Speech of Prime Minister Edi Rama at the conference “Reform in economy and business climate”:
I want to thank the speaker prior to the previous speaker, who is the only optimistic investor here in this room as I can see, among all those I heard before, but also from what I can see from the faces in front of me. I believe that this is a problem with which we all must deal a little more seriously because there is little question that all that was said here makes sense, but I believe that nothing can be separated from the context, and if we are back in the context, we can be much more optimistic about what is happening and what comes next.
We started work 32 months earlier, in October 2013. I want to just remind you that the Monetary Fund was not at all here, it was chased away unceremoniously. I want to remind you that the World Bank had banned any kind of continuity of its programs, due to a persistently demanded reform as a condition for continued funding of the programs, and that was the pension reform.
I want to remind you that we were at the climax of a conflict with the power distribution company as a result of a violent expropriation by the previous government. I want to remind you that we had a total blockage of all companies that performed public works and services on behalf of the government because they weren’t being paid.
On the other hand, we had a total blockage of loans by banks, because relations with these not paid companies would impose such a thing, in addition to requiring 720 million dollars to repay companies and resume a tough recovery from a situation where economic growth would fluctuate between 0 and 1, excluding political forces that tried to push it towards 1 with fabricated figures.
I absolutely agree with what was said here, but I believe that between a situation where not a single VAT refund was made to anyone who wouldn’t pay 30% -50% to those doing the refunding, and a situation where we have automatic VAT refund, this is an epoch-making breakthrough. Today, companies are automatically reimbursed. All entrepreneurs in this room know very well what this means for companies.
In addition, let me remind you that we were in conditions where, because of a conflict with the power company, and because of the accumulated debt from the company of power distribution – $ 1.1 billion of debts accumulated from 2007 to 2013, of which 273 million dollars accumulated from January to August 2013 which was election year, by telling people “Go on, you can consume. We do not want the money.”
One historic year has passed since the government has not given a penny to finance the maintenance of the distribution company, from an average of $ 150 million that it would give each year to fill the pit opened by theft and failure of payment, and as of today 320 thousand household customers have signed contracts, agreements to settle old debts. Because we talk about investments, but we forget that to increase the volume of investments we need to increase all elements of security, ranging from energy to the relationship with the administration. I absolutely agree that there is still much to do to have a properly performing tax administration, but this is the first time that the tax administration has started to work after more than 20 years, with a risk-based platform.
Of course, such a process, from the beginning of work with a risk-based platform to the creation of a sustainable culture and knowledge so that the risk-based platform becomes the grounds for enterprises auditing to not be the barbaric routine throughout the past years, all this will take its time. Because some people in this room were against the action against informality. Some representatives of the chambers of commerce were against it. But they cannot tell how we were going to formalize or to have registered 42 thousand new businesses that for the first time agreed to be subjected to the laws of this country and register, hadn’t we started an operation against informality, which was not perfect but it couldn’t be imperfect either.
But results show that not only was it necessary, but it was also a very important remedy to cure it, for maybe it will never be cured. Andi said it, we have two elder brothers who are Italy and Greece, and with these two elder brothers we will always have a less flirty relationship with informality that we would have, if we had German or Swedish brothers. But in terms of the fight against informality, the progress we have made has never been made before. And I strongly believe that one of the reasons why there is such a broad sense of dissatisfaction, is because people have increasingly less freedom to not pay, freedom to walk at different pace, according to the several agreements with various auditors and inspectors, and so on.
Because I cannot understand, and we find it hard to understand. How is it that all the profits of companies have increased – all the profits of large companies result to be increasing – if we had a pessimistic situation in economy? But of course, part of this increase is the shift form informality to formality. We have renowned companies, very large companies that have made a fortune by working as small businesses. We can’t blame them – it was the trend of those times, as they use to say – and on the other hand companies enter the market to make profits, and not to establish the law. It is our duty to do this. But if we have today an exponential increase in the stated volume and an exponential decrease of informality, it certainly is not something that companies or ventures that used to make profits on the expenses of the state should be happy about. On the other hand, this is something to be highlighted as a very important step forward that sets a platform of free competition and fair market.
