Year-end oil sales of €45 mln save 2016 budget from new cut

Year-end oil sales of €45 mln save 2016 budget from new cut

TIRANA, Jan. 4 – The Albanian government collected about €45 million from the sale of some 167,000 metric tons of crude oil last December in a much-needed operation as oil prices slightly picked up to $55 a barrel to avoid

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CEZ affair: Albania bought EU candidate status for €479 mln?

CEZ affair: Albania bought EU candidate status for €479 mln?

TIRANA, Dec. 29 – Prime Minister Edi Rama has for the first time admitted Albania feared a Czech Republic veto over the country’s 2014 EU candidate status bid in settling a controversial dispute with state-owned CEZ company which Albanian state

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Explore Albania! But how?

Explore Albania! But how?

By Alan Andoni* Albanians are quite rightly proud of their country’s   beaches and mountains.  Albania’s politicians  have underlined the potential of tourism that would not only bring in badly-needed foreign capital but also give the opportunity for Albanians to show

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Pre-electoral tender on new €100 mln medical lab PPP sparks outcry

Pre-electoral tender on new €100 mln medical lab PPP sparks outcry

TIRANA, Dec. 26 – Plans to award a new costly concession of about €100 million in the public health sector next February, only four months ahead of the upcoming June general elections, have sparked concerns among medical professionals, experts, the

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Constitutional Court green-lights vetting law

Constitutional Court green-lights vetting law

TIRANA, Dec. 22 – Albania’s Constitutional Court has given its seal of approval to the vetting law in a six to two vote. The vote opens the way for the justice reform to be implemented through a thorough vetting of

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Suspension sought for three elected officials over criminal records

Suspension sought for three elected officials over criminal records

TIRANA, Dec. 22 – Albania’s General Prosecutor’s Office has called for the suspension from office of two parliamentarians and a mayor over the non-disclosure of information in the framework of the decriminalization process. The elected officials did not disclose prior

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What to expect from the Albanian economy in the challenging 2017 electoral year

What to expect from the Albanian economy in the challenging 2017 electoral year

By Ervin Lisaku TIRANA, Dec. 22 – Albania is heading to 2017 with mixed expectations about a further economic recovery with almost all attention on politics as the country prepares to elect a new president and hold general elections by

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OSFA: General elections, the key threat to 2017 budget

OSFA: General elections, the key threat to 2017 budget

TIRANA, Dec. 20 – The upcoming June 18 general elections have been rated as the key threat to Albania’s public finances for 2017, according to an Open Society Foundation for Albania (OSFA) report analyzing the 2017 draft budget approved last

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Appeal judges’ wealth increased fivefold in past decade, investigation reveals

Appeal judges’ wealth increased fivefold in past decade, investigation reveals

TIRANA, Dec. 19 – The declared wealth of Court of Appeal judges has increased fivefold in the last decade, amounting to nearly $17 million, according to an investigation conducted by Voice of America in collaboration with Balkan Investigative Network (BIRN).

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Albania 2017: Elections, selections and reflections

Albania 2017: Elections, selections and reflections

The future isn’t what it used to be. Conflicts, terrorism, seismic political events and grave incidents stamped the year and are marking even these last festive days. Amidst the tumult, Albania’s small size and relative importance seems, in these dark

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                    [post_content] => TIRANA, Jan. 4 - The Albanian government collected about €45 million from the sale of some 167,000 metric tons of crude oil last December in a much-needed operation as oil prices slightly picked up to $55 a barrel to avoid a new year-end budget cut as government revenue continued underperforming even after a mid-year downward review.

The sale operation by state-run Albpetrol oil company came on Dec. 17 after two previous auctions had failed to attract interest. Porto Romano Oil, an Albanian-owned company, part of Bolv-Oil, one of the country's biggest oil operators, purchased the whole amount as a sole bidder at 70.5 percent of crude oil Brent price, including a discount of $4.12 per oil barrel in transportation and storage costs, the same as the revised price tags, according to the Public Procurement Agency. An initial Oct. 18 tender offering some 200,000 metric tons of crude oil at 72 percent of crude oil Brent price at a discount of $3.79 per oil barrel in transportation costs had failed to attract interest. Due to its poor quality and heavy refining needs, Albania's crude oil is sold at about 30 percent below crude oil Brent prices and is mainly used in road pavement.

The sale operation, one of the country's biggest in the oil industry, also apparently saved the 2016 budget from a new downward review as the government only undertook some expenditure reallocation in late December, also approving 4 billion lek (€29.3 mln) in much bigger New Year rewards for pensioners and households in need ahead of next year's general elections.

Government revenues failed to meet the target by 4 billion lek (€29 million) in the first ten months of this year as the key VAT and excise taxes continued underperforming even after a mid-year budget cut, according to latest finance ministry data.

In February 2016, Porto Romano Oil, a company that has been operating for a decade in the oil and gas and construction sector, also purchased 30,000 tonnes of crude oil from state-run Albpetrol company for $4.5 million, at an average of $24 per barrel. The low price was affected by the reference crude oil Brent price standing at a record low.

Albpetrol, whose assets are valued at €95 million following a failed privatization in early 2013, has had its liquid gas operations split under the newly established Albagaz state-run company as the major Trans Adriatic Pipeline is already in its construction stage. The state-owned company, whose privatization plans have been delayed due to the slump in oil prices, currently runs only 5 percent of the oil wells, some 1,200, while the remaining overwhelming majority is managed by foreign companies on concession contracts.

The slump in international oil prices since mid-2014 has considerably affected Albania's oil and mineral reliant exports and affected government revenue as companies have cut production and frozen new drilling plans.

Canada-based Bankers Petroleum, which had been operating in Albania for more than a decade, was fully acquired by China’s Geo Jade for C$575 million (€392 mln) in Sept. 2016.

