September 12, 2015
Balkanalysis.com editor’s note: as Albania continues its diplomatic and reform efforts towards European Union efforts, it is placing strong emphasis on high-level cooperation. In this exclusive new interview, Balkanalysis.com correspondent Blerina Mecule gets an update on Albania’s EU reform efforts, bilateral agreements, and participation in European initiatives for the region from Arian Spasse, director of the Albanian ministry of foreign affair’s special department for relations with the European Union.
Preparing for Accession Negotiations: the Reform Process
Blerina Mecule: In June 2014, Albania was granted the status of candidate country for EU membership. This was an important achievement for the country. The EU has announced that further enlargement is expected in 2020. What are the signs of progress, in terms of reforms, that Albania is making towards the opening of the accession negotiations expected late this year, focusing particularly in the newly approved National Council for the Integration?
Arian Spasse: Albania views its EU perspective as closely tied to the domestic reform agenda focused on the consolidation of the rule of law. It welcomes the recent positive evaluations of the European Commission and is aware of the challenges that lie ahead for the fulfilment of the five key priorities for the opening of accession negotiations.
We consider that the opening of accession talks would provide a roadmap for progress in addressing the reform challenges. Accession negotiations are an opportunity to better focus on what is to be done, particularly in relation to the rule of law, through the benchmarks for chapters 23 and 24. A clear illustration of the role of accession talks is the reform of the judiciary: if Albania is to adopt a long-term strategy for the reform of the judiciary that is sustainable in time, it needs the screening and benchmarking for chapter 23 to feed into the strategy.
A tangible and credible EU perspective is an irreplaceable support for domestic reforms and motivation of the administration. There has been an enormous advancement concerning the reforms in five priority areas, which are crucial for the next step – the opening of accession negotiations.
The reform of the judiciary is the most difficult one and is led by the Ad Hoc Parliamentary Committee on Justice System. The first analytical draft of the Justice Reform has been discussed with the stakeholders and finalised, identifying the needs for intervention (Phase I). The Ad Hoc Committee, on proposal of the Group of High Level Experts, has adopted two very important documents – the Strategy of the Justice System Reform and the Action Plan for the implementation of this strategy (Phase II). The above mentioned documents will serve as a guide for the development of Phase III of the process for reform in the justice system, the drafting of constitutional and legal amendments. The Strategy and Action Plan will remain open for comments and suggestions for improvement. The Group of High Level Experts will organize a process of public consultation and consultation with international experts (the Venice Commission) and will assess and reflect on their involvement in these documents.
Fighting Corruption and Organized Crime
Regarding the fight against corruption, there has been progress made in strengthening cooperation between law enforcement agencies, by removing obstacles to conduct proactive, efficient investigations of inexplicable wealth and corruption-related offences, including via the effective use of financial investigations. A functional network of Anti-Corruption coordinators and contact points has been set up, and an online system for the denouncement of corruption cases has been set up. We are making efforts to increase pro-active investigations substantially towards establishing a solid track record of investigations, prosecutions and final convictions in corruption cases.
The fight against organised crime has shown a positive trend. A series of legal reforms, approved during 2014, aim at improving the organizational and functional aspects of State Police. Drugs trafficking in general, cultivation and trafficking of cannabis in particular have been hit by police operations. These operations, as well as the cooperation with law enforcement agencies in neighbouring countries, confirm the commitment of the Government in tackling this issue.
Positive trends in track records are reported, especially in relation to money laundering and drugs. The anti-trafficking Strategy has been approved and launched in December 2014, showing commitment to step up the fight against trafficking of human beings, money laundering and implement the Anti-Mafia law. The efforts made in this field have been rewarded with the decision of the US State Department to remove Albania in 2014 from the Tier 2 Watch List.
In order to ensure the sustainability and success of the reforms, an all-inclusive approach is necessary. The Albanian government is committed to making every effort to ensure a constructive political dialogue and to build on the existing political consensus on EU integration. The recently established National Council for European Integration (NCEI), chaired by the opposition, serves as a platform that brings together political parties, civil society, academia and other stakeholders. NCEI has a key role in ensuring all-inclusiveness and the necessary political and social support for the implementation of EU related reforms. Civil society representatives participate actively in the meetings of NCEI.
