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Prof.Dr. Perparim Alikaj

Member of MSG, ALBEITI

Chairman of the Mining, Oil and Gas Committee of the Foreign Investors Association of Albania (FIAA)

Transparency is the showcase by which a society allows appreciation of one of the fundamental human rights and freedoms, as it is the right to be informed. As such, it has been constantly in the focus of public opinion request to become familiar with the creation and distribution of material goods at national level.

The extraction industry of a country’s natural resources (oil & gas, minerals, water, etc.) while this country is blessed (or cursed?) by nature with these assets, is constantly in the focus of public attention and pressure, regarding the income and the manner of their allocation. In many underdeveloped countries, such natural resources are a curse to them, because they are the cause of internal or international wars, associated with unimaginable crimes and massacres of the innocent population, as well as the distribution of these assets under the law of force and fraud.

The “Extractive Industry Transparency Initiative” (briefly EITI in English) was first proposed in September 2002 by Tony Blair, Prime Minister of the United Kingdom at that time, during the World Sustainable Development Summit in Johannesburg, after years of academic debates, as well as lobbying of civil society and business companies on the management of state revenues from extractive industries. The official establishment of the EITI took place on June 17th, 2003 in London, through 140 delegates, representatives of governments, business associations and civil society, who agreed to establish a high level of transparency, based on some basic principles, transparency on payments and revenues in the sectors of extractive industries.

EITI is organized as a non-profit platform under the Norwegian state law. It has three institutional components: the Members’ Meeting, the EITI Board and the EITI International Secretariat with headquarters in Oslo, Norway. The EITI Leadership Group conducts EITI Global Conferences, which are held every two to three years.

Each country with extractive industry sectors can join EITI by applying certain set of transparency standards. Currently, there are 52 global-scale countries implementing these standards, including member states of the Organization for Economic Co-operation and Development (OECD) such as Norway, the United Kingdom and the United States, as well as countries from Africa, East Asia, Europe and Latin America. Each of these countries is required to publish an annual EITI report to provide information on: Contracts and Licenses, Production, Revenue, Distribution of Income and Social and Economic Expenditures.

Each EITI member country is subject to a quality assurance mechanism called “Validation” (assessment), at least once every three years. Validation serves to assess the level of performance of the EITI Standards and to promote relevant dialogue and knowledge at the country level. It also maintains the integrity of EITI by keeping all EITI implementing countries at the same global standard.

The Albanian government supported the EITI initiative and was seriously engaged in its implementation in March 2009 and in May of that same year, Albania became an EITI candidate country (ALBEITI). With the decision of the Council of Ministers in July 2010, the Secretariat of ALBEITI was established, while with a decree of the Prime Minister in July 2011 was established the Inter-Institutional Group (MSG) with participation from civil society, operating companies of extractive industries in Albania and representatives by the Government. The Chairman of this Group is the Deputy Minister of the Ministry covering the extractive industry.

The EITI’s International Board declared Albania as a country compatible with EITI Standards in May 2013. This means that, the country has an effective process for annual declarations and reconciliation of all incomes from members of the EITI extractive industries. This process offers citizens the opportunity to see incomes from oil and gas companies, mining and hydropower sectors.

Through the serious engagement and dedication of the Secretariat and members of MSG, Albania has published to date, in time and quality, the annual reports on the fulfillment of the EITI Standards, as of the first report in April 2011 for the financial year 2009, to the latest report published in February 2018 for the financial year 2016. The recent reports prepared by “Deloitte Audit Albania” have also made the first steps on the voluntary inclusion of the Declarations on “Beneficial Owners” and “Commodity Trading “.

In August 2011, Albania successfully passed its first International Validation Report, subject to the status of EITI member country, while in September 2017 was completed the second Validation Report, completed by the company “Adam Smith”, Independent International Validators, which stated that Albania has made significant progress in implementing the EITI Standards. The report states that in 55% of chapters, Albania has a very satisfying performance (including Government engagement, Business Engagement, Legal Framework, Contribution to Economy, Public Debate, etc.); in about 45% of the chapters there are significant progress (MSG management, Civil Society Engagement) and only 5% are evaluated as without progress.