The Albanian economy is estimated to have grown by 3.2 to 3.4 percent in 2016 and is expected to pick up to 3.8 percent in 2017 following sluggish growth rates of 1 to 2 in the past few years and a pre-crisis decade of 6 percent annually.
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                    [post_content] => TIRANA, Dec. 29 - Prime Minister Edi Rama has for the first time admitted Albania feared a Czech Republic veto over the country's 2014 EU candidate status bid in settling a controversial dispute with state-owned CEZ company which Albanian state auditors later revealed cost the Albanian state budget a staggering €479 million in damage.

Prime Minister Rama was speaking on Thursday at an opposition Democratic Party-initiated investigative parliamentary committee over the CEZ affair two and a half years after the Albanian government and the Czech energy giant reached an amicable out-of-court deal over the Albanian electricity distribution operator, former CEZ Shperndarje, current OSHEE.

Asked by opposition Democratic Party MPs if settling the CEZ dispute was a condition for the granting of the EU candidate status, Rama admitted there was a real chance the Czech Republic could use its veto to block Albania’s candidate status. Two years on, Albania has failed to open accession talks with the EU which has asked the country to make further progress on fighting corruption, organized crime and reforming the judiciary.

"It is absolutely true and I don't think there is anything to get surprised considering how the EU works, that the Czech government had a very strict position on this issue. We don't know if the Czech government would maintain this position until the last moment but there existed the opportunity that it could use its veto,” Rama said.

“I informed several EU member countries describing the Czech pressure as unacceptable and made it clear to the Czech ambassador they would not get everything back through pressure,” he added.

"Personally I talked to the Czech Prime Minister [Bohuslav Sobotka] twice, I once met him and once talked to him on the phone but personally no veto was directly mentioned to me, but I was clearly implied and I implied to them that we want a deal and pressure does not work with us because we Albanians are a bit strange,” the Prime Minister said.

Rama, who has been in office as PM since Sept. 2013 said the deal with CEZ was conditioned by the circumstances as the country risked an energy and financial collapse.

Reacting to Rama's comments at the investigative commission, former Prime Minister Sali Berisha who was in power when CEZ operated in Albania and had its licence revoked, said Rama admitted to having made the biggest robbery in Albania's history.

"Rama admitted that the international law firm had sent him a letter asking him not to directly negotiate with CEZ as Albania was bound to win the case. He admitted that he left the international lawyer out of talks for this reason. With his assertions, Rama undertook the signing of the biggest ever robbery in the history of Albania's state,” said Berisha.

CEZ managed the Albanian distribution operator for three and a half years until it had its Albania licence revoked in January 2013 under the former Democratic Party-led government after an apparent bankruptcy. CEZ entered Albania in 2009 acquiring a 76 percent stake in distribution operator for €102 million. The mid-2014 deal came just before an expected EU decision on Albania's EU candidate status could be threatened by a Czech veto.

In late 2015, Albania’s Supreme State Audit filed criminal charges against Energy Minister Damian Gjiknurki and the General State Advocate Alma Hicka over their role in the compromise solution to the dispute with a  Czech company, CEZ, which auditors said cost Albania’s state budget €479 million. The charges were recently dropped by the Supreme Court.

The Supreme State Audit said the Albanian government lost €95 million it agreed to pay to CEZ in compensation for its revoked licence and some €352 million that CEZ’s unit in Albania owed to KESH power corporation in electricity purchases and OST transmission operator in transmission fees.

The amount of €95 million is irrecoverable damage because of the recognition of undocumented obligations of which Energy Minister Gjiknuri was responsible as the head of the working group negotiating with CEZ, said the Supreme Audit.

In mid-2014, the Prime Minister Rama Socialist Party-led government agreed to pay back CEZ Euro 95 million in annual installments until 2018, an amount slightly lower to its initial investment in the Albanian distribution system, but half of the Euro 200 million CEZ had warned it would claim in international arbitration proceedings. The previous Democratic Party-led Albanian government claimed CEZ’s failure to fulfill its contract obligations over imports, investments and reducing grid losses caused the state $1 billion in damage.

Two years after the launch of an aggressive nationwide campaign to cut off illegal connections and collect hundreds of millions of euros in accumulated unpaid bills, Albania’s now state-run OSHEE electricity distribution has turned profitable while grid losses have dropped to about 28 percent.
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                    [post_content] => By Alan Andoni*

Albanians are quite rightly proud of their country’s   beaches and mountains.  Albania’s politicians  have underlined the potential of tourism that would not only bring in badly-needed foreign capital but also give the opportunity for Albanians to show off their natural hospitality.  Foreign visitors would also have a chance to experience a different Albania to that which they often read about in their press at home.

However, unfortunately, while Albanians are foreigner-friendly, Albania, or more precisely, the infrastructure of Albania,  is not.

The starting point is entering the country.  If a tourist decides to come to Albanian overland from Macedonia, Montenegro or Greece, they have to be involved in some serious detective work on the internet.  As there are no trains into Albania and a general absence of public transport,  they have to travel by private bus or, for the more grossly affluent, by taxi. Any traveller  accustomed to finding information on-line at or a bus station with a timetable, the lack of available information will deter all but those few who delight in venturing into the unknown.  The real alternative form of road transport for the tourist coming to Albania is by their own car but accompanied by a highly developed eye for random holes in the ground, eccentrically placed directions and other road drivers habitually dicing with death. By contrast, arriving by sea is easy; get on the ferry in Italy and arrive in Albania in 7 or more hours or a have short sea trip from Corfu.  It’s a pity Albania isn’t an island.

Or the traveller can fly into Albania to the one civil airport that serves the whole of the country. Although there are charter flights, the current airlines flying in to Albania have little competition and therefore the flights tend to be more expensive than routes in other European countries.  Savvy Albanians find it cheaper to fly abroad from Ohrid, Podgorice or Corfu. For foreigners,  Albania   is currently off the cheap weekend breaks circuit. Barcelona, Tallinn and Prague have nothing to fear just yet.