A New Investment Council and other Pro-Economic Development Policies
BM: Recently Albania has launched the Investment Council, to strengthen the business climate in the country. Could you tell us more about this initiative, as well as about other concrete steps of the government to create a friendly legal framework, in order to attract more foreign investments in Albania?
AS: The Investment Council is a project that was launched in February 2014 with the signing of the Memorandum of Understanding between the Albanian Government and the European Bank for Reconstruction and Development. Representatives of government institutions, donors, international partners and business communities are part of this high-level platform.
The purpose of the Council of Investment is to facilitate a direct dialogue and dynamic interaction between business and government, to address problems related to the business climate and investments, to report cases of unfair and abusive practices to business, to fight corruption, tax evasion and informality, and to suggest legal and procedural mechanisms to prevent, eliminate and resolve such problems.
Foreign Direct Investments (FDI) has been at the focus of the Albanian governments. Three new laws are very important in this respect – the law for strategic investments, the law on public-private partnership, and the law on tourism, as a clear indication of the importance we attach to foreign investments, which bring economic growth, increase competitiveness, and which also offer sustainability and employment.
Albania’s legal framework on FDI has been designed to create a favourable business climate for foreign investors. I would like to emphasize that no prior government authorization is needed and there are no sector restrictions to foreign investments. Also, there is no limitation on the percentage share of foreign participation in companies- 100% foreign ownership is possible. Foreign investments may not be expropriated or nationalized directly or indirectly, except in special cases, in the interest of the public, as defined by law. Foreign investors have the right to expatriate all funds and contributions in kind of their investment. In any case, foreign investments will have a treatment equal to what common international practice allows.
As a result, in the latest “Doing Business” report for 2015, Albania showed a significant improvement in the overall ranking, especially regarding the ease of doing business. In 2015, Albania’s position in “Doing Business” has improved. It ranks in the 68th place compared to 108th in 2014, and 136th in 2008.
Natural Resources and Advantages for Investors
BM: What are the advantages that Albania offers in terms of natural resources combined with its strategic position in South East Europe that might be of interest to foreign investors?
AS: Albania has a very good geographical position along Adriatic and Ionian seas. The coastline has stupendous potential and support for endless opportunities. Albania’s proximity to regional and EU markets, allows low distribution costs and “just-in-time” product delivery.
Albania benefits from extensive Free Trade Agreements and has free access to a market of 26 million customers. The country became a member of the WTO in 2000, and signed the SAA and CEFTA in 2006. In 2009, Albania signed an FTA with the European Free Trade Association (EFTA), etc. Currently we have double taxation treaties with 40 countries.
Actually, Albania can offer a cost-competitive and dynamic workforce. 57% of the population is under the age of 35. More than 100,000 students enrol at university. English and Italian are widely spoken. French and German languages are included in the education system. Other regional languages are widely used, as well.
The government has approved a new fiscal package whose main objective is to maintain macroeconomic stability and continuation of structural reforms. It has been designed in close consultation with the International Monetary Fund (IMF) and World Bank (WB) and does not distinguish between foreign and domestic investors.
As potential investment sectors for foreign investors I would mention renewable energy (hydro, solar and wind), petroleum and gas energy, manufacturing (textile and footwear industry), agriculture, tourism, transport and logistics, etc.
Albania’s Foreign Investors Today
BM: The idea of the Europeanization of the Western Balkans is becoming even more a reality not only politically, but also in economically. The main foreign investors interested in entering South East Europe are the EU, USA, UAE, Turkey, China and Russia. What is Albania’s orientation in this regard?
AS: According to the Bank of Albania, FDI in 2013 reached €2,854 million. Of these, €785 million were invested in the sector of “Post and Telecommunication,” €780 million in the sector of “Monetary and Financial Intermediation,” and €732 million in “Extraction of energetic minerals”. Greece ranks first with 37.49% of the total. Canada is second with 27.93%, followed by Austria with 13.24%, and then the Netherland with 12.26%. Turkey is next, with 9.78% and then Germany, with 3.75%.
