Joint press conference of Prime Minister Edi Rama, State Minister for Reconstruction Arben Ahmetaj, and the Minister of Finance Anila Denaj, focusing on economy:
Prime Minister Edi Rama: This day will turn into a weekly communication specifically on economy. Today we would like to share with you and the public several aspects of the country’s economy, directly associated with the reconstruction programme and dedicated to reconstruction as a process, which, in addition to the fact that it will provide new homes to every family affected by the Nov 26 earthquake and will return schoolchildren, students and teachers to the newly-built schools, because kindergarten children and teachers, too, are attending classes in other schools, and the reconstruction has definitely a significant economic impact that will help the country and people in such a very difficult period in the wake of the second blow Albania went through because of the COVID-19 pandemic.
A day before the last year’s devastating earthquake, growth projections for Albanian economy in 2020 were very optimistic and positive.
Based on the Albanian official data also confirmed by the international financial institutions and their reports and the respective conclusions by the World Bank, unemployment rate in Albania, according to World Bank, stood at 11%, the region’s lowest, and it was expected to decline further.
The country’s debt was following a downward trend below 65%;
Foreign investments and tourism, thanks to the constant further growth of international visitors to the country, would have certainly had a greater impact.
However, everything changed in the wake of the first earthquake on Nov 26 and the second “earthquake”, the COVID-19 pandemic, few months later. However, the government measures in both directions, namely the extremely successful International Donors’ Conference in Brussels, which ultimately relieved us of anxiety as we would have been forced to divert everything in financial terms to the reconstruction programme, shelving all planned investments and spending projects. In the meantime, taking notice of the ensuing results in economic and financial terms following the country’s reopening, we can openly state that the relief packages during the total lockdown have helped a lot to limit the economic downturn to less than 4.5% from a potential -10% GDP decline.
So, the economic slowdown has been prevented significantly.
In addition to the measures we have taken over the past months, last week only we have taken three other essential measures to stimulate the country’s economy. First; the re-employment programme of the people who lost their job during the total lockdown. Today we have an accurate figure, a total of 13.000 people have yet to reintegrate into the labour market out of 33.000 of them who became jobless because of the lockdown. I am talking about registered workers. I am not talking about the overall number, so that we don’t make speculative calculations taking into account illegal employment. If compared to other countries, I believe Albania ranks among the countries experiencing least losses in relative terms. It would suffice highlighting the fact that around one million people have become jobless in Romania, or that official data indicate that 45.000 worker lost their jobs in Kosovo, 200.000 in Serbia, around 200.000 in Croatia and around 100.000 in Bulgaria.
However, I am saying all of these not to suggest that we are working magic, but just to underline that we are seeking to re-employ all the former registered workers, who became jobless because of the lockdown measures and their number is estimated at around 13.000 people. To this end, we have launched the re-employment programmes, which offer specific advantages to this specific category of workers. The goal is to exceed within a year the employment rate of last February, a month prior to the lockdown, when the unemployment rate officially stood at 11% as affirmed by the World Bank, the lowest unemployment rate since 1991. And we are not talking about relative unemployment, in the relative sense vis-a-vis the total number and not vis-a-vis the speculations made by those who oppose these figures by claiming that “the unemployment rate is low, because people have left Albania.” We are talking about the total number. So, it is not 11% of the people who currently live in Albania, but it is 11% of the total population. This is the lowest unemployment rate in the region.
World Bank, by saying this, never forgets the fact that we face a huge challenge that we should win and which is the relation between the type of job and the salary. Of course, we should face this challenge by increasing the minimum wage, a decision that we are going to make in the coming weeks, as we have already promised.
There will no lower minimum salary than 300.000 lek per month.
Second; complete exemption of small business, not simply from having to pay the profit tax and VAT as stipulated by the law adopted by the Assembly of Albania in July.
According to the law, a small business with an annual turnover up to 100 million lek – the turnover ceiling on small business has never been 100 million but 80 million lek – is now totally excluded from having to pay profit tax and VAT, as we have imposed zero profit tax and VAT rate.
Small business with an annual turnover up to 140 million lek is now completely exempted from having to pay profit tax, yet it has to pay VAT.
But it is not only that. Small business will be also ultimately freed from inspections and tax inspectors, who, despite the significant improvements, they still pose a problem to small business operators due to the arbitrary and indecent behaviour of certain inspectors. Small business will no longer be subject to tax inspection actions. Of course, with the progress of the fiscalization process and the overall digitalization of the tax administration, the preparations for which have entered a final stage, small business will be included in the system just for the sake of bookkeeping, so that big businesses no longer can take advantage and use small business to commit tax evasion. By fully exempting small business, we have laid the foundations of a strong alliance between the state and the small business in order to make sure that every big business income and revenue is taxed and make sure that small business no longer remains hostage to big business and refrains from being involved in the 30-year-old game of false invoices and tax avoidance. False invoices submitted to the state and real ones when it comes to the relations between each other.
Third; the minimum hike plan is a measure that will automatically increase the purchase power and will provide relief to the low-wage category workers. However, this is not a definitive measure, but an intermediate measure between the past and the future.
Taking note of the current indicators and the economy’s acute needs, it is a fact that the temporary forced suspension of the post-earthquake reconstruction process could have been a real risk from the economic point of view. That’s why the reconstruction process was a top continued priority back then, at least in the areas where reconstruction had already begun.
Around 70 reconstruction projects worth a total of 80 million euros have been already launched or are about to begin in the Municipality of Tirana and these projects include houses, health care centres and school buildings, which will have an economic impact for 17.000 people. These projects generate around 15.000 new jobs during their implementation stage.
