April 17, new investments, prison bars

April 17, new investments, prison bars

This article has been written for Albanian Free Press newspaper and www.albanianfreepress.al

By Eduard Zaloshnja

April 17 may enter history as the day when Albania was given the green light for the start of the official EU accession talks. This date may have a big importance not only for Albanian politics, but also for the economy. And this is why.

In the past two years, economic growth in Albania (measured through the real growth of Gross Domestic Product-GDP), has revitalized. In the period 2016-2017, average quarterly growth of GDP (compared to the same quarter a year ago) was 3.6%. Meanwhile, in the period 2014-2015, average real economic growth rate was only 2.2%.

The growth of GDP has been mainly driven by private and public investments. Meanwhile, the real growth of GDP in the past two years has been on average around 3.6%, the real average gross fixed capital formation (GFCF) has been 7.5%. Private and public investments account for more than quarter of GDP.

The contribution made by the two giant projects, Trans Adriatic Pipeline (TAP) and Hydro Power Plant of Devollaccounted for more than half of the total amount of investments in the 2016-2017 period. Without these two important projects, real growth of GDP in Albania would have remained at the previous level of 2.2%.

Nonetheless, the most intensive phase of the construction works in the abovementioned projects has been completed and the private and public investments don’t seem to drive economic growth any longer. In the past two quarters of 2017, growth of GDP and the growth of investments were almost at the same level.

Upon the completion of TAP and Hydro Power Plant of Devoll, it will be hard for the Albanian economy to register a 4% GDP growth rate, which is also the short term government target. In order for this target to be reached, there needs to be a strong injection of new investments.

In fact, PM Rama is working hard to attract new private investments.

So, during a visit to Turkey, he discussed with President Erdogan about the construction of an airport in Vlora and Turkish investments in infrastructure, energy and drainage. However, the problems that were associated with the investors of the Vlora airport when they built the new airport of Istanbul, could also pose problems for the future. And the same thing may also be said about further investments expected from Turkey.

In the domestic capital market, PM Rama is trying to attract around 1 billion euros worth of investments from Albanian businesses through the Public-Private Partnership scheme. However, the IMF and World Bank have advised the government against this scheme, because according to them, the Albanian government does not yet have the necessary procedures in place for the evaluation of projects offered by different businesses.

According to IMF, any PPP project would incur a new public debt (which would have to be paid in the future with Albanian taxpayers’ money). This is why this institution suggests that the new government initially drafts a long-term master plan for public investments and then select the projects that it will implement one by one (based on the priorities set out in the master plan).

Based on the problems with the abovementioned investments, the best and the safest long-term solution for Albania would be to launch official talks for accession in the European Union. This would enable the country to attract good investments, similar to the investments attracted by other countries of Eastern Europe, after they launched their accession talks with the EU.

But, we must not forget that while the EU’s technocrats would be willing to start accession talks, politicians from different EU countries would be first willing to see Albania and Greece sign an agreement (for the solution of all pending issues) and concrete results from the implementation of the judicial reform. Above all, they may want to see the culture of impunity for politicians and other senior officials come to an end.

In other words, European politicians may want to see some senior politicians and senior officials end up behind bars…

Note: The views expressed in this article are the author’s own and do not necessarily reflect Albanian Free Press’ editorial policy