In comparison to 2012, Greek direct investments increased to 39.5%. Many Greek companies operate in Albanian banking, construction, services, industry, etc. Most of them are small and medium size businesses. Canadian direct investments increased by 13.4% in comparison to 2012 and are focused mainly in oil extraction. Austrian investments experienced a decrease of 2.33% in comparison to 2012. Austrian companies are focused on banking, energy and services sectors. During 2013, the Turks increased their investments in Albania by 18.72%. Their companies are active in sectors like banking, telecommunications, the food processing industry, mining, energy, education and healthcare. German companies make up 3.3% of foreign companies in Albania. Their investments increased during 2013 by 16.3%.
Regarding trade, Albania exports mainly textiles, shoes, minerals, cement, metals, foodstuffs, etc., and imports mechanical and electrical machinery, foodstuffs, tobacco and minerals. In exports Italy is the main trade partner with 52% of the total, followed by Kosova at 7.3%, Spain at 6.5%, Malta at 6.2% and Turkey at 3.9%. Italy is also the main partner concerning imports, at 29.8%, followed by Greece at 9.4%, China at 7.3%, Turkey at 7.1% and Germany at 6%.
As one can see, the Albanian market is open to foreign investors without distinction. Countries like Italy and Greece are natural partners, but the recent economic crisis in both countries forced the Albanian companies to adapt and look for new markets.
China’s European Investment Tactics and Infrastructure Projects in Albania
BM: Do you think that China is exploiting the zero custom tariff regime in the Western Balkans, applying the same model as with Iceland to penetrate the European Single Market via those Balkan countries which are on the way towards EU membership, but are still not full EU members?
AS: The relations of China with the countries of the Western Balkans are focused on several areas – economy, culture, humanitarian and social development, etc. To come to the question, yes, Western Balkan countries have a zero custom tariff regime for exporting their products to the EU, which China should see as an opportunity for its producers. It means that Chinese companies, after producing their goods, let say in Albania, sell them to the EU market as “made in Albania.”
So far China has not taken advantage of this convenience with the EU, at least not of Albania’s quotas, as it considers them irrelevant. Instead, China is approaching Central and Eastern Europe through the China – CEE Cooperation Initiative. This initiative, which involves 16 European countries, EU members and candidates, aims at strengthening China’s presence through the investment of $10 billion in several areas like infrastructure, energy, transportation, agriculture, etc.
Currently, Albanian authorities are negotiating with Chinese companies on the construction of a highway that will link Tirana with the Macedonian border. Chinese companies have shown interest also for the development of the Port of Shëngjin and construction of an industrial park near the Port of Durrës. Let me underline that for China, the last two projects offer – along with the Port of Piraeus in Greece – access to European seas only a few miles from the EU waters of Italy.
Regional Energy Cooperation and Views on the ‘Balkan Benelux’ Concept and the ‘Western Balkans 6’ Initiative
BM: In the article “The energy-security nexus in south-east Europe” published on The European Council on Foreign Relations (ECFR), the Minister of Foreign Affairs of Albania, Mr Ditmir Bushati, writes about the strategic value of the regional cooperation in south-east Europe: “Connecting the energy islands in south-east Europe will help to build a true region in both economic and security terms, a region that can act as a strategic partner for the EU in the broader energy security nexus. Last but not least, such a bold approach will further consolidate the regional cooperation and the EU integration agenda of the Western Balkans, following the successful example of the six founding member states of the European Union.”
Some months ago, the idea of the Balkan Benelux-Model was again circulated. This would be aimed at creating mainly a Balkan Energy Union, (BEU) and a Balkan Area of Free Trade Agreements (BAFTA) between Albania, Kosova, Macedonia and Montenegro. Who is proposing this model and would it require a change in the state integrity of the countries involved?
AS: The interesting idea of a Balkan Benelux was proposed several years ago by the Action Group for Regional Economic and European Integration (AGREEI), a think tank which aims to support the economic and European integration of Albania, Kosova, Macedonia and Montenegro. According to AGREEI, the creation of a market of eight million consumers with free movement of goods, services, capitals and people and cross-border cooperation would speed up the EU integration of the four countries.
