Meeting of Prime Minister Edi Rama with representatives of financial institutions, enterprise, banks and experts to launch a new “One billion for reconstruction” national program:
Hello to everyone!
We are having this meeting with representatives of business and banks to launch a new “A billion for reconstruction” national program. The program aims to mobilize a substantial capital to promote at a much higher intensity than it has been so far, a comprehensive process of reconstruction which has already started, but which needs a massive funding nationwide for road infrastructure, educational infrastructure and health infrastructure.
The program is an invitation to the enterprise and to banks to engage in a process of partnership with the government, and help implement within a short time a considerable number of projects, while ensuring in terms of funding, state funding for a reasonable number of years according to set contractual deadlines for each project.
This program has been prepared and negotiated with the banks, with the entrepreneurship, with domestic and foreign experts for similar funding systems of public infrastructure, and it has a list of projects. Some of them are projects which we have, while some others are projects that should be designed and developed by stakeholders, and are based on a priority list.
With this program we want to address some important issues of the national road infrastructure, address the need to significantly improve tourism infrastructure. For this reason, projects start from the upper part, the road linking the northern urban areas with Theth, down to Vlora, Gjirokastra and Berat. Part of this program is the Arbri Highway for which procedures have started. It is the first project that is included in this program, and for which a procedure has been started by the Ministry of Transport pursuant to the legislation in force.
Also, our intention is to finance the improvement of infrastructure in areas of intensive agricultural development.
This program has a fundamental importance in terms of education because it gives us the opportunity to finance and build in a short time a number of schools that otherwise would require many, many years if we relied on the conditions and pace of state funding. We intend to build and rebuild approximately 150 schools across Albania, including 6 new schools of excellence for vocational education.
Health infrastructure’s gravity is the construction of a regional hospital of excellence in Fier, as well as 10 health centres of excellence throughout the territory of the Republic of Albania.
I want to underline the fact that for this entire process and this massive involvement of the enterprises and private capital in support of a national program for public infrastructure, citizens will not pay anything extra, based on our new philosophy of Public-Private Partnership which has already made clear that the state does never spend its money to favour a private entity, by charging the financial burden on the citizens or taxpayers.
We have inherited a difficult history of concessions that had a different philosophy, where for services or works to the benefit of the public, privates were paid by the public with extra fees. We put an end to this heritage.
This program also is based simply on a budget planning of the Republic of Albania over the years, to ensure a rapid implementation of a much larger number of projects than those that the state budget could fund, enabling for the first time the country to fund form the budget and from this partnership over $ 1 billion per year for public investments. In addition, it will guarantee that we won’t have any fluctuations in the plan for reducing public debt, and we’ll have full control of the deficit.
It is worth noting that this program will have a new space for a significant increase in employment. It is a program that will create significant employment, since it is about hundreds of new sites to be opened and be operative within two-three years. The program will provide new revenues for the state budget, as a result of liabilities to be collected from these projects, in addition to doing what has been our great ambition since the first day: have an economic growth of over 5%.
I am not exaggerating in the reasonable projections made by our specialists in terms of the impact this program will have on economic growth, as we can reach higher figures, we can reach up to 7 or 8, but what remains important and completely safe is that we will reach over 5%. An increase of over 5% will have a very significant impact on the domestic economy, and will give a great impetus to the further growth of consumption.
I would like to point out for the public opinion that not only the number of European countries relying on the model of the Public-Private Partnership increased in the first 3 months of 2016, but Public-Private Partnership contracts that have been signed amount to over 8 billion euros. Only in Germany, 100 Public-Private Partnership contracts are being performed for the construction of roads, schools, prisons and hospitals. Three major highways in Germany, France and Slovakia, and one of the largest military bases in Europe, in the UK, are some of the projects recently approved based on the Public-Private Partnership formula. I can list endlessly such projects, but I want to conclude by defining on the basis of a recent study of the European Union, this fact: Public-Private Partnerships have the advantage of having an immediate economic and social impact, enabling in a short time assets or important public services, something that cannot be possible through classical procedures supported by budgetary funds.
Thank you!
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Representatives of banks: The banks want to congratulate the government on the initiative to introduce this event, the 1 billion project which is in fact a milestone. In our opinion, the main column which you dealt with today and explained us in relation to roads, schools and hospitals, will dramatically improve the lives of citizens, will improve tourism, culture, education, and it will certainly boost economy. In addition, I believe it will have a very strong socio-economic impact. We consider this a strategic opportunity. Our banks welcome this product, and are willing to support it. Banks have historically supported the local economy, and we are willing to support this project. Thank you!
Prime Minister Rama: We believe that this project has the power to enable an injection so massive in the economy, among other things, also for the fact that banks have much liquidity, and this program will enable a massive funding of large projects, for which, in all the meetings we have with the banks, we hear concerns and complaints due to the absence of major and convincing projects with appropriate guarantees. This is one of the side effects, but which has a lot of importance in terms of the banks’ involvement in this process.
