We Had a Difficult Year, but Reforms Are Real
By Genc Mlloja
Albanian Daily News
Published January 16, 2017

The global world
crisis is still felt strongly in the Albanian economy, affecting badly the
Albanian exports of raw materials such as oil and minerals, said Gjergj
Buxhuku, General Administrator of AlbKonfindustria, who, in the meantime, sees
good performance of the energy sector.



In exclusive interview
with Albanian Daily News on Saturday, Mr. Buxhuku dwelt on his forecast for
2017, an electoral year. Besides the domestic problems he thinks that the
ongoing crisis in neighboring countries such as Italy, Greece and beyond, are
negative factors.



AlbKonfindustria chief
is of the opinion that given Albania’s potentials the growth rate of the
economy of this Balkan country in the years to come should necessarily be over
5%. “The potentials are not lacking, but the political decision-making
authority should be able to find appropriate ways to exploit them,” he said,
insisting that in addition to foreign investments Albanians’ money living
abroad should be attracted.



In the meantime Mr.
Buxhuku thinks that it is high time for wise policy to start the redistribution
of property in a more balanced way in Albania, which, according to him,
conditions the creation of a middle class considered as crucial for the
creation and the well-functioning of the democratic system itself.



 - I believe and expect that Albania has
already got towards the electoral processes both with regards to institutions
and economy. It was apparent in the way how the 2017 budget was compiled where
despite having the show of populism election as in the case of increase of
salaries and pensions in the amount of approximately 70 million euro, generally
it was restrained and within the framework of maintaining macroeconomic
parameters. As a positive factor for the economic growth in this year we would
appreciate the maturation of investments in major projects which I mentioned
earlier, but also tourism and relatively good situation in the energy sector.
Meanwhile the ongoing crisis in neighboring countries such as Italy, Greece and
beyond, are negative factors.



However, I think that
Albania should find the problems and solutions for its successes or failures in
the economy within itself. The sector which has performed well in the economy
is energy, showing clearly that where reforms are real and professional the
success is guaranteed.



“AlbKonfindustria has
prepared a package of 8 projects that will be soon presented to the Albanian
political decision making authorities where it has defined the areas, the way
of construction and management of strategic projects as well as the ways of
financing them worth $ 4-5 billion, said Mr. Buxhuku in the following
interview:


- How would you rate
Albania for its economic and development progress of the business during 2016?



- If I can make a sum up, I would say that 2016 was a
difficult year for Albania's economy. I would consider as insufficient the
expected economic growth of about 2.8% although as compared with the preceding
years but even with the regional countries, it might seem acceptable at first
sight.



And there is a simple reason: the growth of public debt in a
rapid way with nearly 10% of GDP and in absolute figures of over 1.2 billion
Euros during the last 3 years. This means that, if it is translated in
arithmetic order, this will show that the average annual growth as an effect of
the debt the cash flows should have been at least 3%. Also, we should take into
consideration the important role in the growth of national production provided
by the projects initiated long time ago as for example TAP, Devoll hydro-power
station and investments in energy. The other direct investment fluxes have been
lower even as compared with other countries in the region.



Another indicator showing economic weakness during 2016 is
the low employment and the low demand for lending by the business and citizens.
The structures of the Albanian economy inherited from the past are weak and
need quite different policies for starting the path of sustainable
construction. The global world crisis is still felt strongly in the Albanian
economy, affecting badly the Albanian exports of raw materials such as oil and
minerals. The sector which has performed well in the economy is energy, showing
clearly that where reforms are real and professional the success is guaranteed.



 -What would be the forecast for 2017, given
that we are speaking of an election year?



- I believe and expect that Albania has already entered the
electoral processes both with regards to institutions and economy. It was
apparent in the way how the 2017 budget was compiled where despite having the
show of populism election as in the case of increase of salaries and pensions
in the amount of approximately 70 million euro, generally it was restrained and
within the framework of maintaining macroeconomic parameters. As a positive
factor for the economic growth in this year we would appreciate the maturation
of investments in major projects which I mentioned earlier, but also tourism
and relatively good situation in the energy sector. Meanwhile the ongoing
crisis in neighboring countries such as Italy, Greece and beyond, are negative
factors. However, I think that Albania should find the problems and solutions
for its successes or failures in the economy within itself.



The decision-making should be able to give sustainable
solution to such major problems as the low degree of competition and monopolization
of the strategic sectors, the weight that the public economy should have in
strategic sectors. The unlawful and unreasonable exit of Albanian cash abroad,
including their return, the construction of fiscal policies that increase the
power of attraction of investments in the Albanian economy, etc are some of the
main problems. It is of special importance the concept of the role of the state
as the direct actor in the strategic sectors of the economy in order to avoid
the monopoly phenomena and to construct large projects for attracting the money
of Albanians wherever they are.



It is important that the ongoing reforms in the energy
sector should not be interrupted during the 2017 election year. It should be
obligatory that the growth rate of the Albanian economy in the years to come
should necessarily be over 5%. The potentials are not lacking, but the
political decision-making authority should be able to find appropriate ways to
exploit them. We will at best have the opportunity to understand the capability
and accountability of the political forces during the 2017 elections. In fact,
the subject of the electoral political battle will be exactly the economy.