In the meantime, the Albanian Development Fund has already kicked off work or is about to launch the reconstruction projects in other quake-affected areas. Procedures have already completed about around 30 other projects worth around 62 million euros. These projects too include construction of schools, kindergartens and new homes for the quake-affected households. Around 25.000 people will benefit from these projects. It is about many families that will move into new houses. These projects will create at least 2.000 new jobs, without taking into account the indirect new jobs.
In the meantime, the National Planning Agency is carrying out procedures on 35 more projects, project designs in 18 new development zones, where 31 apartment buildings and 2235 individual private homes are about to be built. These projects will affect 33.000 more citizens.
These projects being implemented by the Municipality of Tirana, where huge investment volume will be implemented once the reconstruction sites for rebuilding new residential neighbourhoods, where a large number of apartment buildings will be constructed, and projects being implemented by the Albanian Development Fund in other quake-affected areas, represent the lion share, so to say, of the post-earthquake recovery and reconstruction package, which also includes the pledges from the international donors, with the European Union as an entity only, let alone other member states, set to start injection of around 100 million euros in the coming days. Don’t forget the impact of these projects on employment.
Next year, we forecast an additional amount of 25 billion lek, or around $250 million and an amount of 6 billion lek in 2022, because one should bear in mind the fact that this entire large volume of intense construction of apartment buildings takes place during a very ambitions time in terms of its length, but also it is a volume that requires a significant financial injection.
All this makes the reconstruction programme an economic recovery process materialized with a considerable economic growth in the coming period. One thing is for sure and I say this very proudly that in the medium term, starting from the year that just comes within a few months and in the next two years, Albania will have the largest public investments package in its history and this will happen without compromising fiscal consolidation. So, without affecting the level of public debt beyond the necessity that we had at this stage and that has affected the public debt of the Republic of Albania, as it has affected the public debt of all countries, without exception.
I will give the floor to the Minister. To illustrate this presentation, we have also a series of diagrams in order to make this communication easier.
Minister Arben Ahmetaj: The first slide refers to the commitment of internal financial sources and international donations to date in 2020, and in the next two years, 2021 and 2022. We have earmarked 34 billion lek or $340 million to support reconstruction programme this year.
In 2021, the government will commit $250 million and, given the ongoing discussions on the next year’s state budget, this funding could increase to $280 million. Of course, I mean the concluding phase of payments in 2022 and not completion of the projects, which are set to complete a bit earlier.
Meanwhile, the second slide shows the amount of 33.1 billion lek already allocated to support various projects. Around 30.7 billion lek is provided through the internal sources, whereas the donations are worth of 2.45 billion lek, mainly internal donations from businesses or individuals, who have advanced their donations by transferring them to the treasury.
The 2020 Reconstruction Programme financing; the financial package focuses on four programmes, with 7.29 billion lek earmarked to support construction of the educational facilities that account for around 22% of the total. The financial package will also support construction of the individual houses and apartment buildings. I would like to clarify that these do not represent total sums, but amounts expressed in allocated percentages, respectively 20%, 30%, 40% depending on the requests from the Albanian Development Fund and the Municipality of Tirana and the gradual progress of the construction work.
Third programme includes the rebuilding grants. Based on the damage assessment reports conducted by the local government experts in 11 affected municipalities, a total of 9.42 billion lek or $94 million in government compensation grants has been delivered to the affected households, whose houses have sustained minor damages. The government has allocated an amount of 9.40 billion lek in compensation grants to help affected families rebuild and repair damages to their houses. Around $50 million has been distributed and the process is still underway.
Forth programme is somehow more specific. It focuses on the public infrastructure that will associate reconstruction of the apartment buildings and individual homes and the programme is designed to bring health, education and urban infrastructure closer to residents in rural areas.
The implementing units as of today include the Albanian National Territorial Planning Agency, the municipalities and the grants. Albanian Development Fund is responsible for the development of the infrastructure, individual houses and apartment buildings. The Municipality of Tirana is responsible for construction of individual and collective houses.
A total of 27, 407 families are eligible to the compensation and reconstruction grants. Some 27,000 families are eligible to benefit a little less than $100 million until October this year. Contracts have been signed with at least 20 381 households as of to date and 19 795 of them have already received the compensation grants totalling around 5,44 billion lek. Process is underway to assess damages to some 2000 other houses.
As to the construction of the educational facilities, a day ago I signed an agreement with the Slovak government to support construction of new school in Peze Helmes, which has been subject to recent allegations from the opposition. We warned the opposition the construction of the new school in Peze Helmes is part of the reconstruction programme taken over by the Slovak government and the opposition failed again as the agreement on construction of the new school was signed a day ago.
Construction of a total of 143 schools is funded by the state budget, 34 of them will be constructed by the Albanian Development Fund, 14 by the Tirana Municipality, and work to construct 33 educational facilities has already kicked off. While returning from Durres earlier today, we stopped by to inspect the ongoing works to build “Haradinaj Brothers” school, where 80% of the construction works have completed and the school is expected to complete by end of November. Work to construct four other schools is expected to begin soon. Meanwhile, 92 schools will be constructed by the international donors. The two EU-funded programmes, namely the EU 4 School 1 and EU 4 School 2, total around 75 million euros to construct 82 educational facilities. German government will fund construction of three school buildings through KfW, Slovenian government will build one school, Slovaks will build four schools and Qatar will reconstruct 3 new schools.
We have detailed projects on construction of school buildings according to the municipalities.