Foreign entrepreneurs: It is clear that there is no doubt that this project will be very positive, and it will also have many benefits for citizens and for the state. In addition, this is the first time that the PPP model you will implement, has been a little different. We have the guarantee by the state, and this allows us to consider the best funding criteria. I would like to ask two questions. Could you describe us how the implementation process of the PPP will be? When will it start, taking into account that some amendments have to be made in regulations and laws?
Prime Minister Rama: For us, the program has started with this meeting. We are willing to provide further information to all those interested. There are here representatives from all institutions: the Ministry of Culture, which is involved because of the tourism dimension where both infrastructure and the need for intervention in determined heritage or other objects are combined; the Ministry of Economy, the Ministry of Finance. This whole program will be coordinated by the Deputy PM and the Head of the Delivery Unit to the Prime Ministry. We are willing to provide detailed information on every aspect.
In terms of the legal basis, a preliminary discussion has been made both among us and with a most independent expertise. We believe that the current legislation can guarantee the program. For projects that exceed a certain volume, more than for a major reason, we will address also the Parliament in order to psychologically guarantee the companies involved, but also for a greater transparency. This won’t be required for minor projects, as the current legislation is fully sufficient.
I would like to emphasize that in cooperation with experts of the European Union, we have compiled a very detail roadmap with the steps to be followed, and where we have analysed the concepts and deadlines related to every PPP agreement, regardless of the type of formula. The roadmap follows the model of standard contracts, and here I mean the whole European experience, the tools, the links to be followed during the negotiation of the contract, and a standard model of the feasibility study. We will need the project for a large part of these priorities. Which means that companies must submit a project. Of course, we have also discussed the mechanism in order not to charge the cost of the project to companies, when, according to the type of contract, the tender’s result goes to someone else. But all these are a matter of details about which, all of us here and all those who represent the institutions that I mentioned, are willing to give relevant direct explanations.
This is a very ambitious program, very difficult, because it requires a great coordination. Above all, we do not want to waste time, but we want to strictly abide by the deadlines that are relatively short. For this reason, the heads of institutions will follow directly the whole process of communication with the enterprise, for the expression of interest.
Nikolin Jaka, Chamber of Commerce: This is welcomed not only by the Chamber of Commerce, but also by enterprise. Every breath, every funding, and every portfolio that diversifies whether the work or the commitment of the enterprise is welcome. What remains to be discussed carefully is how flexible and what kind of relationship will there be between the banking industry and the enterprise industry undertaking the project. We are aware that there is still an almost unilateral relationship between entrepreneurship in the role of borrower, and the banking system in the role of lender, both in terms of the granting loans percentage and in terms of the banking services that are almost incomparable with EU countries, or with the requirements for entrepreneurs to be productive in their work. Since this is also a project launched by the government, the banking system must be more flexible and the enterprise be more present in the projects. The other part which we need to discuss and be informed about concerns the priorities of the government for the projects to be launched, what these priorities are, so that entrepreneurs will be able to do these priority projects. So, where are these projects intended, in order for entrepreneurs to be active and then submit projects and their feasibility?
Prime Minister Rama: The whole list has been prepared and will be available to all enterprises concerned, all banks, and it will be made public with regard to the three components and subcomponents of the project. Regarding the non-flexible conduct of the banks, as you call it, I’m on your side, I am on the banks’ side, but I believe that no EU country where those who owe money to banks would block the legitimate requests of banks for assets through corrupt judges. This doesn’t happen in the EU. The effect of counteracting those who counter banks in their legal request for assets, after passing all possible deadlines to repay loans, tit for tat with corrupt judges who abuse every day justice in this country with their gavel, causes a hardening of the relation with entrepreneurs who may not deserve it or who maybe deserve more flexibility. This is a fact.
We have been aware since the first day, and we have been absolutely invested to advance the justice reform also for this aspect, the economic aspect. This corrupt justice that reminds us of that old saying “better die rather than give up” – as the drawing lots showed us, while half of them will go home as soon as the Vetting law is enforced – it doesn’t allow economy to breathe freely, it doesn’t allow the banks to have a flexible relation with the enterprise. This doesn’t allow enterprise either to create a flexible relation with the banks due to criminal records in relation to the banks of some characters who, being totally in debt, go and block the banks with the courts which are “killers”. This is fact. As for the rest, there is no question that I am with you, I am not with the banks. Banks are the necessary evil of the system we have chosen.
