Alleged airport concessionaire’s abusive charges under probe

Alleged airport concessionaire’s abusive charges under probe

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

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Editorial: From the fall of the justice system to the fall of justice in Albania

Editorial: From the fall of the justice system to the fall of justice in Albania

TIRANA TIMES EDITORIAL For all intents and purposes, day after day, we are currently witnessing the fall of the justice system in Albania. This is happening through the removal from office of the majority of officials in key judicial institutions

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Vienna Institute downgrades Albania’s 2018 outlook on ‘unprecedented’ currency appreciation

Vienna Institute downgrades Albania’s 2018 outlook on ‘unprecedented’ currency appreciation

TIRANA, July 16 – The Vienna Institute for International Economic Studies has slightly revised downward Albania’s 2018 economic outlook, citing an ‘unprecedented appreciation’ of Albania’s national currency against Europe’s single currency. In its latest summer report on economic prospects for

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Editorial: The problem with newsless summits

Editorial: The problem with newsless summits

It has been a week of important international summits for Albania on paper. First, Western Balkan leaders met with key EU counterparts in London to discuss the region’s EU future as part of the Berlin Process. Then, NATO held its

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Albania plans two new airports to break international flights monopoly

Albania plans two new airports to break international flights monopoly

TIRANA, July 12 – Albania is preparing to launch two new airports that would break the current de facto monopoly that the Tirana International Airport has on international flights in an operation that is expected to increase market competition and

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Gov’t blames euro’s free fall for revenue slowdown

Gov’t blames euro’s free fall for revenue slowdown

TIRANA, July 9 – The Albanian government has blamed the slowdown in tax revenue collected in the first half of the year on the free fall of Europe’s single currency against Albania’s national currency. Finance Minister Arben Ahmetaj says the

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Balkan Barometer survey: Albanian households, businesses remain largely pessimistic

Balkan Barometer survey: Albanian households, businesses remain largely pessimistic

TIRANA, July 6 – Albanian households and businesses remain largely pessimistic and expectations for this year are not much optimistic, according to a Balkan Barometer survey published by the Regional Cooperation Council this week. More than half of Albanians, some

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Letter to the editor: The double standards in Albania’s diplomatic service

Letter to the editor: The double standards in Albania’s diplomatic service

Shortly after the Socialist Party came to power, they decided to change the law on diplomatic service. A group of Albanian diplomats with a long history in foreign diplomatic service whose names were better left unknown then and are still

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Editorial: With transparency concerns, Albania-Greece sea border deal enters danger zone

Editorial: With transparency concerns, Albania-Greece sea border deal enters danger zone

Concerns over transparency in negotiations between Albania and Greece on a new maritime border agreement are growing to the point that when a new deal is reached, it might be so contested domestically in Albania, it could become dead on

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Albania launches probe on covert call centers acting as brokerage firms

Albania launches probe on covert call centers acting as brokerage firms

TIRANA, July 2 – Albania has launched a probe into dozens of call centers allegedly operating as covert unlicensed brokerage firms involved in fraud operations by offering potential investors attractive return rates for high-risk financial products. The investigation comes after

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

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

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

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

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

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

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

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

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

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

 

Ignored recommendations

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

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

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

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

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

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

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

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

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

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

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

 

Drawing lessons

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

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

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

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

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

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

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

The Tirana airport handles more than 2 million passengers a year, being one of the country’s main hubs.
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                    [post_content] => TIRANA TIMES EDITORIAL

For all intents and purposes, day after day, we are currently witnessing the fall of the justice system in Albania. This is happening through the removal from office of the majority of officials in key judicial institutions as the vetting process, part of justice reform, goes on. And it appears there is no plan to quickly replace the many judges and prosecutors being kicked out the system. 

The Constitutional Court, a key pillar of the state, has been virtually emptied of justices. The High Court appears to be next. Of the 19 judges it had before the reform, there are now only five left. It will likely go on with the appeals courts and others. 

The main issue is that many judges and prosecutors are failing to prove the sources of their wealth. This is, of course, disgraceful for a poor country.

Indeed, in the short-term, perhaps even in the mid-term, the justice reform's vetting will inflict greats costs to the justice system. As such, it wouldn't be unfair to say that it can lead to a complete fall of the system, which means a consequent fall of justice itself in Albania

The justice reform's positive outcomes and benefits for the people of Albania are expected in the mid to long term, but what we are seeing so far are the negative implications, and there are many of them.