As to the construction of the individual houses and apartment buildings, the Albanian Development Fund has already completed the tender procedures under the so-called B-package, which includes 743 construction projects in the Municipalities of Durres and Kruje. The Fund is completing the procurement procedures and three other construction packages are set to complete by October 2. The procurement procedures are underway for construction of 3470 individual private homes and here you can see the respective number of such houses due to be build namely in Shijak, Kavaje, Manze, Region No. 2, Kurbin, Mirdita. As far as construction of individual homes in Tirana is concerned – as you have already seen the Prime Minister symbolically and emotionally handing the keys to the newly-built homes to families in Tirana and Shijak, although they had never imagined they will ever move into new homes – a good part of the individual houses will complete ahead of Dec 31 this year and the rest will complete in the first three or four months of the next year in line with the procurement procedures and commitment of the builders, both financially and the construction deadlines.
Construction of the apartment buildings in 11 other affected municipalities is set to begin within October 15. The Municipality of Tirana has concluded a day ago the framework agreement with operators contracted to construct new residential neighbourhoods in “5 Maji” area. If you still remember, just few months ago, someone, either intentionally or unintentionally referred to the new “5 Maji” neighbourhood as a 3D project. This new neighbourhood will become a reality ahead of October 15, when we will launch the construction work.
The Albanian Development Fund has already detailed projects on construction of the apartment buildings. As far as construction of houses in Durres is concerned, I can say that an official agreement has been signed with the quake-affected families there. In the meantime, the Premier is holding weekly discussion with the Crown Prince of the United Arab Emirates. I am also communicating with the Abu Dhabi Fund every two or three days so that we can launch work to construct 2.000 apartment houses in October as this international donor has pledged. That’s why we are determining the number of apartment buildings due to be built by the Albanian Development Fund and by the international donors.
As to the construction of the collective homes in Tirana, the programme includes rebuilding of 92 apartment buildings. There is a number of buildings that need to be demolished, some others that need just reconstruction, and some others that need further evaluation after the complaints forwarded by residents. Experts are assessing damages to 12 apartment buildings.
Six infrastructure construction sites have been launched by the Albanian Development Fund. Meanwhile, as far as infrastructure projects in Tirana are concerned, work will begin soon in the two main sites in “5 Maji” and “Kombinat” neighbourhoods. Huge reconstruction sites have been launched in Fushe Kruje, Kavaje, Thumane, Vore, Shijak, Bubq, and work to develop 12 other infrastructure projects is underway too, namely in Laç, Marikaj, Golem, Zones 2, 3 and 4 in Durres, Lezhe, Kruje, Valias, and Rreshen.
I just highlighted that some 16 public infrastructure project are being designed and will be implemented in Tirana. Two procedures have been launched on construction of main urban infrastructure in “5 Maji” neighbourhood, construction of main roads in the administrative units 4 and 8. As you have already seen on the due permit issued by the National Territory Council, the area there will be transformed into a new urban centre in Tirana. The same goes for the Kombinat neighbourhood, with the framework agreement set to complete in the next eight days.
Some 175 small and medium-sized and large companies have been involved in the reconstruction process. Projects worth $80 million have been procured. Some 104 operators involved in designing, construction and supervision process are working with the Albanian Development Fund.
I would like to share with you the fact – as each and every one of you can verify for yourself – no complaints have been forwarded either to the Albanian Development Fund and Tirana Municipality regarding the procurement procedures for construction of schools, individual houses, apartment buildings and related urban infrastructure. Municipality of Tirana has involved 55 operators, AKPT has employed 20 design studios, whereas EKB has hired one design and architecture studio that has been helping local government units, where Turkish government is already implementing its construction project.
As to the number of employed people, more than 2065 people have been employed since February mostly in the construction sector; the employment growth in big business involved in the huge reconstruction programme is estimated around 5% currently, whereas employment in small construction businesses has increased by 26%.
Some concluding comments regarding cooperation process with the international donors. While on a visit to Durres earlier today, Prime Minister noted that the international donors carry out the procedures themselves and they hire their own development institutions. The EU-funded projects worth 115 million euros will be implemented by UNDP for construction of schools under the EU 4School1; EU 4 School 2 programmes. In the meantime, the EU 4Culture programme worth 40 million euros will be implemented by UNOPS.
Turkish government too is pressing ahead work with its own contractors after completing the due procedures.
KfW is conducting the procedures itself. This is also the case with Qatar, Slovak and Slovenian governments. But other than the conclusion we now have on hand with the Greek government, the rest is all advanced and part is in the design, a part of it is already on the ground.
As to two huge reconstruction sites launched by the Turkish government through its housing agency TOKI, they include construction of 524 apartment houses, 400 parking places and a shopping centre and the construction work is already underway. Although Turkish government has been facing difficulties following a powerful earthquake that hit Turkey earlier, the government has not postponed its pledge, but quite the contrary it has added construction of an additional number of 24 apartment houses, as it pledged during the International Donors’ Conference in Brussels.
The same goes for the United Arab Emirates.
Regarding the agreements in process, we have already concluded the loan agreement of 60 million euros with the French government through AFD that will construct Durres water supply system. The process is underway to conclude the loan agreement of 90 million euros with Italy. It is practically the energy and fishing industry that is conceived as part of the recovery and we are in discussion with the European Bank for 100 million euros, which I believe will be detailed in the next 4 months.
PM Edi Rama: I would like to provide two or three quick answers, starting with someone who wrote precisely as following: “the new schools are being rebuilt under construction loans.”
No school building across the quake-affected territory of the Republic of Albania will be built under construction loans!