Albania is a country with the tradition of exploring and exploiting useful minerals such as oil & gas, chrome, copper, iron-nickel, coal, bauxite, bituminous gravel, quartzite, titanomagnetite, phosphorite, marine and river placers, gypsum, decorative stones, industrial materials, etc.

The hydrocarbon, mineral and hydropower industries have been consistently contributing to the national income and development of the country. With national policies, the Albanian Government has aimed at developing these industries through investments from the private sector, mainly foreign, but also domestic, for their own high economic risk they carry and the considerable amount of financial resources they need. To this end, the Government and Parliament of Albania have drafted and approved the relevant legislation of these industrial sectors and have upgraded it in accordance with the requirements of the time. The government is also aware of the importance of the fair management, transparency and accountability of these sectors and fully supports the recommendations of EITI reports, as an effective way for sustainable economic development.

However, I think that ALB-EITI can raise its recommendations to the Albanian Government at a higher level, for a number of problems that have been encountered in different directions of the emerging activity in Albania. Below are listed some of these problems/issues that require fast solutions:

1.      The issue of distribution of Mineral Rent revenues to the communes and municipalities, in the territory where the activities of extractive industries are being developed. This is a problem that has not yet found its final solution, since in practice there are various difficulties in the distribution and control of these incomes. Not only CSOs, but also ALBEITI’s MSG Businesses have repeatedly raised this problem, but no definitive and definite solution has been found yet. The delay in finding this final solution is not a major concern only to the public of the extractive activity areas, but also to the investors operating in these areas. By not seeing the benefits of the mining rent of the extractive industries, this public in general will not be in favor of extractive activities in its area. Consequently, the climate of conflicts between investors and residents of the extractive activity areas will be increasingly aggravated and will also create difficulties for foreign direct investment in Albania. Without the final solution to the issue of mining rent, the extractive companies will always be left with a lesser argument in the ongoing debate between them and the local population or environmentalists.

2.      The issue/problem of seriously consideration of the opinion of interest groups (business and civil society) by the Government, in particular by the Ministry of Finance and Economy (MFE), to make necessary changes to the Legislation and the decisions that regulate the activity of extractive industries. As a first example, we can take the proposals by ALBEITI on Amendments to Mining Law no. 10304, date 15.072010 and accompanying DCMs. There have been several discussions at the MSG meetings on these changes, but they are not yet finalized by MFE. The changes are related to mandatory per square kilometer costs and a high bank guarantee of investment (75% of the investment) during the prospecting and exploration period.

It is accepted that the necessary amendments to these issues will make Albania more attractive and competitive in approaching foreign investors in the Mining industry, but they have not yet been done. The fact that the Mining industry does not only include the process of minerals exploitation, but also their prospecting and exploration, without which the exploitation itself has numbered years, must be well understood. The present concept that Albania has studied and discovered all useful minerals, is as naive and harmful to the Mining industry. As a second example, we can take frequent and economically unadulterated changes to Mining Rent, as it was now the case for chromium and bituminous gravel. Even on this issue, the MFE should better understand the business arguments before making the relevant decisions, which may have undesirable consequences.

3.      Broad public awareness on the concepts and implementation of EITI Standards in Albania is a very important challenge for ALBEITI. Besides the work accomplished by the Secretariat and MSG members of ALBEITI for this purpose, it would be of interest to formalize the inclusion of these standards on higher education in some faculties, such as the Faculty of Geology and Mining of the Polytechnic University of Tirana, Faculty of Law and Economics of the University of Tirana, and in analogous faculties of private universities.

For this purpose, following a very positive process initiated by the National Secretariat EITI, a materialized coordination between ALBEITI and these Universities would be needed to definitively institutionalize this demand and to realize it in interest of knowledge, information and academic debate.

Tirana, 04/02/2019

Albania Tourism Investment Summit, the Official Summit in the Albanian Tourism industry was launched in Tirana on 27th of November, organized by FIAA in close cooperation with the Ministry of Tourism and Environment and under the auspices of the Prime Minister of Albania. This Summit was an ideal opportunity platform for discussion on challenges and developments in tourism, for in-depth discussions, meeting national and international key players and experts, exchanging ideas and following up stimulating conversations around the next big trends driving this sector. The Summit brought together important stakeholders in the tourism industry from Albania and abroad, who find this country an excellent destination for the start of new tourism projects and approach of international Operators and Hotel Brands.

