TIRANA, Feb. 19 – With concessions becoming a hot topic in Albania’s politics, the Socialist Movement for Integration, the junior ally of the ruling Socialists, has proposed some legal changes to increase the transparency of such partnerships by thoroughly analyzing them and increasing the number of stakeholders in the decision-making process, including Parliament.
In a draft law submitted to Parliament, the Socialist Movement for Integration, proposes the introduction of the “alternative evaluation” concept that will involve a series government stakeholders, including the contracting authority, the finance and economy ministries and the state advocate’s office in the preliminary assessment of feasibility studies to determine if the concession or public private partnership (PPP) is a better alternative compared to a public procurement contract. The changes envisage the contracting authority cannot continue procedures unless the proposed PPPs are evaluated as economically viable by these stakeholders.
Other important changes include the involvement of the Albanian Parliament in the approval of PPPs whose term exceeds four years, the same as the mandate of a majority from general elections, in a bid to seek cross-party consensus.
Opposition parties have often threatened they will cancel or review PPPs once they come to power, but failed to challenge them in international arbitration courts in most of the cases because of the investor being protected under contract.
“Concession contracts with a term of more than 4 years go beyond the political mandates of ruling majorities and as such impose long-term political responsibility and the obligation of their fair implementation despite changes of a political character,” says the bill submitted by SMI MPs.
The newly proposed changes also limit the term of concession contracts to 35 years and make approval by Parliament compulsory.
The proposed amendments come after Parliament Speaker and SMI leader Ilir Meta recently urged legal changes increasing their transparency and assessing their economic viability.
“There is no problem with concessions or PPPs as a concept or instrument, but with the compulsory transparency we should better envisage in legislation enabling the government to have a full analysis of their advantages and the benefits of the economy and society before approving them,” Meta told Ora News TV in a recent interview.
“At the moment when they go beyond the mandate of a government they have to be approved by Parliament,” he added.
The Socialist Movement for Integration has emerged as a kingmaker in the last two general elections, governing with both the Democrats in 2009-2013 and currently with the Socialists.
The amendments also come at a time when the International Monetary Fund has recently warned Albania faces a variety of significant fiscal risks from concession commitments of about 7 percent of the GDP. In a fiscal transparency evaluation report, the IMF warned 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.
Three new concessions, including the key value added tax, that the Albanian government is mulling over have sparked debates in Albania over the transparency and benefits of such public-private partnerships considering the country’s troubled experience with similar contracts.
Following the announcement of plans to award a concession on a new electronic platform on VAT collection, the Albanian government is also considering public-private partnerships on property tax collection and electronic number plates.
The Tirana airport, managed by the TIA concessionaire under a 20-year concession contract, is perhaps the clearest example of the concession monopolies affecting Albanians who face the region’s highest ticket prices. The Albanian government has been negotiating with the concessionaire to lift its exclusive rights on international flights for several years but failed to reach a deal that would pave the way to the construction and operation of new airports and reduce current ticket prices.
Experts and airline carriers blame the situation on the high tariffs charged by the Tirana International Airport (TIA) concessionaire, which has been in charge of the airport since April 2005 under a 20-year concession contract.
Risky concessions
In a recent fiscal transparency evaluation report, the International Monetary Fund describes hydropower plants, the Tirana airport and the latest customs scanning and health check-up service concessions as risky public-private partnerships.
“The government’s electricity-generation company, KESH, has entered into contracts with hydropower producers with payments worth 4 percent of GDP. Tirana airport is operated under a 20-year concession that began in 2005, in which the concessionaire benefits from a 9 million euro guarantee and a monopoly over the landing and departure of international flights. There are also contracts for a scanning service (2 percent of GDP), a national health-checkup service (1 percent of GDP), and a waste-management project at Elbasan,” notes the report.
Many new projects are being undertaken or planned, including for the Milot-Morinà« and Arbà«ri
toll roads, the last project having an estimated cost of 2 percent of GDP, says the IMF.
In a recent letter to the IMF, the Albanian government says it will work to establish a ministry of finance unit that will evaluate PPP fiscal risks, propose measures to investigate them and provide risk assessment to be included in budget document submissions to Parliament. “By end-2016, this unit will assess the risk stemming from all active PPP and concession contracts and from local government arrears, and will consider whether to quantify these risks in our fiscal account,” says the Albanian government in its letter to the IMF which has provided a 3-year €331 million loan.
“Regarding a PPP for the VAT collection enhancement system, we will undertake a value-for-money analysis before entering into a tender, and any related decisions will be taken in consultation with IMF staff,” adds the government.