It appears at this time that the reform’s proponents and organizers did not properly predict the vacuum being created in the justice system by the vetting process, and thus, they did not create a mechanism to quickly deal with the matter.

The other underlying problem that may have serious implications is that, according to the experts, we are also seeing a double-standards policy. Local but also foreign experts have noted that different standards are applied depending on the person being vetted. For example, the same criteria or reasons used to dismiss one justice official are not applied on the same situation faced by the next. The famous saying from George Orwell's book “Animal Farm” rings true at this time: All animals are equal, but some are more equal than others.

Last, but not least, the opposition claims that in addition to creating a powerless judiciary to keep the government in check in the short to medium term, a longer term danger looms -- that the current government is trying to capture the judiciary through both the vacuum and the people that will replace the sacked judges.

For a republic like Albania to work well, a strong and independent judiciary is needed to keep the other branches of the government in check. Thus a political capture of the courts is something Albania should avoid at all costs. 

 
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                    [post_content] => [caption id="attachment_137921" align="alignright" width="300"]Vienna Institute for International Economic Studies forecasts on Albania Vienna Institute for International Economic Studies forecasts on Albania[/caption]

TIRANA, July 16 - The Vienna Institute for International Economic Studies has slightly revised downward Albania's 2018 economic outlook, citing an ‘unprecedented appreciation’ of Albania’s national currency against Europe’s single currency.

In its latest summer report on economic prospects for Central, East and Southeast Europe, the Vienna Institute for International Economic Studies, wiiw, has downgraded Albania's 2018 GDP forecast to 3.8 percent, down from a previous 4.1 percent last March and slightly revised upward by 0.1 percentage points its 2019 and 2020 expectations to 4.1 percent and 4 percent respectively.

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

The main reason that wiiw, one of the top centers for research in Central, East and Southeast Europe, cites for its 2018 downward revision is the ‘unprecedented appreciation” of the Albanian lek against the euro during this year.

"The year so far has witnessed an unprecedented appreciation of the Albanian currency. Further volatile exchange rates are expected in the coming months owing to seasonality," says the Vienna Institute.

Europe’s single currency has been trading at a 10-year low of about 126 lek over the past month with a series of negative effects on Albania’s highly euroised economy, primarily hitting exports to the Eurozone, local producers facing tougher competition from cheaper imports and half of the country’s savings in Europe’s single currency.

Meanwhile, emergency interventions by Albania’s central bank through purchases of excess euros during the past month have only managed to stop euro’s free fall in the local Albanian market, stabilizing it at the 126 lek rate, down 6 percent from the mid-January peak level of about 134 lek and 10 percent below mid-2015 when the euro’s five-year reign of about 140 lek came to an end.

However, the Vienna Institute is optimistic that the emerging tourism sector and new planned infrastructure investment will keep the economy growing at about 4 percent over 2019 and 2020 at a time when TAP and the Devoll Hydropower, the two major energy-related that drove growth in the past four years complete their investment stage by the end of 2018, leaving a huge gap of about €300 million unless other major projects replace them.

“Backed by a booming tourism sector, large infrastructure projects – some close to completion and new ones in the pipeline – and consumption, the economy will grow by above 4 percent in the medium term,” says the Vienna Institute.

At an average of about 4 percent over the next three years, wiiw expects Albania to register the highest growth among the six EU aspirant Western Balkan countries where overall growth is expected to drop from 3.6 percent in 2018 to 3.2 percent in 2020, mainly because of a significant slowdown in Serbia, the region's largest economy.

Prospects in the Western Balkan countries have improved significantly thanks to fiscal easing, progressive integration into international production networks and the latest rating upgrades, says the Vienna Institute report, adding that foreign direct investors are becoming more and more active in the EU aspirant region which is gaining importance as an alternative to the increasingly expensive EU-CEE countries.

The Vienna Institute’s forecasts are almost in line with the Albanian Socialist Party 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 Vienna Institute has earlier warned the public private partnership-channeled infrastructure investment that the Albanian government is implementing could boost growth in the medium-term but pose certain risks in the longer run.

The Albanian government’s ambitious €1 billion PPP project has come under fire by international financial institutions and economy experts worried over the effect it will have on the public debt and efforts to bring it down to 60 percent by 2021, because of new potential accumulated unpaid bills to private concessionaires. Albania's public debt currently stands at about 70 percent of the GDP, a level considered too high for the current stage of Albania’s economic development.

