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

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

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

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Protests as a Response to the Gap Between the Government and the People

Protests as a Response to the Gap Between the Government and the People

BY Alfoc Rakaj Albania’s sluggish transition to a fully functioning market economy and a consolidated democracy has progress in parallel with the concentration of power and wealth into few urban areas. As a result, politics is increasingly big-city focused while

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Editorial: The ‘peripheries’ revolt

Editorial: The ‘peripheries’ revolt

TIRANA TIMES EDITORIAL Over three days, what began as “some failing university students’ revolt,” according to the government, speedily turned into a well-synchronized protest of hundreds of students which the country’s opposition has tried many times to ignite, but has

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US giant Hyatt takes over former Sheraton Tirana management

US giant Hyatt takes over former Sheraton Tirana management

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

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

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

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

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

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

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

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Easier market access offered to first Albania homemade traditional products

Easier market access offered to first Albania homemade traditional products

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

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

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

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

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Patriarchal mentality holds back Albania’s bid to fight gender-based inequality, violence

Patriarchal mentality holds back Albania’s bid to fight gender-based inequality, violence

TIRANA, Dec. 4 – Leaving behind the patriarchal mentality is the main challenge for Albania and its bid to narrow the gender gap and fight domestic and sexual violence, most of which unreported with the authorities and as a result

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Albania old vehicle import ban met with protests by local traders

Albania old vehicle import ban met with protests by local traders

TIRANA, Dec. 3 – A government decision banning the import of second-hand vehicles older than 10 years and forcing them to pay all taxes for their stock of unsold cars, has been met with protests by thousands of traders who

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                    [post_content] => By Ervin Lisaku

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Massive business closures 

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

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

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

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

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

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

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

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

 

2019 fiscal package

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

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

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

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

Albania’s central bank has identified the much-rumored public private partnerships and the timely execution of government spending as the key threats to the 2019 budget that the ruling majority has approved.
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                    [post_date] => 2018-12-07 20:23:02
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                    [post_content] => BY Alfoc Rakaj

Albania's sluggish transition to a fully functioning market economy and a consolidated democracy has progress in parallel with the concentration of power and wealth into few urban areas. As a result, politics is increasingly big-city focused while local media, blinded by its full attention to daily political quarrels, has failed to sufficiently cover the rising tensions emerging away from the power center. 

Citizens outside of the ruling circle have become disillusioned with party affiliation, as they increasingly perceive politicians as self-serving, and the institutions they represent as incapable of delivering.

Most of them remain voiceless and their issues unheard. Some find solace in taking their cases to the media, especially investigative channels who exert pressure on authorities. Others exhausted by the governments blinding arrogance toward their concerns have embraced protests as a last resort. 

Demographically Unrepresentative

Albania underwent deep demographic changes following the political changes of the 1990s. Most notably, a significant number of people from rural areas move to urban areas in pursuit of a better life. This shift led to economic and political power concentration in urban areas, most notably Tirana, which is now home to 30 percent of the country’s population. 

Tirana is a power-player in Albania politics, not least because it is the largest voting district in the country with 34 MPs. In addition, 70 percent of the Members of the Parliament resident in the capital, further fostering its disproportionate political and economic weight. Meanwhile, in the national spectrum, the country’s 140 parliamentarians live in only 17 municipalities. This physical detachment from the electorate hampers institutional trust and democracy consolidation. 

It’s worth noting that the distance created is not merely physical. The gap is not filled by regular visits to constituencies, reflective journalism or by effective constituency offices. As a result, constituents, bar those that have personal connections with their local MP, are denied the opportunity to voice their concerns. Ultimately, this undermines the effectiveness of the parliament.  

Politically Unrepresented

Discussions in the parliament have increasingly mirrored this narrowing gap in representativeness In a study published by ISP, a local NGO. In line with the popular perception, the parliament produced great theatrics, but little of substance related to major socio-economic issues. 