Alban Zusi of the Industrialists Association of Agro-Food and the National Centre of Export: I’d like to welcome the government initiative to create public-private partnerships to absorb investments and implement at an accelerated time, the works and especially the services that have been missing in the country. We know very well how important it is to use the energies of the public-private partnership. It is important to build public-private partnerships that provide an added value, provide services that have been missing, missing infrastructures that are not like those of the past which only create additional costs for businesses. In this context, the business community welcomes this, and it will be even a stream of oxygen for channelling and directing investments and financial resources to businesses in an economy which still has limited growth opportunities in its traditional directions. In this context, I would like to add to your agenda also the introduction of agriculture and food sector in the list of priorities. Suffice it to say that there are several tens of thousands of kilometres of drainage and irrigation canals, which will put immediately in production mode over 60-70% of our uncultivated agricultural areas, which are limited anyway. I believe that it would be a good business opportunity for construction businesses, but especially for agro-industrials, for farmers who will finally have what they have been missing. Secondly, I consider it very important that the public-private partner operates also in the area of missing services, where the state has failed for 25 years. Such is for example the area of food safety where due to a missing service, 60% of Albania’s agricultural production is not exportable.
Prime Minister Rama: The program is a medium-term budgetary support for public works which we want and will achieve together in the short term. This is the essence. Therefore, this is about a number of public works in road infrastructure, schools throughout Albania, health centres of excellence that are missing today which, considering the state budget and envisaging the increase of other incomes, could be built in 10 to 13 years. By absorbing the private capital, we will build them in 2 to 3 years, and then pay for them in 10 or 13 years according to contracts from the state budget, without taking any penny form the pocket of citizens. It is true that this is a fundamental difference with the past when, for instance, a concession was given for container scanning. A large part of your deal with import, and for an investment asked to privates, a service that the state should do, importers are charged with an additional fee. A hallucinatory fee that must pay not only those who scan their vehicles, but also those who do not scan them. Even where there is no scanner, suffice it to enter the Republic of Albania by truck, and you are required to pay the fee. The stamps concession has increased the price. All these are tasks of the state, they are services which the state should provide, they are instruments that the state should have. The state has engaged privates because it was not able to finance these instruments, but unlike what we do, they have charged additional costs to citizen. The technical control of the vehicle has to deal still to this day with the long queues to check vehicles. What a shame! A contract made in Parliament, with an additional fee for each person who stands in the queue, and absolutely nothing has changed, the service is neither better nor guaranteed. Zero! Money keeps being collected from the private company that was supposed to provide a better service. The long queues where there even before. The management of the Port of Durres is another shameful story. The same goes for that of the HPPs. 161 contracts for hydropower plants with guaranteed rates. The state would buy energy to the company paying a certain amount of money, regardless of how its story goes. All these belong to the past.
We will continue deepening it. We don’t get any complex by the ignorance or malice that throw mud every day against the Public-Private Partnership, and tell vulgar lies to the public. It is true that we have made some partnerships, but we haven’t asked a single penny to people, and we haven’t increased debt by any single penny. If we perform free check-ups, they are for free for the people, and what is paid from the budget is taken from the budget of the Ministry of Health. If we have today a Public-Private Partnership for medical instruments, which are instruments of the latest technology, whereas a large proportion of infections that people got in our hospitals was due to instruments out of every standard, we haven’t charged any fee to those who get a surgery, and haven’t told them, ok, you’ll get the surgery but you have to pay this much money because of the new instruments, and we have to pay privates. This is state money.
Through these actions, and through this program, the state does but one thing, it does things quicker so that people who need to have them can have them as soon as possible, and it does them by adding investment capital by including privates. Nothing more, nothing less. We cannot tell people that it takes 10 years to build from scratch 150 schools with the state budget. It means that thousands of children will have to attend primary schools in horrible conditions for 10 years. Therefore, we ask you to invest, and we will pay you that money step by step, without getting any loan. The other way would be, get a loan and do it yourself.
The truth is that business has less risk compared to both the government and the banks, because it has a guaranteed contract. Our problem and that of the banks is to have the enterprise to execute the contract properly. The enterprise doesn’t have any risk, for it has a normal contract with the state and a full budgetary support. Banks have a minimal risk, because contracts are guaranteed by the state and the budget, the risk is minimal both in terms of its internal balance sheets and in terms of the debt. But with regard to the public, it’s us who take the major risk because we want a maximal quality in the work performance, and we want companies to enter with a full 20% equality, so that at least in the first two years we can fund the work ourselves, otherwise the ends don’t match, and the state will begin paying the obligations starting from the third year. It’s a simple formula, a winning formula, a formula that is increasingly applied by other countries, and for which we have been given full consent both by the IMF and the WB which will support this project along with other great investment banks. We are negotiating with the WB the opportunity to have it enter the program as a guarantor. So, we are just about to start concrete work as soon as possible. We expect proposals and projects, and we are available to all companies that want to be involved in this massive reconstruction program, which will bring an economic boom because it will have a great impact on the economic growth.
Many thanks!