Lack of cheap flights is not the only barrier to travelling with ease here. While many of us may agree that it may be worth paying extra money just to come to Albania, we  would like  the powers- that-be to make an effort to make us feel more welcome.  Unfortunately,   confusion is the first reaction of the lone first-time traveller unlucky enough not to be met at the airport by someone in the know or not part of a tour group.   On arrival to land-side, they   will be greeted by taxi drivers offering to take them to Tirana. They have no way of knowing whether the price quoted is   genuine or not other than the taxi driver’s assurance that it is ‘a good price.’ What has been absent is a sign to inform   them   that there is a bus that will take them to Tirana for a tenth of the price of a taxi. The visitor can go out of the airport terminal to search for a bus but why would they? They make the assumption: no sign for a bus, therefore no bus.

Of course, they have to go to Tirana. All routes to Korçë, Durres, Shkoder or anywhere else in Albania start from there. Perhaps there is no demand for public transport from the airport to somewhere else in the country, but how would they know?

Once in Tirana the adventure continues and a lack of proper signs is a problem that dogs the traveller throughout his stay. There are now three bus stations in Tirana but there is no way of finding this out, except by coming across a local or a taxi driver who might be aware of this innovation. The station for the south west is strategically placed at the other end of Tirana to the station for the south East, which is now inexplicably wedged in at the entrance to the student village. So if the traveller gets it wrong, they have to trek across town, either by bus (which bus and where?) or by getting a taxi. The taxi driver may know where the right bus leads from.   Or they might happen to be in the right part of town and be accosted by a man who whispers ‘Fier’ or ‘Vlora’  in their  ear and takes them  down a side street to a private furgon.  In fact, travelling by private bus in Albania  appears to have  become  a more clandestine operation than buying marijuana. What the foreigner doesn’t  realise is, of course,   that   unless he happens to be psychic, in Albania public information is acquired on the grapevine which unfortunately   is not readily available to outsiders

What this means is that while Albanians are  resigned to this process  of  a haphazard discovery of simple things, foreigners are not.  In fact, apart from the young intrepid   backpackers who crave adventure,   visitors really don’t want to spend their holiday time trying to find out basic information. They might rightly argue that data on travel   routes, times and stations  can be easily available by the simple expedient of the authorities documenting them  on an easy –to-access website.  In the end, if   the authorities cannot be bothered organising the information flow (let alone a proper, relatively comfortable, transport system), then why should the foreigner bother to travel round Albania?

All these issues may seem baffling to a foreigner. For long-suffering local people who have to travel on public  transport it is just plain annoying, especially when some of their taxes presumably goes to   a ministry which should make travel in Albania less stress-free  but  has been unable to do so. It is not simply a matter of money; it is a matter of political will and doing things properly.  For sure, however, if all those with money and power (including foreigners tasked to support Albania’s development) spent a week routinely travelling by public transport instead of using their own cars, there might just be a rapid improvement.  In the meantime the same mantra and speeches about tourist potential will continue to be made but without any real strategy to join up the dots and make it  happen.

*Alan Andoni is the author of Shqiptaret para Pasqyres and the Xenophobe’s Guide to Albania.
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                    [post_content] => TIRANA, Dec. 26 - Plans to award a new costly concession of about €100 million in the public health sector next February, only four months ahead of the upcoming June general elections, have sparked concerns among medical professionals, experts, the opposition Democratic Party and even the Socialist Movement for Integration, the ruling Socialist Party's junior ally.

The concerns come as the health ministry has announced a February 15, 2017 tender to award a 10 year-concession contract to a private company that will operate the laboratory services in the country's main hospitals through public funding in return for investment in their renovation and maintenance.

The ten-year concession, the fourth controversial PPP in the health sector in the past couple of years  will cost Albanians 13 billion lek (€96.5 mln) for the next 10 years with the government having already planned 886 million lek (€6.5 mln) in payments to the concessionaire for 2017, according to the Open Procurement portal and the finance ministry. The concession will cover the key Tirana university hospital center, 12 regional hospitals and the small Saranda and Lushnja local government run hospitals.

The Association of Lab Technicians, representing some 700 professionals employed with the country's public hospitals, has protested government plans worried over lack of transparency in the concession process and their future.

Gramoz Ilias, the head of the association, has warned the concession also poses a threat to national security.

"The privatization of labs also poses a threat to national security. What happens in case of an epidemic or the concessionaire's bankruptcy? The way the health ministry is planning to award the concession is quite unique," says Ilias, adding that only special services such as investment and maintenance of labs can be considered for public-private partnerships.

"It is a concession that monopolizes the market, risks the management of public labs under a unique system and throws the country's medical lab professionals into the street. The lab and screening services are the only services to make a profit," he adds.

Economist Zef Preçi has described the concession as dangerous to the health sector.

“The concession, which the health ministry is intensively working on as also identified in the 2017 budget law, is turning into business a very important and integral health component, automatically increasing households’ compulsory payments to the health budget,” says Preçi, the head of the Albanian Center for Economic Research.

“This not only runs counter to the "Free of Charge Healthcare" slogan, but risks dozens of millions of euros being destined for this purpose. Considering the weaknesses of our regulatory institutions or lack of them in this sector, the financial risks in addition to risks in the health sector become greater," adds Preçi in an article about the proposed concession.

The opposition Democratic Party has also been severely critical of the new concession in the health sector which it has described as corruptive and abusive.

"The concession will monopolize the medical lab system, produce high unsupervised fees and put at risk the quality and transparency of the service and patients’ health," says Democratic Party MP Albana Vokshi. According to her, the concession will cost taxpayers an extra €7 million a year, compared to only €1 million currently.