Instead, another format raised more interest and was accepted by our countries, the EU and other actors – the Western Balkans 6. This informal initiative is a forum of Albania, Bosnia and Herzegovina, Kosova, Macedonia, Montenegro and Serbia. Like Balkans Benelux, it aims at supporting them on their individual paths towards the EU. It involves the European Commission and the Regional Cooperation Council (RCC) as observers.
So far, WB6 meetings have focused mainly on connectivity, youth cooperation and mobility, establishment of the Western Balkans Fund (WBF), etc. Tangible results have been achieved. In November in Prague, the WB6 Ministers of Foreign Affairs will sign the Agreement on the Establishment of the WBF. Its seat will be in Tirana.
In Vienna, the WB6 prime ministers signed the Joint Declaration on the Establishment of the Regional Youth Cooperation Centre. Earlier, in April, they agreed on the regional projects related to the extension of the EU core network in the Western Balkans. The ministers of Energy, as well, have agreed on regional projects that aim at creating a regional energy market, functioning according to TEN E guidelines, and connecting the energy islands in this part of Europe. Cooperation includes other areas, as well, like security and home affairs, cross-border cooperation, etc.
Regional Free Trade Area Processes and Bilateral Agreements
BM: The Free Trade Area between the EU and the Western Balkans countries has been achieved progressively through the SAA agreements and further on is subject to membership obligations in the Euro-Atlantic structures. The reliability of such a process is to be achieved also by avoiding bilateral competition between the Western Balkan states.
Within the framework of the Regional Cooperation Council of SEE and the common efforts to address the political, economic and energy-security nexus of regional issues in a cooperative way, could you describe for us the bilateral and multilateral relations of Albania with its neighbouring countries, starting with Kosova, mentioning also the number of bilateral agreements undersigned in the latest High Level Meeting held between the two countries in Tirana, Albania, in March 2015?
AS: Good neighbourly relations and regional cooperation are pillars of our foreign policy and form an essential part of Albania’s EU integration process. Albania has continued to actively participate in regional initiatives, including the South-East European Cooperation Process (SEECP), the Central European Initiative (CEI), the Regional Cooperation Council (RCC), the Energy Community Treaty, the Central European Free Trade Agreement (CEFTA) and the WB6. In November, the countries of the region will formalize the Western Balkans Fund, followed by the Regional Youth Cooperation Office. According to the Progress Report 2014, “Overall, Albania has continued to act as a constructive partner in the region, further developing bilateral relations with other enlargement countries and neighbouring EU Member States.”
Albania’s Bilateral Regional Relations
Concerning bilateral relations with the neighbouring countries, Albania has excellent relation with Kosova. Last year, on 11 January, in Prizren, was signed the Joint Declaration for Cooperation and Strategic Partnership between the two governments. I would like to point out the G to G meeting between Albania and Kosova on 23 March 2015, in Tirana, where 11 agreements of cooperation were signed. These relations are a successful example of cooperation between two countries, sharing one European future.
We welcome the resumption of political dialogue between Kosova and Serbia under the auspices of the EU High Representative for Foreign Affairs and Security Policy, Mrs. Federica Mogherini, as a contribution to peace and stability in the region.
At the same time, Albania urges all countries to support Kosova in its bid for membership to regional and other international organizations, like UNESCO. The membership to international organizations means more opportunities for the country to develop, more responsibility and more accountability.
Albania aims at having good-neighbourly relations with the Republic of Serbia and has full readiness to engage in an open political dialogue, in order to create a sustainable climate of confidence and respect. The visit of Prime Minister Rama to Belgrade opened a new chapter in our overall political and economic bilateral relations. Meetings between Prime Ministers Rama and Vučič are not a taboo anymore and the ministers of foreign affairs, Bushati and Dačič meet on regular basis, particularly in the WB6 format. There is a set of pending bilateral agreements which need to be finalized. Albania pays great attention to the well-being of the Albanian minority living in the Presheva Valley and to their treatment according to European standards.