An earlier Vienna Institute study has shown no Western Balkan country, including frontrunners Montenegro and Serbia already holding accession talks, will be able to meet EU accession criteria before 2030.

The wiiw baseline scenario sees tiny 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 late June 2018, EU leaders at the European Council decided to delay Albania's opening of EU accession talks for mid-2019 requiring the Balkan country to show more progress with reforms in the judiciary, tackling high level corruption and organized crime.
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                    [post_content] => It has been a week of important international summits for Albania on paper. First, Western Balkan leaders met with key EU counterparts in London to discuss the region’s EU future as part of the Berlin Process. Then, NATO held its major annual gathering in Brussels. 

Both summits were attended by Albanian Prime Minister Edi Rama with a group of accompanying officials. The outcome of both were a lot of photos and statements repeated year over year of the importance of the region’s EU future of the transformative role of being under NATO’s security umbrella, etc.

Important as these things might be, there has been little substantial news for Albania at both summits. 

In an age of short attention spans and sensationalism, some might see appearing on the BBC social media for wearing tennis shoes at a formal group photo as news -- an old and tired tactic of an attention-seeking small country prime minister. No publicity is bad publicity after all. But in terms of what Albania got out of the Berlin Process summit in London, there is nothing substantial. 

In fact, the summit was a major dud. Germany’s public broadcaster, DW, went so far as to call it “grotesque.” The very organizer and host, the British foreign minister, Boris Johnson, could not be at the opening ceremony because he had just resigned over Britain not getting enough of a clean break from the European Union, the very body the Berlin Process aims to promote in the Western Balkans. 

The NATO Summit is important for Albania, because as an alliance member for a decade, the country has both rights and responsibilities, like increasing its military spending to meet NATO expectations, for example. Instead, the news related to Albania was the typical the assortment of handshake photos of Albania’s prime minister with the likes of US President Donald Trump or German Chancellor Angela Merkel. There was even a viral video of Rama peeking over Merkel and UK Prime Minister Theresa May watching Croatia beat England in the World Cup semi final.  Like Albanian leaders before (and those likely to follow), the head of the Albanian government has the bad habit of seeking to legitimize his rule at home through photo ops abroad. We suspect the readers of this newspaper know better. 

For Albanian leaders, who are willing to pay hundreds of thousands of dollars to lobbyists during campaigns to secure a photo with the US President it, be it Barack Obama once or Trump today, such summits must seem like a golden opportunity for these photos. (Think of all the funding that could be going to schools and hospitals instead of campaign photo ops more associated with third-world leaders than European ones.) 

The NATO Summit is not there to take pictures and create political propaganda for domestic consumption. It is there so Albania can play a role, no matter how small, to help the alliance in which it is a full member.

In perhaps what could be the best source for domestic news, on the sidelines of these summits, Albanian and Greek leaders met to discuss the strategic new maritime border deal. Here too, photos and empty words were distributed, and again, the Albanian public received no substantial information. 

And, if the summits to the West were not enough, there was one to East too, in Bulgaria, were the 16 Plus One initiative members met to discuss cooperation with China and its Silk Road trade initiative. Again a lot of photos, no substantial news on new tangible projects related to Albania. 

The axiom that no news is good news, does not stand in this case. To the Albanian public, newsless summits are useless summits. 

 
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                    [post_content] => TIRANA, July 12 - Albania is preparing to launch two new airports that would break the current de facto monopoly that the Tirana International Airport has on international flights in an operation that is expected to increase market competition and lead to lower ticket prices and also serve the country’s emerging tourism industry through faster access to southern and northern destinations.

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

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

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

To date, almost all companies that have been awarded bonuses for their unsolicited proposals have resulted in apparent winners in tenders where competition has been poor, giving rise to allegations of pre-determined winners.

The approval of bonuses through the controversial unsolicited proposal procedure comes amid warnings by international financial institutions such as the IMF and the World Bank calling on the Albanian government to put an end to that practice.

However, the ruling Socialists says the practice will be discontinued only by 2021 when their second consecutive term of office expires and after a controversial €1 billion PPP project to rehabilitate road, health and education infrastructure has come to an end.

As the Albanian government is implementing an ambitious €1 billion PPP program to upgrade road, waste management and education infrastructure, the IMF has warned the controversial project expected to be implemented in the next four years could create new government arrears and hamper efforts to bring down public debt to 60 percent by 2021.