The Socialist Movement for Integration, the junior coalition partners, had also expressed concerned over the concession, demanding transparency and that the concession does not receive budget support for 2017, something which was not taken into when the budget was voted.

Health Minister Ilir Beqja has assured the concession prepared with assistance by the IFC, the World Bank's private sector investment arm, will further improve the quality of medical tests.

"Labs need to be certified under EU standards, something which they currently don't have. It is a condition for the company signing a contract with us to do this in time when it expands all over Albania," Beqja said in a TV interview earlier this month.

The four PPPs in the health sector are expected to cost taxpayers an estimated 45 billion lek (€334 million), the same to the current annual government budget, from 2015 to 2026, according to data published by the Open Procurement portal.

In its 2017 budget, the government has planned to pay concessionaires in the medical check-up, dialysis, the provision of ‘surgical equipment, treatment of biological waste and the disinfection of surgical rooms,’ and the expected hospital lab services provider a total of 3.85 billion lek (€28 million).

Public-private partnerships have become a hot topic in Albanian politics after some risky concessions and warnings by international financial institutions that some 55 public-private partnerships the Albanian governments have signed during the past decade, have created commitments with a present value of about 7 percent of the GDP or €700 million in which the government will either pay the cost of the investment in installments or guarantee the revenue of concessionaires.

A multimillion-dollar concession contract awarded last year to joint venture led by an Albanian pharmaceutical distributor to offer hemodialysis services to patients suffering from kidney failure has surprisingly changed hands for only a few hundred thousand dollars, casting doubts over the transparency and efficiency of the 10-year public-private partnership just one year after its kick-off, an investigation has shown.
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                    [post_content] => TIRANA, Dec. 22 – Albania’s Constitutional Court has given its seal of approval to the vetting law in a six to two vote. The vote opens the way for the justice reform to be implemented through a thorough vetting of judges and prosecutors in an attempt to weed out corruption in the justice system.

Two weeks ago, the expert Council of Europe's Venice Commission, whose advice Albania's highest court had sought, said that it had no objections to the constitutionality of the vetting bill as well as to its accordance with international conventions.

The vetting law has caused polarization among political parties, as the ruling majority has called on the Constitutional Court to unblock the law, while the opposition insists on the violations of the law and criticized Prime Minister Rama of trying to take the justice system under his control through the reform.

Rama in turn has accused the opposition of trying to block Albania's EU integration through delaying the justice reform.

“They delayed, but they could not stop it. Now it's time to start implementing it,” Rama said on social media after hearing the vetting law court decision.

In a statement, the main opposition Democratic Party said it respects the court's ruling and agrees of the need to clean up the justice system from corruption and political influence. 
“However, the Democratic Party remains concerned that the current law will put the vetting process of judges and prosecutors under the control of the prime minister,” the Democratic Party statement added. 

The vetting law, and the justice reform part of which it is, has received generous support from European Union and United States which repeatedly have called on Albania to implement one of the most important laws of the judicial reform package.

Constitutional Court judges have also been divided on the constitutionality of the law. Some of them favored amending some of the law’s articles while others want the law to not be deformed.

“Constitutional Court has been under attack and pressure over delays in reviewing this matter. This is a very sensitive and a very important issue for the Justice Reform. It represents a key legislation besides the Constitution that paves the way to implementation of other laws. The Court will do its best to make a fair ruling,” Chairman of the Constitutional Court Bashkim Dedja said earlier this week.

Pressure from the international community, political parties and public opinion on the approval of the law has intensified as the European Union expects to set a date on the membership talks with Albania based on the implementation of the judicial reform.

 
                    [post_title] => Constitutional Court green-lights vetting law
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                    [post_date] => 2016-12-23 12:00:16
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                    [post_content] => TIRANA, Dec. 22 - Albania’s General Prosecutor's Office has called for the suspension from office of two parliamentarians and a mayor over the non-disclosure of information in the framework of the decriminalization process. 

The elected officials did not disclose prior criminal convictions, prosecutors say.

A spokesperson of the General Prosecutor’s Office said the immunity of members of parliament Dashamir Tahiri from the Party for Justice, Integration and Unity and Shkelqim Selami from the Socialist Movement for Integration along with the Socialist Party mayor of Kavaja, Elvis Rroshi, must be lifted, because the three officials failed to declare problems with the law they had had in the past.

According to officials, MP Dashamir Tahiri has not revealed his involvement in a money laundering scheme in 1995 in Foggia, Italy. Data shows that Tahiri was also convicted by the Italian court to nine months in prison for using a false driving license.

Tahiri has said he was not aware of the indictments in Italy.

In 1994, MP Shkelqim Selami was wanted by the police in Brindisi, Italy, for being involved in a criminal organization dealing with human trafficking. Twelve years later, in 2006, Selami was held in police custody in Brindisi for a week. He was released but the case against him was not closed.

The mayor of Kavaja, Elvis Rroshi, also known as Ervin Rroshi, has not declared some of his criminal past which begins in 1993 when he applied for asylum in Switzerland. He was also expelled from the country over a drug related charge. In 1995, Rroshi was convicted of gang rape in Italy. In July 1997, Rroshi entered Switzerland illegally under a different name and sought asylum for a second time, but Swiss authorities banned him again. He was also investigated for drug trafficking and distribution. During the time, Rroshi used several names, according to Albanian and Swiss law enforcement authorities.

In May this year, Rroshi, who has been mayor of Kavaja 50 kilometres from Tirana in central Albania, since 2011, resigned, becoming the first senior official to step down after the passing of the decriminalization bill that aims to free politics from people with criminal records. 

Few months later, however, Rroshi was reinstated to office, becoming a symbol, the political opposition says, of how the ruling Socialist Party works with people with criminal pasts.