Undoubtedly, on the other hand, I have not believe a single day and I never will that the problem of this country is taxes. Fore we have also here some preachers of the flat tax. Let’s go back to the flat tax and go to 9%. Now tell me, why should we increase the tax to nurses, why should we increase the tax to teachers, why should we increase the tax to office workers, why should we increase the tax to the whole middle class, in order to go to that 9% or 10% for large enterprises? There is no theory that can prove that it is better. While the opposite has been proven. We established a new tax system, we put a new tax system with tax cuts for 97% of people who pay taxes, and actually we have higher income also from higher wages.
On the other hand, we have made some reforms that eventually are all connected to climate, for energy was burying us. Governments are evaluated for what they do. Nobody takes the trouble to evaluate them for what governments prevent from happening, but I can tell you, with figures, that by entering an agreement with IMF, by undergoing a very tough program of fiscal adjustment, and by starting to settle the debts of companies, we averted the financial bankruptcy in November, December 2013. We would have been unable to pay salaries and pensions. This is the truth. I emphasize this, the context is very important. I have no doubt that all together we will do a frontal battle against every form of negativism, abuse, corruption that continues to occur, because modernization of the administration is still far away. But however, if today the tax authority alerts business via e-mail about their situation and ask them to correct it, how do they do it?
They do it starting from the electronic platform that we have built for the tax authority. Tracking businesses is not conducted anymore by gangs going there and abusing with controls, but is made by following remotely and digitally a whole process of daily transactions.
And we are not comparing what I’m saying to 15, 20, 25 or 40 years ago, but we are comparing it to 32 months ago. We did the pension reform, which everybody had avoided like the devil avoids the incense. We did it in cooperation with the WB, and actually we have entered a positive trend. We were threatened by the collapse of the scheme due to the growing deficit year after year. The deficit had reached over $ 400 million.
We did welfare reform. A capillary reform that was actually another very important step to fight systemic corruption.
We did the territorial administrative reform that has actually overturned the second-level governance manner, but has freed the country from another burden of corruption.
We did the property reform. For the first time after 25 years we undertook to do a law on property that would not tell owners “you will have everything”, while winking to others “they’re not going to have anything, you will”. We were the only country in Europe, the only member country of the Council of Europe that didn’t have yet a law on property that could solve the property issues. We committed and we did it. It might not be the best law in the world, it is not perfect, it doesn’t make everybody happy, but it gives everybody all it can. And this again has to do with the stability of the doing business platform.
On the other hand we are doing a radical reform in education. We are paving the path year after year to building a reliable professional education, which will give us qualified people. Here is Shkëlqim, ask him what problems the company recruiting qualified employees encounters today. I understand very well that it sounds very sexy to do today a perverted debate building on an egregious case of abuse, or five or ten cases of abuse if you want, in different ways, face to the desire of people to be employed. But the very truth is that the big problem that we have inherited is the lack of qualified workforce, which we are dealing with.
I want to tell a figure. A major part of the 173 thousand people who have been provided an insurance number, who today pay social and health insurance, and receive their payroll as people with dignity, would work as slaves, because they weren’t employed regularly and did not appear anywhere. Aren’t they a reason to believe that the basis are being built here to create more opportunities and to give more tools to enterprises in order to work properly? Or they doesn’t matter.
There is no doubt that the judiciary reform is essential to give sustainability all other reforms. I have been in touch with several companies that are in this room, and who have faced unimaginable arbitrariness in court, but I believe that we should jointly share a conviction. Albania cannot become the country we want, if informality, privileges and different speeds provided through preferential lanes will not be fought every day and everywhere, whether it is a domestic business or a foreign business. I heard Jansen mentioning the “Bankers case”. The Bankers case is a very simple case. We don’t think that a foreign company, just because it is an American or Canadian flag, or a German flag or whatever flag you want – they are all flags to which we bow with a lot of respect – has the right to not pay taxes in the Republic of Albania. We don’t believe this. We don’t believe that the fact that this company can mobilise lobbies, or several representatives from its country, can make it an invulnerable company. Bankers didn’t pay taxes. And we did nothing but our duty. How can a foreign company ask the government to tell tax authorities “let it be, for we don’t need this now; it is a foreign investor and we don’t want to ruin our image”? Who can do this? What EU government does this? Who can even think about this? Who can dream of asking Angela Merkel to tell tax authorities to skip a company just because it is from an important partner country?