We are willing to maintain good bilateral relations with Macedonia. We consider Macedonia a friendly neighbour and we support its prosperity, sovereignty, integrity and stability. Events in Kumanovo have threatened normality and ethnic relations, which are still fragile, due to the partial implementation of the Ohrid Agreement. Interethnic relations are vital to the existence of the Macedonian state. Albania condemns any act of violence, considering it unacceptable for a democratic society that aspires to Euro-Atlantic integration. We consider that the full implementation of the “Ohrid Framework Agreement,” without any delay, is essential for Macedonia’s security, democratization and its Euro-Atlantic integration processes.
Political dialogue and high level contacts with Montenegro have been further intensified. Cooperation is focused on economic and trade relations, energy, joint cross-border projects, strengthening of the system of communications and telecommunications, further facilitation of the movement of people and goods, strengthening of the joint fight against organized crime and illegal trafficking, etc.
Albania and Greece have good neighbourly relations. As NATO members and as countries sharing vital and mutual interests, relations between the two countries are of strategic importance in the region. Nevertheless, from time to time, some frictions fuelled by certain circles arise. In our opinion, bilateral issues should be addressed in compliance with international law and accepted by both parties. Greece continues to be a very important economic partner for Albania. For years, it has been at the top of Albania’s list of partners in trade and foreign direct investments. The Greek minority in Albania and the community of Albanian immigrants in Greece constitute strong bridges of friendship and cooperation between the two countries.
The Berlin Process and Developments after the Recent Vienna Balkan Conference
BM: Let’s discuss the Berlin Process initiated by Chancellor Merkel, created with the aim of fostering the interregional cooperation among the business community and the governments of the Western Balkan countries, to strengthening the interconnection b2b, g2g e g2b and reinforcing the perspectives for EU accession. What is the message Albania is bringing home after the waltz on the beautiful blue Danube in Vienna?
AS: Indeed, the Berlin Process, initiated by Chancellor Merkel, has intensified regional cooperation. It set in motion a process that aspires to generate tangible benefits for our citizens from the process of EU integration. But it is not a substitute for EU accession. It aims at reinforcing the perspectives of EU accession, by building up in the Western Balkans a true region in economic and political terms.
The process has produced practical and political consequences and has shown that the countries of the region can deliver on their promises. The participating countries committed themselves to resolve any open questions through bilateral negotiations or other peaceful means, and not to block the progress of neighbours on their respective EU paths.
Kosova and Serbia signed four agreements while Montenegro signed the border agreement with Bosnia-Herzegovina. The participants jointly identified the projects related to the extension of EU core network corridors through the Western Balkans, as well as the projects related to energy connectivity. They agreed on establishing the Regional Youth Cooperation Centre, an initiative of both PM Rama and PM Vučič.
The Conference of Vienna served also as a platform where our countries voiced their concerns. The resource gap between member states and candidates is significant: in terms of net inflows the difference between membership and accession is a factor of almost six.
In Vienna we emphasized that citizens of all countries in the region need to feel the benefits and the transformative power of the EU accession process. In this context, connectivity is seen as a transformative concept aiming at increasing social cohesion, reducing economic “nomadism” and supporting trust-building mechanisms that are born out of successful regional cooperation processes.
In its second phase, the Berlin Process should lead to the definition of investment priorities that will form a growth package for the Western Balkans in the form of financial guarantees. The EU’s strategy for the region needs to encompass the energy security dimension: more particularly, a better channel of EU funds towards energy infrastructure. One key pre-identified project that deserves collective backing in the months and year ahead is the Ionian-Adriatic Pipeline.
For these connectivity investments to be sustainable, we must continue to invest in the education of our youth. We must implement vocational training in our countries in the fields matching our countries’ respective market demands, among them, IT, tourism, energy, and agriculture. We must also maximise use of the Erasmus+ program, which will allot up to 14.8 billion euros EU-wide by 2020. Additionally, we must mirror the opportunities created by Erasmus+ for students and lecturers in a program solely for the Western Balkans.
This is just one part of the homework we need to focus on doing this year. The others are related to the strengthening of the National Investment Committees’ role in preparing the single sector pipelines, to the establishment of the Regional Youth Cooperation Office and youth mobility, to the involvement of civil society in the integration process, etc. As you can see, there is a lot to do before going for a “tango” to Paris.
*Note: the content of this interview does not represent the official position of the Albanian MFA.