A family-owned business, Kastrati is the largest oil importer and trader in the country with a market share of about 50 percent, and has in the past few years diversified its investments in the construction, tourism, insurance and road maintenance. Kastrati also holds exclusive rights to trade Mercedes vehicles in Albania and together with another construction company will manage the Durres-Kukes highway linking Albania to Kosovo for 35 years under a concession contract expected to kick off next September making it the country’s first toll road. Its owner Shefqet Kastrati is one of Albania's two richest people along with shopping center, mining and construction tycoon Samir Mane.

Albanian authorities have earlier said the abandoned Kukes airport needs at least €2.5 million in investment to make it operational for international flights. Experts say that while the Kukes airport could reduce ticket prices, its location in northeastern Albania does not serve the country’s promising tourism industry a lot and only a new airport in southern Vlora and Saranda close to the Albanian Riviera, could really give a boost to tourism which officials say brought more than 5 million tourists and generating a record €1.7 billion in income in 2017.

However, if attracting low-cost carriers, the Kukes airport, located some 100 km from Tirana, a one and a half-hour drive from the capital city, could serve as an alternative for thousands of passengers choosing to fly from the Prishtina airport offering much lower tickets compared to the Tirana International Airport. Due to the high charges it has been applying since 2005 when it was reconstructed and taken over under 20-year concession by a German-led consortium, TIA has been little attractive to low cost carriers and Albania has had one of the highest ticket prices in the Western Balkan countries.

 

Vlora Airport 

The Albanian government says it is on track to conclude contract negotiations with a Turkish consortium and set up its 'Air Albania' national carrier with the support of Turkish Airlines, one of the leading global carriers. Construction works are expected to kick off by late 2018 once the contract has been signed and could take three years to complete.

Prime Minister Edi Rama has earlier unveiled the ‘Air Albania’ national carrier will initially connect Tirana to regional unserviced countries such as Kosovo, Macedonia, Montenegro and Bosnia and Herzegovina and several Western Europe destinations.

The Turkish consortium that has offered to build the Vlora airport is composed of Cengis, Kalyon and Kolin Construction, three companies also involved in the construction of Istanbul’s third airport, a multi-billion dollar investment that is set to become the world’s largest.

While the airport investment will be private, the Albanian government is expected to guarantee the concessionaire a minimum annual income in traffic guarantees in return for the investment and operation over a period of time that will be determined during the negotiations.

Meanwhile, local residents see the construction of the new airport as a new opportunity that gives added value to their lands, where the salt business is one of the few employment opportunities in the local marshlands.

The proposed airport is located 133 km, a 2-hour drive from Tirana, making it competitive only in case it attracts low-cost carriers.

However, Germany-based EuroNatur Foundation has slammed the Albanian government’s hurry in proceeding with an international airport project in a protected southern Albania area as incompatible with preserving the local ecosystem.

The new Vlora airport is projected to be built along the Narta Lagoon, where one of Europe’s last wild rivers flows and the endangered Dalmatian pelican feeds, the German environmental foundation says.

The operation of the Vlora airport could extend the Tirana International Airport’s concession term by three to four years, depending on the year when it becomes operational. Since mid-2016, TIA has been managed by a Chinese consortium and handles more than 2 million passengers a year.

 
                    [post_title] => Albania plans two new airports to break international flights monopoly 
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                    [post_date] => 2018-07-09 17:54:32
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                    [post_content] => TIRANA, July 9 - The Albanian government has blamed the slowdown in tax revenue collected in the first half of the year on the free fall of Europe’s single currency against Albania’s national currency.

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

"The currency exchange rate is the sole blow government revenue has received. We have met 98 percent of the target despite the serious and sizeable blow that the customs revenue received from the currency exchange rate," Ahmetaj told a press conference last weekend.

Europe’s single currency has been trading at a 10-year low of about 126 lek over the past month with a series of negative effects on Albania’s highly euroised economy, primarily hitting exports to the Eurozone, local producers facing tougher competition from cheaper imports and half of the country’s savings in Europe’s single currency.

Meanwhile, emergency interventions by Albania’s central bank through purchases of excess euros during the past month have only managed to stop euro’s free fall in the local Albanian market, stabilizing it at the 126 lek rate, down 6 percent from the mid-January peak level of about 134 lek and 10 percent below mid-2015 when the euro’s five-year reign of about 140 lek came to an end.