In response to public and international pressure over criminals in politics, Albania approved a decriminalization bill in 2015. The law forced 1,836 politicians and 5,000 senior officials in Albania to declare their criminal past and obliged authorities to check their statements. The law excludes people that have committed serious offenses such as murder, rape and genocide from holding public office.

The law also imposes minimum periods for those convicted of lesser offenses.

According to provisions, anyone with convictions requiring jail terms of up to two years will be banned for 10 years but a government official found guilty of corruption would be banned from public office for 20 years.

Furthermore, all public service employees, from MPs to members of the state’s security forces, are subject to criminal background checks.

At least 30 MPs have resigned in the last two years, as some of them have been accused of being involved in criminal activities.

Albania became an EU candidate country in June 2014. Two years later, European Commission decided to open accession negotiations with Albania on the condition that the small Balkan country adopts constitutional amendments which pave the way for the implementation of a comprehensive judicial reform.

European Commission said that it expects from Albania to adopt the amendments in time before the next general elections next year.

Fight against organized crime is also one of the key reform areas listed by the European Commission for Tirana.

 
                    [post_title] => Suspension sought for three elected officials over criminal records
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                    [post_date] => 2016-12-23 11:47:54
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                    [post_content] => By Ervin Lisaku

TIRANA, Dec. 22 - Albania is heading to 2017 with mixed expectations about a further economic recovery with almost all attention on politics as the country prepares to elect a new president and hold general elections by next June.

A decline in exports due to oil and mineral prices at record lows, public debt at 70 percent of the GDP, credit struggling to return to positive growth rates as non-performing loans stand at 20 percent are some of the key challenges the Albanian economy will face in 2017 when the mid-year general elections could pose new fiscal risks.

The run-up to the general elections has always been accompanied by threats to public finances in Albania in the past 25 years of transition with incumbent governments sharply increasing public investments and putting at risk budget deficit and public debt targets, apparently to gain an electoral advantage.

“In the run-up to next year’s election there is a risk that the government relaxes its fiscal consolidation plans, which will lose an important anchor following the end of the country’s IMF-supported programme in February 2017. Increased political uncertainty related to next year’s parliamentary election might dampen consumption and investment,” the European Commission has warned in its latest report.

The Albanian government plans to spend some $100 million on wage increases for the public administration in the next electoral year following a three-year freeze, a move which on the one hand will increase sluggish domestic consumption, but could pose a new threat to fiscal consolidation efforts as the government targets to bring public debt down to more affordable levels of 60 percent of the GDP in the next few years.

In addition, the accumulation of a new €105 million in unpaid bills by central and local government units, equal to 1 percent of the GDP, will have a negative impact on the business climate.

Next year’s mid-June general elections, unless they go smooth, could also cause problems to the emerging tourism industry, which generates most of its income during summer vacations. The tourism industry was the best performing sector in the first three quarters of 2016 with travel income increasing by an annual 15 percent to €1.16 billion.

Another issue the government will have to tackle is further improving the business climate which although marking considerable progress in the latest Doing Business report still lags behind key regional competitors due to the high tax burden and complicated procedures to pay taxes.

The high tax burden has emerged as the key concern for the business community after the corporate income tax and the withholding tax on dividends, rents and capital gains have increased by 5 percent to 15 percent since 2014 when the ruling Socialist Party-led government abandoned the 10 percent flat tax regime.

High taxes are considered a barrier to attract foreign direct investment considering tough competition from neighboring countries applying lower tax rates.

At 36.5 percent of profit, Albania’s total tax rate is slightly lower only compared to Serbia’s 39.7 percent which is a much bigger economy. The total tax rate in other smaller regional EU aspirant economies ranges from a record low of 13 percent in Macedonia, 15.2 percent in Kosovo, 22.2 percent in Montenegro, 22.6 percent in Bosnia and Herzegovina, according to the Doing Business report.

Another phenomenon the Albanian government will have to tackle is curbing the ongoing asylum-seeking to EU countries, mainly Germany, where about 100,000 Albanians, some 3.5 percent of the current resident population, have applied for asylum in the past couple of years mainly because of poverty and lack of opportunities at home, although German authorities have made it clear chances asylum will be granted to Albanian citizens are exceptionally low after the country was designated as a safe country of origin in late 2015 following a wave of migrants as rumors spread Germany needed workers. The wave of asylum seekers continued at a slower pace even in 2016 when 12,800 Albanians filed applications with German authorities in January-September, down 71 percent compared to the first three quarters of 2015, according to a report by Germany’s Federal Office for Migration and Refugees, BAMF.

Migration, which often affects skilled workers, was the top concern for 78 percent of respondents about doing business in Albania for the next ten years, according to a survey published in the latest Global Risks Report by the World Economic Forum.

Providing security to foreign investors also remains a challenge after violence against an American-Lebanese executive last August led to a Dubai-based company withdrawing from a major tourist resort investment worth $450 million that was supposed to create 1,200 jobs by 2018 at the Gjiri i Lalzit Bay, just outside Durres, some 35 km from Tirana.

Other threats to the country's economy include the depreciation of the Europe's single currency against the national currency, with the Euro having hit a six-year low of 134.45 lek, down 4 percent compared to its average 140 lek in the past few years, further affecting the ailing-exports, two-thirds of which are destined for the Eurozone.

Possible growing cannabis cultivation could also have detrimental economic and social impacts after a sharp increase in 2016.

Experts argue the mass cannabis cultivation will have severe economic consequences for the country, including the shift of attention from the key agriculture sector, negative social impacts, the distortion to the labour market and the strengthening of the criminal economy.

Albania is closing another difficult year when economic growth is expected to pick up to 3.2 to 3.4 percent, following growth rates of 1 to 3 percent since the onset of the global financial crisis in 2009 and a pre-crisis decade of 6 percent.

