perspective of Albania’s integration within the European Union, the Albanian public opinion is fragmented and generally skeptical about Greek support. Hence when asked if their fellow citizens in Greece would support the European integration of Albania, Albanian themselves seem divided in almost there equal parts between those who believe in the Greek support, those who are afraid of a negative relation and those who don’t know. With a very small advantage of 37 percent Albanians are hopeful that Greek citizens would support Albanian E integration while 34 percent believe that Greek citizens do not support this aspiration of Albania. 30 percent is the group that does not have a clear opinion on this matter. Even grimmer seems to be the perception of whether the Greek government has been to help to Albania in its effort of European integration. In this case a majority of citizens , 46 percent, believe that this has not been in the case while 35 percent believe that the Greek government has helped. 18 percent do not know the answer.[8]

The difference in the perceptions about the role of citizens and government is particularly odd. Whereas skepticism and even dislike among the Greek population regarding Albania might be existing and might increase after specific incidents, the Greek government has had to surpass that in sustaining Albania’s effort to join the EU.

For a comparative perspective, an opinion poll undertaken in Greece has revealed that “About half of the Greek public opinion views current relations with Albania as neither good nor bad, while one third consider them as good.” When it comes specifically to questions about integration, “six out of ten (58%) [believe] that the Greek government has assisted Albania in its EU accession process. 32% of respondents believe that Greeks do not want Albania to become a member of the EU, while 56% disagree with that statement.”[9] It is interesting to note in the last result that the majority of Greeks seem to be of a positive attitude towards Albania’s European perspective.

Media role

Of course these perceptions are flamed by occasional media coverage of declarations of Greek politicians as well. For example in the case of the debacle about some properties of Greek minority citizens in the city Himara frequently generate strong statements. This is not the only time. European standards that have to be respected are brought up when it comes to complaints about Greek minority, properties of the Orthodox Church, Greek soldiers’ cemeteries on Albanian territory, etc.

There is no doubt that the long list of unresolved issues and long held misunderstandings puts this relationship in a far from perfect position. However the media articles also do not provide the right contextualization and use titles that sound more sensational than the coverage would warrant.

A previous study of the Albanian Institute for International Studies (AIIS), has shown that the percentage of articles and coverage with negative and quasi negative connotation in Albanian press when it comes to Greece and Greek-Albanian relations is double that of positive articles. The study also points to few positive stories while exposing some stories such as the infamous ‘Kareli case’ which poisoned relations in the public opinion for a long time. [10]

One example is the case of the declarations at the end of last year, of former Minister of Foreign Affairs of Greece, Nikos Kotzias about Greece not being generous with the vote pro opening of negotiations for Albania.[11] The most used title in this case was ‘Greece will block the European integration of Albania’, suggesting absolute certainty and not possibility.  In fact the full statement regards the necessity of Albania fulfilling the 5 conditions posed, monitored and evaluated by the institutions of the European Union and therefore it’s factually correct. Naturally the connotation given in the statement by highlighting the respect for minorities is not encouraging but the statement does not convey at all a certainty that a decision to block has been taken.

On the other side, many Greek politicians have not hesitated to come forward with strong support declarations in the time when the decision to grant Albania the official EU candidate status was being deliberated. Just before the meeting of the EU Council of Ministers, where the decision about granting Albania the EU candidate status was eventually postponed, the Geek ambassador to Tirana, Leonidas Rokanas, emphasized Greece’s firm support for Albanian’s EU integration. This statement was followed recently by another one that was made this time by the Greek Deputy Prime Minister and Minister for Foreign Affairs, Evangelos Venizelos, who reaffirmed Greece support and stated that “Albania should get the candidate status in June”.[12]

 

Not taking things for granted 

Through the timeline of Albania’s integration process, Greece has not been an obstacle or a delaying factor, on the contrary, it has been a de facto supporter. The gap that exists between the specific perceptions about its stance on Albania’s integration and the performance so far is a direct result of heated political declarations, faulty media coverage and lack of communication between other important social actors.

That said there are of course no guarantees that things will not go south. The rhetoric in the last months, mirrored by a media frenzy has been mostly negative. Integration is coming up again and again as a keyword for addressing how relations can become worse, instead of improving. The last declarations of President Pavlopoulos, that Albania does not seem to have a European perspective since it is infringing upon minority rights are an alarm bell since he is not considered an extreme voice. [13]

The risk that Greece can use its voice and decision making power to impede Albania’s goals or even veto its milestones is a real possibility. Indeed the most recent political class in Greece has been less patient and more aggressive with its rhetoric. Whereas in the past, Albanian politicians could count on matured and familiar political actors such as those from PASOK or New democracy, the relative new players are definitely more challenging. In this context the need for better communication becomes even more pertinent.

Communication challenges should be seen and targeted by a strategic approach that goes beyond the occasional friendly meetings, lunches and so on. The latter often do more to confuse the public than to reassure it that dialogue is on the way to resolve outstanding issues. The contrast between the way these symbolic milestones are presented (with outmost enthusiasm) and the subsequent or even parallel messages that come from the neighbors.

Improving communication both at the political and public level requires a long term investment also on key actors such as media which has been missing entirely. While there are several attempts of organizing regional exchanges with reporters and editors, or even bilateral from Albania and Serbia, the experience has not been replicated in the case of Albania and Greece.

Conclusions 

It is not just symbolic that the most public commitment taken by the Union to this region regarding its European future has been during the famous Thessaloniki Summit, albeit many years ago. The Stabilization and Association Agreement was signed with Albania in June 2006 and entered into force in April 2009. Albania became an official candidate country in 2014 and the next step is the opening of negotiations. The road has been long and will continue to be arduous. Albania largely benefits from having the support of Greece in this process and should be committed to preserving and deepening this support.

On the other side, the European future of Albania is also a desirable goal for Greece. A northern neighbor which is safe and stable, integrated in the Union and further developed represents a positive outcome for Greece, its politicians, investors and citizens.

The mutual support becomes even more necessary in a context where the internal developments in the EU itself have seen the enthusiasm and commitment to the enlargement policy weaken substantially and there is now a clear split between skeptical countries and countries that have been pushers of integration. Albania recently secured the public support from Italy to open negotiations[14] and should it get the same support from Greece it would send an unmistakably positive signal to European institutions to go forward with this step.

Both sides can and should do more to improve the official and public discourse when it comes to their collaboration in the context of European integration, this also includes an effort to refrain from emotional short term responses to occurring events in order to safeguard long term achievements  on both sides. The primary responsibility rests with the political class which needs only to keep in mind the long term mutual benefits of the process and use that framework when dealing with specific issues.

Media in Albania and Greece should be provided with information and opportunities to further explore the positive aspects of partnership in this regard rather than focus on sensational events that create misperceptions.  One illustrative example is the Cross Border Program between Albania and Greece financed by IPA funds, which best portrays the potential of European integration to assist the border regions and strengthen bilateral bonds. Successful project examples and their socio-economic or environmental impact need to have more highlight and presence alongside the inescapable political coverage.[15] Similarly there is a recent project that assist the Parliament of Albania to fine tune its role in the process of European integration, assisted specifically by the counterparts in Italy and Greece. [16]

Finally civil society on both sides has taken important steps to improve the communication and have genuine discussions even on difficult matters. CSOs should keep up the work done in the aspect of bilateral relations and therefore needs financial and technical assistance to continue increasing dialogue, awareness and collaboration between different social groups.

European integration should be the key positive realm of improving, developing and sophisticating bilateral relations between Albania and Greece. Unless the level of maturity in political and other forms of communication increases significantly we all risk to lose out on this enormous potential.