It doesn’t happen. Why should be that easy in Albania for this to be deemed possible? What is Albania? So, all this is part of the same thing. I wouldn’t do this debate, if the international court didn’t side with the Albanian government. We won the case in court. We won in court the right to have them sit. And what were we asking? We were just asking for an agreement to pay taxes. We won it in court and they started to pay taxes. Everything got back to normal. We didn’t have any issue with the company, which is now being sold. Something that doesn’t have any value cannot be sold, and the Chinese don’t buy things that don’t have any value. Who are those who say that investors are leaving? What investors are leaving? I’ve heard this from representatives of foreign commercial chambers. Who are the investors that are leaving? Tell me one investor who is leaving Albania. Bankers is not leaving Albania. Bankers is being sold, which means that is making profits, and those who have it are making profits. Bankers will continue being there, will continue working there, and it will always have our support.
There are no Germans in Rinas airport. Germans are leaving, Americans are leaving. For your records, there are no Germans. Germans have sold since long their share in Rinas airport, and now have only one administrator. There are no Germans at all.
Here’s the thing. They are selling, and they’re selling at a price much higher than they bought it. Should we prevent the Germans and the Americans to sell, just because they need to stay here? They are here to make their profits, they made them and now they are selling. Others are coming. Just like the German who is here and has given us a chance to do this conference. What was all this fuss about? I’ll tell you.
There are here many forces within the business who are used to open their doors for their own interests and do what they want. Just imagine a business community that doesn’t admit to have a difference balance-sheet for its own use, one for the tax authority, and another one for the banks. Today, it is foreign investors who face this, entrepreneurs coming from the EU who tell us: “No way, it is a scandal that we have the same balance-sheet in the tax authority and banks”. For, when they go to the taxes they reduce it, and increase it when they go to the banks. Because when you go to the banks you should flex your muscles as much as you can in order to obtain a loan, while at the tax authority you should be ragged in order to pay fewer taxes. This is the story. I again want to tell you very modestly. We are the first, I am the first among the first to believe that there are 1001 reasons for us to not be happy with the situation, with regards to all the services we provide for the business, including the administration, the channels of bureaucracy that often become unbearable, the many different administrative barriers, and for all these we want support, and not just the support with votes for the government, but the support and cooperation to do jointly what we need to move in the right direction.
The Minister has launched an operation where he has invited all entrepreneurs to give their opinions, and very soon, in June, we will come up with a new plan to ease bureaucratic procedures for business, but on the other hand I believe that everybody has much to lose. The country, the public, enterprise have much to lose if we do not acknowledge what has been done. Any backsliding is lethal for the economy and for all the fundamental principles and values of competition, which are to us the lodestar for whom we are working.
I would be very happy if you looked at just a document that proves that in all cases, without any exception, where the enterprise has denounced or expressed concern in the tax administration to an inspector or inspection team, the answer to the violation of the human rights was dismissal, unconditionally. But this cooperation should be much stronger, and entrepreneurship in the first place must choose communication with institutions, the Directorate General of Taxation, the Directorate General of Customs, the Ministry of Finance, the Ministry of Economy, instead of choosing to befriend inspectors. Corruption is like ballet, like tango, it cannot be done alone. It is not the dance of swords, which can be danced alone with just a sword, jumping and twisting in front of the public. Tango needs two people, and in many cases it is simulated by those who afterwards go to the media and talk about the big problems that business and foreign investors have today.
Foreign investors in Albania are the most respectful and the most supported people. This is not much, but it is for sure. Our conviction since the very beginning has been and will be, with regard to foreign investors, to provide the utmost support. There is no foreign investor who has found the doors closed when in need to solve an issue. There are problems that can be solved sooner than some others, but there is no foreign investor who, having expressed his concern, has found the doors closed or has been refused support by the government to solve his problem. This, for a very simple reason, because we believe that foreign investors are not only those who invest, but are important because they bring others.