The growth has mainly picked up due to a recovery in foreign direct investment led by major energy-related projects such as the Trans Adriatic Pipeline and the Devoll hydropower plant by Norway’s Statkraft while domestic consumption has been sluggish also affected by some aggressive nationwide campaigns to collect accumulated electricity bill debts and fight widespread tax evasion.

The 2017 expectations are that the country’s economy will accelerate to between 3.5 percent to 3.8 percent fuelled by the ongoing construction of the major TAP pipeline bringing Caspian gas to Europe, consumption growth and a modest recovery in top trading partners Italy and Greece, also the country’s top investors and home to about 1 million Albanian migrants who contribute to the country’s economy with the remittances they sent and investment at home.

While Albania's growth forecasts are slightly higher compared to the other EU aspirant Western Balkans countries, the country's growth needs to be far higher in order to catch up with regional competitors in terms of GDP per capita and consumption.
                    [post_title] => What to expect from the Albanian economy in the challenging 2017 electoral year
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                    [post_content] => TIRANA, Dec. 20 – The upcoming June 18 general elections have been rated as the key threat to Albania’s public finances for 2017, according to an Open Society Foundation for Albania (OSFA) report analyzing the 2017 draft budget approved last week.

OSFA experts say the upcoming general elections could negatively affect both investor and household confidence and as a result lead to lower consumption and private investment, two of the key drivers of the Albanian economy.

“2017 is accompanied by some challenges related to both risks because of the general elections and possible geopolitical and economic risks Albania is exposed to. Among the potential risks that 2017 carries is the negative effects of the upcoming general elections in investor and household expectations which can lead to lower consumption and private investment, making it more difficult for the 2017 budget to achieve the economic, social and fiscal targets for next year,” says the report.

“Other negative effects that next year's general elections could have is the impact on the performance of the public administration, especially the tax administration,” it adds.

General election years in the past 25 years of Albania’s transition have been traditionally accompanied by an increase in spending and public investment by incumbent governments apparently to gain an electoral advantage but leading to trouble in the post-election period with higher than expected deficit and public debt levels often requiring post-election budget cuts.

Commenting on the 10 billion lek (€73.4 mln) fund the government has set aside on wage and pension increases for 2017, experts say this will be a challenge.

"Under conditions of tight budget policies, the wage and pension increase policy, mainly supported by a cut in spending and failure to increase public investment, represents a quite difficult challenge in the mid and long-term,” says OSFA, part of the network of Soros Foundations.

While the budget revenue is forecast to only slightly increase by 5 percent, spending will be cut to 29.3 percent of the GDP in 2017.

“This option of achieving and maintaining fiscal consolidation could have costs in the quality of fulfilling public operations and services, transferring real problems to future periods. In the 2017 draft budget and the 2017-2019 mid-term budget, the reduction in the budget deficit and public debt has been mainly based on lower spending,” says OSFA experts.

Support to some priority sectors such as education, health, environment and agriculture from the point of view of their impact on the quality of economic growth, continues to remain at low and even critical levels.

The report also rates sluggish lending and the accumulation of new government arrears as risks to the 2017 budget.

Commenting on the five priorities the EU has set on Albania to pave the way for opening accession talks, experts say that the 2017 budget provides higher financial support to meeting requirements on the public administration, the judiciary reform, fighting corruption and organized crime, and respect of human rights and property rights.

“Analyzing the 2016 budget, one notices that in general it provides higher budget support compared to 2015 for all those institutions closely related to the implementation of the European integration priorities, except for the Ministry of European Integration, the Commissioner for the Civil Service Oversight, the Constitutional Court and the High Inspectorate for the Audit of Declaration of Assets and Conflict of Interest.”

The Albanian government has drafted a rather realistic budget for 2017 when the economy is expected to recover by 0.4 percent to 3.8 percent but several international and local developments could put the targets at risk.

In its report accompanying the 2017 draft budget, the government has identified several risks related to fluctuation in international oil prices, tobacco imports, the performance of value added tax, natural disasters and unexpected decisions related to final court decisions mainly on property cases.

The Albanian government expects revenue to increase by 6.9 percent to 376 billion lek (€2.7 bln) in 2017 and the economy to accelerate to 3.8 percent fuelled by investment and private consumption. The budget deficit is targeted to drop to 2 percent allowing public debt to slightly drop to 69.1 percent, down from a record high of 71.8 percent of the GDP in 2016.

The forecasts are slightly more optimistic compared to what other international financial institutions and the European Commission predict for the Albanian economy.

Poor social housing, education funding

Only 751 poor families out of a nationwide of 70,000 are expected to benefit from next year's modest funds of Euro 4.9 million in social housing.

"Housing is a basic need for thousands of households in Albania. Officially, there are some 35,000 households in housing need, but if the rural population and municipalities not included in the official figure are taken into account, the figure could reach 70,000 households. Most of them are poor families with limited access to public services,” says OSFA experts.

"Lack of decent and safe housing affects the health of both adults and children and makes schooling more difficult, producing poverty among generations,” they add.

OSFA experts say spending on education, which in Albania accounts for only 3 percent of the GDP compared to an average of 4 percent in other developing countries, has not been given a priority for 2017.

"The money that the 2017 state budget allocated on education cannot guarantee higher quality," they say.

The 2017 budget envisages €235 million on the pre-university school system, down €30 million compared to the education ministry's strategy. In addition, 85 percent of the budget on education for 2017 will go to paying wages and social security contributions.
                    [post_title] => OSFA: General elections, the key threat to 2017 budget
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                    [post_date] => 2016-12-23 10:49:20
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                    [post_content] => pasuriTIRANA, Dec. 19 – The declared wealth of Court of Appeal judges has increased fivefold in the last decade, amounting to nearly $17 million, according to an investigation conducted by Voice of America in collaboration with Balkan Investigative Network (BIRN).

Data provided by the High Inspectorate of Declaration and Audit of Assets and Conflict of Interests and analyzed by Balkan Investigative Network shows that the pay of these judges does not justify their wealth.