- You said that the
amount of foreign investments has been low in 2016. Which are some of the
reasons of the failure to attract investments, particularly from countries that
have traditionally been present in Albania since many years ago?



-Foreign investments are important for all countries and
particularly for those countries with developing economies like Albania. They
become more important when the public investments are in decline due to
budgetary constraints because of the crisis. In fact, Albania had a good
opportunity to attract foreign investment at the time of the global crisis.
Many companies of EU countries, especially of neighboring countries such as
Italy, which were hit by the global crisis, were facing the alternatives of
closure or transfer to countries with lower cost and fiscal burden. It was
exactly in this political decision- making moment that it acted wrongly by
raising taxes and setting the progressive taxation. Consequently, the
competitiveness of the country dropped as compared with other countries of the
region for attracting foreign investment. It should not be forgotten that other
countries besides the burden of the lowest taxation system had a priority with
regards to other facilitations for the foreign investments like infrastructure,
proprietary system, better functioning of the institutions, the rule of law,
market size, etc. Also, we must be aware that the Albanian market besides being
a small one is very much closed with the presence of oligopolies and cartels
which hinder the entry of new operators.



The implementation of concession schemes and PPP influence
even more on the closure of many markets by law. At the same time we have no
real government policy to find proper ways for the initiation of large and
stable projects to attract capitals of foreigners and Albanians wherever they
are.  And there are many chances. The
laudable effort of Prime Minister Edi Rama to withdraw the capitals of the
large Albanian Diaspora must be accompanied by concrete projects as otherwise
it is destined to remain just a wish.



 - Mr. Buxhuku, figures show that the wealth
distribution in Albania is very disproportional with a trend of concentration
of wealth in few hands. What do you think about this and do you consider a
handicap that Albania is not creating the middle class which has been
considered as the engine of development in the capitalist economy? For example
recent examples of economic growth in countries like China, Brazil, Turkey etc.
show that the promotion of middle class is considered as the main element of
success.



- Albania does not constitute any particular case as
compared to the other developing countries as far as the unequal wealth
distribution is concerned. Time and wise policy are needed to start the
redistribution of property in a more balanced way, which conditions the
creation of a middle class, which is also crucial for the creation and the
well-functioning of the democratic system itself.



In this sense, I think, that we should concentrate primarily
on stopping the illegal and unreasonable exit of money of Albanians abroad. The
cash outflow of Albanians' money abroad in an illegal and unreasonably way is
on the edge of national betrayal at time of peace. Albanians' money must be
invested in the country at the largest possible dimension respecting human rights
at a maximum level. It is right here the role of political decision making
authority which should create new development projects, open markets,
competitiveness and support to qualified people as the source for the creation
of the middle-income strata through a favorable and fair fiscal system. But the
placement of a growing progressive taxation is the opposite of what should
happen and this is regrettable.



 - Besides energy, which are some of the
sectors of economy that should be encouraged, and do you think that it should
be continued with the focus on fason enterprises? Examples show that such
businesses are not long- term as they rely on foreign entrepreneurs that very
often are obliged for different reasons to withdraw.



- The fact that the fason industry is important part of
Albanian economy indicates the low level of economic development and welfare of
the country. Fason industry is overwhelmingly unstable and it produces less
residual added value and in addition it can be easily removed. The latest
example of Italian call center companies speaks clearly to the foregoing.
Certainly, fason sector should be helped by all means to turn as much as
possible into a closed cycle industry, to be more stable and productive, but
there is no much hope in middle- term one.



Albania has great potential for sustainable projects at
great value by exploiting its strategic position as a crossroad of the
international networks of gas, electricity, ports, roads and regional railways,
the development of industries of oil and minerals with a closed cycle, tourism
industry, full utilization of the energy possibilities in water, wind and the
coal in Kosovo. I think that they should be the fundamental sectors on the
basis of which it can be thought of building sustainable and long- term
projects to the benefit of the economy and Albanian citizens. Based on the
above mentioned areas it is possible to develop agriculture, food industry,
light industry, etc. But it is important to work on major strategic projects.



I repeat that the economic opportunities and also the
financial resources exist. 
AlbKonfindustria has prepared a package of 8 projects that will be soon
presented to the Albanian political decision making authorities where it has defined
the areas, the way of construction and management of strategic projects as well
as the ways of financing them worth $ 4-5 billion. The latter are far different
from the ways used so far. It would be essential a new concept of the role of
the state in the economy for the success of the packet of AlbKonfindustria
projects. Let us hope that how much ready the politics would be to change the
way according to which it has run the national economy so far.



On January 31 this year in cooperation with the Ministry of
Energy and Industry, IFC and with the participation of many important
international and domestic institutions of Albania and Kosovo, we will organize
the Forum for the Albanian Stock Exchange Power as part of the regional and
European power liberalization and integration strategy. The event is of special
importance and is thought to be like a new beginning of the change in the
mentality of politics for country's economic development. Let us hope that it
will be so to the best of all!





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