By Fatos à‡oà§oli
There are six road segments, a regional hospital in Fier and five schools in Tirana that the Albanian government is planning to build under the public private partnership approach and their contracts for this year, worth about €1 billion. Most of them, if not all of them, under unsolicited proposals, i.e. avoiding competition. Even though the International Monetary Fund has strongly advised of eliminating the practice of unsolicited proposals, the Albanian economy and finance minister has said the government will accept unsolicited proposals until 2021.
With the completion of this year or by next year of two major investments, the Trans Adriatic Pipeline and two hydropower plants along the Devoll River, Albania finds itself in a situation when for the 2018-2019 period there will be €200 million less in foreign direct investment each year.
This €400 million gap has to be filled by all means, because otherwise, it will not only be new jobs that will suffer, but also many vital indicators in the fragile equilibrium of the Albanian economy will deteriorate. For this reason (maybe many other untold ones), the government has opted not to abide by IMF’s advice. The government is no longer in its desperate need for IMF funds as it was in autumn 2013 when it found the state budget in ruins. The government can now maneuver.
But this swerve could cost us and the next generation of our children dearly. PPPs are not like simple concessions. They bear risks, which in case of failing, the government will have to pay with taxpayer money. Only for 2017, the state budget spent through taxpayer money €57 million to pay off obligations for the existing PPPs. This year’s figure has dangerously increased to €70 million as PPPs increased to 12, up from a previous eight. The new projects include the construction of the Arbri Road, the ‘Nation’s Highway’ maintenance concession, the construction of the Tirana incinerator and the construction of six schools in the Tirana Municipality territory.
The construction of six schools under this formula in Zagreb 11 years ago, cost six times more than it would have cost the state budget and the Croatians are now mourning the wasted money. The fiscal rule is that if you pay more than 5 percent of the previous year’s tax revenue to pay off PPPs, then a real danger is present. To date, we are paying half of this amount, €57 million, and the government can still signs PPPs.
But if they are not transparently contracted, under thorough studies and forecasts, we risk paying an extra 10-fold in the upcoming years, quite irresponsibly burdening our children’s future with an almost bankrupt government because of debts to the private sector. That means cutting off our nose to spite our face. This €1 billion investment based on this year’s PPPs will be a really tough battle. (Translated from Albanian, originally published on ekonomix.al portal)
