Interviewed for Albanian Free Press by Eglantina Nasi
For weeks now, the country has been engulfed by a political gridlock. Do you think that this situation may have an impact on the economic development of the country in general and on businesses in particular? If the so called “civil disobedience” starts, how will it reflect on businesses?
In fact, the Albanian economy has been in difficulty and is not launching any signals of long term recovery, even if we put the political crisis aside. Of course, any further political tension causes more difficulties for businesses and the economy. However, I would stress on the lack of competition between development alternatives. It seems that the only objective of today’s political class is how to remain or come in power, in spite of the public interest, which above all requires wellbeing. If the political crisis was accompanied by clear development alternatives and economic change, then I would praise this confrontation.
Could you offer us more details on the consequences that private companies will suffer in conditions of political uncertainties in the country?
The first clear sign is the low level of demands for loans by businesses. This indicator has been present for a while now and shows the difficult state of the economy, the fact that it has been structured in the wrong way, the fact that we have failed institutions and as a result, the low level of confidence that businesses and individuals have for the future. The outflow of Albanian money abroad continues in the absence of open markets in the country, the system of monopolies and oligopolies in strategic sectors of the economy and finance, etc, are enough to see that the banking system alone has invested abroad around 700 million USD and around 400 thousand Albanians have either left the country or are trying to emigrate. This makes us realize the bitter economic truth and above all, the fact that hope has been killed for people and businesses.
Does Konfindustria have information on the interest of foreign investors to invest in Albania? Are they more reluctant than before or are there any changes in this aspect?
The clear drop in the number of foreign investors coming to the country is another indicator of the difficult economic situation in the country. This doesn’t necessarily relate to the recent political crisis, which will aggravate the situation even more. According to Konfindustria’s Research Center, in 2016 we have a drop of over 40% of the number of investors who have expressed their interest, compared to the same period of 2015.
Italy has recently started to implement plan B for call center businesses. In your opinion, what will be the impact on the Albanian economy? What more could our state have done to prevent this situation? Did it do enough?
The situation is delicate, because on one hand, Italy has openly violated the principles of free trade, the rules of the World Trade Organization and Albania’s agreements with the EU as a candidate country. On the other hand, Italy is Albania’s main economic partner. Here, we can also add clear political interests. If this issue was handled in the economic and commercial point of view, the Albanian state should have been more determined and professional. Stopping the import of call center services from Albania is the same as introducing special extra taxes for Made in Italy goods for the Albanian market in order to protect domestic products.
The new minimum salary has been enacted. What will be its real impact on businesses of the country?
The timing and the way the government takes such actions is more serious than the impact of the rising costs for businesses. First of all, in principle, the salaries are decided by the market and secondly, the fact that this decision was taken prior to the elections is an entirely political decision. In this case, the government has a double benefit, because it is hoping to benefit politically and at the same time, increase revenues in the budget as a result of the increase of health and social contributions. Ultimately, the costs are paid by businesses and people. Some sectors even risk their existence or embrace informality as a way to survive.
The application of the latest tax amnesty started ahead of the electoral campaign. How would you comment it?
Tax amnesties in Albania happen on a regular basis regardless or the party which is in power before the elections. As such, they have a clear political objective. In essence, they should be considered as a “pain relief”, but unable to cure the cause of the illness, which pardons 900 million USD worth of taxes. The reason for these debts relates to the inability of individuals and businesses to pay these taxes and not to the lack of desire. The true causes relate to the difficult economic situation and the bad tax policies followed throughout the years. An amnesty which is not associated with deep surgical interventions with the aim of curing the illness, but only associated by “narcosis” to temporarily offer pain relief, is not only wrong, but also damaging, because it encourages businesses and people to embrace informality and result in serious blows against honest competition.
Do you have a comment on the four year term in office of the left wing government? What were the reforms, which, according to you, helped the business sector and which ones didn’t? What more could have been done?
We have supported the good management of the electric energy sector and the administrative territorial reform. The other part of this government relating to the economy, has been a failure. The consequences are being felt today, but they will be felt even more tomorrow if no drastic changes are introduced in governing policies. Here, we can mention the tax policies, which have been completely wrong, backed by an increase of taxes, at a time when the economy is weak, competition in other countries is high and strategic sectors of the economy are being monopolized. We must also mention the proceeds of illegal economy, generated through the cultivation of cannabis. We are unable to offer details on the value of the latter, but it has had an impact on keeping consumption at a certain level and an impact on the agroindustry and construction sector. Of course, the engagement of many farmers and the allocation of capitals for the production of cannabis is a big threat for the development of the economy of the country. But, we also have the threat that this poses on the democracy and social stability.
How is the trend of direct foreign investments in our country? Can you offer us some figures that indicate their recent performance?
The inflow of direct foreign investments in Albania has preserved a positive growing trend throughout the years. For 2015, referring to the data of the Bank of Albania, Albania has attracted more foreign investors compared to last year, thus preserving this trend. From a value of 869 million euros in 2014, the value of foreign investments in 2015 was 890 million euros. For 2015, we have a growth of 21 million euros or +2.4% compared to 2014, covering 11.6% of the GDP. For the third quarter of 2016, the value of foreign direct investments was 286 million euros, 12% or 255 million euros more compared to the same period in 2015 and 10% more compared to the second quarter and 85% more compared to the first quarter of 2016. As far as investment stock is concerned, in 2015 it registered a growth of 9.6% compared to the previous year, amounting to 5.005 million euros, as opposed to 4.564 million euros in 2014.
On the other hand, do you have any numbers relating to the foreign investors who have left Albania? Let us recall the case of the Lebanese who was brutally aggressed for his investment in the Lalez Bay. How is this trend? Why do foreign investors leave our country? Have they suspended potential investments or caused consequences for the economy of the country?
Such cases are isolated.