EBRD Also Warns Against PPPs, Foreign Investments Needed

The European Bank for Reconstruction and Development (EBRD) warned against unsolicited proposals for public-private partnerships (PPP), and urged the government to work on attracting foreign direct investments (FDI). EBRD’s warning against PPPs follows similar ones by the World Bank and IMF.

In an interview with the Monitor, Head of EBRD in Albania Matteo Colangeli said that public projects financed through PPPs require more transparency, risk analysis, and open and fair competition. Unsolicited proposals for PPP contracts coming from private companies are even more problematic, as in most of the cases they don’t benefit the public.

“Whenever PPPs are deemed the proper financing tools, the call for offers should be prepared by the public sector and presented to investors through a competitive tendering procedure. This would guarantee more transparency and generate more revenues for the government compared to the alternative form of unsolicited proposals coming from investors. There is no true project risk sharing between the private investor and government if the PPP contracts consist only in government’s obligation to pay the private investor throughout several years.”

Instead of PPP contracts, the head of the EBRD recommended the use of loans from international financial institutions as the way for the lowest cost for public projects.

“Loans from international financial institutions combined with donor grants, particularly under the EU-supported Western Balkans Investment Framework (WBIF) are still cost effective ways for financing infrastructure in Albania.”

Colangeli said that one of the Rama government’s main challenges for 2019 will be attracting new FDIs. TAP and Devoll Hydropower projects, which comprise the overwhelming bulk of the total FDIs in Albania, are coming to completion soon.

“Albania has undoubtedly benefited a lot from the two [TAP and Devoll Hydropower] investments in the energy sector, but diversification of the economy and access to production and agribusiness global markets are essential for a sustainable economic growth. The challenges to attract FDIs particularly in production, tourism and agribusiness will continue to be factors in generating sustainable growth and employment […]”

The head of EBRD office in Albania added that the improvement of business climate and attraction of FDIs will also be affected by the implementation of the justice reform, and solutions for the land ownership problem in the country.

The urgent need for FDIs in Albania was also raised by the World Bank, the International Monetary Fund, and Standard and Poor’s.