Mediterranean Investments: the opportunities of Albania

  • 27 June 2015

Today Albania is a very different country from what it was twenty-three years ago, when ended the Socialist Republic of Albania. In recent times, in fact, the Land of the Eagles is pursuing economic development particularly intense, managing to attract a growing amount of foreign investment.

Undoubtedly, there are two positive factors that play in favour of the Albanian economy: the low level of taxation, and the low cost of labour. Other features that attract foreign workers are, on the one hand, the demand for skilled labour is still high, the other, the geographical location: the Albanian market is geographically close to Europe, this allows us to reduce costs related to transport of the products to commercialize throughout the area.

Today Albania is also a candidate as a member of the European Union, however, despite the progress has been significant, the path of reform is still long. The country, in fact, not only needs modernization, but also it needs concrete action to combat corruption (a plague that still marks this country), illegal construction (the government has knocked down dozens of buildings in the seaside resorts of the south) and the amount of common (which must be reduced from the current 300 to 60).

The issue of corruption is intersected, however, with a social structure where the family is central and the parental bond is sacred. There is a visceral relationship with the family, so it is unthinkable for an Albanian who holds an important role not hire a relative. In addition, an ancient code, called kanun, passed orally, provides that the tribe is governed by a council of elders, custodians of justice. This code represents the tradition of the Albanian people and, therefore, of parental ties remains important and reforms difficult to implement.

In its latest report, the European Commission has analyzed in detail the Albanian economy. The overall assessment is positive, although the Commission has suggested some strategies to be implemented to achieve the economic standards required.

Europe provides, in fact, a positive trend of growth of the Albanian economy (3% in 2015, 4% in 2016 and 4.5% in 2017) and a fall in unemployment. However, data on public debt are not positive: the values ​​are high, even if you highlight an effort for its gradual reduction.

In the analysis of the Commission there was an improvement in the climate of economic confidence and good payment terms to businesses, thanks to the government’s decision to liquidate obligations arrears. As regards foreign investment, also, for the period 2015-2017 it is expected to grow, primarily in the energy sector. The banking system is a positive, although it emphasizes the need of solving the problems of bad loans. The report welcomes the efforts of the Albanian Government, as part of the program with the IMF; it also calls for further progress in structural reforms.

Noteworthy is also the new partnership program with the Albania that the Executive Committee of the World Bank has approved for the period 2015-2019, in which it is expected the provision of loans of up to $ 1.2 billion and which has as its objectives:

–          Support for the improvement of fiscal sustainability

–          Strengthen the capacity of public administration in the management of public investment in transport

–          Increase financial stability

–          Improvement of business climate

–          Development of sustainable tourism

–          Increase the quality and efficiency of electricity supply

–          Digitization of registration of real estate

–          Increase the productivity of land

–          Increase the efficiency of public services

–          Increase in equity and the provision of social protection services

–          Increase the efficiency and delivery of health services

–          Improving public services of aqueducts channelling.

Analyzed the different sectors of the Albanian economy it is possible to identify four areas where it should invest:

1. Energy and Gas

A major goal of the Albanian government is the development and modernization of the energy sector, which today is based in part on the investments made by the communist regime.

Albania can boast a huge hydroelectric potential, positioning in Europe behind only Norway and Switzerland.

This area offers great space for export to the country of know-how, machinery electromechanical energy production and electrical equipment and software for plant management. The Albanian government has also approved in 2014 the draft law providing for the inclusion of a fund for renewable energy, so as to increase investment in this area.

Albania is rich mainly chromium, copper, nickel and coal and has significant untapped deposits of bauxite, phosphate and significant reserves stone used in the construction industry.

Among the objectives of the Government to turn Albania into a producer of top-class also includes plans for the construction of nuclear power plants to generate energy.

The country has oil reserves (estimated at about 550 million tonnes) but not maximally exploited. Foreign investments in Albania should revitalize the capacity in the oil industry, in particular equipment and spare parts, as well as the modernization of industrial processes, communications, transport, environmental technologies and equipment.

Given the need to improve and modernize the sector in order to attract foreign investment and to ensure the country’s development.

