TIRANA, March 30 – The Chinese are targeting big business in Albania. As the economic giant adjusts to a new normal following strong double-digit growth, Chinese companies have already targeted the oil industry in Albania and most recently are reported to be in talks over taking over the country’s sole international airport.
If completed the deals would increase China’s presence as a foreign investor in Albania from almost zero to more than half a billion euros making China among the country’s top foreign investors at a time when the emerging superpower is already emerging as the country’s second largest trading partner.
Citing government sources, local media reported this week a Chinese company has offered to take over the Tirana International Airport while the consortium has reportedly declined to comment on the possible transaction. The negotiations come at a time when the concessionaire is already concluding talks with the Albanian government to relinquish its exclusive rights on international flights in exchange for an extension of the original 20-year build-operate-transfer concession awarded in 2004.
Few days ago, Canada-based Bankers Petroleum signed a preliminary deal with China’s Geo-Jade Petroleum Corporation to sell its major Albania assets and a newly acquired minor oil block in Hungary for a reported C$575 million (€392 mln). The surprise announcement came as the country’s biggest oil producer has recently been facing tough times after more than a decade of operations in Albania due to a sharp cut in international oil prices and tax and environmental disputes with the Albanian government.
The Albanian government has been negotiating with the TIA concessionaire over the past couple of years over lifting its exclusive rights on international flights that would pave the way for the construction and operation of new airports and reduce current ticket prices, estimated among the region’s highest. 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.
The deal would activate the new United Arab Emirates-funded Kukes airport in north-eastern Albania and the construction of a new airport in southern Albania serving the tourism industry.
With ten years having already operated TIA, the concessionaire retains the exclusiveness of international flights in Albania which is barrier for the opening of new airports in Albania.
Since April 2005, the airport has been managed by TIA, a consortium led by Germany’s Hochtief AirPort GmbH (HTA), one of the leading private airport investors in the world, which won a 20-year concession to be in charge of the airport’s activities.
However, in May 2013, Germany’s Hochtief, which had majority stakes in leading airports in five countries, including Albania’s Tirana International Airport (TIA) sold its shares to Canada’s Public Sector Pension Investment Board (PSP Investments) for Euro 1.5 billion.
The consortium’s shareholders now include AviAlliance GmbH, a subsidiary of Canada-based PSP Investments with 47 percent, Germany’s DEG with 31.7 percent and the Albanian-American Enterprise Fund with a 21.3 percent stake.
Passenger numbers at Albania’s sole international airport, slightly recovered for a second year in a row in 2014 but stood below their peak level in 2011 soon after Albania was granted visa free travel. Passenger numbers at TIA slightly rose by 3 percent to 1.81 million in 2014, but were down by 0.4 percent or 6,770 passengers compared to the airport’s most successful performance in 2011 soon after the visa regime in Schengen area was lifted for Albanians in December 2010.
State statistical institute, INSTAT, says the airport handled some 2 million passengers in 2015.
Some 14 airline companies operate in Tirana, all of which foreign-owned, linking Tirana to 22 foreign destinations through direct flights, mainly Italy. In late 2013, Albanian-owned Belle Air airliner which had a market share of about 50 percent went bankrupt, paving the way to Italy’s Alitalia and its Air One subsidiary to gain control of the Albanian air transport market.
Since 2005, the consortium has invested more than €70 million in the airport’s reconstruction and expansion including a new terminal. The consortium employs some 275 people.
Chinese projects in Albania
The expected private sector deals in the oil and airport industries come at a time when the Albanian government has failed to reach a final concession agreement with China State Construction Engineering Corporation over the completion of the Arbri road linking Albania to Macedonia.
Last February, the Albanian government invalidated a bid by a Chinese company to build an industrial park outside Durres, the country’s second largest city, that was supposed to attract a billion dollar in investment and create dozens of thousands of jobs.
A consortium composed of China’s Zhejiang Haiteng Investment Co., Ltd and Bejing Dongrun Tongbao Technology Co. Ltd. had emerged as the frontrunner in the tender held last October after bidding to invest $1.5 billion in the Spitalla technical and economic development area and create 90,000 jobs. However, the economy development ministry turned the bid down because of irregularities and lack of appropriate documentation in the submitted proposal. The bids evaluation commission found the consortium lacked the technical capacities and there were uncertainties about the proposed amount of investment and its financing.
Another Chinese company is also rumored to be a frontrunner in the government’s controversial initiative to award a 10-year concession on the value added tax, the country’s key tax levied at a fixed 20 percent rate on almost all goods and services and accounting for about a third of total government revenue.
Back in 2014, a consortium led by China’s biggest copper producer bought a 50 percent stake in Turkey’s Nesko Metal Sanayi ve Ticaret’s Albanian mining operations for $65 million. However, the Turkish-Chinese consortium operating the copper plant in the northern Albanian district of Puka announced last September the suspension of its activity for one year due to a sharp decline in international prices, leaving hundreds of workers jobless.
Albania’s ties with China date back to the 1960s under communism when China was Albania’s key ally until the late 1970s.
