Interviews

“Shell wants to assist building a thriving energy industry in partnership with the Albanian Government”

FIAA: What is your role and background?

Mr. D’Souza: Earlier this year, I was delighted to be appointed as the Country Chairman and Commercial Manager for Shell’s activities in Albania. I have previously lived and worked in numerous countries around the world including in Africa, Asia and Australia across nearly all of Shell’s business’s: Upstream, Integrated Gas, and Downstream.

What are your impressions of Albania?

I was thrilled at what a beautiful and pleasant country Albania is to live in. The country has incredible natural beauty that will undoubtedly make Albania a tourist haven. But perhaps the most notable thing is the positive transformation we see in Tirana itself – improving infrastructure and a thriving atmosphere. From a Shell perspective, we are also committed to the development of this beautiful country.

What is Shell’s upstream project in Albania?

Shell is currently appraising an oil and gas prospect called Shpirag near the city of Berat. We operate under a contract with the Albanian government. As a part of that Shell puts significant amounts of dollars upfront to fund the exploration and development – with significant risk to Shell as it is exploration after all. In the chance that we are successful, the benefit is then significantly shared with the Albanian Government.

“As a small economy, although quite strategically located, stability remains crucial at all aspects, but more specifically as relates to laws and institutions”

FIAA: What is your impression of the current business investment climate in Albania?

“An independent, functioning and reliable justice system is a basic element required for all!”

FIAA: During the first four years of the operation phase of the Ashta Hydro Power Plant, what have been the most significant challenges that you have had to overcome?

 Mr. Dietmar Reiner:  We have invested more than 200 Million EURO until end of 2012 to build a state of the art Hydro Power Plant. VERBUND and its partner EVN were the first large–scale private investors entering the Albanian Energy Sector. Due to the difficult situation in 2008, the time when the concession agreement has been signed, it was agreed with the government to enter into a long-term power offtake agreement. This agreement entered into force in April 2013, until June 2016 KESH was the off-taker, but then it was transferred to OSHEE. In the last four years there were a lot of challenges in the Albanian energy sector, especially in the downstream business, with the difficult situation in the distribution system and the supply to endcustomers. These difficulties also influenced our business; we were mainly suffering from payment delays which created for some periods huge arrears mainly to our lenders. Due to the background of our shareholders as large public utilities in the energy sector in Austria, the understanding of the situation and our belief in the success of the necessary reform in the energy sector, we and also our shareholders and lenders kept calm and focused during this time.

“It is important that state institutions play a greater role in creating a business environment able to retain current investments and attract new ones”

FIAA: What is the IFC’s current long term finance investment strategy in Albania?

Mrs. Qorlazja: Thank you first of all for giving me the opportunity to talk about IFC in general and its work in Albania.

IFC was established in 1956 as part of the World Bank Group to support private sector investment in emerging markets to create jobs and raise standards of living. IFC’s financial products enable companies to manage risk and broaden their access to foreign and domestic capital markets. Our financial products consist of fixed and variable rate loans extended to the private sector, which finance both early-stage companies and expansion projects. IFC also makes loans to intermediary banks, leasing companies, and other financial institutions for on-lending. In addition to lending, IFC engages in equity investments that provide developmental support and the long-term growth capital the private sector needs. IFC invests directly in companies’ equity and also through private-equity funds.

“Albania needs greater trust in law and order”

FIAA: During your time here in Albania, have you seen any change in the operating environment for foreign businesses in the country?

Mr. Larsen: Yes – several laws which have been passed, for example. I think the law on strategic investment is beneficial for investors that want to do business here in Albania. It gives businesses a one-stop window in terms of interaction with the government, and so on. We already have that kind of one-stop window in the energy ministry and in the project implementation unit which has been established in the Ministry of Energy, and I believe that the law on strategic investment should help all businesses.

The fact is that Albania is in a period of active reform and we are hopeful of seeing changes in the energy sector as a result. The whole energy sector is undergoing reform and the new energy law passed last year makes commitments to changes in the institutions, for example, liberalization of the market for power trading. We were originally expecting these things to be in place by now, but they will come. The government is committed to reform and it will make it happen. I think it will take some more years still before we have a fully functional power market here in Albania.

“Justice Reform will contribute to creating a more predictable and transparent business environment in Albania”

FIAA: What is your impression on the current business operating environment in Albania?

Mrs. Vlahutin: Despite its dominant role in the economy, business is held back by significant shortcomings in the regulatory environment and the rule of law. To Business Operating in Albania, the challenges remain mainly related to judicial system, property rights enforcement, contract enforcement, fight against corruption and informality.

Whereas, Albania has great potential to develop in terms of its geographical position, natural resources, and relatively cheap labor force, it still has to improve labor skills, to improve trade logistics, reduce the regulatory burden to businesses and ensure law enforcement in order to increase its competitiveness and attract foreign investors. 

“Justice Reform can increase investment in Albania”

FIAA: What are your impressions of the business operating environment in Albania currently?

Mr. Canacaris: The environment has improved a lot in recent years, especially after the international crisis of 2008. For sure the growth in 2016 is much higher than in 2015, which was higher than 2014. The overall environment is not so bad. Of course, it can always improve.

What have been some of the drivers of this change in recent years?

The payment of the arrears by the state was an excellent move; the state needed to do it and it did it properly. And the power reform was also a good move; it has improved the business climate.

“Judicial reform is a major turning point for Albania”

FIAA: What is your perception of the Albanian economy currently?

Mr. Reinke: We have been saying for some time that a modest recovery is on the way. We see growth rates rising slowly — perhaps a bit too slowly — but nonetheless the outlook is positive. We remain somewhat concerned about the still high level of non-performing loans in the banking sector and very slow credit growth.
If we look at the performance of the economy in a regional and global context, it’s doing quite well. Both the recovery in the Eurozone and the current performance and outlook for emerging markets globally are much worse than we were expecting at the beginning of Albania’s programme with the IMF. Nonetheless Albania is continuing to recover. It is a broad-based recovery affecting all the sectors.

“The BoA expects Albania’s growth trend to continue in 2016”

 FIAA: What are current economic indicators telling you about the state of the economy in Albania?

Mr. Sejko: Economic growth was 2.98 % in the third quarter of 2015. Our estimate of growth for the full year 2015 is 2.7 %, compared to 2.0% in 2014 and 1.3% in 2013. For 2016 we forecast growth above 3.0%, which means a moderate growing trend. This is positive for Albania, especially considering the current difficult economic environment in the region and the eurozone.

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“EBRD plans further support for foreign investors in 2016”

FIAA: How do you see the outlook for Albania in 2016?

Mr. Denk: We think that the economic outlook for Albania will continue to improve steadily in 2016. Overall we expect the economy to grow by around 3.3% in 2016, up from 2.2% in 2015.