[1] “Albanian Greek relations from the eyes of the Albanian public – perceptions 2013”, A. Cela; S. Lleshaj http://library.fes.de/pdf-files/bueros/albanien/10896.pdf

[2] “Joint Declaration Adopted by Western Balkans Foreign Ministers in Vienna – Countries Will Not Obstruct Neighbours’ Progress in EU Integrations”, http://balkanfund.org/2015/08/joint-declaration-adopted-by-western-balkans-governments-representatives-in-vienna-countries-will-not-obstruct-neighbours-progress-in-eu-integrations/ Accessed on August 29, 2017.

[3] http://top-channel.tv/lajme/artikull.php?id=363977#k1

[4] http://top-channel.tv/lajme/english/artikull.php?id=13663&ref=ml#.WcN149VL-M8

[5] http://www.balkaninsight.com/en/article/eu-commissioner-caught-in-between-albania-greece-hot-topic-09-29-2016

[6] “Albanian Greek relations from the eyes of the Albanian public – perceptions 2013”, A. Cela; S. Lleshaj http://library.fes.de/pdf-files/bueros/albanien/10896.pdf , pg 31.

 

[7] “Albanian Greek relations from the eyes of the Albanian public – perceptions 2013”, pg 19, http://library.fes.de/pdf-files/bueros/albanien/10896.pdf .

[8] “Albanian Greek relations from the eyes of the Albanian public – perceptions 2013”, pg 36-37.

[9] All results of the poll undertaken in Grece in 2013 are available at “he Greek Public Opinion towards Albania and the Albanians Social attitudes and perceptions “, Ioannis Armaklosas, ELIAMEP http://www.eliamep.gr/wp-content/uploads/2013/12/The-Greek-public-opinon-towards-Albania-Final-report-Dec-2013.pdf. Cited numbers are in page 8.

[10] “Greece and the Albanian-Greek relations in the Albanian printed media 2014”, pages 10-11,  http://library.fes.de/pdf-files/bueros/albanien/11319.pdf

[11] Media coverage examples with titles saying Greece will block the European integration of Albania:

[12] Tirana Times, (2013). Albanian-Greek relations: Beyond the status quo. Tirana Times. (2014). Greece to support Albania’s EU integration process. www.tiranatimes.com

[13]“ Greek president uses harsh voice, conditions integration”, Ora News 8 September 2017  http://www.oranews.tv/vendi/presidenti-grek-ashperson-tonet-ndaj-shqiperise-kushtezon-integrimin/

[14] Tirana Times: “Gentilioni promises support for opening of the EU talks “ http://www.tiranatimes.com/?p=134135    (Prime Minister Rama official visit to Italy)  13 October 2017

[15] Recommendations also form the research study on Albanian media also pinpoint the fact that more articles of economic and social nature are needed to change perceptions on both sides. “Greece and the Albanian-Greek relations in the Albanian printed media 2014”, pages 10-11,  http://library.fes.de/pdf-files/bueros/albanien/11319.pdf

[16] https://ec.europa.eu/neighbourhood-enlargement/sites/near/files/pdf/albania/ipa/2015/20160126-eu-integration-facility.pdf
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                    [post_date] => 2018-05-25 07:10:17
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                    [post_content] => By Robert Butler* 

The recent occurrence of the violent reactions to the payment of tolls for the A1 motorway in northern Albania brings to the forefront the whole question of who should pay for road transport infrastructure; the provision of new roads, their management, operations and maintenance.

In the past all forms of transport infrastructure was predominantly built, owned, and operated by government institutions and departments. None of them more so than road networks. Roads have always been the original form of communication and as such their development and usage has been assumed as an indubitable right of the public with no direct costs or payments. The provision and use of roads traditionally assumed to be a public service obligation that was the responsibility of governments for all their citizens.

Other forms of transport, civil aviation, maritime and rail have however, increasingly become recognised as transport for which ‘the user pays’, with commercial air and ferry services leading the way towards the privatisation of infrastructure provision, management, and operations. Correspondingly, the management and commercial operations of the supporting infrastructure of airport and port facilities has increasingly passed over to the ownership of private sector commercial companies. The case in many countries with developed economies.

Even rail services are becoming progressively commercialised and private operators more prevalent in the provision of dynamic services, initially on commercial rail transport but also for passenger traffic. Generally, for the moment at least, rail infrastructure has been leased from government but the cost of rail tickets sold by the private rail transport companies also contains charges for track and station use.

Although In the past two decades in the transport subsectors of civil aviation, maritime, and to a certain extent rail, have required the user to pay in some form for the management and operations of the supporting transport infrastructure,[1] the road sector is the last subsector in transport to move towards the ‘user pays’ concept. Given the international trend however, it is inevitable that in future road users will pay directly for road use. Payments possibly based on amount of use. Albania cannot be an exception. New high speed efficient road infrastructure has to be paid for by the users, either in the form of tolls or indirectly in the form of road funds or vignettes[2].

The concession on the A1 motorway in the north of the country may have been a step in the right direction as this section of the road network will demand very serious maintenance and upkeep expenditures in the coming years and the traditional government department approach will not be appropriate for such a modern and sophisticated road link. It is therefore arguably only fair that those who make use of this particular road facility, either commercially or for private and social reasons, should pay some direct contribution for the use of the link.

Many motorways throughout the world, with their provision of fast, direct travel and time savings, are tolled. Many of them however are increasingly built through private financing, not government, with the original constructor retaining the responsibility of maintenance under a concession arrangement. In such cases, where the builder is also the investor, the constructor has a legal right to make a profitable return on his investment over a given period of time. This return on investment and risk is generally achieved through tolling. The concessionaire undertaking the public service obligations of government and being paid for this service provision in differing arrangements, on a commercial basis, part by the direct toll receipts and part by government subsidies.

During this time however, the concessionaire/developer also accepts full responsibility under the concession agreement for maintaining the facility at an agreed level of service; the level of service to be agreed with government as the client, agreed on behalf of the travelling public to levels that support safe and reliable travel.

In the case of the A1 motorway to Kosovo it was always known that the low traffic volumes would probably never make a tolling system a self-sufficient system of financing on this link, it would always require some form of additional financing from government, the concession being based on a single road model, i.e. just the motorway.

Single road concessions however have to retain certain characteristics to make them viable as a concession; namely higher than average usage and traffic volumes. The A1 motorway to Kosovo does not approach these financially viable traffic volumes when calculated annually. This situation will not change in the foreseeable future.

 

Possible alternative road sector concession arrangements better suited to Albania

In past studies in the country alternative forms of commercialised maintenance were considered a better option for the road networks of Albania. Successive governments were developing new roads as international transport routes and these were being constructed to the latest design and construction standards in line with international models. The study specialists were of the opinion therefore that the traditional maintenance service provision, as supplied by the General Roads Department[3], was not appropriate to fulfil the needs required from the new modern highways being built or existing roads that were being improved; the recently completed 1500 kms of rural roads is subject to a non-standardised maintenance approach and unknown management future. Modern road networks demand the application of sophisticated business systems to maintain them safely, the traditional maintenance approaches in the country were considered to be non-responsive to the needs of such networks.

Although the original GRD is now the Albanian Road Authority, the modus operandi of the department has not ostensibly changed, the authority still retains a public-sector approach to road management. Business systems and market driven innovations for better quality outcomes are not the core qualities of the authority. Going forward the authority has to see itself solely as a client-based organisation and no longer the service provider.

