The European Bank of Reconstruction and Development (EBRD) has criticised the Albania government for awarding public-private partnership contracts (PPPs) to companies with a “general lack of track record and financial standing of the chosen bidders.”
In their Transition Report 2019-20 for Albania, they referred to “controversial and unsolicited PPPs” such as the Milot-Balldren and Orikum Llogara road projects and observed that these “inadequately assessed” PPPs pose further risks to an increase in public debt
“Large unsolicited PPPs continue to be awarded, particularly in the road sector (for example the Milot-Balldren and Orikum-Llogara sections), without a sufficient level of cost-benefit analysis and competition in the tender process. This increases the potential social cost and exposes the government to implementation risks, also given the general lack of track record and financial standing of the chosen bidders relative to the scale of the projects tendered,” the report found.
However, today Albania’s Prime Minister Edi Rama praised PPP contracts awarded to businessmen close to the government, whom he refused to call “oligarchs”, and said PPPs “help citizens”.
The risk to the Albanian economy from PPPs that lack in transparency and accountability are one of the key reasons why the EBRD has lowered its growth forecast for 2019.
From a high of 4.1 % growth in 2018, the EBRD lowered its forecast for 2019 to just 2.8%. Its lowest growth rate since 2015, the assessment also found that public debt remains very high at 68% and government debt is 1.8 % of the GDP. “Contingent liabilities arising from recent PPP contracts, some of which have been inadequately assessed, pose risks for a further increase in public debt”, according to the report.
The EBRD also found that Albania’s business environment remains “difficult” and it ranks 82nd out of 190 countries in the World Bank Doing Business 2020 Report, falling 19 places from the previous year. Difficulties that impact business include dealing with construction permits, getting utilities like electricity, enforcing contracts, and paying taxes. Also noted was its poor performance in areas of innovation capability, financial sector development, and infrastructure as per the World Economic Forum 2019 Global Competitiveness Index.
Economic catch-up is likely to be slow in the short term and are related to the delay in starting EU membership talks and internal risks such as unsolicited PPPs and “the ongoing political instability.”