Speech of Prime Minister Edi Rama:

The first item on our work agenda since the beginning of government, together with the Harvard group, has been to not allow the energy crisis affect us just as a financial crisis would do. Which, in fact, was clearly possible but fortunately it was much more easily preventable thanks to the direct involvement of the International Monetary Fund and the World Bank in an attempt to keep under control a situation that tended to be out of control due to a very large accumulation of debt and to the depletion of an economic model based mainly on remittances from migrants and on the construction boom, which actually have been two major sources of growth over the years, but which were being depleted.

It was very important to identify, together with the professor and with the group of professors and young experts at Harvard, new sources of growth and ways to address them, in order to move from an economic model that led obviously to development, but which was an unsustainable development with a very high cost and, above all, with unemployment, so it brought no real employment, in an economic model that ensures sustainable development and real employment, by reducing development costs.

If we look at the five sources of growth that we have identified and addressed together – I believe we have done it successfully until now – from energy, oil and minerals to agriculture and rural development, tourism, manufacturing, these are sectors where everything done before has been a totally uncontrolled granting of development rights, without taking any measure to ensure a level of liabilities in relation to the path of development.

Let’s look at energy. We have inherited a situation where development rights were granted in a completely liberal way, if I can say so. But I would say more than liberal, it was chaotic. Suffice it to recall that we have inherited a situation where the previous government has given out over 400 hydropower development rights in any watercourse of the Republic of Albania, while on the other hand nothing has been done to ensure a certain level of responsibility in relation to development and in order to keep under control the costs of this development.

The same with oil and the mining sector. Suffice to say that to date, the Ministry of Energy and Industry has revoked 160 mining licenses and over 200 are to be revoked. What are these mining permits? They are development rights given to individuals without any standard of liability for individuals. On the other hand, no work has been done to build institutions for monitoring development and take for the public the benefits of this development. Today, the Ministry is preparing, in order to have it ready in September, a plan for shuting down the dangerous area where we have a vicious cycle of deaths of miners, because development rights were granted without any kind of liability.

Same thing if we look at tourism. Countless development rights have been granted, in addition to allowing illegal development rights in the name of development. Allow me to remind that my predecessor used to invite people to build without permission and to add to floors, to host more tourists, and to not wait for bureaucracy to recognize the right of this development.

Of course, this is a growth that generates income for a certain number of people, and for sure it gives people the opportunity to have a second home on the coast, but what is the cost of this growth?

The cost of this development is incalculable if we consider how much it affects the potential of sustainable growth. Because, for this chaotic development and in order to ensure all these rights of chaotic development, entire forests have been destroyed; entire river beds have been destroyed to get construction materials; entire surfaces of agricultural lands have been destroyed, and entire areas planted with olive trees have been replaced with buildings, apparently for tourist development. We have been denied the opportunity to have safety roads, because development occurred even on the sides of the roads, as you have seen, and national roads were transformed in extremely dangerous areas. Entire coastal area have been destroyed. Development could have been of a very different nature there, and development responsibilities would have ensured development rights to produce sustainable development and a long-term development rather a short-term unsustainable development.

The same can be said for agriculture. We have funded illusions rather than development for 20 years. The illusion of a country based on solidarity, a country that would crumble that little income it has available for agriculture and give it to people as alms for survival. This money was never prioritized to create a value chain, about which we have thoroughly talked, and which has been one of the most important flows of knowledge brought by your center and by the group of experts at Harvard.

The same can be said for any other sector.

I would conclude with a sector that is not related to the work we do with your group, but which is related to the philosophy of professor Hausmann – which in my view is the basis for addressing future ambitions – and which consists in the view that countries are not distinguished from each another based on what they have, but based on what they know.

What is the investment we made in knowledge? Granting of development rights to open universities, 8 times more than the United Kingdom and 15 times more than Germany, for 1 million residents. Private universities that had become factories awarding diplomas of no value, and which were not papers on the basis of knowledge, but were simply tuition certificates. We are now in a new situation after addressing these problems and changing the angle towards resource of development rights and responsibilities. This does not mean that we have reached where we have the ambition to reach, neither that we are at a point where we can tell people “you are happy to have us”, but at the point where we can see more clarly the challenges and results we expect from winning these challenges.

If employment has been a major inherited problem, addressing manufacturing as a source of new growth, with the new toll manufacturing package, but also with stimulation through fiscal incentives for import of machinery, has brought us today to a situation where we can say that we will have an exponential increase in employment in this sector in the next 4-5 years. Thanks to a joint work and as a result of this policy, we have a new situation concerning free economic zones. Albania has been talking about them for 20 years, and we have a dozen of them on paper. They have been reduced to areas covered by thorns, where people who have been granted the right to transform them into building territories would allow nobody to enter those areas. There has been a great interest on the first economic zone of Spitalle, due to the process, where the professor and the group working with the free economic zones suggested to make a transparent, open and international process, in order to increase interest. This fact encourages us to look further.

Of course, it’s not over.