Consequently, in the given period, 399 of the speeches held in the parliament focused narrowly on daily or weekly news items, whereas 391 of the speeches were mere accusations aimed at rival political factions. In contrast, key issues such as education, infrastructure, corruption and poverty were only discussed in 74, 103, 123 and 164 speeches respectively. In the same vein, media produces great spectacles, and noisy talks shows where daily political developments are discussed, but little space is dedicated to public concerns such as employment, poverty and corruption. 

When asked, the public does not hesitate to point out the diagnosis. Annual surveys such as “Trust in Governance,” a UNDP sponsored project, illustrate the increasing distrust in institutions, political parties and the media. Feeling without representation, people's choices are exponentially diminished. This is the reason why locally organized protests have increasingly become a platform through which they express their grievances. 

Protests as a Response 

Protests are growingly gaining ground as a tangible platform to exercise public pressure on institutions. The public has reason to believe in their effectiveness when they are non-political, cause-specific and persistent. This year’s examples are a testament to this claim. 

The much-politicized protests in Kukes, after the introduction of a road toll on the highway connecting Albania with Kosovo is a case in point. 

Following the introduction of a hefty fee for residents, protests ensued. The government seemed determined on its objective to implement the toll, even though the municipality council itself had objected the fee. As the institutional response remained unchanged, protests violently broke the installed toll facilities, leading to the arrest and the controversial trial of several protesters. It took half a year for the government retracted its position and considerably reduced the fee for local-residents. 

In similar vein, the protest organized by the Ballsh oil refinery workers’ falls in a similar pattern. Subsequent to a lengthy institutional approach seeking compensation, protesters concerns went into deaf ears. Left without options, they travelled to Tirana on foot to take their protest closer to the power circle. Unable to ignore their demands, the government budged, offering them not only space to express their concerns with central government representatives, but also to meet some of their demands. 

Other promising attempts include the Alliance for Theatre protests against the demolition of the national theatre, and the protests of activists against environmental degradation through unsolicited government projects that threaten Albania’s natural treasures such as Valbona and Vjosa rivers. 

The way forward

The current government is no stranger to protests. Months after returning to power in 2013, the socialist led government, unexpectedly faced a massive popular protest resisting the plan to dismantle Syria’s chemical weapons in the country. Confronted with the challenge, the government gave in, leaving analysts and democracy hopefuls awestruck. Succeeding protests have not matched it in size and approach. Yet, they provide a ray of hope at a time when the political fragmentation is reaching a dangerous level. 

The current student protest is especially promising if it manages to avoid being hijacked by political parties. Otherwise, it risks fueling the government propaganda to dismiss the movement and its demands as politically orchestrated by the opposition, as it is the case of the ring road protest. Instead, it is up to the young people to continue pressuring beyond current grievances. 

The government would do well to notice that it takes more than pleasing allies demands to successfully govern. Similarly, the opposition could benefit from a platform that fosters sustainable solutions rather than resolving to short-sighted approaches. 

Combined, they must realize that the Albanian people living outside their power circle need tangible results. The next election provides a unique opportunity for them to demonstrate that credible candidates who offer viable solutions. Anything less than that, and we are likely to see more protests against the government outside of the institutional spectrum. 

 
                    [post_title] => Protests as a Response to the Gap Between the Government and the People
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                    [post_content] => TIRANA TIMES EDITORIAL

Over three days, what began as “some failing university students’ revolt,” according to the government, speedily turned into a well-synchronized protest of hundreds of students which the country’s opposition has tried many times to ignite, but has lacked the spark to do so.  

Tirana’s Polytechnic University students headed to the Education Ministry on Wednesday demanding that a 670 Albanian Lek tariff on each credit of each failing class be removed and that the university payment deadlines be changed.During their march to the ministry, capital students from other universities joined them and Elbasan University students boycotted classes too, showing solidarity with the protest even over distance. 

As the student protest grew considerably big on Thursday, blocking one of Tirana’s main roads completely, the list of demands put forward by students also expanded, including improvement of dorm facilities, equal representation between students and officials at the university discussion board and reduction of university fees. 