All these schools are being built with state budget money and the funding made available by the European Union. So, not a single penny has been borrowed.
Someone else says: “I am the first one to lose my job for three months and I received nothing from this state.”
I say that the assistance packages made available by this state have been totally disbursed and not only that but the state has postponed the deadlines in order to allow everyone receive what they deserve. However, if there is still someone who has failed to file the needed requests and complaints on time, he or she can do it now and we won’t let them alone.
As to this “reminding” word I have been coming across it so often lately, I would say it is just the same old song commissioned by the opposition’s recording studio, claiming that it is just now that we are being reminded to cut taxes. The truth is “no” as we have been reminded to cut taxes by end of 2013. We have pledged to halve the small business taxes and fair taxation as an alternative to the flat tax and we halved small business taxes under the first fiscal package our government approved in 2014. This is a fact anyone involved in small business knows and not those singing in opposition’s recording studio or those who follow Albania in a distance via TV channels or web portals.
This is something that nobody who is not interested to learn the truth can know. The current further cut in small business taxes is not a promise to be fulfilled in the future, but a reality. We have pledged about it earlier, if I am not wrong, before the total lockdown was imposed because of the COVID-19 outbreak, ensuring that no profit tax and VAT will be imposed on small businesses by 2029. The promise was made then and despite we were hit by the COVID-19 outbreak, we turned this promise into law in July. It is not a campaign pledge and we will keep it as stipulated by law and just like we have pledged to do it by 2029.
When I talk about the minimum wage I don’t mean the minimum wage in the public administration, but I mean a mandatory minimum monthly salary every worker in the private sector should earn in the Republic of Albania. This is because someone wrote: “How are you supposed to work for a monthly salary of 200.000 lek?”
The minimum wage in Albania will be 300 000 lek and this will be mandatory for every private company to pay its workers, or for every self-employed worker in the Republic of Albania.
There are no such salaries in the public administration. The limit has been imposed long time ago for salaries in public sector and such a limit is now being imposed on the private sector.
Finance Minister Anila Denaj: I would like to add two budgetary elements not related to the reconstruction fund that my colleague dwelled upon, but indirectly concern the post-earthquake situation. In 2020 we allocated a bonus rent to help more than 13.700 families through a fund of 3 billion lek or $30 million. The bonus rent will be certainly provided to these families while the reconstruction process goes on.
Second, earlier this year we have approved a fiscal incentives package that is worth mentioning, helping business by recognizing as deductible all expenses related to damages or accommodation of their employees. We offered relief to businesses by suspending the property tax, by suspending and postponing tax liabilities or fines due to the belated financial statements. We excluded builders and contractors from having to pay VAT, and exempted individuals and businesses from the infrastructure tax few weeks ago. This measure complements and completes the entire support and relief package for the 2020 fiscal year and 2021 the entire impact, not only in terms of capital expenditures, but also the entire impact on the economy and projected economic growth in the coming years. It was just yesterday that we concluded discussions with the IMF mission. IMF projects an average GDP growth of 7% in the next three years, up from 4.5% we have projected in the draft medium-term budget. Specifically, we expect agriculture to register an average growth of about 1.3% per year over 2021-2023, industry is expected to record an average annual growth of 5.2%, construction by 3.6% and services by 5.7%.
The World Bank projections are even more optimistic ones, forecasting a 9 to 10% growth rate in the coming years, with reconstruction programme and other support packages expected to provide a direct contribution.
Mr. Prime Minister, I don’t know whether you have had the opportunity to hear the would-be prime minister, the opposition leader, while he unveiled an economic recovery package, mainly focusing on health sector. In addition to the three employment promotion packages you unveiled last week, do you have any other similar plan focusing on health system?
Last week too, you hinted that the progressive tax could be reviewed. Would you elaborate more on what this plan is about?
Me poshte vijon pjesa e dyte e konf per shtyp te KM Rama, ministrave Ahmetaj dhe Denaj:
Prime Minister Edi Rama: First and foremost, my answer about the one you call PM candidate is quite simple, he has proven to be inefficient and as such he is unreliable. I mean, he hasn’t landed from the moon, but he has been tested several times earlier and of course resorting to extreme moves through the so-called alternative platforms and proposals is merely an indicator of the lack of seriousness. The lack of a seriousness already demonstrated when this country was governed by someone else. God forbid it if this COVID-19 outbreak was to hit the country when it was governed by the one you call the candidate and the club of the so-called the united opposition and if the plague was to find the country’s hospitals in their lamentable state we found them when we took office, the health services we found when Albanians trusted us, the professional capacities we found when Albanians trusted us.
Just recall that time to figure out that this is not a battle between us and them. This is not a battle, let alone between me and the “cut watermelon”, who happens to be the opposition leader. This is our battle within us and a battle against time. We have a lot to do. Time waits for no man, because Albanians have waited so long and we definitely have a lot to improve and a lot to speed up. But this is not between us and them. This is between us in battle against time and ourselves.
As to what I have said a week ago, I want to reconfirm, we are conducting a series of researches and I would like to avail myself of this opportunity to reiterate it. The ones who don’t wish to understand, they will never figure it out. The ones, who wish to understand it, simply do so and need no explanations. I am pretty confident that the majority of Albanians understand that the measures taken by our government are made in compliance with our opportunities. We couldn’t afford it in the past, but we can afford it now. We couldn’t afford cutting the profit tax and VAT to zero in the past.
The fact that we make such a decision today has nothing to do with the fact that the upcoming general elections are nearing. This has been an earlier goal and it has to do with the fact that we can afford it now. So, we grow the opportunities and take further steps towards this direction. If we were to do all the things we are doing now, we would have had to be magicians, but this is impossible.