As with much infrastructure, whether transport related or not, the modern trend is for build operate and transfer under commercially viable business management models. A significant amount of modern town centre infrastructure in developed cities is maintained on behalf of the owner by the original constructor. The logic is self-evident, the builder knows the building and its peculiarities and special considerations better than anyone else. It is also considered a value-added approach to the provision and management of quality i.e. if the constructor is to take on the additional risks associated with maintenance of the facility over a given lengthy period, he will take extra care with the quality of construction of that facility at the time of construction, wishing to avoid the risk of costly and untimely and un-envisaged repairs or interventions at his own cost under his maintenance contract. It is generally acknowledged that this same principle applies to new roads.

The best models emerging world-wide for road management therefore are aimed at harnessing the inherent knowledge and experience of the road construction industry, contractor and knowledge-based companies, for the maintenance of the built facility. Modern roads and bridge stocks require the most modern approaches; a combination of innovative solutions and business management systems that are cost-effective. Only market driven enterprises can supply such business-like outcomes. Managing modern road networks is a business activity.

In the case of the A1 motorway to Kosovo however, the investor was the Albanian government; the road was built under contract by international contractors and the constructor did not have a long-term maintenance contract.

The newly released maintenance concession therefore is based on a clear commitment to operate and maintain a facility that has been financed and built ‘by others’. The risks of any inadequacies of quality are therefore transferred to the maintenance concessionaire. It can be assumed that the concessionaire would have a clear understanding concerning the ‘as built’ condition of the road and therefore the envisaged maintenance interventions and the risks associated with his projected financial planning and programming. The concessionaires setting of the toll tariffs for the road link would have to have include risk mitigation elements in the tolling targets and forecasts. And may to a certain extent point to the setting of higher than expected tolls, as it occurred. The concessionaire will have calculated the corresponding returns that would result as a result of different toll pricing scenarios to fund the needs of different levels of maintenance interventions.

The whole toll tariff pricing process would be based on varying levels of financial risk and this is something that both government and the concessionaire have to calculate. The government invariably having to provide some assurances for subsidising any shortfalls in available finance for maintenance in the case where the traffic volumes do not generate the required funding. The Government’s wish to keep their contribution to a minimum may also have influenced the toll pricing for the A1 to be fixed on the higher side; the higher the acceptable toll, acceptable to the road user that is, the less is the subsidy that the government budget has to contribute.

Concessions let on single road links, unless the roads concerned have significant average traffic volumes, when calculated over an annual period, are usually not the best concession option for the road owner. In such circumstances the government concerned may have to commit themselves to significant levels of subsidisation to make up the shortfall that is calculated as necessary to fulfil both the required level of service (to provide the public service obligation) and the agreed profitable returns for the concessionaire to take responsibility for the risks. The concession has to be profitable in order for concessionaire to undertake the considerable risks involved.

The alternative approach proposed during a capacity building project in the Ministry of Transport circa 2007 was for the use of a Management Agency Contract (MAC) form of concession. This is a more modern and holistic type of concession that is best suited to the case where a supporting feeder network that was historically provided by government, is gradually declining in service level due to the lack of applied investment strategies. Investment strategies that could benefit through the use of commercial business management processes and systems. The management of constrained budgets by traditional road departments lack policies that support innovation and asset management strategies to optimise available funding. Only the application of commercial business models can provide value for money in the management of the built environment.

The MAC type of concession involves the government letting the concessionaire manage and operate all the roads within a region or agreed area. The government correspondingly aggregating all the maintenance budgets that it provides for this complete network and making this aggregated funding available for the maintenance concession.

The MAC contractor takes responsibility not only for delivering an agreed service level of maintenance across the whole network but also undertakes the added responsibility for modelling and forecasting the future annual programmes of period maintenance interventions and minor improvements. Something that it can be argued is not carried out at the present time. The improvements to include the identification of improvements to safety as the concessionaire is also responsible for improvements associated with road safety programmes.

The programmes of continuous improvements provide an inbuilt profitability to help offset any losses or lack of financial returns from routine maintenance, helping the MAC to provide a full set of maintenance provisions.

The MAC model is increasingly becoming the model of choice by governments that require a guaranteed level of service across the complete public road network for their constituents and enables the policy makers to highlight the measurable improvements in road network provisions that the government provides.

The same consultant that recommended the MAC, made a recommendation to divide the country into three separate road network zones and consider letting three separate MAC concessions, one for each zone.

Whilst the government of the day accepted the recommendation of the consultant for dividing the country into 3 zones – they were created - the concessions that were contracted out only took in some of the network in each of the zones. This has limited the effectiveness of modelling of the overall network in terms of obtaining value for money from the overall road maintenance budgets that are available; benefits on all roads, local and national.

This part adoption of the recommendations, made a decade ago, left significant budgets available for road maintenance outside of a transparent system of road sector business management. A regularised and accountable system that could provide creditable returns for all road users no matter which class of road they used most or was beneficial to them. It could also, as this article mentions above, balance out the need for unacceptable toll levels on single road links.

 

The advantages of the MAC form of concession;

- The government obtains a given level of service across the whole network that is contract guaranteed;

- The concessionaire is customer focussed, the level of service confirmed in customer satisfaction surveys;

- The profit margins for the concessionaire are network based and do not depend from a profit for a single road;

- Network management through concession uses the latest models in order to be competitive and market based;

- The concession provides a programme of continual improvements for the road user that is market driven;

- The concession agreement provides for public consultation between concessionaire and local communities;

- The customer feels an integral part of the concession arrangement with his views reflected in outcomes;

- The Government can deliver their public service obligations without the overheads of larger public departments;

- The system is cost effective as it reduces the wastages in funding that are associated with government services;

- The whole programme is transparent as the concessionaire has to publish the annual network programme;

- Government overheads and direct involvement and commitments are reduced to a minimum.

 

The MAC form of contract, if applied to the northern region of the three regions that the government have adopted, would mean that through considerations on the profitability of the whole northern MAC economies of scale could underpin the costs of maintaining the motorway. The concession could evaluate and apply the lowest of profit margins on the motorway when balancing the returns on this road link against the overall business model and profitability of the complete MAC network.

A non-optimal profit target on the motorway link, when placed inside the whole profitability of the MAC, could still provide the required profit to set against the risks of the concessionaire, but importantly, for the Government, it would allow significant flexibility when agreeing to and setting the toll charges on the motorway.

Perhaps allowing the setting of what could almost be a ‘token toll’ with a break-even scenario. It could be significantly lower than the original toll that caused the upset for road users.

 

Going forward

There is a need to get the concessions in the road sector right, future BOT investors will be put off by a vision of toll booths in Albania being set on fire and destroyed. They will stay away and the country’s development aspirations will be set back. Viable road networks provide major contributions to any country’s development.

Additionally, the public will have to accept that the ‘user pays’ concept will inevitably have to come to the road sector as it has to the civil aviation and the maritime sector.

This correspondent does not believe that the government have considered enough the options that were presented for the road sector when concessions were just entering the diction of government policy. A re-visit to more suitably and internationally favoured models for road network management and operations is necessary. The experience of others can be adopted directly without the need for the present road administration to set out on a programme of ‘experimentation’ under the existing management status quo. Experimenting with the reduced budgets that are available is not an option given the less than best results from the past and current administrative set up; i.e. non-sustainable outcomes when external technical assistance is withdrawn. The ultimate loser has been and continues to be, the road user.

The use of MAC contracts across the whole network as the concession option, one applied separately in each of the three zones originally recommended and accepted by government, should be seriously re-considered as the most suitable model for a small country like Albania.