Meanwhile, in Tirana’s peripheries, the protests of Astir residents who will be affected by the government’s Great Ring project by losing their houses in exchange of under-the-market-value compensations have been protesting for more than a month now, despite arrests and injuries among protesters and police. 

Whenever such situations arise, the government employs a very specific self-defense mechanism - it did so with the highway toll protesters and it is doing so with Astir residents and students - it de-legitimizes their right to protest, by calling them names and pulling fun at their cause. 

The Kukes residents who protested by force and fire the government’s highway tolls with Kosovo, a main trading partner, were arrested. 

Prime Minister Edi Rama called on Astir residents to stop hypocritically looking for their rights where they don’t belong, saying it is their fault for building their houses illegitimately and that they don’t deserve any sort of compensation. However, truth of the matter is most of those people’s properties’ legalization processes have been promised and postponed by governments from left to right for many years, before unexpectedly informing them they’ll be living in social homes indefinitely.

On Wednesday, Rama told a Facebook commenter he did not believe taxpayers money should pay for failing students classes and credits, undermining the complexity of the students’ demands and frustration. 

The Socialist government, which has done a good job at building a shiny capital centre and displaying smiling faces as its campaign poster, might think that whoever belongs in the peripheries - be those geographical or metaphorical - will withstand whatever plan the government has without second thinking. After all, the Great Project Ring will only heavily affect those living in Tirana’s peripheries and don’t enjoy its shiny centre, while the student tariffs will affect those who are, according to Rama,  “peripheral” to the corruption-filled education system due to their low results. 

What the government forgets is that while the Albanians who are living in the shiny centre are packing their bags in search of content over appearances in other countries, the “peripheral parts of society” are becoming the vast majority which is increasingly difficult to silence, fiasco after fiasco. 

Moreover, if recent examples from France have taught anything of value is that it’s the most vulnerable, peripheral, and affected parts of society that raise for their rights when they have nothing else to lose. 

It is nice to believe that the government took a lesson from the civil protest the students put forward, after Minister of Education Lindita Nikolla came out on Thursday evening to inform students their initial request to remove fees per credit was heard and would be granted. However, chances are slim, considering the government’s strategy of putting off fires by initially backing off and then going forward with plans. 

The only thing one can hope for is for this generation of student to keep the spirit of protesting against what is wrong and demanding one’s right alive, in a country losing its middle class via the Rinas airport and delegitimizing its majority into “peripheral” parts of the society. 

 
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                    [post_date] => 2018-12-06 17:32:19
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                    [post_content] => TIRANA, Dec. 6 – US-based giant Hyatt has entered Albania where it will manage a former Sheraton hotel that in early 2018 was purchased and rebranded by an Albanian investor, filling a void in international brands managing five-star hotels in the country following Sheraton’s departure.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Why Albanians migrate

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

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

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

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

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

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

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

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

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

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

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

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

 

Reasons for coming back

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

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

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

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

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

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

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

 

A key long-term threat 

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

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

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

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

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

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

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

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

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

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

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

 

Grim Diaspora prospects

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

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

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

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

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

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

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

 
                    [post_title] => ‘Turning migration to advantage,’ experts unveil way out of one of Albania’s top threats 
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                    [post_date] => 2018-12-05 17:43:55
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                    [post_content] => TIRANA, Dec. 5 – Albania is trying to give a permanent solution to the long-standing issue of unclear property titles through legal changes which it says will bring an end to the chaos of property ownership in the country during the past quarter of a century of transition.