As for the progressive tax, yes, we are making a plan and once ready we will share it with you. The plan to review the progressive tax will again seek to further ease the burden on those who earn their living through work. I mean the ones who live by a monthly salary and who also help to enhance the purchasing power of everyone, as much as possible, whenever and wherever possible. Otherwise, Albania cannot move forward, on the contrary it can move backward with platforms created and promoted when you have no responsibility of whatsoever and when I know that the chances for that responsibility to be granted to you are minimal. Albanians know it clearly that the “cut watermelons” turn out to be just melon heads and there is no chance for them to buy them for edible watermelons.
Minister Arben Ahmetaj: I would like to make two short comments since you referred to the package. Respecting the work of everyone, the opposition should now that seriousness should be at the core of everything. Practically, if you are to look at every project, almost all of them are scheduled to complete within six months. Our vision is consolidated and it extends beyond this six-month schedule, because you have all seen that this government and this Prime Minister handled the emergency with a sense of high responsibility with a minimum death rate because of COVID and an accelerated process of reconstruction.
The opposition again refers to a 9% rate. I want to explain what this 9% rate is. Simply put, if big business – I will use an inappropriate terminology and I apologize for that – if the big businesses of oligarchy, or the help for the oligarchy, let’s us go back to the state, institutional, and human history of the today’s majority and the opposition.
We have increased the profit tax rate on the so-called oligarchs to 15%.
Do you know what will happen if the 9% flat tax rate is applied?
The state budget would lose a total of $46 million and this amount would be transferred to “the oligarchy”.
We have done the opposite and we will continue to do so, as the Premier stated. We will continue to do the opposite to what a referred to as a 9%.
We have imposed the progressive tax since and therefore a total of $90 million became initially available to the citizens, especially to the low-income citizens, and $120 million each year since then.
One might have forgotten, but many haven’t, because this money ended up in their pockets.
Another figure, the $46 million amount due to be transferred to the oligarchs is the amount allocated by the state budget to cover the unemployment benefits and economic assistance. With the 9% tax rate, the needy people will be deprived of the social and economic assistance and this amount will end up in the pockets of those unfairly branded as oligarchs. This is all to explain what pro-oligarch and pro-poor people policies mean.
The rest is equally important and we are talking about an average salary of 1200 euros for doctors and 700 euro of nurses. The Prime Minister has advanced and has decided to add an extra $ 45 million to cover the salary rise for doctors and nurses.
Many claim that around 2/3 of Albanian businesses are operating at a loss. Last week we provided a figure. Small businesses in the country recorded net profits estimated at $16.8 million in 2014, while their net profits today are estimated at around $42 million, when the world has lost more than $28 trillion. The world has lost $28 trillion out of the total GDP of $80 trillion or one fourth of profits. With its modest elasticity, the Albanian economy is showing recovery and growth sings we just referred to a bit earlier. Some 3000 new businesses were launched compared to six months ago and consumption has reached the 2019 level. Thank you!
PM Edi Rama: I believe that final announcement on the pay rise for the doctors, nurses and teachers, whom we will strongly support. We will again provide and elaborate facts and figures, because the refusal to take into account and make fun of facts and figures, claiming they doing so on behalf of the people, is degenerating into a kind of disease that needs to be treated by everyone who has assumed a responsibility and your responsibility is to verify our claims. If it turns out that since 2014, when we made our own decisions on taxes, until 2019, the wealthy people – including the ones they shamelessly name as oligarchs, who are not, because no wealthy or groups of wealthy people can influence even a single government decision – haven’t paid more taxes than they used to pay during the 8-year term in office of the previous government, then make it public.
Facts and figures show that we have halved the small business taxes and we have increased taxes on big business in 2014. The two categories used to pay a 10% flat tax rate. So a five-star hotel and a bakery used to pay the same amount in taxes. But the 10% tax rate weighs a lot more on a bakery rather than on a five-star hotel. We decided to level a 15-tax rate on the five-star hotel and only a 5% rate on the bakery.
From now on, small businesses, the bakery in this case, will pay zero profit tax until 2029, whereas I don’t know what is going to happen with the five-star hotel until 2029, but I am sure the tax rate will change from the current 15% rate.
We won’t cut big business taxes. We won’t offer tax cuts to big enterprises. We will ask big enterprises to do what they are meant to do, contribute a lot more, because they earn a lot more. This is a simple difference. Saying we will go back to where we were, it actually means what you think we were better when we were worse. It’s as simple as that.
To go on with my colleague’s question, on May 24, June 2 and June 9 respectively, you hinted that a national economic and social recovery plan was to be unveiled within June, so that the country, household economy and income and the national economy return to normality in the last 4 months of this year. Why this plan has yet to be announced with three months to the end of year?
PM Edi Rama: You are right and the answer is simple. What we have not been able to do has been the result of the inability to have a process, as we would have liked at the time, due to the severe limitation of contacts and interactions. But what you are hearing today and will keep hearing every other day and every week are all part of this plan. We are not talking about things for the time being, or about things related to the elections, but they are part of our plan for 2020 to 2030. We have decided to announce the total plan after collecting all bits of the whole mosaic, also for another reason. Unfortunately, and this is not the case of Albania only, political aspects related to the economy are considered second hand stories and media coverage of crime and gossip columns dominate. We want to unveil this plan step by step and in the end it will all be summarized. Let’s not move from summarizing to detailing, but from detailing to summarizing, so that we can buy more time to spend with the public. If it was a big and general plan, you would most likely have reported it as the latest news once and we would not have talked about it anymore. If it was lucky to be reported as the latest news, but I do not believe it would be that lucky. However, your question is correct.