This concession option can be accomplished through concessions awarded to local contractors and without the need, initially at least, to majorly increase road maintenance budgets or use outside funding or loans. The aggregated road maintenance budgets available through the various funding mechanisms for roads, are sufficient to hold the serious deterioration of road asset values if they are placed in a transparent and accountable system. Concessions are always subject to publication and scrutiny in the public interest and transparent accountability. Where there are considered loopholes, these can be soon highlighted.

There is a general opinion in the profession that over the past two decades the overall performance of road maintenance budgets has been far less than optimal under the public-sector administration systems that exist; approaches and structure that have been bought forward from the past. The delay in real reform is hurting the country and its economic development, poorly maintained roads are a considerable hurdle to development.

The days of big government road departments are a thing of the past[4]; they cannot compete in a market-based environment and in many countries with developed economies have been re-structured as small, client-based units. Traditional road sector departments are too inefficient and expensive in terms of productivity and are not capable of introducing competitive environments as ‘the service provider’. In advanced countries the roles and responsibilities of previous road department is constrained to that of service manager. All road products and services being provided by commercial companies that utilise financially efficient business management systems.

Maintaining the status quo of the traditional public-sector service provider road department in Albania, as it exists at the present time, is not in tune with the leading European models; the existing departments carry too much historical baggage, with too many approaches that are not only not fit for purpose and as long as they remain they are facilitating a very visual and increasing deterioration of roads and road asset values across all classes of road. Many such examples are now very apparent to the road user both at national and local level.

The main problem in the road sector does not revolve around the setting of the correct tolls on the A1 motorway, the systemic problem is the lack of much needed and overdue major reforms of the whole sector.

The country will be a contributor to the overall European road network and European standards of both management and operations are therefore required as part of this transition.

The current overall depleted condition of the national and local road networks, especially the newly constructed roads and highways that have been built over the past 10-15 years, reflects the non-responsiveness of the current administrative setup for the management of the sector.

It is not question of ‘why’ were the toll booths on the A1 motorway trashed that should be debated in the press and televised media, the problem runs much deeper. The debate should be asking what model of road administration is best suited to Albania’s development needs and to provide efficient and effective use of available human, technical and financial resources and turn road round the current deteriorating condition of the network?

Adopting modern commercial and technically advanced international road management models, as continually recommended by the government’s lending partners, will again prove to be unsustainable and ineffective if government policy and the country’s road sector institutions are not re-orientated and restructured respectively.

 

*Road Maintenance Engineer

 

[1] Included within the cost of an airline or ferry ticket are taxes or charges for the airport or port services.

[2] Vignette is a form of road pricing imposed on vehicles, usually in addition to the compulsory road tax, based on a period of time instead of road tolls that are based on distance travelled. Vignettes are currently used in several European countries.

[3] Now the Albanian Road Authority (ARA)

[4] A generally accepted yardstick for modern public-sector management staff levels is 1 or 2 staff per 100 kms of road in the network.
                    [post_title] => Concessions in road sector management and operations – A contrasting view
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                    [post_content] => TIRANA, May 24 – The controversial waste-to-energy incinerators that Albania is building under public private partnerships risk the livelihoods of local farmers, increase waste management costs and run counter to EU principles that promote recycling, says the Voice of America in the local Albanian service in an in-depth article examining Albania’s waste incineration projects.

A farmer in the village of Verri in the southwestern region of Fier, where a waste-to-energy incinerator is being built only about 1 km from his tomato and melon farm, says the incinerator will destroy his greenhouse investment producing about 100 metric tons a year and force him back to migration.

“I don't want to leave, but under the circumstances of lack of information, violence used and failure to have justice delivered in this country I am forced to," Leonard Janji, a 38-year-old farmer is quoted as saying.

Local village residents have been staging protests for more than a year against the incinerator's construction, uncertain about the impact it will have on their livelihoods and claim the public hearings that the concessionaire held were a farce.

The Fier incinerator project was displaced in Verri following strong opposition and protests by residents in Mbrostar and Plyk villages.

The Fier waste-to-energy plant is a 3.66 billion lek (€28.8 mln) investment that will be built and operated under a 6-year PPP with a capacity of 200 metric tons of waste a day that is also expected to produce electricity from the burning of waste through an incinerator.

The plant will be operated by Integrated Technology Waste Treatment Fier, an Albanian joint venture which was the sole bidder in a tender held in 2016.

Albania introduced waste-to-energy plants in late 2014 when the government made a U-turn from its EU-aligned national strategy that considers disposal and incineration the least preferred waste management options.

The country has already built its first waste-to-energy plant in Elbasan, central Albania and has signed concession contracts backed by the central government to build two new such plants in Tirana and Fier, despite environmental concerns by local residents and environmentalists worried over the new plants and their incinerators increasing dangerous pollution in the country.

The Elbasan waste-to-energy plant, already operational since April 2017, was also built under a 7-year concession contract with an Italian company.

The Albanian government has also concluded contract negotiations with a Netherlands-based company that has been awarded a 30-year concession to build a waste-to-energy plant in Tirana in return for investment of €128 million.

The Tirana Municipality will be forced to guarantee payment for a minimum amount of 550 metric tons of waste a day, taking annual Tirana taxpayer support to the project to €5.8 million and a total of Euro 174 million at the end of the 30-year contract.

Documents obtained by VoA show the winners of those concessions include a network of small companies in partnership with each other as well as offshore tax haven companies with unknown shareholders.

Albania's main opposition Democratic Party has accused Klodian Zoto, an Albanian businessman with stakes in the Elbasan and Fier incinerators, as linked to the government, claims which government has dismissed.

Prime Minister Edi Rama has described such waste-to-energy plants as a perfect solution to the long-standing issue of waste management in the country.

 

Environmental, high cost concerns

In addition to question marks over their ownership, the incinerator projects have also raised concerns over the sharp increase in costs on waste treatment in Albania as well as their environmental impact.

Environmentalists and economists say the incinerators will produce too much pollution for Albania and cost taxpayers dearly.

"An incinerator burning 1 million metric ton of waste for 30 years means huge pollution for a small country such as Albania," environmentalist Lavdosh Feruni is quoted as saying.

“This U-turn is in the best base naive decision-making and in the worst case massive corruption," he adds.

Economy expert Zef Preçi is also worried over increased costs and the unsolicited proposals Albania applies offering concessionaires bonuses ahead of the tenders.

"There's deviation from the landfill approach and an increase in costs by four to five times through the waste processing and burning. There is a strange selection through the method of unsolicited proposals which in reality secures larger profits for companies," says Preçi, the head of the Albanian Center for Economic Research.

The European Commission, which last April recommended the opening of accession negotiations with Albania pending a green light next June by the European Council, has also been critical of Albania's waste incineration projects.

"Economic instruments to promote recycling and prevent waste generation remain limited. The construction of an incinerator in Elbasan which started to operate last year and plans for further investment in incinerators pose concerns in terms of compliance with EU principles since disposal and incineration are the least preferred waste management options," says the European Commission.

The VoA says taxpayer support to the Elbasan and Fier incinerators has already amounted to €21.8 million and is expected to further increase with the more costly Tirana waste-to-energy plant.

Earlier this year, business associations warned the waste recycling industry in the country is on the brink of bankruptcy claiming state inspectors revoked licences to local companies operating in Tirana to pave the way for the upcoming waste-to-energy plant that will use incinerators to burn waste and produce electricity.

Waste management has been a chronic issue in Albania in the past two decades, with widespread burning and dumping having negative effects on human health, the environment and the rapidly growing tourism industry.