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

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

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

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

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

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

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

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

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

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

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

 

Coastal area land registration

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

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

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

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

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

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

 

Property tax

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

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

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

Albania’s 61 municipalities, which are going to collect the new fees either through the state-run water company or the OSHEE electricity distribution, can reduce or increase the rate by 30 percent.
                    [post_title] => Proposed legal changes target final solution to long-standing property issue 
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                    [post_date] => 2018-12-05 12:56:38
                    [post_date_gmt] => 2018-12-05 11:56:38
                    [post_content] => By Ervin Lisaku

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Permet Gliko 

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

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

 

A historic town

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

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

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

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

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

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

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

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

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

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

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

 

Oil, electricity uncertainties

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

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

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

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

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

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

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

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

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

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

 

Euro’s effect on new contracts

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

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

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

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

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

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

London-based financial institution recently said some ‘unrecorded cross-border activities’ may also be contributing to the appreciation pressures on the Albanian lek which it says reflects the ongoing de-euroisation policy initiative of the central bank in the financial sector, as well as the capital conversion of some banks.
                    [post_title] => Euro’s free fall, energy uncertainties could hit Albania’s poorly diversified exports  
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                    [post_content] => [caption id="attachment_139520" align="alignright" width="300"]Roskovec community center in Fier region, southwest Albania, turned orange. Photo: UNDP Albania Roskovec community center in Fier region, southwest Albania, turned orange. Photo: UNDP Albania[/caption]

TIRANA, Dec. 4 – Leaving behind the patriarchal mentality is the main challenge for Albania and its bid to narrow the gender gap and fight domestic and sexual violence, most of which unreported with the authorities and as a result going unpunished.

The message was unveiled this week by Albania's social protection minister as the Balkan country has joined a global movement against gender-based violence to hold 16 days of activism through awareness-raising.

“Albania's greatest challenge toward adopting European values of gender equality is changing the mentality and leaving behind the culture of men's superiority," Health and Social Protection Minister Ogerta Manastirliu has told Deutsche Welle in the local Albanian service in an interview.

The phenomenon is more common in rural areas where women are less financially independent and gender stereotypes of men as breadwinners and women as housekeepers and child-rearers still prevail, often leading to unreported domestic violence cases.

"We target the education of boys and girls as early as the pre-school education system with the principle of gender equality and implanting the concept that girls and women are part of the opportunities offered by Albania’s economic and social development and its European integration perspective. We aim at removing barriers that prevent their strengthening,” says the minister.

According to her, Albania currently has equal representation of men and women in the government, more women in Parliament and a gender quota of 50 percent at municipal councils.

“Women are represented at the police, the armed forces and in diplomacy, in professions that were earlier destined only for men. There is still a long road ahead and a lot remains to be done so that women and girls enjoy gender equality, live their lives without fear of violence and realize their potential as individuals serving public interest,”  she adds.

The minister says local government referral mechanisms to address violence against women will be extended to all 61 municipalities next year, compared to a current 39 local government units.

Earlier this year, Albania amended legislation against domestic violence by offering immediate initial protection for 48 hours to victims of domestic violence reporting with police before the case is examined by court.

 

‘Breaking the silence’

The United Nations in Albania, which has joined the Albanian tailored campaign called ‘Orange the World # Hear me Too’ says breaking the silence is the first step to transforming the culture of gender-based violence.

“We all need not only to stand in solidarity with women and girls, survivors of violence, but also to intensify our efforts to find solutions and measures to stop this preventable global scourge with a detrimental impact on women's and girls' lives and health," says Brian Williams, the UN resident coordinator in Albania.

"I appeal to each and every woman to come forward and raise their voice against violence and let their stories being heard,” he is quoted as saying by a UN statement.

Surveys show one out of three women in Albania have been affected by at least one form of gender-based violence in their lives, but only few thousand cases are reported with the authorities each year. Fear of prejudice and financial uncertainty play a key part for the phenomenon, in addition to inadequate protection which last year did not even save the life of a judge that was brutally shot dead by her ex-husband downtown Tirana.

Judge Fildes Hafizi, a mother of two, had been issued an official protection order, but it wasn’t enough to protect the 39-year-old victim from her violent ex-husband in late August 2017 when she was shot dead on a Tirana street, shocking public opinion. The late judge had told friends she was afraid for her life after her ex-spouse was released from prison for beating and threatening her.