However, Albania’s overwhelming Eurozone-destined exports grew by comfortable double-digits of about 18.4 percent in the first five months of this year amid concerns over a considerable decline in profits exporters are incurring from the sharp strengthening of Albanian lek which makes exports more expensive and reduces costs for importers.

Albania exports about three-quarters of its poorly diversified exports to Eurozone countries, mostly Italy, Greece and Germany.

Finance minister Ahmetaj says the positive trend in exports is a result of Albanian companies having increased their productivity and competitiveness, which he describes as two key elements for the Albanian economy in order to positively perform in the mid-to long-run.

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

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

 

€50 mln million gap

Latest official finance ministry data shows government revenue grew by a mere annual 1.8 percent in the first five months of this year, but failed to meet the January-May target by a considerable 3.4 percent or 6.4 billion lek (€50 million).

The value added tax, the key tax that Albania collects and levies at a fixed 20 percent rate on almost all products and services with few exceptions in the tourism and health sector, underperformed by 2.8 billion lek (€22.3 million) in the first five months of this year, accounting for 44 percent of the January-May revenue miss.

Excise duties, the second most important that the customs administration collects from key imports of oil, tobacco, coffee and beer, dropped by about 1 percent in the first five months of this year, partly reflecting the strengthening of Albania’s national currency against both the Euro and the U.S. dollar.

The excise duty decline came amid a 50 percent surge in oil imports following the late 2017 bankruptcy of a local oil refiner and its partial reactivation only a couple of months ago with crude oil from local Albanian production.

The effect from euro’s free fall is also reflected on companies' profits for the first five months of this year which grew by a mere 1.7 percent or 263 million lek (€2 million) compared to the same period last year.

Albania’s public finances registered positive growth rates for the fourth year in a row in 2017, but failed to meet the government’s overoptimistic forecast for an electoral year, in a situation which led to lower than projected public investment as the budget deficit was kept in check and public debt brought down.

The 2017 revenue performance, with a 5.7 percent increase in income, is however considered one of the best in general election years during the past quarter of a century of transition to democracy and a market economy when incumbent governments traditionally sharply increased spending in an apparent bid to gain an electoral advantage, resulting in sharp budget cuts during the post-election period.

The tight spending policy also allowed the Albanian government to bring down public debt to a 4-year low of 70 percent of the GDP, a level considered too high for the current stage of Albania's economic development, with the high servicing costs curbing much-needed public investment in key education, health and road infrastructure sectors which the government is now seeking to rehabilitate through an ambitious but controversial public private partnership program.

The International Monetary Fund has warned the ruling Socialists’ controversial €1 billion PPP program and newly accumulated central and local government unpaid bills of about 1.7 percent of the GDP pose key threats to the government’s public debt reduction agenda over the next four years.

 
                    [post_title] => Gov’t blames euro’s free fall for revenue slowdown 
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                    [post_date] => 2018-07-06 15:27:06
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                    [post_content] => TIRANA, July 6 - Albanian households and businesses remain largely pessimistic and expectations for this year are not much optimistic, according to a Balkan Barometer survey published by the Regional Cooperation Council this week.

More than half of Albanians, some 54 percent, say they are mostly unsatisfied and completely dissatisfied with the way things are going in the Albanian society, a 5 percentage point improvement compared to last year's Balkan Barometer survey.

Similarly to regional EU aspirant countries, Albanians are mostly concerned over unemployment, the economic situation and corruption, the top three barriers for 33 to 56 percent of respondents.

“And although unemployment is still seen as the most important problem facing the [Western Balkan] region, interestingly, brain drain/emigration is increasingly seen as a major challenge by the region’s citizens, as 12 percent of them said so, which is 5 percent more than in BB 2015," says RCC Secretary General Goran Svilanovic.

An annual survey of citizens and business communities’ opinion on the situation in the six EU aspirant Western Balkan countries, the 2018 Balkan Barometer showed satisfaction of people and businesses on the overall situation in the region, while still below average, is steadily improving.

About two-thirds of Albanians say they are not happy with the economic situation in the country and one out three expect the situation to deteriorate over the next 12 months.

The slightly better expectations come at a time when Albania's economic growth recovered to a 9-year high of 3.8 percent in 2017 and is expected to further pick up to 4.2 percent this year fuelled by some large energy-related projects with not much impact on the majority of households and not contributing to inclusive growth.

Half of respondents say they are dissatisfied with the health services in the countries and admit to having paid bribes to access medical and health services over the past year.