Three quarters of Albania’s municipal waste is landfilled, about 17 percent is recycled, 3 percent is incinerated and 1.2 percent is still dumped, according to 2016 data by state statistical institute, INSTAT.
                    [post_title] => ‘Shady’ incinerators raise environmental, increased waste management cost concerns
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                    [post_content] => TIRANA, May 22 - Albania's natural population growth registered negative growth in the first quarter of this year as the number of deaths slightly exceeded births in a dramatic but warned situation that takes place for the first time in nine decades since Albania established a civil registry in the late 1920s.

The country’s deaths outnumbered births by 285 in the first quarter of this year as the birth rate dropped by an annual 18 percent to hit a record low of 5,670, according to data published by INSTAT, the country’s state-run statistical institute. If the downward trend continues for the remaining three quarters of the year, 2018 would mark the first year on record that Albania’s natural population growth turns negative.

The decline in Albania’s birth rate is a result of cultural changes in the typical Albanian household during the past quarter of a century of the country’s transition to democracy and a market economy, lower marriages and fertility rates and high migration rates which in the past few years transformed into asylum-seeking in wealthy EU member states.

Due to massive migration and a sharp decline in fertility rates, natural population growth has been even more dramatic as it dropped from about 60,000 in the early 1990s to less than 9,000 in 2017.

The high number of asylum seekers in the past four years, the ongoing legal migration and a sharp decline in birth rates have sparked concerns over a rapidly shrinking population with negative impacts for the country’s developing economy of 2.8 million residents, already suffering one of the world’s highest per capita migration with 1.5 million Albanians living and working abroad.

 

Why Albanians massively migrate

Experts says Albanians are mostly leaving the country because of economic reasons, looking to escape poverty in their homes but also to integrate into leading European economies and take advantage of better education, health and social protection infrastructure for their families.

Social affairs expert Kosta Barjaba says it’s youngsters and the poor who mostly migrate.

“Today, the influx of Albanian migrants is composed of economic migrants, family members who migrate for reunification, students and the so-called ‘economic asylum-seekers’ who constitute a masked form of economic migrants,” says Barjaba.

“The poor are more prone to migrate. The poor and the jobless see migration as a solution. The middle class migrates not only as a solution but also as a choice. That is mainly related to pull factors such as ambitions to have a better job, a more decent and quality life and more opportunities for their children in Western host countries,” he adds.

According to Barjaba, Albania's demography is not expected to dramatically change in the next few years as the migration influx moderates and the rate of return for successful migrants increases.

“Nobody can deny that Albanians continue to migrate because they are unhappy with their country, they are unhappy with the government and their living standards. The numbers should worry us because we continue remaining on the natural limits of migratory potential. The most concerning thing is that the migratory influx is twice higher compared to the natural population growth,” says Barjaba.

Meanwhile, Kastriot Sulka, another social affairs expert, says Albania’s migration also takes place because of lack of hope which is reflected on the big number of asylum-seekers with Albanians often competing with migrants escaping war-torn countries.

“The most common thing is that labor forces move because of wage gap and extra advantages they have in certain societies which have social protection, education and health more developed,” says Sulka.

GDP per capita in Albania and other EU aspirant Western Balkan countries is estimated at only a third of the EU average at a time when consumer prices are at only a third below the EU-28 average, according to Eurostat, the EU’s statistical office.

“There is also migration because of the qualification and opportunities certain societies and countries offer to develop or reward individual investment such as the case of doctors and nurses. Their migration has now become a concern for the society due to their high costs incurred during their qualification period and problems they create with shortage of service in certain areas of the country,” adds Sulka.

According to him, Albania’s typical migrants mostly include people aged up to 30 years old who after consuming their efforts in the internal market, try to earn a living for their families abroad, not only by looking for a job but also seeking asylum and quite often ranking on top.

The pension system, which has been reformed in the past few years by gradually increasing retirement age for women is also at risk due to the low number of social security contributors.

“What adds to the concern is the very high levels of migration in the past few years which has made the situation even more tragic as we are dealing with the departure of those who contribute or constitute potential for social security contributions at a time when the number of beneficiaries is increasing due to higher life expectancy,” says Sulka.

 

Sharp decline in birth rates

In 1929, when Albania established its first civil registry, the number of births was over 30,000 while in the 80s the country had over 60,000 births a year. Data shows that in 1990, just before the collapse of the communist regime, the number of births reached to 82,000 and dropped to about 31,000 last year.

Experts says the sharp decline in birth rates and high levels of migration are expected to have multiple consequences to the country’s demography, economy and society in the future decades.

In its latest World Population Prospects, the United Nations Population Division expects Albania's current 2.8 million resident population to drop to below 1 million by 2100 under a pessimistic scenario that more than halves population numbers for regional Western Balkan countries not attractive to migrants.

The World Bank has warned the recent fertility decline in Albania has been dramatic and rapid. “For example, the shift from an average fertility rate of over five children per woman to below the population replacement rate took two centuries in France but only 34 years in Albania,” the World Bank says in its Golden Ageing report.

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 International Monetary Fund says shrinking populations pose a formidable fiscal challenge, placing public finances of countries 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.

The Albanian economy grew between 1 to 3 percent annually in the past nine years, compared to a pre-crisis decade of 6 percent annually, the growth rate estimated to bring tangible welfare to Albanian households, considering the current stage of the country’s economic development.

However, public debt remains at 70 percent of the GDP, a high level for the country’s stage of development, with high debt servicing curbing much-needed public investment.

An estimated 1.5 million Albanians already live abroad, 1 million of whom in neighboring Italy and Greece. Their contribution to the Albanian economy in terms of remittances and investment has sharply waned in the past decade due to recession in their host countries and because of creating their own families and often taking their parents with them.

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

 

Asylum exodus 

More than 146,000 Albanians, about 5 percent of the country’s resident population, have sought international protection in EU member countries in the past five years with their number peaking at 66,000 in 2015 and dropping to 22,000 in 2017.

However, only few thousands, about 5 percent of them, have been granted international protection and a considerable number have come back either voluntarily or after being deported.

Europe’s largest economy, Germany has been the main destination for Albanian asylum-seekers.

With only few applicants managing to get asylum, more and more Albanians have turned to studying German language in the past couple of years, joining a Western Balkan trend of preparing to integrate into the German labor market and escaping high unemployment and low-income jobs in their home countries.

Repatriated asylum-seekers are also among the German language students in Albania’s main cities as they plan to move to Germany legally through employment contracts.

Doctors and nurses are also among those who have left the country, leaving many hospitals with a shortage of experts.

Obvious reasons for Albanian citizens leaving their home country include high unemployment, small income which in some cases is lower than the social benefits as asylum seekers in Germany, lack of trust in state institutions perceived as corrupt and inefficient, real or perceived lack of job perspectives and unrealistic expectations compared to income in Western European countries, primarily Germany, according to a study conducted Tirana-based Cooperation and Development Institute.

Data published by state-run statistical institute, INSTAT, shows some 40,000 Albanians left Albania in 2017 and 25,000 permanently moved to the country, leading to a gap of about 15,000 people.

Prime Minister Edi Rama has described migration as a normal phenomenon also affecting EU member countries such as Poland, Croatia but also southern Italy, which in Albania’s case is reflected on asylum-seeking due to the country not being an EU member yet and not enjoying free flow of workers.

However, some experts have attributed the high level of migration from Albania to the tough rule of law reforms the country has undertaken in the past five years, especially with electricity and tax evasion, often targeting the poorest.