 

Center for victims of sexual violence

With reporting sexual harassment and other forms of gender-based violence still a taboo even in urban Albanian areas, the government is planning to set up an inaugural one-stop center that will provide emergency services to victims of sexual violence in the country.

“The center for victims of sexual violence that we are setting up this year, the first of this kind in Albania, is one of the latest measures to enforce the Istanbul Convention provisions [Council of Europe Convention on preventing and combating violence against women and domestic violence]. Survivors of domestic violence will be offered professional healthcare, psychological, social, legal assistance as well as housing and employment support,” says Albania’s Social Protection Minister.

While more than a third of respondents in a survey conducted in the country’s three largest cities admit to having been at risk or exposed to sexual harassment or violence, only few cases are reported with authorities in ongoing phenomenon hampered by both fears of prejudice and lack of trust in the country’s law enforcement bodies, according to a recent survey conducted in the cities of Tirana, Durres and Fier.

“There are various reasons that stand behind this phenomenon, mostly related with harmful patriarchal traditions and gender stereotypes or myths, lack of information on where to report and ask for help especially for specific forms of violence such as sexual violence as well as lack of trust in the authorities in charge and the fear of being labelled or prejudiced,” shows a UN and Swedish government supported survey conducted by Tirana-based research company.

 

Rural area inequality

High levels of unemployment, poverty and low access to economic opportunities has strengthened the inequalities between men and women in Albania's rural areas during the last two decades of the socioeconomic and institutional transformations taking place in Albania, according to a study by the United Nations office in Albania.

Examining the economic diversification for women living in Albanian rural areas, the UN report shows women face discrimination when it comes to land rights, labor market participation, education and training, access to financial support and agriculture advisory services.

Albania’s hardline communist regime that lasted for more than four decades until the early 1990s banned land ownership and private entrepreneurship and both men and women worked for state-run enterprises or institutions under a centrally planned economy. Freedom of expression was however quite limited and religion banned for more than two decades, making Albania’s the world’s first officially atheist country.

 

Gender gap narrows

Albania climbed a huge 24 steps to rank 38th among 144 global economies and become the Western Balkans best performer in the latest Global Gender Gap, a report measuring the gap between men and women in economic participation, educational attainment, health and survival rates as well political involvement.

The 2017 rating, when Albania registered its best ever ranking 12 years after the annual World Economic Forum report was first published, was mainly dedicated to major progress in women’s political empowerment following a sharp increase in women MPs and women holding ministerial positions ahead of the mid-2017 general elections.

The report however shows Albania still has a lot to do in narrowing gender gaps in educational attainment and economic participation and opportunity.

“Gender parity is fundamental to whether and how economies and societies thrive. Ensuring the full development and appropriate deployment of half of the world’s total talent pool has a vast bearing on the growth, competitiveness and future-readiness of economies and businesses worldwide,” says the 2017 Global Gender Gap index.
                    [post_title] => Patriarchal mentality holds back Albania’s bid to fight gender-based inequality, violence 
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                    [post_content] => TIRANA, Dec. 3 – A government decision banning the import of second-hand vehicles older than 10 years and forcing them to pay all taxes for their stock of unsold cars, has been met with protests by thousands of traders who fear bankruptcy over what they call unaffordable extra costs they will have to incur and an expected sharp decline in sales due to much more expensive cars offered for sale.

While the government says the decision will curb pollution from car emissions and make the country’s vehicle fleet younger, traders claim the decision will considerably reduce the sale of second-hand cars that overwhelmingly dominate 95 percent of vehicles in the country. Traders say many of the potential buyers could no longer afford buying cars produced in the past decade and meeting at least the Euro 4 emission standards in costs starting from at least €6,000 compared to as cheap as €2,000 under no import restrictions until early December 2018.

With the ban on import of vehicles older than 10 years in force starting this week, traders have been ordered to pay all taxes for their stock of unsold cars by March 1, 2019.