Since we are on the eve of the campaign for the upcoming parliamentary elections, where you would seek re-election for a third term in office, which will be the pillars of your economic plan for the citizens to vote for you again?
PM Edi Rama: There is still ample time for this. What we are saying today are things that will be happening today and not tomorrow. So, if we are saying that the profit tax and VAT on small businesses have been scrapped, this is something taking place today. It is a law adopted in July and it has come into effect. If we are today here taking stock of the reconstruction programme and if we provide data on the number of new jobs, the number of companies and builders involved in this process, the number of houses and apartment buildings are being constructed, this is something that is happening today. This is not something that will happen tomorrow. I would like to add something else and tell everyone that a standard form contract is being signed with all families eligible to benefiting a new individual house or apartment under the reconstruction programme. So, not only each of these families will be able to see their apartment building being constructed by early next year, but they will also have a contract signed with the Albanian government that provides them housing and if not the government would face penalties should it fails to respect this deal in terms of deadlines and everything else, which something very difficult for 1001 reasons, because the process was long delayed and hampered due to the COVID-19 pandemic that caused many procedures to be suspended.
I believe that the Ministry of Infrastructure will announce in the next few days the reopening of the tender procedures for construction of Vlora international airport, which will fortunately reopen right there where it was previously suspended, meaning it won’t start from the beginning. The process will take some more days to reopen after it was suspended for several months causing long but objective delays, but this was not because we neglected the process. But the process will restart now and all these have a significant economic and financial impact. In the meantime, it was just earlier today when I was provided with a detailed information about Kukes airport and I am confident that if any unforeseen force majeuree doesn’t prevent us from meeting the deadline, I will pick Kukes-born citizens currently living in London, who have ridiculed the Kukes airport project via Facebook comments, and land them in new Kukes airport. I will pick and land them in Kukes so that they can vote the Democratic Party, so DP will have 120 extra votes from me for free.
–Mr. Prime Minister, I remember quite well the Donors’ Conference in Brussels, where the term “transparency” was so repeatedly stated. Minister Ahmetaj rightly explained what is happening with the donors and how they conduct procedures for their own programmes. I would like to know, has Albanian government set up a body, a watchdog over all these investments and the state budget spending for the sake of transparency? The second question concerns tourism, the tour operators, tourism associations that are pressing for a third support package. Is government ready to offer such a package? Thank you!
PM Edi Rama: We are very pleased to find out that tourism sector has sustained a much easier blow than we expected thanks to the internal tourism and the so-called patriotic tourism that was enabled after we opened the border with Kosovo, North Macedonia and Montenegro and other neighboring countries to allow them spend holidays in our country and the tourism revenue and number speak for themselves. There is another element too. A significant sovereign fund has been made available to the tourism sector. I am talking about the second sovereign fund, about which many said it wouldn’t work, just like they did when the first one was announced, but they are both working and banks have provided $120 million to companies, including the ones operating in tourism industry,
And let’s not forget also another element, the government decision that allows companies and businesses in tourism sector to defer profit tax payment. They owe no liability to the state. Frankly saying, I don’t see a third relief package looming on the horizon for next year and by this I mean that we don’t think about the next elections anytime we announce our decisions, but we think about a much longer period after the elections.
Minister for Reconstruction Arben Ahmetaj: Two institutions within the Reconstruction department are tasked with overseeing the process, in addition to the normal institutions like the Supreme State Audit or the internal audit structure within various institutions. The State Reconstruction Committee comprises nine cabinet members – and although we asked them to have the right to vote, the international donors declined to join this Committee. The Committee includes also five donors and, in the meantime, another institution operates as part of the reconstruction process, namely the Secretariat and the Task Force. The Secretariat and the Task Force do not focus on donors and donations only.
We provide embassies regular and detailed information on all decisions made by the State Reconstruction Committee. These decisions are also published on the Reconstruction’s website and the info is updated on daily basis. You can verify everything also through images from the reconstruction sites already underway. You can check the information and report if the information is not updated every day so that we can correct it, although we do so on daily basis. I will meet European Commission representatives tomorrow to redo, so to say, all the homework of the Task Force and ask them audit and monitor specific projects and the entire reconstruction process. What I earlier noted that no complaints have been lodged during the tender process, it has happened also because of the transparency of all processes and procedures that have been followed by all three implementing units.
PM Edi Rama: One of your colleagues here is telling me to “stop dealing with economy and instead focus on the homeland that is being taken away by Greeks.” I would provide a short and simple answer: You can defend the homeland from Greeks together with your dear Like (President Ilir Meta). Like, Luli, Sali and Monika are there too, and together paddle the canoe to defend homeland from the Greek and it would be better if you sail along Vjosa River as Like is defending Vjosa too. Keep on defending all Albania’s waters from Greeks and other imaginary enemies.
– The International Monetary Fund has suggested that the taxation system be simplified and called for an increase in state budget collection from taxes. How do you plan to deliver on that? By conduction more inspection actions or by increasing taxes? And second, if I may, you hinted that the progressive tax could be reviewed, you announced plans to increase the minimum wage and you have also earlier announced a new pay rise for doctors, nurses and teachers, suggesting a 40% pay hike for health workers. Don’t you think you are somehow coping the Democratic Party’s economic programme, given that all these have been earlier announced by Mr. Basha? Thank you!