What's concerning is that 43 percent of Albanians still say they would consider leaving and working abroad, at a slightly lower rate compared to last year's record high of 50 percent. However, 88 percent say they wouldn’t consider moving to the other five EU aspirant regional countries, where GDP per capita and consumption rates are at similar rates compared to Albania and at only a third of the EU average.

High migration rates and a sharp decline in the number of birth rates has turned into a key concern in Albania where about 1.2 million people, almost 40 percent of the country's 2.8 million resident population, already live abroad.

More than 146,000 Albanians, about 5 percent of the country’s resident population, sought ungrounded 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 about 5 percent of them have been granted international protection.

Two-thirds of Albanians believe the law is not applied and enforced effectively in the country and only a quarter say they trust courts and the judiciary.

Albania is currently implementing a long-awaited justice reform that is vetting judges and prosecutors on their wealth and professionalism, but the reform, a key requirement set by the EU to open accession negotiations, is slowly progressing and could take years.

Two-thirds of the respondents say they don't believe the Albanian government is fighting corruption in the economy effectively.

 

Businesses pay up to €5,000 in bribes 

When it comes to the business community, perceptions on the economic situation are slightly better with a quarter of respondents saying it has improved over the past year and one out of three expecting it to improve over the next 12 months.

Overwhelmingly dealing with Eurozone economies, about half of Albanian businesses don't consider the quality of regional cooperation in South East Europe as important to their businesses.

Business representatives rate macroeconomic instability, tax administration and tax rates as well as corruption as the top three problematic factors for the operation and growth of their businesses.

Companies cite tailor-made criteria for certain participants and deals before the tender is even published for not participating in public tenders.

Albanian businesses are much more generous than their regional peers when it comes to the amount of unofficial payment/gifts to public officials and pay from €100 in dealing with environmental inspections to a record high of more than €5,000 in dealing with courts, five times more compared to the regional average.

The survey shows Western Balkan region’s businesses are slightly more optimistic than the population with some 40 percent of company leaders reporting improvement in their business situation over the previous year.
                    [post_title] => Balkan Barometer survey: Albanian households, businesses remain largely pessimistic 
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                    [post_date] => 2018-07-06 10:23:14
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                    [post_content] => Shortly after the Socialist Party came to power, they decided to change the law on diplomatic service. A group of Albanian diplomats with a long history in foreign diplomatic service whose names were better left unknown then and are still better left unknown now - sent the following e-mail to a number of EU, US and German representatives through third parties:

“Our diplomatic service is facing a deadly blow with the new draft law due to be passed on Thursday by the parliament majority. The law puts the foreign service completely under political control. The hitherto law foresees 20% of the ambassadors as political appointees. The new law removes this figure thus enabling 100% political appointments; not just ambassadors but also other diplomatic posts. Even some MPs like Arta Dade have failed to avoid that from happening. It's not strange that even the opposition keeps silent about it. They can use the law politically, too, when back to power. Such practice goes against EU practices, even though, as candidate EU country we are supposed to make legislation according to EU standards. There is serious concern and despair among career diplomats who see no future for their career under the new law and we feel powerless about it. Years of investment in the service could be rendered useless. This never happened before, at least injustice was never legalized.”

Unfortunately, our warning fell on deaf ears and, for the last years, we’ve seen a number of our predictions come to life and seriously harm competitiveness, fairness and a chance at a career.

While any "street man" may become an ambassador, it takes at least 14 years for a career diplomat to be posted as ambassador.

Most of the current Albanian diplomats serving abroad have little or nothing to do with the foreign service and often have no experience at all. A "street ambassador" is supposed to have 10 years of work experience dealing with foreign relations in what is a very broad and abusive definition. Meanwhile, a career diplomat must serve not less than 14 years in the foreign ministry to get the title of counsellor, let alone ambassador, a paradox a normal country diplomat would never believe.

But, instead of speaking generally, let us refer to some concrete cases that had us compile a second letter and make it public.

The Albanian Ambassador to Stockholm for starters, is a former retiree who has been renamed in service, although he was once only a presenter at the Albanian National Radio-Television during communism. Similar is the case of Belgrade, where the ambassador is a retiree, while the Albanian Ambassador to Vienna had to return home after reaching his retirement age.

These kind of double standards have even devalued the altered law, bringing it down to new lows. Some ambassadors, such as the ambassador of Albania to the OSCE, don’t even fulfill the base requirements, such as the “ten years of foreign work experience.”