According to Voice of America, the last decade has witnessed a hike in the declared wealth of some of the judges of the Court of Appeal, raising a lot of questions as to the origins of these assets.

The figures reveal that judges in the Court of Appeal have accumulated about 2 billion lek or $17 million in real estate, business companies, bank accounts or cash.

The self declaration forms completed by the judges, show that their wealth has increased by five times in the last 11 years of their career.

At the beginning of 2004, the wealth of 81 Appeal Judges was merely $3.2 million, whereas at the beginning of 2015, their wealth and that of their relatives has jumped to $17 million. This means that in the last 11 years their wealth has increased by $10 million.

Each of the judges has boosted his or her wealth by an average of 12,000 USD each year while the maximum pay of a judge at the Appeal Court is 9,400 USD.

Almost half of the declared assets by the end of 2014, consists of investments in real estate worth 8.8 million USD. Judges have also spent about 1.5 million USD purchasing cars.

The analysis of figures obtained by the High Inspectorate of Declaration and Audit of Assets and Conflict of Interests also show that these judges have also declared a lot of debts, bank loans or even borrowed money from their family members.

Furthermore, until the end of 2014 judges of the Court of Appeal have declared about 3.8 million USD in bank liquidities, five times more than the amount declared in 2004.

Tirana Appeals Court Judge Gjin Gjoni, who is also a member of Albania’s High Council of Justice is the richest of the judges. Judge Gjoni and his family’s wealth amounts to 1.6 million USD. The list of the wealthiest judges includes the Vlora Appeals Court judge Gjinovefa Gaba, Zeqine Sollaku, Alaudin Malaj and Tirana Appeals Court judge Agim Bendo. Judges such as Lefter Jahaj, Gurali Brahimllari of the High Crimes Court, Fiqerete Mullaj, Vasil Hanxhari and Evjeni Sinoimeri who altogether own 800 million lek in assets, according to Voice of America and BIRN.

The international community has repeatedly called on Albania to fight corruption and political pressure in the justice system.

The judicial reform in Albania is not just a condition for progress towards EU accession, also represent a historic opportunity for Albania to break with its past legacy of corruption.

 

 
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                    [post_content] => The future isn’t what it used to be. Conflicts, terrorism, seismic political events and grave incidents stamped the year and are marking even these last festive days. Amidst the tumult, Albania’s small size and relative importance seems, in these dark times, almost a blessing. However the upheaval in the world order is posed to be a formidable obstacle to the country’s future path: European integration. We take a look at what is expected to happen in this corner of the Balkans in 2017, a year that is going to be first and foremost an electoral year, with all the complimentary drama and excessive media frenzy.

General elections, June 18, 2017

Elections in Albania are riddled with negative side effects: Too long of a campaign, nail-biting days of counting votes, extremely polarizing climate, exhausting media coverage. One can say that is true for many other states, even in the West. Unlike in other states though, where institutions hold to the tradition of rule of law, in Albania the electoral context threatens to consume everything that stands in its path like a hurricane. All the months leading to June shall be consumed by the ghost of the electoral reform (that is unlikely to occur), the all-directions speculation about coalitions (who is the kingmaker going to choose this time?) and the new players’ relative strengths.

The ruling majority coalition, despite shakes and stirs seems poised to face the electoral challenge together, however, with intense internal fighting over importance and key positions. The governance record of the majority is mixed. Some progress in areas like rule of law and enforcement of regulations negatively balances out with the explosion in cannabis cultivation and increase in criminality. Major electoral promises remain unfulfilled, especially in healthcare quality and employment numbers. The opposition is divided whether they should tempt the junior coalition partner once again and upset the results, however that seem less likely to happen.

Keep an eye on the implementation of the decriminalization law as scrutiny shall be exerted on the candidate lists to spot the culprits. The participation of people with criminal records and shady pasts has been a major theme throughout the year, while elections are the first real test for the effectiveness of the law or better said the will of key players to go through with it.

As for any developments in internal party democracy, the nature of the electoral candidate selection, with closed lists, shall keep the power that stands with the party leaders unchallenged, a negative mark for Albania's democracy.

The elections shall see also shifting dynamics with the southern neighbor, Greece, as the ruling coalition has recently incorporated a political party running on rhetoric that puts it at loggerhead with official Greek foreign policy.

Elections shall be observed and evaluated according also to the political criteria necessary to be fulfilled for the integration of the country. A smooth and proper elections process would mean a lot for the country going forward to the negotiations process.

Selection of a the President of the Republic

There are several scenarios on how, and, especially, when this shall happen since it is combined with the elections themselves. However, most likely the President shall be chosen from the current MPs in the incumbent Parliament. After the constitutional changes of 2008, the position of the President has suffered decline in public trust since he can be chosen at the last round by a political majority as it happened. Time will show whether this can be escaped and it will depend also on the selection of the personality. Speculations so far are feeble, some include Speaker of the Assembly Ilir Meta and some venture to say that time has come for a woman president. The process has the potential to be the reason for a full-fledged political gridlock if political forces decide to test their strength and alliances and not find common ground.

Reflection on European Integration - ‘eppur si muove’

The inner context of the European Union is at the most unfavorable point regarding enlargement with the impact of external crisis as well as the rising tide of populism crouching upon the Union at frightening speed. Realistically, Albania cannot hope for any substantial decision before spring of 2018. However, in the last days of December, Albania has gotten some positive news, acclaimed for the approval of the justice reform and encouraged to follow up on it. Despite the fact that 2017 shall see no country reports to assess progress, in the words of the Slovak presidency of the EU ‘calendar is not an obstacle” as the Council shall welcome signs of considerable progress being made, in order to then proceed with more substantial steps related to negotiations.