The energy challenge is a great challenge that we won in terms of avoiding a major crisis and collapse, but we haven’t won it yet in terms of transformation of the sector, from a sector for which Albanians who respect the law had to pay extra in order to not let it be turned off, in a sector that should bring profits to society and to the public. We are the second richest country in water resources and hydropower in Europe, and the only place in the country that, instead of receiving benefits from this wealth, has only problems, debts, missed opportunities, obstacles, etc.

We will continue with this philosophy in September. We will open some new sites of similar reforms.

Water reform, to ensure that our water supply system, that is a totally failed system, becomes a system guaranteeing water supply, but which is also able to maintain itself; to ensure that the still very high percentage of agricultural land, which does not produce because there is no water, will have water and be drained, and to ensure that this great asset that goes for drinking water, energy, agriculture, becomes an asset that produces wealth, rather than an asset that produces only problems, debt, stress and concerns.

September’s major operation, which will extend similarly to the energy operation, will be against informality. The situation we have in the income sector is very similar to the energy sector, where some pay and some do not pay and those who pay, pay for those who do not pay. Our goal is to reduce taxes. So, the final objective of this battle, which will start in every city, in every street, in every commercial activity against informality, is to reduce taxes. But in order to reduce taxes for all, we must first ensure that everybody will pay. Meanwhile, what has happened over the years has been the creation of a tradition that every year has gripped more those who pay; has always checked more those who pay; has tried to have more revenue and keep the budget from those who pay.

This cannot go on like this. We will ask those who pay what is due, but cannot ask them to bear also the burden for those who do not pay. For this reason we are prepared for a frontal operation that will include Customs, Taxation, Labor Inspectorate, as part of the fight against informality, which is also the fight against slavery in the illegal labor market. We say that we have a strategic sector, which is tourism, and we have hotels that appear to have one and a half employees; which means, they have one declared employee along with the owner who works on a part-time owner. So, two people. This cannot continue.

We will do a more consistent intervention in the Criminal Code for evasion, informality at work, on all aspects relating to the inability we have had so far to make everybody pay. We will strengthen even more criminal measures, in order to have everybody keep cash boxes, declare income, and so on. In our country large companies work with two statements, one for taxes and one for banks. They reduce income drastically, when it comes to taxes, in order to make the victim, but increase it to maximum, when it comes to banks, to ensure that they will obtain large loans.

Part of this policy against informality is our cooperation with the Bank of Albania, to ensure that on 1 January 2018, banks will only recognize tax statement, and will not to take illegal statements and balance sheets to use as the basis of decision to whether or not grant loans. Only tax statement! We cannot do this in the blink of an eye, because we do not want to load business with a de facto super taxation, but we will give them time until January 2018, to regulate their situation, and ultimately comply with the law by providing a statement which is only declared at the taxes, and on which banks work. Then, the interest to lower and to hide income will move toward being zeroed.

I will give you just one figure. By the end of 2014, we managed to register in the list of state contributors an additional 93 thousand jobs and several hundred new jobs, a part of which are new jobs created, while the other part are jobs of people that we freed from the slavery of illegal labor. We are convinced that the potential is much greater. We have today 106 thousand new jobs in the non-agricultural sector. Not to mention the agricultural sector, where employment has increased, and where there has been a significant formalization, but still far from we want.

I want to express once again my gratitude for the work done so far together, but also the conviction that the work will continue. I am sure that those who came this time will want to come back. We welcome them without Ricardo. We are ready to give them job in our administration work, make them advisors to ministers, advisors to national agencies. Of course, we are not able to pay them as much as they deserve, but we are able to give them things they cannot get in America or in Europe. We are competing with Latin America with the same tools, which are love for life and love for each other, then love for the work. The fact that you will find a “small Latin America” in the middle of Europe makes us have a competitive advantage.

On the other hand, we have under way two major projects, on which we will continue to work together. First, the project of supporting the agricultural sector through the new scheme we have prepared, where the government will establish the Guarantee Fund, and together with banks with whom we have had very good cooperation on this project, we will ensure lending because the risk will be taken by guarantee funds and the interest will be reduced to zero. This way, applications that we have received but to which we could not respond with funding by ARDA, will be funded. In addition, starting from the principle of the value chain, we will fund even more.

Another big project is that of taking forward and successfully finalizing the first free economic zone of Spitalle, and then take forward two other areas where employment forecasts are very optimistic, but which requires a lot of work. Meanwhile, all other sectors are part of the effort. But these two major projects are projects that I believe will bring a substantial and fundamental changes in the country’s economy in the 3-4 coming years. Lending to agriculture with 300 million Euros in the next three years, with an average of 100 million per year accessible and guaranteed by the state, and economic areas where we foresee an investment of $ 1.5 billion in the area of Spitalle, with a first stage of 350 million, in order to pave the way for further expansion of the area, depending on the flow of business to be established there. The fact that over 80 important companies, mainly from Asia, have been registered to date and have shown interest to establish in the area is a very significant fact.

Many thanks!

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The Ministry of Economic Development, Tourism, Trade and Entrepreneurship, in cooperation with the Center for International Development at Harvard University, organized today the closing conference of the Summer Internship Program of the Harvard University in Albania with topic “Sustaining Albania’s Economic Development: Growth Opportunities and Challenges”.

The results of the work made in some sectors by Harvard student teams were presented at this conference.