President returns debated Milot-Balldren road concession contract

Tirana Times
By Tirana Times August 8, 2019 23:26

President returns debated Milot-Balldren road concession contract

Story Highlights

  • The Albanian parliament approved during its last session amendments to the law on concessions by banning unsolicited bids in the case of road axes construction. The draft law, which was written last year, initially provided for the measure to take effect on July 1. But a proposal shortly before the parliamentary session by former Economy and Finance Minister Arben Ahmetaj postponed the deadline to 1 October.

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TIRANA, Aug. 8 – Albanian President Ilir Meta returned to parliament on Thursday a  concession contract for the construction of the 17.2-kilometer-long Milot-Balldren road, worth 256m euros, whose approval was preceded by heated debate for the high costs and doubts on the possibility of the private company ANK Ltd for its realization.

According to Meta “the Law and the Concession Contract attached are proposed, drafted, signed and adopted contrary to the principle of the rule of law. This law approves a Concession Agreement where the will of the Albanian Government in this process is formed in open opposition to the public interest and in violation of the principle of free competition and equality before the law.”

In his argument, he further states that “the contract concluded between the contracting authority and the economic operator is formalized through a process not at all transparent to the public and without a legal basis for negotiating its price”, and that “the lack of a clear economic evaluation creates a risk of threat to the state’s finances.

The President notes that “there does not appear to be a full and objective feasibility study designed and approved by the responsible state institutions charged with the law with this task”, and “no approval has been given to this project by the Ministry of Finance and Economy, requirements of the act regulating this process.” 

According to him, this project “seriously endangers the state budget, as it does not have a precise calculation of its effects on the country’s economy”. 

For Meta “the purpose of the law approval of this contract is only to cover the unlawfulness committed by the contracting authority and the Albanian government, in order to avoid liability in this process and to cover any unlawfulness through the law.” 

The Public Private Partnership formula stipulates that the works will be financed by the company itself, with the state then repaying it over a 13 year period by paying in installments. In the case of the Milot-Balldren Road, company A.K.N. shpk has stated that it will borrow 70m euros, invest 52m euros of its capital, and take 19.5m euros from suppliers. 

However, officially the company turns out to have, according to its 2018 balance sheet, a capital of just 3.4 million euros

The road includes in addition to the main axis and the construction of secondary roads, two bridges and two 850 meters long tunnels. Initially, the company had foreseen the construction of only one tunnel in its bid, while in the second phase it had undertaken the construction of another tunnel, but without claiming any additional value. In 2017, the company estimated a construction cost of € 63 million and a maintenance cost of € 3.5 million, while the following year the cost increased by more than twice, while maintenance increased by more than 5 times.

The authorities have not given any public explanation for these allegations, which have been raised more than once by the opposition, but have merely stated that the road will be of European standards, that its costs increase due to the construction of secondary roads and joint connectors, from the construction of two additional bridges and tunnels and that the cost of maintenance is calculated in the final cost.

Prior to its adoption in parliament, the Democratic Party reiterated its allegations that “with the Milot-Balldre concession, Edi Rama broke every record of corruption and clientelism. Within a year, Edi Rama has given the family of his personal friend, Ndue Kola, 526m euros or nearly 5 percent of National Production through today’s concession and the Arbri Road concession, which is being built by the same family.”

The implementation of PPP projects by the Albanian government has been viewed with concern by international institutions. On July 11, in its Business Climate Report in Albania, the US State Department stated that “the increasing use of Private Public Partnership contracts has narrowed opportunities for competition, including for foreign investors, in infrastructure and other sectors.  Poor cost-benefit analysis and lack of technical expertise in the design and monitoring of PPP contracts are ongoing concerns. By the end of 2018, the government had signed more than 200 PPP contracts.”

Concerns have also been voiced by the International Monetary Fund. In an interview with Voice of America, a few weeks ago, IMF Chief of Mission for Albania Jan Kees Martijn said that “we have emphasized that PPPs bring risks to the budget. So it is very important to make sure that when considering these projects there is a careful analysis of the value of the investment, the risk that is being undertaken and a close monitoring of the situation if these risks materialize. We have noticed that these measures have not always been implemented. We have also emphasized the need to stay away from unsolicited proposals, ie PPPs that are not proposed by the government itself but when the proposal comes from an investor.”

The Albanian parliament approved during its last session amendments to the law on concessions by banning unsolicited bids in the case of road axes construction. The draft law, which was written last year, initially provided for the measure to take effect on July 1. But a proposal shortly before the parliamentary session by former Economy and Finance Minister Arben Ahmetaj postponed the deadline to 1 October. 

It was precisely this change that prompted President Meta to return this law on Wednesday. 

 

Tirana Times
By Tirana Times August 8, 2019 23:26