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Improving the business climate is the goal of reforms and endeavours in the second phase of the government’s economic program. This, along with the advantages and challenges of the Albanian economy, was discussed today at the conference “Reform in economy and business climate” moderated by the Minister of Finance. Discussions involved also the Prime Minister, the Minister of Economy, representative of the World Bank and the International Monetary Fund, foreign investors in Albania and local business leaders.
Minister of Finance Arben Ahmetaj recalled two important statistics for the economic performance of the country. The first statistics shows the increasing trend of foreign investments, where 499 foreign businesses have been registered in the National Business Centre in the first 4 months of 2016 only, half of foreign companies registered in 2015. Meanwhile, referring to the figures of the Bank of Albania, Ahmetaj said that 2015 has marked a record in attracting foreign direct investments. The second statistics has to do with consumption. The first quarter of 2016, again according to figures provided by the Bank of Albania, is the third consecutive quarter after the 3rd and the 4th quarter of last year, where consumption has increased.
The Minister of Economy spoke about the government incentives to create a good climate for doing business. “The Government has undertaken to develop some incentives related to economic and technological areas, which are areas where we undertake to facilitate the business not only for procedural reasons, but also in terms of tariffs, customs or paying taxes. We have developed and improved the law on Public Private Partnership, we have made a new law on strategic investments, we have enabled a new law on tourism, and obviously we have given AIDA a new dimension, by turning it into the only unique portal where business can go and be an investor, and the Agency commits to assist it with facilitated and specific procedures. All this requires a broader communication platform that is not limited only in Albania, but expands at a Balkan level.”
The World Bank and IMF are engaged in Albania on a three-year program to support the reforms. WB representative in Albania, Tahsin Sayed, noted that the World Bank shares the Albanian government’s vision to make Albania an interesting investment destination. “There are signs that indicate a recovery of the economy and the restoration of a growth equilibrium in relation to private investments” – Sayed said. She singled out as “very commendable steps” the pension reform, the stabilization of the energy sector, reforms in the provision of public services, the government’s commitment to move faster in terms of facilitating the doing business, the creation of the one-stop-shop for business registration, the activation of permits electronic.
Sayed considered FDIs as one of the priority areas. “Albania has a number of strong points and includes, first of all, a well-educated population with knowledge in information technology, a considerable proximity with the largest economic bloc in the world, and a low labour cost” – Sayed said. In addition, she noted that in this regard “the government has done a lot to encourage foreign investments, by taking very important steps that include sectors that use human capital and facilitate the creation of jobs.” But the representative of the World Bank added that we must ensure that we have a proper judicial system, and respect the rule of law.
According to IMF representative Jens Reinke as well, the macroeconomic situation has improved constantly. “The government has been very careful to control costs and to work with income and ensure that the fiscal situation remains stable. At the same time structural reforms are moving forward as a whole”, Reinke said while noting that the improvement is related also to the functioning of foreign investors, but the easing of doing business should continue. In view of the IMF representatives, improvement of the business climate will also benefit from the justice system reform. “This will also lead to a much better environment for all foreign investors. By not doing this justice system reform, investors can go through unpleasant situations”, he stressed adding that “it will be important to curb many of the charges related to the justice system.”
Some suggestions, particularly with regards to the improvement of the justice system, were provided by leaders of important investment associations in Albania. “All the macroeconomic facts in Albania are positive, and they have been confirmed by international financial institutions with which we cooperate every day”, FIAA President Silvio Pedrazzi said, in addition to announcing that in the meetings with Confindustria in Italy, Albania is seen as a good country for investments, therefore new steps will be taken to increase the presence of Italian companies in Albania. Even according to him, the judiciary reform is considered very important by the business community, because the lack of it is seen as a hindrance to them.
The representative of the Canadian company “Tirex Exsploration”, Përparim Alikaj raised the justice issue as a concern, given their more-than-a-year-long experience in the Albanian courts.
“I know this is a matter that has been going on for years. It is a spectacular case of how administration gives the same right to two different companies. You can imagine why such a thing can happen. We must wait for the court decision, for these are the courts we have, and cannot invent something different. What we can do is to improve the existing situation in the courts through the judicial reform”, the Prime Minister responded to the concerned raised.
Other investors expressed the need for improvements in customs procedures, the enhancement of professional education for more skilled work force etc.
