October 2016

THE STRATEGIC IMPORTANCE OF BERLIN PROCESS FOR THE WESTERN BALKANS: A VIEW FROM ALBANIA

Monitoring Report

This Working Paper aims to document and analyze the progress Albania has achieved in implementing the commitments taken in the framework of the so-called Berlin Process as stated in Vienna Summit in August 2015, and the challenges ahead to the upcoming Summit of Paris of July 4th 2016. The Berlin Conference held in August 2014 was the starting point of the official coming to existence of the “Berlin Process”. Initially planned as a one-off event called by Chancellor Merkel, this process took an existence by itself to become today one of the most important regional cooperation platforms, equipped of a budget of EUR 1 billion until end of 2018. Its objectives are to enhance joint regional economic governance – in the framework of the European perspective of the Western Balkan countries – by laying the foundations for higher and sustainable growth. The process aims to contribute to the reinforcement of a sound economic environment and reliable political, legal and societal structures in these countries. This Working Paper aims to document and analyze the progress of the Albanian Government in achieving the: a) necessary alignment to the standards of legislation and reforms (soft measures) needed and agreed upon in Vienna Summit; and, b) in implementing the related measures with regard to infrastructure projects. In drafting this Working Paper, Cooperation and Development Institute has hold several meetings and interviews with the main relevant institutions involved in the process (i.e. the Strategic Planning and Development Unit – part of the Department for Development, Financing and Foreign Aid at the Prime Minister’s Office, the Ministry of Transport and Infrastructure, the Ministry of Energy and Industry, WBIF, etc.). Moreover, an extensive research and analysis of information from other public sources has been carried out, namely: a) official declarations and joint statements, public speeches,  political statements, and press releases of the main EU and WB6 institutional actors; b) specialized economic media; c) national strategic documents and annuals reports of different institutions/structures in charge of implementing sector-based policies.

Tags: Berlin Process, Connectivity Agenda, Institutional Governance, Transport

This Policy Brief was prepared for the Symposium on “16+1 Cooperation” in Synergy with the “Belt Road” Initiative”, organized by Chinese Academy of Social Sciences in Beijing 25 June – 1 July 2017.

The current text is an updated and adapted version of March 2018 for publication under the Berlin Process Series. The Berlin Process Series is an initiative started by Cooperation and Development Institute, in November 2015, in Tirana, and supported by Friedrich Ebert Foundation, Konrad Adenauer Foundation and Hanns Seidel Foundation.

It consists in:
a) Research on the Berlin process and its priority areas;
b) monitoring of progress in Connectivity Agenda and in WB6
Regional Cooperation; and
c) Annual conference on the Berlin process”, followed by publication of conference proceedings.

Tags: China, Connectivity, Economy, Transport, Western Balkans

In 2018, Chinese investment in the Western Balkans shifted from infrastructure towards mergers and acquisitions (M&A). Two such M&As took place in the mining and rubber sector while a Chinese-owned steel mill in Serbia jumped from bankruptcy in 2016 to the 66th biggest company in Southeast Europe in 2018. Speedy loan procedures and the revitalization of “lost” cases characterize the Chinese involvement in the region. But Chinese companies are absent from regional cooperation thus limiting the expansion of “China Inc.”.

Moreover, when compared with investment volumes by the EU in the region, China’s resource commitment still remains small. The “Berlin Process” in the region focuses on connectivity and regional cooperation. This may provide the launching pad from which “China Inc.” and corporations in Europe can connect. It could be a win-win- scenario starting from the Western Balkans.

Tags: China, Connectivity, Economy, Transport, Western Balkans

The Belt & Road Initiative has spurred the production of a large number of data, information on and research into Chinese endeavors in the Western Balkans (WB). This existing body of knowledge has created the base from where further and more focused research can be carried on, and relevant information needed for decision-making can be produced.

In the Balkans, the main challenge of the region remains the ever-lasting transition towards European standards of democracy, institutional efficiency and a market economy, as well as the gaping need for significant investment in infrastructure and production facilities. Lately, Chinese companies have been increasing their investment and involvement in the region.

The main pull factors in the Balkans are the region’s huge investment needs in infrastructure, re-industrialization and the improvement of public goods and services, exacerbated by the lack of access to the EU Structural Funds. The main economic push factors for China relate to the availability and competitive prices of Chinese technology; the Western Balkans geographical location on the BRI road- and maritime corridors; a decent return on investment (ROI) rate; and the WB access to EU market quotas.