In Ankara, the ambassador is a former Socialist Party financier, while the head counselors in Thessaloniki, Ioannina, Bari, Milano and Istanbul have little to no connection with the diplomatic service. In Washington, too, the serving ambassador is a political appointment, someone with no connection to the diplomatic service at all. The same applies to the cases of Switzerland and the Netherlands.

In other, even more flagrant cases, such as those of Middle East countries, the embassies are run by ambassadors who have even been involved in corruption cases, while the Vatican is lacking an ambassador altogether, for the least five years.

According to sources, an ambassador who has run an embassy in an Arab country, and who was fired for being involved in a sensational criminal case in Albania, has been appointed secretary in another embassy in a European country.

This has brought about some worrying effects - the most worrying of all being that “street diplomats” are leading career diplomats - the people who have been in the service for 10, 15 and even 20 years and who have acquired the skills of diplomacy by actual experience.

In Ernest Geller’s notion called “tyranny of cousins” one can see a lot of Albania - by definition, the tyranny of cousins describes a primitive stage of society, one still ruled by the power of the tribe and by family ties, a phenomenon Albania is still unable to shake after years of communist rule.

Today, this tyranny of cousins has come to include more harmful things - political ties, economic ties, interest ties - leading to a tyranny of incompetence, which has been supported by law for the last three years and which will continue to harm Albania if our warning calls keep falling on deaf ears.

 

 

 
                    [post_title] => Letter to the editor: The double standards in Albania’s diplomatic service 
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                    [post_content] => Concerns over transparency in negotiations between Albania and Greece on a new maritime border agreement are growing to the point that when a new deal is reached, it might be so contested domestically in Albania, it could become dead on arrival. 

The opposition says it and the relevant parliamentary institutions have neither been consulted nor informed on the negotiations. Some politicians, like former Prime Minister Sali Berisha, have warned a new conflict between Albania and Greece could be the result if the deal is reached without transparency.

Albanian institutions, with the exception of the government, and the public at large are getting more information from Greek news media than Albanian officials involved in the talks. 

Diplomatic sources told Tirana Times that in fact the agreement was negotiated as early as last year and as late as the first two months of this year. However, according to the official record, these negotiations officially started only a month and a half ago, when the government received the official permission to negotiate from the President of the Republic. Moreover, diplomatic sources confirmed that the Albanian side was given a new agreement with some partial and technical corrections from the Greek side, which were nonnegotiable, and the rest of what appears like negotiation is just for show. 

Officially, three rounds of negotiations concluded last month between Albania and Greece to reach a new maritime border agreement to finally divide the sea shared by the two countries. 

The Albanian public simply got a rubber stamp press release, saying the last meeting was “constructive and it developed in a positive, friendly and cooperative climate.” 

As a result, the Albanian public has had the Greek media as a main source of information on how the delimitation of the maritime border will take place.

Similarly, the Socialist-led government has completely excluded the possibility of consulting with the opposition, much like its predecessor, the Democratic Party. The ruling SP doesn’t even need the opposition MP numbers in parliament to seal the deal. 

Instead clarifying what Albania will get from the sea border dispute, the Albanian government has been much more open in declaring as “wins” issues included in the “package of negotiations,” such as the recognition of Albanian driving licenses and apostille stamps, as well as the removal of the Law on the State of War.

Although these are agreements that will benefit a number of Albanians living in Greece, foreign policy experts have said it is wrong to include them in the same package of negotiations as the maritime border agreement, as their benefits to citizens will only be peripheral.

Albania does not have a good history with these agreements. DP’s own 2010 agreement was rendered useless by Albania’s Constitutional Court for violating the country’s interests and the constitution. However, at this time, Albania’s Constitutional Court is frozen due to lack of judges -- as the judicial reform takes place -- thus placing a great question mark on who will ultimately have a say on the constitutionality of the latest deal.

If the deal is hurried through parliament without further wider consultations, and without the Constitutional Court filter, the deal could enter a dangerous zone in terms of the Albanian public opinion and its legality under domestic and international law. 
                    [post_title] => Editorial: With transparency concerns, Albania-Greece sea border deal enters danger zone 
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                    [post_date] => 2018-07-03 10:26:53
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                    [post_content] => TIRANA, July 2 – Albania has launched a probe into dozens of call centers allegedly operating as covert unlicensed brokerage firms involved in fraud operations by offering potential investors attractive return rates for high-risk financial products.