As the Constitutional Court approved the vetting law the day this newspaper went to print, a key component of the justice reform is now ready for implementation, and Albanians shall be holding their breath to see whether the reform shall start to be implemented or will be lost in another vortex of legal, political and even linguistic challenges.

Quo vadis economy?

The pessimistic among us say that Albanian economy is being oriented alas to the cannabis production, transportation and trafficking with a few call centers that employ the rest of the youth peppered around in big cities. The optimists shall point at international reports from the World Bank indicating better conditions of doing business and sounder fiscal profile. The realists shall conclude that no matter the situation now time has come for the country to face a crucible: define the economic priorities and the areas of competitive advantage for the country and take action accordingly. Few large investments, such as the TAP pipeline, which is expected to finish groundwork in 2017 offer a glimmer of hope, which is not enough.

Nation on the move

According to the world economic forum, Albania is among the countries with the highest percentage of its population living abroad, around 28 percent. According to a trusted civil society organization report, only in Germany, asylum seekers in the first ten months of 2016 were above 30.000! If these tendencies continue at this rate the country shall be soon hollowed out of its core: human assets, young labor force, drive for progress. Frequently mentioned the economic status does not suffice to stay, one needs hope that things shall improve, that life standards shall catch up to other European countries.

Neighbors: Gossip and breakups in the digital time

Sometimes the drama that goes on in the Balkans seems like a soap opera: quibbles, little fights, bullying, grandiose daydreaming and surprising flirts. Albania is posed to increase its positive collaboration with Serbia as two offices start their operations based in Tirana: RYCO, the Regional Youth Cooperation office as well as the Joint Chamber of Commerce between Albania and Serbia. Dubbed as the best year among the two countries so far, 2016 laid a lot of foundation work for more progress to be made in 2017. The reactions from Kosovo so far have ranged all over the love-hate spectrum, when one can expect as much also for next year.

Albania is posed for a difficult year with Greece as the emerging alliance of the ruling majority with a political force popularly referred to as the ‘Cham party' is posing a lot of dilemmas in the public rhetoric. The prime minister himself is walking a fine line between being a voice for the whole region and a champion of Albanian dignity, recently even holding post elections talks with Albanian parties in Macedonia. Much of the regional cooperation next year shall be determined also by the future development of the Berlin process, whose next in line event is the Rome Summit.

The magic of music

To end on a good note, no matter what days lie ahead, and several grey ones are foreseen, the year shall be waltzed in by a wonderful concert of classic music of the Vienna Philharmonic Ensemble, set for Jan. 2, thanks also to the engagement of the talented abroad such as violin virtuoso Shkelzen Doli. This is not, of course, “the famous Vienna Concert coming to Tirana” as marketing tricksters and politicians using culture for their own selfish narratives attempted to sell it to Albanians this month -- but it is the next best thing. According to Doli himself, more than 30 artists are traveling from Austria to wish Albanians a prosperous new year with their music. All we can hope for is that this event brings good luck to Albania because it is much needed.
                    [post_title] => Albania 2017: Elections, selections and reflections
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            [post_content] => TIRANA, Jan. 4 - The Albanian government collected about €45 million from the sale of some 167,000 metric tons of crude oil last December in a much-needed operation as oil prices slightly picked up to $55 a barrel to avoid a new year-end budget cut as government revenue continued underperforming even after a mid-year downward review.

The sale operation by state-run Albpetrol oil company came on Dec. 17 after two previous auctions had failed to attract interest. Porto Romano Oil, an Albanian-owned company, part of Bolv-Oil, one of the country's biggest oil operators, purchased the whole amount as a sole bidder at 70.5 percent of crude oil Brent price, including a discount of $4.12 per oil barrel in transportation and storage costs, the same as the revised price tags, according to the Public Procurement Agency. An initial Oct. 18 tender offering some 200,000 metric tons of crude oil at 72 percent of crude oil Brent price at a discount of $3.79 per oil barrel in transportation costs had failed to attract interest. Due to its poor quality and heavy refining needs, Albania's crude oil is sold at about 30 percent below crude oil Brent prices and is mainly used in road pavement.

The sale operation, one of the country's biggest in the oil industry, also apparently saved the 2016 budget from a new downward review as the government only undertook some expenditure reallocation in late December, also approving 4 billion lek (€29.3 mln) in much bigger New Year rewards for pensioners and households in need ahead of next year's general elections.

Government revenues failed to meet the target by 4 billion lek (€29 million) in the first ten months of this year as the key VAT and excise taxes continued underperforming even after a mid-year budget cut, according to latest finance ministry data.

In February 2016, Porto Romano Oil, a company that has been operating for a decade in the oil and gas and construction sector, also purchased 30,000 tonnes of crude oil from state-run Albpetrol company for $4.5 million, at an average of $24 per barrel. The low price was affected by the reference crude oil Brent price standing at a record low.

Albpetrol, whose assets are valued at €95 million following a failed privatization in early 2013, has had its liquid gas operations split under the newly established Albagaz state-run company as the major Trans Adriatic Pipeline is already in its construction stage. The state-owned company, whose privatization plans have been delayed due to the slump in oil prices, currently runs only 5 percent of the oil wells, some 1,200, while the remaining overwhelming majority is managed by foreign companies on concession contracts.

The slump in international oil prices since mid-2014 has considerably affected Albania's oil and mineral reliant exports and affected government revenue as companies have cut production and frozen new drilling plans.

Canada-based Bankers Petroleum, which had been operating in Albania for more than a decade, was fully acquired by China’s Geo Jade for C$575 million (€392 mln) in Sept. 2016.

The Albanian economy is estimated to have grown by 3.2 to 3.4 percent in 2016 and is expected to pick up to 3.8 percent in 2017 following sluggish growth rates of 1 to 2 in the past few years and a pre-crisis decade of 6 percent annually.
            [post_title] => Year-end oil sales of €45 mln save 2016 budget from new cut 
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