TIRANA, March 14 – The Albanian government has paved the way for a new major public private partnership project as part of its ambitious €1 billion PPP program, defying warnings by international financial institutions to temporarily suspend such projects until guarantees are put in place to reduce potential risks to public finances.
The new major project is a €244 million 21-km highway linking Tirana to northern Albanian routes and comes as unsolicited bid by Gener 2, one of the country’s leading construction companies, under a proposed 10-year PPP. The Albanian-run company has been awarded an 8.5 percent bonus for its unsolicited bid, placing it at a comfortable advantage and making it an apparent winner when an international tender is held in the next few months.
In late 2017, the Albanian-owned company that won the first major PPP as part of the €1 billion project had no rivals in the international tender for the long-awaited Arbri Road linking Albania to Macedonia after it was awarded a bonus. Few months later in February 2018, the Albanian government concluded contract negotiations with Gjoka Konstruksion that is expected to invest €240 million in the Arbri Road under a 13-year PPP deal spanning from 2018 to 2031.
The two Albanian concessionaires are supposed to build the highways with their own investment in two or three years and manage and maintain them for eight to ten years in return for annual instalments paid by the Albanian government and finance part of their investment by introducing tolls.
Prime Minister Edi Rama hailed the second PPP project as very important to improve access between Tirana and northern Albania.
“The government paved the way for the second project of the Euro 1 billion reconstruction program, the Kashar-Thumane road, a segment of special importance for the road infrastructure of the Albania that we want. Faster and safer access of northern Albania to the capital city under EU standards,” Prime Minister Edi Rama posted on social media.
The proposed Thumane-Fushe Kruje-Vore-Kashar highway crosses through an industrial area with major businesses operating and links it to the so-called Highway of Nation connecting Albania to Kosovo.
Gener 2, the company that is expected to build it, also runs two shopping centers in Tirana and is engaged in two hydropower plant constructions along the Valbona River, northeaster Albania, a project that has triggered strong protests by environmentalists and local residents relying on the emerging mountain tourism there. The company has also recently announced a partnership with U.S.-based CNN giant to launch a local news channel by the end of 2018 and “bring CNN standards to the Albanian media market.”
The new PPP project comes at a time when the International Monetary Fund has warned the Albanian government to be careful with its ambitious €1 billion program, especially unsolicited bids coming from private sector companies.
Jens Reinke, the IMF resident representative in Albania, says the projected PPPs undermine efforts to reduce public debt, currently hovering at 70 percent of the GDP and posing a key threat to public finances and priority investments.
According to him, Albania must put an end to approving new concessions without a clear cost-benefit analysis, especially those coming as unsolicited bids by potential concessionaries who are awarded bonuses in tenders or engage in exclusive negotiations.
“Economically, that is the same to borrowing. The investment is immediately made with funds from the private sector and the government pays later. That’s why the whole investment or part of it must be recorded as public debt,” says the German economist who has been the IMF resident representative in Albania for about four years now.
The Washington-based lender of last resort has earlier warned Albania’s €1 billion PPP project will not only fail to bring public debt down to 60 percent by 2021, but could create hidden costs which if included in the debt stock could take it to 71 percent of the GDP, a high burden for Albania’s current stage of development.
The ambitious government PPP project is also intended to compensate for the gap that two major energy-related foreign direct investment such as the Trans Adriatic Pipeline and the Devoll hydropower plant create by the end of this year when their investment stage completes.