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

In a hearing with MPs a month ago, the head of Albania's Financial Supervisory, Ervin Koçi, said he had asked for support by intelligence and money laundering prevention officers to investigate into the suspected companies which could turn into a national issue and mar the country’s image.

"We possess information that there are such companies operating with foreign markets where they sell financial products. Being licensed by EU brokerage firms is something positive because they are supervised. The problem is whether they are ‘ghost’ brokerages and households are also involved," said Koçi.

The suspected companies frequently post job advertisements on portals, offering online trading training and wages which in some cases can exceed €1,000 including bonuses, a high level for the Albanian standard where average wages stand at about €350 to €400.

"The problem with these companies is that they mostly contact foreigners and could turn into a national issue tomorrow because of cheating foreign citizens. In case of serving for money laundering, this could also turn into a problem for international institutions,” says the head of the financial watchdog.

The second most important financial institutions involved in supervising the insurance, securities, investment fund and private pension markets, the Financial Supervisory Authority says it has addressed the country’s state intelligence service, the police, tax administration and money laundering prevention unit for detailed information.

Last year, Albania's financial supervisory authority licensed three brokerage companies, all of which subsidiaries of Cyprus-based companies to conduct operations from their online trading platforms from Albania, except for currency exchange operations which are licensed by the country’s central bank.

Another two companies operate in the sector, one of which licensed by the Bank of Albania and offering foreign exchange (forex) investment opportunities. A subsidiary of a Cyprus-based company had its licence revoked in mid-2017 after only less than a year of operation following its sudden disappearance.

Under Albania’s legislation, foreign brokers are allowed to offer services in the country through an “agent” operating as a company in Albania after receiving the Financial Supervisor’s okay.

 

Pyramid schemes?

“Unlicensed and unsupervised activity exposes investors to hidden costs and other obligations which under conditions of lack of necessary transparency by the intermediary operator could be huge. Every investment or purchase of financial product from an unlicensed company or operator could be subject to fraud and speculation,” the authority says.

The watchdog says those brokerages could link to companies established in Albania operating as covert call centers but marketing financial products and services for customers inside or outside Albania which could prove Ponzi schemes or ghost brokerages disappearing after getting investor funds.

In the early 1990s soon after the switch to a market economy and transition to democracy, Albania faced some pyramid investment schemes that saw Albanians lose their life savings and took the country to civil unrest in 1997 following their collapse.

The Financial Supervisory Authority says it is aware of unlicensed operators and has informed law enforcement agencies to conduct respective investigations and constantly cautioned investors not to invest in unlicensed operators.

“Although some companies promote sales of contract for differences (CDFs) and foreign exchange outside the country, the fact that they were established and operate in the territory of the Republic of Albania and are unlicensed and unsupervised by the authorities has a negative impact on Albania,” it says.

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

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

Online trading platforms offer investors opportunities to invest in financial products in international stock exchanges, mainly in government securities, foreign exchange and commodity products such as oil and precious metals.

Rising interest to investment in online platforms comes at a time when interest to invest in traditional bank deposits has waned due to interest rates dropping below 1 percent and the emerging investment funds are facing a slowdown due to a sharp drop in bond yields as the key interest rate has been cut to a historic low of 1 percent.

The spread of brokerage firms in Albania also comes at a time when dozens of small call center companies in the country have ceased their operations in the past year following Italian legal changes making the supply of services for Italy-based companies from non-EU countries such as Albania much tighter starting April 2017, according to the tax administration data.

Albanian authorities have also previously warned potential investors to avoid investments in digital currencies after Bitcoin, the world's primary cryptocurrency soared to $20,000 in December 2017 before plummeting to a current $6,600.

People investing in Bitcoin in Albania and the region include those who trust in new technology, those trying to hide the source of their wealth and adventurers seeking to immediately become rich.

A European Union ban on binary options sales to retail customers has come into force on July 2 with restrictions on sales of contract for differences (CFDs) starting a month later, according to measures announced by the European Securities and Markets Authority, ESMA, the block's securities watchdog.

Binary options and CFDs are financial products that give an investor exposure to price movements in securities without actually owning the underlying assets such as a currency, commodity or stock.

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

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

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

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

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

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

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

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

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

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

 

Ignored recommendations

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

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

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

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

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

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

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

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

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

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

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

 

Drawing lessons

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

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

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

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

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

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

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

The Tirana airport handles more than 2 million passengers a year, being one of the country’s main hubs.
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