While not affecting licensed cars already in use, the government decision hits dozens of thousands second-hand cars that have already been cleared through customs but have not been equipped with number plates and paid annual taxes and compulsory insurance.  Some 60,000 such cars pending sale have been handed a deadline to be equipped with number plates and pay all taxes by March 1 next year in a legal provision which traders say risks taking them to bankruptcy because of extra costs of around €300 per car at a time when their sale is not guaranteed to take place within one year.

Second-hand vehicle traders, most of whom based in the port city of Durres, some 30 km off Albania’s capital city Tirana, have been staging a series of protests in the past few weeks, calling on the government to revise its decision that negatively affects some 5,000 traders and their households relying on income from car trade.

“Few can afford buying vehicles produced in the past decade and there is no reason that licensed traders that already pay customs duties for the cars they import should pay all taxes before selling them,” say irritated traders who have warned of escalating their protests in Tirana in case the government does not withdraw its decision.

While the government could withdraw from the decision forcing traders to pay all taxes for their stock of unsold vehicles by March 2019 in a concession ahead of the upcoming June 30 local elections and as a disincentive to a possible boom in imports of second-hand vehicles in the transition period from late September when legal changes were unveiled until December 2, 2018 when they entered into force, the ban of vehicles older than 10 years, already effective starting this month, will be difficult to change because of pollution-related health and climate change concerns.

Importers of second-hand cars currently pay only 20 percent of the purchase or reference prices in customs duties since mid-2011 in a decision that eased import of second-hand cars at the expense of brand new vehicles, triggering concern by car concessionaires who have a market share of only around 5 percent in the car sale.

Due to the heavy tax burden levied on fuel, Albania already has one of Europe’s highest fuel prices, but one of the continent’s poorest income, which makes owning a car very expensive for many and more and more have been switching to cheaper liquefied petroleum gas-powered vehicles.

Albania imports around 50,000 second-hand vehicles a year, the majority of which older than ten years and not meeting the Euro 4 emission standards.

The import ban does not apply to vehicles produced until 1970 for museum, collection or humanitarian purposes. An exception is also made for smaller goods and passenger vehicles with a maximum mass of 3.5 to 5 metric tons which must not be older than 15 years before registering in Albania.

Introducing the legal initiative on Sept. 22, the World Car Free Day, Environment Minister Blendi Klosi said Albania was joining regional EU aspirant countries in banning the import of vehicles older than ten years.

Albania has been gradually applying EU norms on car emissions since late 2016 in a decision that has seen a high number of car owners install new catalytic converters to meet emission standards in order to pass their annual compulsory technical control tests.

Only 3.3 percent of vehicles circulating in the country, some 14,000, are estimated to meet Euro 5 and 6 emission standards applied in the EU since late 2009 and 2014 respectively, in a situation that significantly contributes to air pollution in the country.

Air pollution figures in Albania remain among the highest in Europe, claiming more than 2,000 lives a year in pollution-related diseases, according to a 2016 report on air quality by the European Environment Agency. Most pollution in the country is caused by vehicle emissions, but also plants and open-air waste burning.

Albania had some 535,570 vehicles in 2017 but only 421,570 underwent the compulsory technical control, according to the country’s Institute of Transportation.

The Balkan country has one of Europe’s highest death tolls from road accidents with an estimated 15 fatalities per 100,000 inhabitants. About 2,000 road accidents took place last year, with a death toll of 222, the lowest level for the past six years when data is available.

Experts blame the high number of accidents on reckless driving, poor road infrastructure and lack of road signs.
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            [post_content] => By Ervin Lisaku

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Massive business closures 

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

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

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

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

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

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

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

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

 

2019 fiscal package

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

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

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

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

Albania’s central bank has identified the much-rumored public private partnerships and the timely execution of government spending as the key threats to the 2019 budget that the ruling majority has approved.
            [post_title] => Euro’s free fall, sharp hike in business closures hit Albania government revenue
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