This report is a written version of the contributions made during the international seminar organized by the Cooperation & Development Institute (CDI), in partnership with Hanns Seidel Foundation (HSS) and the Southeast Europe Association (SOG), held under the title “Corporate China in Western Balkans”, on 16-17 May 2019 in Tirana, Albania. The report has been prepared by Ardian Hackaj, Research Director at Cooperation and Development Institute based on seminar notes and recordings, and enriched with additional data provided from the participants after the seminar, and / or references of their previous research and / or publications.

Tags: China, Connectivity, Economy, Transport, Western Balkans

EU Connectivity Agenda in South East Europe Six (SEE6) aims at improving transport and energy connection with and between the Western Balkan and European countries. Up to 31 December 2019, Albania has received financing support for four infrastructure projects in the framework of this initiative. These projects – totalling EUR 300 million – cover road and rail transport, energy, digitalization, and maritime connectivity. Albania is the only SEE6 country that has received funding for projects in digitalization and maritime connectivity.

However, by the end of 2019 the execution of works had not commenced in any of the projects. Long procurement procedures – similar to other countries in the region – are the main explanatory variable. For example, the tendering procedure for Tirana-Durrës-Rinas Rail approved in 2016, has been postponed for nearly a year, and March 2020 was the new deadline for the completion of tendering procedures and the commencement of works. The Albania – Northern Macedonia (I) energy interconnection line: The Albanian section approved as a project in 2015, is still in the tendering phase, while works have already commenced for the Macedonian section. In some cases, implementation pace has been slowed down by the requests to make changes to already approved projects. The project for the rehabilitation of Quays 1 and 2 (cargo) in the Port of Durrës – approved in 2018 and considered of high significance for Albania – is still in its initial phases because the Albanian Government is considering a change of destination towards the rehabilitation of passenger quays 3 and 4.

Another important project still in its initial phases is the Adriatic-Ionian Highway with an estimated budget that varies between EUR 2.4 and 2.7 billion, excluding VAT. There are two main considerations regarding this project. First, the cost of some segments on the way to be contracted through Public Private Partnership (PPP) format, is 30 to 40 percent higher than the initial feasibility study projections. One of these sections has now been contracted in this format, causing donors to withdraw the grant they had approved for the feasibility study of the section in question. Second, to date there is no detailed analysis on those sections’ economic impact to the territory they cross, or on their contribution on the competitiveness to priority sectors.

Considering the reconstruction efforts and the respective financial aid promised for the 26 November 2019 earthquake, and in the framework of drafting the Economic Growth and Investment Pact, the Albanian Government can re-focus the development of connectivity infrastructure at the service of the economic and social needs and of the country’s financing capacity. Consequently, the connection to European networks should come after. In this context, the economic crisis caused by the efforts to curb coronavirus renders the good management of connectivity infrastructure projects and of related funds even more important. In addition, the benefits of Connectivity Agenda should also include assessment of the geostrategic and local economy impact, as well as practical benefits for small businesses (that constitute up 84% of the enterprises in the country) affected, and Albanian citizens at large.

This report was developed in the framework of the “Preparing and Supporting Albania for the EU Accession Process – ALBE” project, part of the MATRA programme, and with the support of the Embassy of the Netherlands in Tirana.

Click here to read the report in Albanian language.

Tags: Berlin Process, Connectivity Agenda, Western Balkans, Transport

This monitoring report aims to inform on the current progress of the Connectivity Agenda projects implemented in Albania in the context of the Berlin Process. Additionally, this report analyzes the advantages brought to the Albanian economy – through the opportunities provided for improving transport and energy connections with and between Western Balkan countries and Europe – as well as the problems accompanying this process.

The projects that Albania has benefited under the Connectivity Agenda are still in the early stages of development and, in general, there is little public information on their progress and impact on the country. Therefore, this monitoring report aims at increasing transparency, fostering debate and providing recommendations for improvement of monitoring during the implementation phase, and the utility of the projects in terms of increasing the added value of the local economy and improving the quality of life of Albanian citizens.

This report is published in the framework of the project “Preparing and Supporting Albania for the EU Accession Process – ALBE” , part of MATRA programme, and with the support of the Embassy of the Kingdom of the Netherlands in Tirana. ALBE is an innovative effort contributing to the development of a methodology focused on the impact of policies and measures in practice and factoring the regional dimension. This analysis is conducted within the institutional framework of the Berlin Process, launched in 2014 and which is symbolically closing its first cycle at the Berlin Summit in autumn 2021.

This study is an update of the previous monitoring report of the Connectivity Agenda, published in March 2020. Its publication coincides with the completion of the first cycle of the Berlin process marked by the return of the Western Balkans Summit in Berlin.

Click here to read the report in Albanian language.

Tags: Berlin Process, Connectivity Agenda, Southeast Europe, Transport