PM Edi Rama: First of all, I would invite you to remove programme copying phrase from the communication vocabulary, because it is useless. Second, there is a big difference between someone who just says and someone who does it , even we consider it true that we are talking about the same thing. Third, there is even a bigger difference between the pay hike for doctors and nurses by 40%, which will do based on a law that will be adopted by the Assembly of Albania, and the idea that the salaries could increase up to 1200 euros, that the agriculture subsidies could grow to 150 million euros.
Increasing wages by around 40% for nurses and doctors under the current conditions, and considerably increasing wages for teachers, increasing minimum wage to 300.000 lek, totally scraping profit tax and VAT and keep finances under control by further consolidating the country’s macro-economic aspect, this is true governance. Telling lies as the elections near is something simply ridiculous. Therefore no comparison lines can be drawn.
Fortunately for everyone, we have all seen them. So, it is not they are not unique. They are unique in the way they behave as if we haven’t seen them, but we have. Especially these ones, Sali, Luli, Iliri, Monika, we have all seen and tried them and they have always proved to be unripe. I believe this is implied within this answer and there is no contradiction to it. We are now on a path where we are actually sharing with people the fruits of our joint work and shared efforts. These fruits are all the outcome of our shared work and efforts, in other words they are not electoral asphalt, like it is the whole program of the so-called Democratic Party’s platform. That is typically “an electoral asphalt”, like the one paved during the previous government with tam-tams, but that was destroyed as soon as the first post- campaign rain fell. They sound typically similar to the Tirana tram project; a tram in every sector. But where is the tram? You would certainly find out where the tram is if you are to go to the opposition party headquarter, but I would strongly recommend not forgetting your face masks.
Finance Minister Anila Denaj: I would like to clarify something about the IMF suggestion on its report and the statement you referred to. Yes, IMF has suggested that we can grow the country’s GDP by 2.3% over the next four years, but 1.5% of this 2.3% projected growth is a result of good tax management and as of today four laws have been drafted and adopted to ensure better fiscal management through systems next year. I have earlier highlighted these four pieces of legislation. Three of them have been already adopted and ratified by the Albanian Parliament and fiscalization, automatic information exchange and the benefiting property owners, whereas the last legislation on the bank accounts will be approved in November. We are finalizing these initiatives this year and again we are talking about approved and ratified laws on the established systems that will manage this fiscal administration. The 1.5% target is reachable.
–I have two questions I would like to ask. A survey conducted by SCAN for the period from January through July has found that a total of 78.000 people have been removed from the social insurance scheme. You said that the employment promotion plan includes 13.000 people. Should this plan expand to include more people? The second question concerns a fresh initiative announced by Kosovo government to allocate around 60 million euros to help business hit hard by Covid-19 pandemic. On the other hand, you said that no support packages for business are projected for 2020. Don’t you think that this part should be reconsidered? Again, taking notice of Kosovo, the Albanian Soccer Federation, too, has demanded that same model applied in Kosovo be applied also here, as Kosovo government provides around 12 million euros for football, while Albanian government provides around 700.000 euros only? Thank you!
PM Edi Rama: This is the employment situation in the country, as this chart here shows, which indicates a downward trend during the lockdown and a gradual upward and recovery trend following the country’s and the sectors’ reopening. This is the situation today and these here are not paintings, but easily verifiable data from the state registers. They are not paintings. So, I would invite you to take the state registers, the social insurance registers, the tax registers and check them and I would admire you all if you were to prove me wrong through facts! I respect the trips a television crews do across Albania, yet I don’t know how alternative data are provided in the course of these trips. Take the state data and these are data on contributions and they are not name registers. Every name included in those registers is related to his or her contribution to the tax system, social and health insurance system. I am not talking about illegal employment and we would refrain from speculating in this area, because if we are to do so then we would have calculated the number of workers in the illegal employment system and claim that the unemployment rate is even lower. We don’t do that. We consider the official unemployment rate that is based on the number of the registered workers as compared to the total number of population, and I don’t mean the population currently living in the Republic of Albania – and I am saying this to respond to all of those who claim that half of population has emigrated…no, absolutely not – but the total population number registered in the Republic of Albania and not just the number of people currently living here. The truth is much more complex and much more significant than the non-sense talks constantly repeated on daily basis. In this aspect, I think this is an easier communication, because we provide figures here, while you can take and verify them. We are ready to acknowledge and admit any mistakes and apologize should the official data do not coincide with the reality. So, these are not speculations. When a leading opposition official shows up on TV and flies like a kite swept high into air by saying that all businesses have been shut down, this is merely a poem or stanzas. We are referring to concrete figures. We refer to income from employment, we talk about registered workers.
I don’t there is room to discuss about gifts or support from the taxpayers because this is a direct taxpayers’ support in the form of a gift, which was indispensable during the total lockdown. The companies have access and they can apply for funds under the sovereign guarantee fund. So, no further packages will be approved. We can’t deprive needy people from the economic assistance or take away half of the wages of health workers and grant them to business. Why should we do that when reality shows something completely different and when we know pretty well that big business, although the government has increased big business taxes, this community has still undeclared assets. As to the aspect of a stronger control, we will strengthen control over business but not through inspection actions and by deploying inspectors, but through the digital revolution, which will be a soft but efficient one.
Now, we have adopted a law on sports and we have provided incentives to football in particular like no one ever before, but the request to exclude football players from having to pay taxes for ten years is unacceptable and it doesn’t work.
We agree on an initial tax-free period in order to formalize their wages. We know quite well that football players do not receive a minimum salary in numeration. They don’t receive 230.000 lek per month, just like the sanitary workers. We are setting a minimum wage of 300.000 lek for the sanitary workers too, whereas clubs declare wages of 230.000 lek. Without speculating, they receive much higher wages. They receive thousands of euros each month and it is impossible to exclude them from taxes for 10 years. This can’t work at a time when Ronaldo and Messi end up in courts on tax fraud charges.