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. Prospects are pessimistic as the population is expected to undergo another decline in the next few decades.
                    [post_title] => Albania’s natural population growth turns negative for the first time in almost a century
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                    [post_date] => 2018-05-21 12:58:57
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                    [post_content] => TIRANA, May 21 – Albania’s domestic oil production hit a 6-year low in 2017 despite international oil prices considerably recovering following the mid-2014 slump, but yet remaining at about half of their peak 2011-13 levels in a situation that has slowed down new drilling and investment.

Data published by state-run Albpetrol oil company shows Albania produced 956,000 metric tons of crude oil in 2017, down about 10 percent compared to 2016 and about 30 percent less compared to the peak 2014 production of 1.36 million metric tons just before oil prices embarked on a downward trend.

Canada-based Bankers Petroleum, the country’s largest oil producer which in mid-2016 was fully acquired by a Chinese consortium, accounted for the overwhelming majority of 90 percent of total domestic production.

Earlier this year, the company won an arbitration battle with the Albanian government which was ordered to pay back the country's largest producer $57 million (€48 mln) over a tax dispute dating back to 2011.

The company is now exporting most of its crude oil production after the late 2017 suspension of operations of a local oil refiner that went bankrupt leaving more than 1,000 oil workers jobless. Last year, the Chinese-run largest oil producer in the country sold up to two-thirds of its production to the local refiner.

Bankers Petroleum operates the Patos-Marinza, one of Europe’s largest onshore heavy oilfields under a 25-year concession deal with the Albanian government which expires in 2029.

The company, which in Sept. 2016 was acquired China’s Geo Jade for  C$575 million (€392 mln) from Canadian investors, has considerably curbed oil production and delayed new drilling following the mid-2014 slump in international oil prices.

Bankers Petroleum posted losses of about 5.7 billion lek (€45 million) in 2016 as oil prices hit a 12-year low of an average of $43.55 a barrel, a situation that paralyzed new drilling, according to financial reports submitted with Albania's National Business Center.

Meanwhile, state-run Albpetrol oil company which currently runs only 5 percent of oil wells, almost doubled its production to 93,000 metric tons in 2017, up from 51,000 metric tons in 2016. The increased production came as three oil fields were taken back under state control following failed deals with private concessionaires.

Last March, the energy ministry said it was offering the Gorisht-Kocul, the Cakran-Mollaj and the Amonica oilfields, all located in the region of Vlora, southern Albania, but the call apparently received no interest from potential investors.

Domestic refining also registered a strong recovery last year.

The local refiner produced 156,000 metric tons of fuel from locally extracted crude oil in the first eleven months of 2017 before it went bankrupt in December 2017.

The domestic refining industry has recently been partially reactivated by a Switzerland-based company following a four-month halt that led to a surge in oil imports.

Due to the poor quality of domestically produced oil that needs heavy refining, Bankers Petroleum usually sells crude oil at about a third below Brent prices.

 

Prospects improve 

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

UK-based BMI Research, a unit of Fitch, expects Albania's crude oil production to drop from an estimated 19,000 barrels of oil per day in 2017 to 17,100 by 2021 in a forecast that does not take into consideration results of new drilling by Shell oil giant in southern Albania and whether it will engage in production.

Crude oil Brent prices have currently recovered to about $79 a barrel, up from a 12-year low of $30 a barrel in early 2016, but yet stand almost a third below the peak level of more than $110 in mid-2014 just before the slump.

Domestic oil production peaked in 2014 just before the mid-year slump in international prices when the Bankers Petroleum-led domestic production hit a 35-year high of 1.36 million metric tons.

Albania’s highest oil production dates back to 1974 when the then-communist country produced 2.25 million metric tons equal to about 38,408 barrels of oil per day in an industry that involved 34 state-run enterprises and employed about 25,000 people.

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.

The oil industry produces Albania’s second largest exports and employs more than 3,000 people, but what the Albanian government gets from exports is only a 10 percent royalty tax as no company currently pays the controversial 50 percent tax rate, which under current contracts, concessionaires start paying once they meet investment costs.

In its new contract with British-Dutch multinational Shell the government says Albania will be able to earn a portion from the first oil production in addition to the mining royalty when the oil giant engages in production.

The new production sharing contract that Albania signed with Shell earlier this year extends the British-Dutch multinational’s operations in the country, currently at an exploration stage, to three blocks.

Shell’s oil exploration in Block 4 will be carried out in three stages over the next seven years with investment of $42.5 million. In case of oil discovery, the development/production contract will be for 25 years with an option of renewal, says the energy ministry.

The oil giant has included Albania on its map of more than a century of key discoveries thanks to its early 2013 Shpirag 2 well discovery in excess of 800 million of oil and flowing at rates of 800 to 1,300 barrels of oil per day.

The oil and mining industry was the fourth largest FDI recipient at the end of 2017, with the investment stock at about €875 million, accounting for 13 percent of the total FDI stock of €6.5 billion, according to Albania’s central bank.

 
                    [post_title] => Albania’s oil production hits 6-year low as prices slowly recover from mid-2014 slump
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                    [post_content] => Optimism for anything happening fast on Albania’s bid to join the European Union has long evaporated, but even for the few remaining optimists that hoped to get a date on the decade-long horizon at a key summit in Sofia this week were disappointed. 

Touted as a way to refocus EU’s attention on the Western Balkans, the summit showed instead that the EU itself remains divided on how it sees enlargement and the region. 

This time the problem was not Brussels itself. The EU’s bureaucrats have gotten the message that if nothing is done to show the Western Balkans some actual light at the end of the tunnel, the bloc risks losing the region to instability, autocrats and meddling actors on the continent’s periphery and outside it. However, key member states like France, Germany and the Netherlands -- perhaps reflecting the feelings of their societies -- seemed to want to push the breaks rather than the accelerator on the EU membership bids of Albania and other states in the region. Others, like Spain, are projecting their own internal problems to the international stage by being as harsh on Kosovo as Serbia and Russia. 

Back to Albania’s issues, there is no logic in not opening negotiation in June, as the EU’s executive has recommended the move, and Albania has done enough reforms to warrant the opening of negotiations. 

Even Albania’s warring main political parties agree on this one thing: that opening negotiations should happen and that it will be good for the country. 

Of course, the reasoning differs. Prime Minister Edi Rama has tried to reflect legitimate opposition concerns about corruption and organized crime as mud slinging that helps those who want to stop Albania’s EU bid. Opposition leader Lulzim Basha of the Democratic Party, on the other hand, says the negotiations need to open so there can be stronger light on the government’s ills and change things for the better. 

In fact, Albania’s political class in general knows that it has failed to meet the expectations of the Albanian people in terms of the joining the EU, which an overwhelming majority of Albanians support. Much blame is placed on Brussels, Berlin or Paris, perhaps righteously so, but there is a fair amount to be shared among Albanian political elites as well. If they had done their jobs better, perhaps the country would be wealthy and modern in enough to be attractive rather than scary for EU member states. At the end of the day, local ownership is the only way forward. The EU owes the region nothing. Change should and must come from within first and foremost. 

Sadly, the new normal for Western Balkans in general is that what was once believed to be a process that would move at constant pace forward is now a process that can freeze for years and even move backwards. While the words of EU’s commitment to having the Western Balkans as member states have not changed in 15 years from Thessaloniki to Sofia, a broken record does not make for nice music to the ears of the region’s people. 

 
                    [post_title] => Editorial: New uncertainties hit Albania’s EU bid
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                    [post_date] => 2018-05-17 12:03:11
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                    [post_content] => Vienna tableTIRANA, May 17 - No Western Balkan country, including frontrunners Montenegro and Serbia, will be able to meet EU accession criteria before 2030, according to a study by the Vienna Institute for International Studies.

