Concessions are spiraling out of the state’s control, Supreme State Audit reports

Tirana Times
By Tirana Times October 22, 2019 11:39

Concessions are spiraling out of the state’s control, Supreme State Audit reports

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  • For the next 15 years (2019-2032), the government will be engaging in several projects for which it has to pay a total of 2 billion euros collected through taxpayers' money.

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TIRANA, Oct. 22 – In its 2018 Factual Budget report, the Albanian Supreme State Audit Institution (KLSH) stated that “so far, the monitoring process of concessionary contracts has been out of the state’s control and has faced many complications, questioning the overall quality of the contract preparation and measurable indicators on service monitoring for which these contracts were signed.”  However the KLSH also pointed out that during 2018, the payment deadlines for concessions were generally respected in proportion to tax revenue.  

Article 4/2 on ‘Minimization of risk for extra-budgetary actions’ of law no. 9936, on 26.06.2008 ‘For the management of the budget system in the Republic of Albania’, states that “the overall amount of annual net payments made by the general governance units out of concessionary contracts or Public-Private Partnerships (PPP) must not surpass the 5 percent limit of the previous year’s factual tax revenue. In case this limit is exceeded, the Council of Ministers takes corrective measures through the revenue budget in order to set the payments back within the permitted limit in the following two years.” The KLSH  considered it mandatory that this limit is respected throughout the duration of the concessionary/PPPs contracts in the following years, on the basis of accurately projected cash flow, in order to fairly assess the implementation of the limit for new concessionary/PPPs contracts. 

In regard to the outflows of respective projects for each year, selected for auditing in the Concessions Directorate in the Ministry of Finance and Economy, differences were found towards the reflected values in respect of the 5 percent limit. These issues involved the lack of outflow quantification of the State Budget for the management of risks undertaken by the public sector and simultaneously of all VAT or expropriation costs. The KLSH pointed out the need to focus on the income growth rate in respect of the 5 percent limit during the concessionary period. It also expressed concern for the impact that PPPs will have on the level of public debt, stressing that the monitoring procedure of the debt indicator should be implemented, considering the budgetary implications associated with concessions/PPPs. “In this way, each concessionary contract is a contract that involves inflows and outflows for several years, for which funding of the project is needed. As regards to current data linked to 15 concessionary contracts, it appears that some of them, in reference to the classification standards in or out of the government balance sheet, have an impact on the debt indicators. Therefore, the financial costs of these projects should be taken into consideration during the planning and implementation of debt indicators, despite the fact that the Ministry of Finance and Economy does not give out reports in accordance with the right international standards which require these contracts to be included in the debt stock report.” the KLSH added.

A future of concessions

This report comes at a time in which the government has undertaken many Public Private Partnerships (PPP) projects. For the next 15 years (2019-2032), the government will be engaging in several projects for which it has to pay a total of 2 billion euros collected through taxpayers’ money. Payments will double in the four upcoming years, reaching their peak in 2022, but eventually diminishing later on. Regarding this year’s concessions, the expected payment of 102 million euros is predicted to reach 188 million euros in 2024 and later fall back at 95 million euros in 2032.

After this year, the only concession which will continue to be paid for through the budget is that of the incinerator in Tirana, at 166 million euros per year until 2041. The total number of approved concessionary contracts is 14, with four  of the following road projects taking up 60 percent of them: Thumanë – Vorë, Orikum – Dukat, Milot – Balldren and Arbër Road.

Besides roads, the government’s main focus has also been on seaports; concessions were recently granted for the Port of Limion in Sarandë and Port of yachts in the Cape of Rodon. The former was granted to the joint venture of ‘Kastrati’ and ‘Edil Al’ while the latter was given out to another joint venture between ‘Praslin Investment’ sh.p.k. and ‘R&T’. However, this could mean more trouble for the Albanian government as this is not the first time that concessions involving natural resources were granted to big corporates. During the last few years, HPP concessions such as those in Valbona and Vjosa rivers, were deemed as controversial, sparking debate about the ecological issues that could arise from them. The government has been subject to criticism by the EU Court of Auditors and European Network on Debt and Development, for the lack of environmental impact assessments as well as the European Commission which has recommended focusing on addressing ecological and social considerations.

 

Tirana Times
By Tirana Times October 22, 2019 11:39