Much ado, for 1 Euro

By Ilir Ciko
The latest “Albania 1 Euro” proposal created an unnecessary debate among economists who struggled to argue about the cons and pros which this proposal would generate for the Albanian economy. Given the lack of long term vision on Albanian economic perspectives, the debate needs to be focused on these perspectives and not miss the point.
The 1 Euro proposal is not an idea of Mr. Berisha, – neither is it new. Promotions aiming to attract investments, both domestic and especially by foreign sources, have been used in many transition countries in the past and often they have been successful. Albania is not an exception. The Albanian legislation is considered to be very supportive for the promotion of foreign investments and even more generous in this aspect as compared to other countries in the region. By the same token, similar promotions have been used in the past and thanks to their success some hundred million Euros have been injected in the Albanian economy and as a result, more than ten thousand Albanians find themselves employed at fruitful partnerships between private investments and public properties. No matter that today that exactly such successes in the past have been a preferred target for political criticism.
If it is true that in other countries in the past and in Albania as well, such methods for investments promotion proved to work, then there should be no question on their validity for the future. Whilst it is useless to debate on the ownership of such ideas, which are explained in details in every undergraduate microeconomics textbook, the key point with the 1 Euro idea at this moment is not in what it brings, but in what it is missing.
This because businesses in Albania have repeatedly said that their problems have nothing to do with the costs of registering a business, nor with the costs of physical entry to Albania, nor with the high cost of land or water. The problems of Albania are those which everybody foreign or not knows: lack of secure electricity supply, inadequate infrastructure, lack of water, lengthy and bureaucratic procedures, weak capacities of public administration and even worse of political parties, uncertain land ownership, non-performing and deformed market institutions mainly due to existence of artificial monopolies and (wrong) state interventions in the market, in addition to the corruption which is invisible and everywhere found. All these problems are the main theme of every international report on Albania, including reports prepared by the Albanian Government.
Under such conditions and constrained by limited budget, every government has to set priorities for intervening in the market. If aiming to make any correction at all, every step made must take in consideration the real needs the private investors have in Albania; otherwise everything would be just waste of efforts. In other words, not 1 Euro nor a 1 cent incentive – but even paying foreign investors to come to Albania simply won’t work if they will not be sure if tomorrow they’ll have 10 or 15 hours electricity supply.
The latest proposal on 1 Euro package is missing the real debate with what problems businesses have to invest in Albania. All such promises were part of the electoral promises that brought victory to the DP in the last elections and most of them were part of the government’s program which is approaching its first year of implementation. Sadly, on all such promises, very little if anything at all has been achieved. You could just travel from Shkoder to Saranda to observe how many hours per day of electricity supply receives the national economy or try to get a birth certificate and see how much time, efforts and money is wasted. More than enough to understand that whilst others are progressing ahead, we stay in stand-by position and in some aspects, regress. Another example: although much has been said about monopolies, they are still alive and perhaps even in better shape than a year ago. Because for a careful analyzer it is not difficult to find out that not only promises are not maintained, but in cases such as monopolies, there is clear evidence for the consolidation of new monopolies of different types, which today dominate the Albanian market.
For this reasons the ‘new reform’ 1 Euro doesn’t bring anything new for the Albanian economy but it sounds more as the latest invention which is expected to fascinate and make us forget about past promises on monopolies, corruption, electricity, land for emigrants, VAT and tax reductions etc. And as such it is not difficult to imagine that a few months later it would be followed by some other promises. Sort of like offering electricity for 1 Euro or anything else that may be thought up by a state which continuously reinvents the wheel on paper but forgets to do the basic things which the people demand of it.