Of course, we would offer an initial tax cut, a six percent VAT rate on investments in sports, as we have already approved in Parliament. We would probably review the sports infrastructure impact tax, since football pitch and stadiums are infrastructure. We are ready to do what is necessary also for the chain of talented sports kids. However, we should put an end to the long-lasting story of football club owners who seek to hide sports revenues instead of settling tax liabilities by pretending to be owners of other business activities.
We are ready for everything, yet time has come that direct support from local government units to professional football clubs should now be channelled to provide support for sports, for the talented kids who play football. There are a lot of things that can be done for children, an academy for them, but we can no longer provide everything to professional football clubs.
These stories about alleged models from this and that country are inappropriate, because such stories are poorly told. We have seen and we know such models and how they have developed in various countries, but if you are to combine all years since the Albanian state was formed you would find out that nobody has done as much we have done over the past years. It is as simple as that. We will keep delivering and doing a lot more about football in the country, yet everything has limits. And I really wonder how they haven’t yet figured out that the language of force, boycott and blackmailing doesn’t work with me. I don’t understand what purpose their boycott serves, if they don’t calculate whether they would feel more comfortable by resorting to boycott. This could be the case too. I am not accusing them, but I don’t know. They could probably fare better if they resort to boycotting and this way they provide footballers just a real minimum wage, cut other spending and in the meantime they wage war on government. This doesn’t work and it will never work. Do they want to boycott? Let them do so. It is their right to do so. They operate independently from the government. They should just cooperate with the government and whatever the government grants them, they should be OK. The government has no obligations to the professional football clubs. Government has obligations to every sports discipline, basketball, volleyball, sports for children. All sports federation could raise their voice too, because they are not part of a lucrative industry like football is. Football is an industry.
Therefore, I repeat, everything that is possible, reasonable, worthy for the country and football, we are ready to do our part. But I see no reasons why football should be exempted from taxes for ten years. What football players in Albania do more than you do today? It is best possible that many of you here run a lot more than the football players.
I have a question for the Reconstruction Minister. Could you please provide concrete figures on the number of newly-built homes handed to the quake-affected families as of today? So, how many families have received the keys to their new homes? Could you also provide figures on the number of schools buildings whose construction has completed to date?
PM Rama Edi Rama: None of the buildings has completed, because if a building had to complete then we would have taken over all public projects in terms of speed of construction process. None of the school buildings has completed. A part of them are slated to complete on Nov 26, while many others will complete later. The minister could provide figures on the new homes.
Reconstruction Minister Arben Ahmetaj: The figures we provided here were concrete ones. Al the figures are provided are concrete. Practically, construction of 14 school buildings in Tirana and 37 schools in ten other municipalities will complete within this year. Construction of the majority of the new homes has started a month ago. A number of newly-built homes, probably 30 homes, have been already submitted to the quake-affected families, but Dec 31 is the deadline for completion of the first phase of construction for the individual homes, so around 5.5 months. The rest will complete four months later due to the procurement procedures.
PM Edi Rama: I would like to conclude this communication with something worth highlighting.
The word has spread, also thanks to your media, allegedly suggesting that casinos and gambling parlours have been reopened. That’s completely untrue.
No casinos are reopening in Albania.
No licenses or permits are being issued to casinos.
Just a specific procedure has been launched and it has to do with the expiration of the licence of the only casino that has been operating over the years at the heart of Tirana and waiting any possible bid, if there is any, for a certain defined area. So, it is not the way it has been translated, suggesting that a casino is going to open along this and that street. No, it is all about the borders of a perimeter, because based on the existing law the only companies allowed to open casinos are the five-star hotels, or specific casinos can launch operation in strategic areas for development and tourists. It is something that has not been exerted massively and won’t be exerted massively.
So, it is as simple as that. No casinos are being opened. Such operations can be opened by five-star hotels only in accordance with the specific law on incentives to the international chain-branded hotels or five-star hotels. License to open casinos can be issued to international hotel brands only. There is no backtracking on this issue, but we are really worried about the illegal online gambling, as it is the case also in other countries like China, Turkey, where gambling is banned. We are thinking about what we are going to do. But such a thing is out of question now. It is completely fake news. There could be no faker news than this!
What is happening with the fiscal amnesty? Has the government backtracked from this initiative?
PM Edi Rama: I have shown more than once that I can backtrack when I should, but there is no reason to so in this case. There are actually reasons to work patiently and cooperate with all international bodies to come up with a consensual draft law with them. Reaching 100% consensus about internal drafts is not legally binding. In this case it is mandatory, until I say no, but we will say OK, we did not achieve 100%, but we will move forward. But at the moment we are cooperating very well with a number of international bodies. So of course in this case we cannot set a deadline, say a month or two, because it also depends on them. They have to deal with other issues too.
Few months ago, you have expressed your idea about legalizing cannabis.
PM Edi Rama: I won’t give up that idea.
Since you are not going to give up, would legalize cannabis during this term in office, or would you wait for the third term?
PM Edi Rama: We will do it whenever ready.
Few months ago you have stated you would do it during this legislature.
PM Edi Rama: The legislature has yet to end and the draft to legalize it will be ready when it will be ready and as it is the case with the tax amnesty, this draft too should go through consultations with the international expertise. So do not rush. We will be here for at least another 5 years. We will then wait and see for another 2025-2029 term.