The study published ahead of this week's EU-Western Balkans summit in Sofia shows that bridging the governance gap between Western Balkan countries and EU members within 8 years by 2025 as the European Commission targets is unrealistic and specific countries such as ethnically divided Bosnia and Herzegovina could need up to 23 years to reach the level of governance required to join the EU.

"The new 2025 target for Western Balkan EU accession represents a highly ambitious best-case scenario, which could serve as a powerful incentive for countries in the region to speed up their reform agendas. We do not completely rule out at least Montenegro and Serbia joining the bloc by 2025 or shortly thereafter," says the Vienna Institute, one of the top centers for research in Central, East and Southeast Europe.

The Vienna Institute (wiiw) says the governance deficit in the Western Balkans is big, at about a third below the levels of Bulgaria and Romania as well as Croatia when they joined in 2007 and 2013 and that based on current trends meeting the EU accession criteria by 2025 looks very ambitious even for frontrunners Montenegro and Serbia, which are already holding accession talks.

The wiiw baseline scenario sees Montenegro reaching the level of governance required to join the EU in around 12 years, followed by Serbia in 13 years, Albania in 15 years, Kosovo in around 18 years, Macedonia in 21 years and Bosnia and Herzegovina in 23 years.

In a second wiiw ‘democratisation jump’ scenario, Montenegro could reach the respective governance levels of Bulgaria, Romania and Croatia upon their accession in just three years. The others would still need around 10-13 years, Bosnia even 17.

An EU candidate since mid-2014, Albania is hoping to launch accession talks next June pending a decision by EU leaders at the European Council after a positive recommendation by the European Commission, the EU’s executive arm, but some big powers remain skeptical and the final say is uncertain.

Macedonia, whose accession talks have also been held back by a name dispute with Greece, is also hopeful of launching negotiations next June while ethnically divided Bosnia and Herzegovina as well as Kosovo, whose independence is still not recognized by five EU member states, still remain potential EU candidates.

The Vienna Institute says the six Western Balkan countries must tackle their governance and infrastructure deficits, as well as expanding their industrial bases, in order to drive sustained economic convergence and meet EU economic accession criteria.

Commenting on possible threats from outside actors such as Russia, Turkey and China, Vienna Institute experts says concerns for the potential of these countries to seriously compete with the EU for influence in the Western Balkans have grown louder in recent years, but at least in an economic sense "sees these concerns as being often overplayed” at a time when the EU remains the main trading partner and investor in all regional countries.

"While the economic influence of third parties in the region is not as significant as often portrayed, this is not guaranteed to last, particularly in the case of China, which is set to increase its economic presence in the Western Balkans in the coming years through its Belt and Road Initiative ," says the Vienna Institute.

“The Belt and Road Initiative will help with much-needed infrastructure upgrading in the Western Balkans, but also creates several potential risks which should be closely monitored,” wiiw says, worried over possible unsustanaible debt burden for some countries borrowing from China, concerns about growing corruption, greater dependency and political influence from China and infrastructure development likely undertaken by Chinese contractors, suppliers and workers, reducing economic benefits for the region.

Political conflicts, governance and infrastructure deficits and a poor industrial base are rated as the main barriers facing the six Western Balkan countries on the road to EU accession.

"The region must upgrade and expand its industrial base. Manufacturing accounts for a small share of GDP in much of the region, which is a barrier to productivity growth, innovation, employment and the expansion of the services sector," says the report.

Other barriers on the road to the region's EU accession include less enthusiasm for accession in Western Europe, potential interference by third parties, and conflicts between Western Balkan states and current EU members.

"We are cautiously optimistic about a solution to the Greece-Macedonia name dispute, but the Spanish position on Kosovo, for example, looks like a major obstacle," says the Vienna Institute.

In its new Spring forecast, the Vienna Institute expects the Albanian economy to grow by about 4 percent annually over the next three years, following a 9-year-high of 3.8 percent in 2017, in a growth agenda that is expected to be driven by consumption, large infrastructure projects and tourism.

The Vienna Institute’s forecasts are almost in line with the Albanian government’s optimistic scenario of growth picking up to 4.2 percent in 2018 and gradually accelerate by 0.1 percentage points each year to reach 4.5 percent by 2021 when its second consecutive term of office expires.

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 six Western Balkan countries as a whole are expected to grow by about 3.2 percent annually from 2018 to 2020, a rate which the World Bank has predicted could take the region up to six decades to catch up with the average EU income.

 
                    [post_title] => Vienna Institute: No Western Balkan country is ready to join EU before 2030
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                    [post_date] => 2018-05-16 17:53:02
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                    [post_content] => [caption id="attachment_137142" align="alignright" width="300"]Finance Minister Arben Ahmetaj Finance Minister Arben Ahmetaj[/caption]

TIRANA, May 16 – The Albanian government has unveiled a package of tax incentives for 2019 when Albania will be holding its upcoming local elections and the ruling Socialists eye to preserve the ruling of the country’s big local government units.

Finance Minister Arben Ahmetaj says Albanian businesses will benefit lower corporate income tax as well lower value added tax rates on agritourism and exemptions from 20 percent VAT on imports of equipment to build solar power plants.

The legal changes are expected to be approved next June but enter into force before next January, six months ahead of Albania’s next local elections in 61 municipalities, the largest 36 of which are run by Socialist Party mayors. The remaining municipalities are run by the main opposition Democratic Party and their new allies, the Socialist Movement for Integration, who served as kingmakers from 2009 to 2017 ruling both with the Democrats and the Socialists.

Finance minister Arben Ahmetaj says some 10,000 businesses, currently paying a 15 percent corporate income tax will be taxed by 5 percent on their profits following the increase in the annual turnover threshold.

Small businesses with an annual turnover of up to 5 million lek (€39,000) are currently stripped of the profit tax. Businesses will an annual turnover between 5 million lek to 8 million lek (€62,000) pay a fixed 5 percent profit tax while companies with a higher turnover pay a 15 percent corporate income tax.

The new government plan is to apply a 5 percent corporate income tax on businesses with an annual turnover of between 8 million lek to 14 million lek (€110,000), something which minister Ahmetaj says would benefit half of the 21,000 big businesses currently paying a 15 percent corporate income tax, one of the highest among Western Balkan countries.

The initiative is aimed at reducing tax evasion among businesses who often report lower than real turnover to pay less in taxes, Prime Minister Edi Rama has earlier said.

Albania has some 160,000 businesses, 90 percent of which small family-run ones employing up to four people.

The new incentive which favors medium-sized companies currently paying a 15 percent corporate income rate, comes after the tax burden on some 10,000 small businesses nationwide has sharply increased after their inclusion in the VAT system last April.

Legal changes reducing the annual turnover threshold on VAT inclusion to 2 million lek (about €15,000), down from a previous 5 million lek (€39,000) were met with nationwide protests last April with some 10,000 affected traders voicing concerns over massive bankruptcies at a time when small businesses are already facing tough times amid tighter competition by supermarket chains and shopping centers already in the 20 percent VAT system.

The high tax burden making Albania less competitive compared to other regional countries applying 10 percent flat tax rates is one of the top concerns for foreign and local businesses operating in the country.

Since 2014, the corporate income tax and the withholding tax on dividends, rents and capital gains have increased by 5 percent to 15 percent, making the tax burden in the country one of the region’s highest.

Other tax incentives that the Albanian government will offer for 2019 include the exemption of imported machinery and equipment intended for solar energy production from the 20 percent VAT in a bid to diversify domestic electricity generation.