FIAA’s Chairman Mr. Tom Kristian Larsen in the opening speech of the Summit said: “It is a great privilege to inaugurate the Summit, and I am very happy that we have been able to conclude on our initiative for an International Summit for Tourism Investment in Albania, after intense preparations over the last 6 months”. Download here Mr. Larsen Speech.

The Summit noted the presence and high interest from global hotel Brands and Operators such as Marriott, Orbis and Accor Hotels Group, Best Western, Wyndham Group, Expedia Group and international Consultants.

Minister of Tourism and Environment Mr. Blendi Klosi made an overview of the Tourism statistics and sector performance during the recent years. Furthermore, Mr. Klosi referred some international brand leaders in this sector who have seen Albania as a potential country for developing their activity. Brand names like Hilton, Marriott International, Melia Group, Hyatt Group today are a successful reality for Albania.

A special message in the Summit was delivered from Prime Minister Edi Rama who highlighted the high influx of tourists who visited and continue to visit Albania. Mr. Rama presented concrete figures of the income generated by this sector of employment and the attention that the government is devoting to the further development of this industry. The Prime Minister presented the government’s vision for tourism where the construction of Hotels and Resorts and not just Real Estate or complex villa complexes will take great care. The prime minister invited foreign and domestic investors to invest in this sector.

Distinguished national and international experts and representatives of hotel brands such as Marriot, Hilton, AccorHotels & Orbis Group, Green Coast, San Pietro Resort and Hysenbelliu Group, were speakers of the Summit.

The second edition of the Forum and Trade Fair on Eastern Europe Hydropower organized by REECO Austria GmbH was held on 29^th- 30^th of November 2018 in Salzburg, Austria.

This activity provided a platform for presenting all investments in the energy field from different European countries with Participants of medium and small hydropower plants, who through this platform could strengthen existing contacts and also create new connections with companies and investors in the field of energy in Europe.

Panelists from different countries in the Eastern Europe presented the development of the energy sector in their respective countries and provided best examples. Common challenges in the field of hydropower were discussed among participants.

FIAA’s Executive Director Ms. Marinela Jazoj and Mrs. Anita Shushku, President of AREA (Albanian Renewable Energy Association) were among the speakers in the Energy Forum Panel, where they presented the hydropower potentials of Albania and the future challenges that this industry faces. In addition, this Forum was a great networking opportunity with Investors from different European countries.

On November 8^th, FIAA Board met with its Members and presented the results of the conducted Survey on Business Compliance. The survey was focused on the issue of Business Integrity, as an important element for the business climate in the country. FIAA believes that talking and practicing good ethics, values and integrity in business is an integral part of the core values of the functional economies and necessary to fight corruption and to build transparency.

The Survey’s outcomes were presented and discussed in a dedicated roundtable together with the participation of the Head of Anti-Corruption Unit at the Council of Ministers of Albania, as well as one Member from the Vetting Commission, an important tool for the implementation of the Justice Reform Process in Albania. During the meeting, Statkraft and Shell Industries in Albania showcased their best models of Business compliance which may serve as an example to the companies in Albania. Among the findings, it was highlighted by the Respondents at a rate of 91.3% find the Corruption and Bribery in Albania as main obstacles in doing business.  As a guest Speaker in this Roundtable, the Head of Ani Corruption Unit Mr. Pirro Vengu explained the role of his Unit and the approach they are using in fighting corruption practices thus, trying to help Business overpass this difficulty. Mr. Vengu found very interesting the results of the Survey considering them an important indicator for the fighting of Corruption phenomenon. An interesting Intervention in this Meeting was also the Introduction of the work and the so far achieved results of the Vetting Commission by Mrs. Etleda Kaja. Also, Mrs. Kaja encouraged the business to contact the Commission directly and address all the unfair practices and corruption cases they have faced while operating business activity.

Click here to access the Survey findings. 