2. Textiles

The textile and clothing sector is one of the sectors most successful investments in Albania and the main source of employment in the manufacturing sector. Based on a strong tradition of post-war active in the production of garments, from the privatization of the 90’s many local companies have established a solid reputation while foreign companies have significantly increased their share of production in the sector, particularly in the processing for export.

The long tradition of manufacturing and textile manufacturing and the low cost of labour have given Albania a strong power of attraction for foreign investors.

More favourable factors are the exemption from VAT and customs duties to 100% of the re-exported products, the proximity to Italy, Greece and the Balkan countries, the presence of a flexible workforce and able to adapt to new technologies and international standards of quality, the ability to produce small orders in respect of short delivery times, lower transportation costs thanks to the privileged geographical position of Albania.

The relocation of manufacturing firms abroad in Albania began in the 90s and has since then always been on the rise. The import and export of semi-finished products have a key role in the trade balance of the country. Recently, however, this sector has suffered from the negative effects of the global economic crisis, a decrease in demand and the number of contracts, particularly for companies that operate in partnership with the Greek and Italian companies.

3. Tourist flows

The tourism sector is an important sector for economic development of the country. Albania has in fact parts of the coast still largely unspoiled and cultural sites of great importance as the sanctuary of Butrint and Apollonia. The city of Berat and Gjirokastra, already recognized as a world heritage by UNESCO, in the syllabuses of several European tour operators. Also the area of ​​the North offers attractive growth potential for mountain tourism. Currently, the areas of greatest tourist development are primarily those on the coast around Durres in Albania and southern city of Vlora and Saranda. In addition, several critical issues continue to hamper sector development and foreign investment, so that today the service the tourist Albanians is much less than what a foreign tourist can find in neighbouring Greece and Montenegro and all tourist entrepreneurship facilities are handled privately outside of plans. Among the problems facing the sector they are cited those related to the certainty of property titles, the lack of infrastructure, the widespread illegal, inadequate treatment systems and water purification with serious environmental effects, particularly on the coast, but also the persistent problems related to the supply of electricity.

In the near future it is expected a sharp increase in requests for concessions on the part of foreign investors towards the coastal areas of Albania for the construction of “resorts and spas”, operating throughout the year and also for tourism elite. The sectors are the most attractive housing infrastructure, the increase and modernization of local residences based on the architecture, the resorts in the vicinity of residential areas, the external infrastructure such as swimming pools, gyms, etc. Albania may well take advantage of the opportunities offered by marine and recreational tourism.

Incentives in the tourism sector were introduced in 1993 with the Law “For the development of tourist areas” article 7, nr. 7665/1993. Such incentives are determined on the basis of a special status, designed for investors operating in the tourism sector -designate as “privileged subjects.” Investors who have this status are exempted from customs duties and excise duties on imported goods from taxes on profits for five years since completion of the development phase of the investment, and are also beneficiaries of a tax on profits up to 40% , provided that the profits are reinvested in Albania.

4. Construction

Improving physical infrastructure is one of the main objectives that the Albanian government will set us for the future. This sector has been given special attention by the assignment of most national and international funding for the achievement of objectives such as: the creation of an integrated road infrastructure in the national, regional and pan-European; the improvement of railway infrastructure and its integration into the regional and European network; improving the quality of services in sea ports by increasing infrastructure investment.

The road network of the country is about 18,000 km long and is particularly obsolete due to poor maintenance and the large increase in car traffic in recent years. Only 32% of the Albanian road network is paved. In this context, the Government has launched and completed in the many projects and initiatives planned or in progress in the road sector.

The Albanian government has provided promotional and study also in favour of the port sector for the benefit mainly of large retailers who, in Albania, is doing now by leaps and bounds. Finally, in the medium to long term, there may be investment opportunities in the context of the necessary work of modernization of the inadequate sewage system and aqueducts and the still more precarious state planning of various Albanian cities.

Another opportunity for foreign investors shall divide in July this year: Investors of free economic zones will have a series of fiscal and procedural. Who will invest in “Zone of technology and economic development” will be excluded for the first 5 years following payment of 50% of normal profit and 20% of the expenses they will be recognized as deductible expenses. The legislative amendments also provide for the exclusion from the tax impact of infrastructure, the tax of real estate for the first 5 years and set the transition of property rights for real estate.