Albania’s domestic electricity production is currently wholly hydro-dependent, making it vulnerable to adverse weather conditions such as last year’s prolonged drought that cost the country €200 million in electricity imports.

Agricultural cooperatives, currently in their early stages due to massive fragmentation of agricultural land and still notorious from the communist regime, will also be offered a 5 percent corporate income tax.

Currently, there are only a few dozen agricultural cooperatives operating in Albania, a small number for a sector that holds huge potential by employing about half of the country's population and generating a fifth of the GDP.

Last April, agricultural cooperatives were stripped of 20 percent value added tax in a move that is expected to give a boost to a key sector of Albania’s economy suffering high levels of tax evasion, extreme farm land fragmentation and poor productivity.

The Konispol area, in southernmost Albania just off the UNESCO World Heritage site of Butrint, is a perfect example of successful farmers’ cooperatives in citrus cultivation.

The emerging agritourism sector is also set to benefit from several tax incentives, including a 5 percent corporate income tax, a reduced 6 percent VAT and exemption from infrastructure tax on investment.

Agro-tourism is in its initial steps in Albania with several restaurants, wineries, bee and fruit farms offering tourists authentic local products.

The government has also earlier tax incentives for luxury hotels and resorts in a bid to build infrastructure for elite tourism as tourism gradually becomes a key driver of the economy.

The finance minister says the government will continue to apply unsolicited bids on public private partnerships until mid-2019 despite IMF warnings on the risk of the government’s controversial €1 billion PPP to the public debt reduction agenda and bonuses awarded to companies for unsolicited proposals in road infrastructure and public service tenders.

Ahmetaj says the strengthening of Albania’s national currency lek, which has hit a ten-year high of 127 lek against Europe’s single is a signal of Albania’s economic recovery, but the opposition and some economy experts link the phenomenon which is negatively affecting Albania’s exporters to the euro inflows from the massive 2015-2016 nationwide cannabis cultivation and ongoing drug trafficking.

The ruling Socialist Party of Prime Minister Edi Rama holds a comfortable majority of 74 votes in the 140-seat Parliament, allowing the Socialists to rule on their own in the second consecutive term after a coalition government in 2013-2017, but lack the required three-fifths of votes to trigger reforms in the country.

Albania is hoping to launch accession talks next June pending a decision by EU leaders at the European Council after a positive recommendation by the European Commission, the EU’s executive arm, but some big powers remain skeptical and the final say is uncertain.
                    [post_title] => Ruling Socialists offer tax incentives ahead of upcoming 2019 local elections
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                    [post_content] => In the dying days of Albania’s brutal communist regime, the first Western television series made it to Albanian public television. “If one day you will knock on my door” was an Italian drama focusing on Claudia, a drug addict that had thrown her formerly model family into turmoil due to her heroine habit. The message of the communist censors in allowing the show was subtle but clear: This is what Western Europe and democracy bring. It targeted Albania’s young who at the time were starting the chant: “We want Albania like the rest of Europe.” 

At the same time, a young communist apparatchik was leaving the provincial town of Tepelena to become the last interior minister of the communist regime. Tepelena had many years earlier been the site of one of the most brutal internment camps of any communist regime in Eastern Europe, a site where family members of anti-communist dissidents were interned. An untold number of children died there from disease and malnutrition in conditions rivaling concentration camps of an earlier era. It was only one of many stories and sites of communist brutality. 

This week, that same former communist interior minister is Albania’s Speaker of Parliament. And Gramoz Ruci has apparently not forgotten the message of his youth on the “dangers of Europe.” Forced to explain to European lawmakers why there is such a big problem with drug trafficking and criminality in Albania, he said this week that Europeans were to blame. 

“Someone might call me nostalgic, but that [communist] system didn’t have drugs, criminality, corruption or any of this phenomena. We made a choice to topple dictatorship and open Albania up, instead of staying as we were. And this phenomena wasn’t brought by Albanians, it was found among Europeans,” Ruçi said during a media conference on Europe Day, responding to the issues raised by eight Dutch MPs that visited Albania on a fact-gathering mission in the context of the country’s EU integration, but who remain skeptic concerning the surge of criminality, corruption and cannabis trafficking. “I’d tell my Dutch colleagues that if cannabis is a black stain in Albania, the technology and the market come from the Netherlands. I am not accusing the Netherlands, but we have the right not to be identified with this, but rather with what we have achieved,” Ruçi added.

Ruci’s tirade is nonsense as order in dictatorships is achieved through the brutality of state and oppression of basic human rights. And the poverty and valueless atheist society the Albanian communist regime created are far more to blame for today’s criminality. 

But nostalgia for communism is more dangerous for another reason: It tears the social fabric of the country and it pins the descendants of the victims against those of the perpetrators, as violent clashes this week between nostalgics and anti-communists show. 

Albania has not done enough to address its communist past. It needs to do more. But the last thing it needs is to have the second man in the hierarchy of state glorify the communist regime and blame Europe for Albania’s own problems, starting with his own party’s failures to at best fight organized crime and at worst assist in it.   
                    [post_title] => Editorial: Nostalgia for communism a sign of dangerous times  
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            [post_date] => 2018-05-25 09:40:52
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            [post_content] => The case of Agron Xhafaj, brother of Interior Minister Fatmir Xhafaj, has led to renewed conflict in Albania’s political scene. But, perhaps more importantly, it has raised questions among Albanians that require better answers than what the public has received so far.  

Agron Xhafaj is now said to have gone to Italy to serve a prison sentence issued back in 2002 for drug trafficking. Albania’s opposition says his brother, Fatmir Xhafaj, first as a powerful Socialist lawmaker and then as minister of interior shielded him for years. 

Fatmir Xhafaj has denied the charges and said his brother was at the wrong time at the wrong place, and he had not been involved in anything illegal in more than a decade. And, regardless, according to the minister and Prime Minister Edi Rama, the brother has his own life and should not harm the political career of the minister of interior. 

However, an investigation performed by a journalist and then handed to the opposition for making it public has brought forward a series of pressing questions. According to a wiretap done by cooperator, the minister’s brother allegedly continued his criminal activity in drug trafficking until very recently. Based on the wiretap, the opposition alleges that the brother has strong influence in the criminal underworld of Vlora, Albania’s second largest port city and one with a long history of powerful organized crime networks. 

The opposition accuses the minister of in effect granting his brother immunity, not only through not sending him earlier to Italy to serve the sentence -- but also by allowing him to continue his criminal activity in a protected environment. These accusations have been called “nonsense” by the minister.  And the reactions to the accusations from the government have been that they believe the wiretap is fake. The prime minister says he has checked it with an unnamed expert organization and he believes it is not real, but has refused to divulge more details. However, he agrees a proper, thorough and independent investigation should now take place to determine the wiretap findings.  

The brother’s choice to go and surrender to Italian authorities also raises questions whether he did so to escape Albanian authorities, and the conflict of interest with the brother leading the Ministry of Interior. 

This is the second controversy in a few months involving a Socialist interior minister so questions abound: What kind of state is this and based on what standards? These questions are even more pressing as Albania hopes to open membership negotiations with the European Union. The EU is first a family of strong states and second a family of democratic states.

Rama says the DP has invented the scandal to hurt Albania’s chances of opening EU membership negotiations, while the Democrats say they want negotiations to open precisely so there can be more supervision and pressure on Albania’s government when dealing with cases such as this. 

Ultimately, all can agree that the Albanian public and its friends abroad need thoroughly-investigated answers on this case. That’s a good place to start. 

 
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