Why Albania must foster private sector development and boost competitiveness
- August 21, 2015
Holger Muent, EBRD’s Director for the Western Balkans, says in an interview that if Albania is to increase its GDP and be prepared to enter the European Union, it must strengthen its private sector and boost its competitiveness at the regional level and beyond. He also says the EBRD is ready to offer support to the proposed Adriatic-Ionian highway, a regional project linking Croatia to Greece.
What opportunities are there for Albania given its geographic location?
Albania is situated in the heart of the Western Balkans — the region with a strategic importance for the trade links with the European Union and important access points to the Adriatic. As for most countries in the Western Balkans, approximation to the EU remains the main driver behind economic and structural reforms. This is an opportunity in itself and it needs to be seized as reforms will help Albania realise its economic potential and deepen its regional cooperation. Just recently, we released our regional economic prospects with projected GDP growth at 2.5 per cent in Albania in 2015 and it can achieve more. To do that Albania needs to strengthen its private sector and boost its competitiveness. This is one of the priorities for EBRD’s work in the country.
Some say that cornerstone of the healthy economy is a strong private sector — how do you support it in Albania?
Supporting the private sector development is at the heart of what we do at the EBRD. We have several ways of supporting the private sector in Albania:
We can provide financing directly to larger SMEs, both equity and debt. We are also providing funding to SMEs indirectly through local banks and microfinance institutions. We are currently working on a new facility which will improve the access of businesses in the agricultural sector to local bank financing. We believe that there is a lot of untapped potential in this sector for growth and employment. We are pleased to see the government’s effort to tap this potential with the National Guarantee Fund. Under the umbrella of the Fund, we are jointly working with the banks and financial institutions to create an Agribusiness Financing Facility.
Fostering sustainable development of the private sector and boosting its competitiveness, such as growing strong small and medium enterprises segment is one of our priorities for Albania. It will help the country to become more resilient to external economic factors, such as volatility in Eurozone and commodity prices.
What are particular sectors Albania needs to develop in the regional context?
In the regional context, the Albanian economy is comparatively small and to attract private investment it needs to be well connected to the wider market in the region, both in terms of infrastructure but also in terms of harmonisation of regulations vis-à-vis its neighbours. This is why regional integration is one of the key priorities for our work in the country.
In the Western Balkans, for instance, the EBRD in cooperation with the European Commission, other IFIs, and the government authorities is investing in the rehabilitation and construction of key road and railway sections which are part of transport corridors (such as Corridor Vc, VIII and X) linking the Western Balkans with the EU. The Bank is currently considering financing the rehabilitation of railway and road sections in Kosovo, rehabilitation and construction of road sections in Bosnia and Herzegovina and FYR Macedonia. In Montenegro, the Bank is considering other investments in the airport and seaport sectors.
The Bank works closely with the Western Balkans Investment Framework (WBIF) which is an important coordination mechanism bringing together all stakeholders and establishing priority projects of common interest. Such regional projects have an effect on important policies, such as trade and customs regulation to simplify economic collaboration between the neighbouring countries in the Western Balkans.
The Bank would be interested to consider supporting the Adriatic-Ionian Highway which is a regional project being promoted by the governments of Croatia, Bosnia and Herzegovina, Montenegro and Albania. The highway will connect the central and western Europe with Greece through the Western Balkans, fostering regional cooperation and integration.
Has the EBRD already done any projects in Albania to support its regional integration?
The EBRD conducted a number of projects in Albania that contribute to the regional integration, as it is one of the key priorities for our work in the country. For instance, the Bank is currently financing, together with the EU and the EIB, the construction of the Fier and Vlore bypass roads. These projects are part of Corridor VIII in the SEETO’s Comprehensive Network and benefit from significant grant funding from the EU’s Instrument for Pre-Accession (IPA). Previous EBRD projects include the rehabilitation of the Elbasan-Librazhd road section which is part of Corridor VIII, the construction of a new terminal at the Tirana International Airport, the construction of the Levan-Vlore and Levan-Tepelene road sections (also on Corridor VIII), and the passenger terminal at Port of Durres. We’re also looking to support the regional energy security and are looking into the options of investing in the interconnector between Albania and Macedonia.
Institutional strengthening is equally important to attract investors in the country. Improvement to the business climate is already at the heart of the economic agenda of the government. The EBRD supported Albania in setting up the Investment Council, to create a platform for public-private dialogue and improve the investment climate.
What is your view on a ‘Balkan Benelux’?
I would rather talk about a common regional market. The EBRD strongly supports regional cooperation in the Western Balkans, which is indispensable for the economic prospects and stability of this region. This is the best answer to its numerous challenges. When we convened the first ever all-inclusive meeting of the Western Balkan prime ministers at EBRD Headquarters a year ago, we primarily sought to promote the region as an investment destination. But it was also a strong political message of the newly achieved stability and maturity of the region. Intensifying regional cooperation among all nations in the region is among the greatest recent achievements of the Western Balkans.
How would you assess Albania’s readiness for EU accession?
EU reform agenda and economic reforms is an important catalyst for Albania’s economic development and the country must keep this course. We are really encouraged by the government’s reform drive. Implementation of these reforms will be key to practically improve the investment climate and foster growth and employment. So Albania is certainly moving into the right direction. But some of the challenges are quite deep-rooted, such as weaknesses in the justice system and in public administration, and they will require a lot of perseverance. EU approximation is a marathon, not a sprint.