In addition, the costs of salaries and contributions, will be recognized at 150% for the first fiscal year of the financial year. For the first ten years of starting the costs of training of employees in the areas of technology and economic development, following the calculation of the taxable profit will be recognized as expenses in the taxable period with twice the value. The costs of scientific research and development will be recognized as an expense with twice the value, also for the first ten years.

 

Turkish elections: a change is coming

  • 14 June 2015

On June 7th, Turkish people were called to vote for a new Parliament. The Islamic party of President Erdoğan, the AKP, is still remains the first Turkish Party (with 41.2%, and 259 seats out of 550), but AKP loses its absolute majority in parliament since 2002. It has lost eight points, seventy seats and three million of votes compared to 2011. This result is primarily a defeat for Recep Tayyip Erdoğan, who had asked voters a majority of 330 deputies out of 550 to change the constitution and introducing rules super presidential, to give him full powers. The reason may lie in the choices made by the President, who, as a consequence of the revolt of Gezi Park and the bribery scandal in the Bosporus two years ago, imposed to the country a strict and authoritarian Islamic policy.

As far as concern the exit poll the statements were very clear: “Turkey has a democratic revolution” -says the Hurriyet columnist Yusuf Kanli. “The Turks have rejected the super presidency Erdoğan, an Islamic dictatorship” – says the opposition. Kanli had warned before the vote that he was “the last exit before the dictatorship”.

The financial markets reaction to the electoral earthquake was not the best. The day after the voting the Istanbul Stock Exchange opened down sharply by 8.2% and the Turkish lira has fallen by 5%, so that the Turkish central bank has practiced cuts in the interest rates of deposits in euro and dollar to curb the depreciation of the national currency.

The scenario that has been created following the elections is as follows: The AKP, Erdoğan’s party, came in at 41.2% -against 49% of the 2011- and gets only a simple majority in Parliament. The CHP is the second largest party in the country, with 25.3% and 131 seats. The HDP has reached 12.3% thus winning 79 deputies in Parliament. In addition to the Kurds, including the ultra-nationalist Devlet Bahceli, the MHP, has got it through to 16.6% with 81 seats, thirty-two more than in 2011.

The parliament, therefore, as a result of these findings, it is very different from the previous elections, because the elected women are 97 (in the last year were 79), there will be 3 Armenian Christians deputies, 2 Yazidis, an Assyrian and, for the first time, a rom. There is a Meclis more diverse and more representative, therefore, as with the entry of the Kurds 95% of voters will be represented.

All analysts agree that the real phenomenon of this election is the Turkish party Selahattin Demirtas, libertarian, based on full gender equality and Kurdish. The HDP was established only a year ago, but failed to break through the high electoral threshold (10%), bringing a breath of fresh air in the country.

However, it must always remember that the AKP is still the largest party and the crisis of consensus seems daughter of the last excesses of its leader rather than an erosion of its solid base of support, but the loss of the majority will not pass without consequences, forcing party leaders to confront an unknown and unpublished experience of a coalition government.

An important fact to the percentage of the voters, which has actually increased since the last vote and the intent of many voters, disappointed or otherwise believed, was precisely to stop Erdoğan and his race to a presidential system pushed. The strong response of voters helps to prove that the Turks themselves will put their trust in the important moments and that flock to the polls.

The urgency now is to reach a confidence vote by parliament to a new government within 45 from the date of the election. If this does not happen, Erdoğan would be obliged, according to the Constitution, to call new elections that would take place within ninety days from their announcement.

No party has the numbers to form a government alone, therefore all scenarios are open. A coalition government is difficult to be envisaged as, just given the difficulties of the AKP; none of the other three parties entered parliament has a real interest in marrying Erdoğan.

The hypothesis that seems more realistic is the possibility of a coalition between the AKP and the nationalist MHP. It is also open the possibility of a pact between the three opposition parties, the CHP’s Kemal Kilicdaroglu, the MHP Devlet Bahceli and the HDP, apparently opposed by Erdoğan.