December 7^th, 2018, Plaza Hotel Tirana, Albania

Tirana Economic Forum is a high-level meeting of the most influential Albanian and international political, corporate, and intellectual leaders to address pressing challenges currently facing Albania and the world.

The forum will provide an opportunity to identify and assess key growth challenges, learn from policy experiences in other countries, support the adoption of corporate social innovation practices in the private sector and identify a course of policy actions towards more competitive and inclusive economies in Albania and South East Europe.

For more information please visit: http://www.tiranaforum.com

A delegation of FIAA representatives from the Mining Industry has meet with the Deputy Minister for Energy and Industry Mr. Aliko to discuss on the current situation of the mining industry. The talks were mainly focused on the recent changes presented in the New Fiscal Package for the increase of Excise Tax in bituminous coal and related articles which do fiercely affect the ongoing activity of the companies operating in this sector. Other concerns discussed with the Deputy Minister were related with the necessity to incentive Exploration activity in Albania and create new reserves of minerals. The sector representatives stressed out the need that the mining industry has for reviewing the existing legal framework and work towards a sustainable strategy which would make this industry attractive to the eyes of new investors.

Recently, the foreign business community was presented with the second package of Drafts for the Fiscal Package 2019. Being part of the Fiscal Council in the Ministry of Finances, FIAA distributed the proposed articles to its members ‘Community for opinion and feedback. Among the proposed articles which were subject to changes were related with: “Tax Procedures”;“Income Law”; “Excise Law”; “Withholding Tax”, and other articles. FIAA has officially addressed its position to the Ministry of Finances reflecting all the recommendations and opinion of its members. Most of the proposed articles were also addressed during the presentation of the Fiscal Package in the National Economic Council Meeting.

The Investment Council (IC) hold its regular meeting this time focused on “Formalization and Competitiveness in Tourism.” Chairing this Council, Minister Ahmetaj said that “Although the tourism sector has a substantial growth, its formalization remains a challenge for the country. During the last tourism season, many tax control structures were engaged, although in the focus were not penalties, but taxpayers’ education and, of course, further formalization. ”

Following, Head of the IC Secretariat, Ms Diana Leka delivered a presentation on the Secretariat’s analysis focusing on the impact of informal activities and fiscal evasion in the competitiveness of the sector. The objective of the analysis was identification of the fiscal, legal and regulatory measures, necessary to address sector’s high informality and their alignment with the general framework of policies and strategies for the development of the sector.

For more information please visit: https://www.investment.com.al/6408/

EIRA is a distinct publication which aims at assessing specific policy, regulatory and legal risks concerning foreign and domestic investment in the energy sector of different countries.  Considering FIAA’s active role in the energy sector of the country, the Secretariat trusted FIAA to be a peer reviewer to the EIRA project, and bring attention to the challenges faced by the business and investor communities and maybe contribute to reducing the investment risk in the energy sector in the country.

The publication incorporates perspectives from all relevant sides in the country (the government, industry, investors, financial consultancy and law practitioners.

EIRA 2018 represents Energy Charter Secretariat’s efforts to assist both governments and investors in reducing the level of risk in the international energy sector and thereby unlocking investment for a sustainable energy future.

 For more information on EIRA 2018 please do contact us.

President of FIAA, Mr. Tom K. Larsen and Deputy President, Mr. Turker Sengonul developed an introductory meeting with the President and CEO of Bankers Petroleum Albania, Mr. Xingyun Sun.

Bankers Petroleum is now part of the successful Chinese Oil Company  GEO -Jade, which has moved all out its HQ functions from Calgary to Fier with special focus on the only business in Albania. Mr. Sun has recently moved to Albania to lead operations of Bankers in the country which is among the most important foreign investments in Albania and one of the most outstanding members of FIAA. Mr. Sun sad that the company is expanding its investment and oil production in Patos Marinza oil field and plan to continue to heavily increase their investment next year in the oilfield. Meanwhile, he mentioned that for their business is very crucial having a stable and favorable environment in the Country. Mr. Sun stated that he will willingly commit to the FIAA’s mission along with bringing  more Chinese investors in Albania.

FIAA Executives welcomed his intentions and look forward to strengthen this cooperation.