The Kurdish party HDP, entered for the first time in parliament, due to its leader, Selahattin Demirtas, excellent speaker who managed, with a Liberal program, to raise the trust of the Kurds, both lay and religious, attracting votes even from not Kurds. Throughout the election campaign Erdoğan has never shown available or has never appreciated the HDP, because good relations with the Kurds had ceased during the siege of Kobanî in Syria, when President Turkish had prevented the Kurds of Turkey cross the border to help the “brothers” there threatened with extermination. This decision was intended to prevent a conjunction between the PKK and the Kurds of Syria Turkish to avoid the birth of a new identity and has meant that throughout the campaign HDP was carried out with the promise that he would never have made alliance with Erdoğan’s party. Therefore, is very unlikely that this party can offer their votes for the birth of a parliamentary majority.

The HDP is the evolution of a platform that included left parties like the Revolutionary Socialist Workers Party, the Labour Party, the Socialist Party of the Oppressed, the Social Democratic Party, the Socialist Party of the PRC, the Greens, the Left Party’s future, the Party of Peace and Democracy, as well as groups and associations of the left, feminist and LGBT. A platform that for the first time presented itself under the banner of a party that presents itself as social democratic and anti-capitalist instead of presenting candidates ‘independent’ and so escape the electoral threshold. The decision to take the risk of not entering at all in parliament paid and now for the first time the Kurds have representation in parliament, even if the HDP is proposed as a national party and rejects the dichotomy Turks / Kurds.

The Kemalist party CHP, ranking second with 25% of the votes is the historical opponent of Erdoğan and he never shared nor the forced Islamization of society nor the neo Ottoman foreign policy in the Middle East. Its alliance with the AKP is not impossible, however, it remains unlikely; and, in fact, the Republican Party (CHP) has opened a door to the possibility of a coalition government with the AKP. The leader Kemal Kılıçdaroğlu gave the availability of the 132 votes from his party “out of respect for voters’ and, albeit ideologically far from the AKP, clarified that the agreement is possible in exchange for the implementation of some program points promised to voters in campaign election. “Two months bonus to pensioners, raising the minimum wage, tax relief for the gas to farmers, the cancellation of the laws introduced by the coup in 1980 and eradicating the work within one year.”

An alternative is Devlet Bahceli’s MHP, considered the ally most “natural” of the AKP, as Erdoğan’s party certainly cannot be called progressive. But this is an ultra-nationalist party that has always strongly criticized the rays Turkish for his overtures to the Kurdish minority.

Bahceli has publicly presented its conditions for supporting a government Davutoğlu, including the renunciation of the presidential system, the defence of the Turkish Constitution, the exclusion of corrupt and discard forever the peace agreement with the Kurdish PKK. This condition is very problematic for the AKP and the president himself, who focused heavily on the normalization of relations with the Kurdish minority (about 18% of the Turks) and obtained by the PKK and other forces hostile to Ankara renouncing separatism and the armed struggle in exchange for administrative autonomy and an end to repression, which has always characterized the relationship between the central government and the provinces with a strong presence Kurdish.

Among the various policy scenarios on the table, there are also early elections; or the possibility that the party Erdogan may seek support from MPs from his party.

The reality is that Turkey is faced with a scenario suddenly uncertain after 13 years of rule of the AKP, a party essentially moderate although inspired by Islam, in power since 2002. The reasons of AKP lose, according to several analysts and opposition, involving also the situation in Syria. In fact, they claim that the initial revolt of young Syrians for more democracy would not have turned into a terrible bloodbath without the support from Ankara Recep Tayyip Erdoğan, immediately sided with the militias and Sunni jihadist with the obsession to replace former friend Bashar al-Assad with a government of the Muslim Brotherhood.

A reversal of foreign policy neo-Ottoman Sunni and muscle dictated so far by only Erdoğan seems inevitable. As soon as the country will have a government the first major change should involve Syria. The three opposition parties CHP, MHP and HDP are against any interference in Syria. A majority of the population agrees with them. “Discontent with the foreign policy of Erdoğan has contributed to the loss of the majority by the AKP”, says the analyst Mustafa Aydin. The decline of the Islamic party was net along the Syrian border where the presence of hundreds of thousands of refugees creates tensions. The CHP’s Kemal Kilicdaroglu, Alevi as Bashar al Assad, sent delegations to Damascus until a couple of years ago. The HDP is with the Syrian Kurds who are fighting the Isis, which Erdoğan is accused of helping. CHP, MHP, HDP are for an uncompromising struggle against the jihadist group. Any new government, led by Kilicdaroglu participation or CHP or MHP, Turkey should lead the coalition anti-Isis, grant the use of the strategic Incirlik base as they ask the US and really block the streets of jihad in its territory.

The loss of power to Erdoğan should normalize strained relations with the other great neighbours, Iran, Iraq, Russia, and Armenia, to get out of the frost with Egypt, dropped after the fall of the Muslim president Mohammed Morsi, and with Israel, facilitate agreement on the Cyprus crisis. And there is the big question EU. The close authoritarian imposed by the President, after the Gezi Park and the Bosporus bribery scandal, paralyzed in fact the accession negotiations. The opposition wants to restore democracy, abolish laws against freedom and resume the process of approaching Europe.

However, as a consequence of Sunday’s vote, there could be a coalition between AKP and MHP, the party more and more euro sceptic anti-Kurdish in the national parliament. This could lead to block any reform required by the EU and could derail the already precarious peace process with the Kurds.

Turkish voters have shown their will to reject a Turkey led by one man and that slowly moves away from Europe. The reward of Brussels for this courageous decision, unfortunately, is likely to come when all the dust is settled.

The European Union has suggested to Turkey, through a resolution of the European Parliament, to engage “unequivocally” to respect democratic values ​​and principles of the EU, putting the process of reform at the centre of the domestic policy choices. MEPs ask the Turkish government to fully respect press freedom and judicial independence and invite the European Commission to re-examine the way they have been done so far negotiations for its entry into the EU. “Turkish voters expressed themselves in favour of a change: our response should not be to close the doors,” he said the Dutch reporter Kati Piri (S & D). The resolution points out that the last election showed –on one hand- “the democratic spirit of Turkish citizens” and -on the other hand- this election has brought “to the Parliament more inclusive and representative of modern Turkish history ”. Strasbourg therefore calls on all political parties “to work to get to the formation of a stable government that raises the democratization process in Turkey and the dialogue with the EU”.

 

 

 

 

Renewable energy, a necessity for the economy of Jordan

  • 12 June 2015

 

 

The Jordanian Prime Minister Abdullah Ensour launched a project to build the largest power for solar energy in the Middle East, in the southern city of Maan.

The initiative, stressed Ensour, is particularly necessary now that the Hashemite Kingdom is to suffer the economic consequences of the Arab Spring, in particular with the cutting of gas supplies from Egypt.

Jordan has embarked on a policy to mitigate the impact of high fuel prices and developing alternative energy sources, setting up a series of projects such as a wind farm in the province of al-Tafila in the south, which has a total capacity of 117 megawatts, and the draft Shams Maan, which has a total capacity of 52.5 megawatts. The country will pursue renewable energy projects from wind and solar energy with a capacity of 1,800 megawatts by 2020. These projects will constitute 10% of the overall energy mix.

Electricity demand is growing by 7% annually in the kingdom and Jordan currently imports 97% of its electricity needs, making the government more determined to implement alternative energy projects.

The development of a credible medium-term energy strategy that ensures greater autonomy to the Hashemite Kingdom in the supply, is strongly “advocated” by scientists of the International Monetary Fund (under the stand-by agreement signed with the Hashemite Kingdom in August 2012) and it receives more and more attention from international organizations that financially support the development plans of Jordanians (EU, EBRD).

Many are therefore the projects in preparation or under consideration (especially in the field of renewable energy, but also in the field of “oil shale”) aimed at finding an effective solution to the problem. In addition to the project of an offshore terminal in Aqaba for gas import LNG (Energies and the Ministry of Mineral Resources has formalized the invitation to pre-qualify for the supply of LNG), the authorities are working on other procedures of international tenders, particularly in wind and solar energy, and the creation of a regulatory framework that allows the realization of projects with the involvement of the private sector.

The last regulatory change, implemented through the recent Law no. 13 of 2012 on Renewable Energy and Energy Savings, specifically designed to open the way for investment in the private sector, encouraging their active participation.

The political stability of the kingdom and the strategic position are two key factors for attracting investments in this field.

Jordan will seek to reduce its imports of energy to 91% by 2020 to make up the difference with renewable energy from local sources.

In 2015 Jordan will create several renewable energy projects, with a capacity of 500 megawatts. This will create many job opportunities for young Jordanians.